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Thread: Congress's financial mess

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    Elite Member JamieElizabeth's Avatar
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    Default Congress's financial mess

    Congress's Financial Mess

    Opinion Editorial by Walter E. Williams - Jan 26, 2009 22 ratings from readers

    Are we ailing from too much deregulation? Is the financial meltdown a result of free markets? A quick look at some of these facts should help answer these questions — and more.


    News media people, often plagued with little understanding, fail miserably in their duty to inform the public.

    This is particularly evident in their reporting on the current financial meltdown, suggesting it was caused by deregulation and free markets.
    Professor David Henderson, research fellow at Stanford’s Hoover Institution, writes about regulation in “Are We Ailing From Too Much Deregulation?” in Cato Policy Report (November/December 2008).

    The Federal Register, which lists new regulations, annually averaged 72,844 pages between 1977 and 1980. During the Reagan years, the average fell to 54,335. During the Bush I years, they rose to 59,527, to 71,590 during the Clinton years and rose to a record of 75,526 during the Bush II years.

    Employees in government regulatory agencies grew from 146,139 in 1980 to 238,351 in 2007, a 63 percent increase. In the banking and finance industries, regulatory spending between 1980 and 2007 almost tripled, rising from $725 million to $2.07 billion.
    So here’s my question: What are we to make of congressmen, talking heads and news media people who tell us the financial meltdown is a result of deregulation and free markets? Are they ignorant, stupid or venal?

    A New York Times article, “Fannie Mae Eases Credit To Aid Mortgage Lending” (9/30/99), reported, “Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people …”

    The pressure was the 1977 Community Reinvestment Act that was beefed up during the Clinton Administration. It required banks to make high-risk loans they would not have otherwise made. Failure to comply meant fines and difficulty in getting approval for mergers and branch expansion.

    When questions began to arise about government policy that intimidated lenders into making high-risk loans, we received congressional assurances. At hearings investigating the solvency of Fannie Mae and Freddie Mac, Rep. Barney Frank said, “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

    In a speech to the Mortgage Bankers Association, Frank advised, “People tend to pay their mortgages. I don’t think we are in any remote danger here. This focus on receivership, I think, is intended to create fears that aren’t there.”

    Protesting against greater controls against lax mortgage lending, Sen. Harry Reid said, “While I favor improving oversight by our federal housing regulators to ensure safety and soundness, we cannot pass legislation that could limit Americans from owning homes and potentially harm our economy in the process.”

    One-third of the $15 trillion of mortgages in existence in 2008 are owned or securitized by Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Housing and the Veterans Administration. Wall Street buyers of repackaged loans didn’t mind buying risky paper because they assumed that they would be guaranteed by the federal government: read bailout from the taxpayers.

    Today’s housing mess can be laid directly at the feet of Congress and the White House.
    Congress and the White House aren’t finished with the taxpayers yet. Once a bailout parade gets started, it has a momentum of its own. President Bush, citing danger to the economy, signed a $17 billion bailout for the auto industry.

    According to the Wall Street Journal article “Shovel-Ready on Campus” (December 17, 2008), presidents of 36 state government universities have called for bailouts; they call it a “federal infusion of capital.”

    Soon, if not already, state governors and city mayors will descend on Washington seeking bailouts. California is $15 billion in the hole, Florida $5 billion and things are so bad in Michigan that the governor has shut down one prison to save money.

    What kind of assumptions do politicians and news media make about the intelligence of Americans to expect us to buy the idea that our current mess results from deregulation and free markets? I do not find that assumption flattering.

    Walter E. Williams is a professor of economics at George Mason University in Fairfax, Virginia. He has authored more than 150 publications, including many in scholarly journals, and has frequently given expert testimony before Congressional committees on public policy issues ranging from labor policy to taxation and spending.
    Congress's Financial Mess - Ayn Rand Admirers at The Atlasphere

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    Elite Member Grimmlok's Avatar
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    yeah, didn't read this either.. more "blame the clintons and poor people" shit that was debunked about 8 months ago.
    I am from the American CIA and I have a radio in my head. I am going to kill you.

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    Where do you get this shite?

    While there were programs to make it easier for low income people to own their own homes, those programs are not responsible for a failure of the mortgage industry to behave responsibly and the failure of regulators to rein them in. That is just silly.

    Banks and lenders wrote a LOT of mortgages with short-term gains in mind, period. Lenders and appraisers have been making money hand over fist for the last several years, on a transaction by transaction basis. Since they didn't hold on to the mortgages themselves but rather sold them off, they didn't give a shit about whether they were sustainable. They took their money and got out.

    But, you know, JamieElizabeth, blame it on the Clintons and the poor people if it makes you feel better.

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    Elite Member Grimmlok's Avatar
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    It's from 2 or 3 retarded right-wing fundie sites.. i dunno why she keeps posting it, it's all garbage
    I am from the American CIA and I have a radio in my head. I am going to kill you.

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    Just the phrase "Ayn Rand" admirers in the byline makes me laugh in my sleeve.

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