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Quote:

Originally Posted by YardleyLabs View Post
It makes for a nice, ideologically satisfying story, but has little to do with anything that actually happened. Subprime mortgages are not new and rapid increases in default rates for these mortgages happened in each of the prior downturns in the real estate market in the 80's and 90's. The actual number of such mortgages remained a small fraction of the overall market until 2002/2003 when the number began to skyrocket.

http://graphics8.nytimes.com/images/...ORTGAGEjmp.gif
That growth actually started while Congress was controlled by Republicans and Bush was in the White House.

What changed? Several things. Until 2001/2002, the risk of the subprime market was obvious to all. Delinquencies had always been high and were headed higher, rising from 8-12% between 2000 and 2003. Several factors changed. Interest rates plummeted from 9% in January 2001 to 4% two years later. This stimulated massive mortgage refinancing and refinancings, not first time buyers, were the primary recipients of subprime mortgages. The derivatives market developed new instruments to make absorption of the risk associated with these mortgages more palatable with a mix of mortgage backed securities and, more importantly, default swaps that appeared to provide a hedge against a new upturn in defaults.

Easy money plus dropping rates contributed directly to the boom in housing prices. Many pointed out the risk of a bubble. Greenspan led the chorus against those people warning of a possible bust. He stated that there had never been a nationwide real market collapse and he didn't expect to see one now. He resisted any move toward implementing new regulations or even toward using the regulatory power under the existing law to curb speculation. While he believed, and said publicly, that risk was being underpriced, he felt it was up to the free market to price that risk appropriately, not regulators. He apologized for this in 2008, indicating that he had overestimated the intelligence of the market and the regulators should have intervened earlier.

Many factors contributed to the mortgage problems, and there is enough blame for everyone.
I would place the private mortgage financing market at the top of the list and Federal regulators not far behind. The astronomical profits that financers were making in the market paid for some heavy duty lobbying that went far beyond what was being done by Fannie/Freddie. Fannie Mae and Freddie Mac were up there, but they were also fairly active in pointing out that too many risks were being taken by the private market without consideration of the effects of a future downturn. This risk was increased by the fact that 50% of subprime mortgages were adjustable as compared with only 18% of standard mortgages. Fannie Mae and Freddie Mac both spread their risk in part by selling off the riskiest fraction of their portfolios. This was done very openly and the private financing markets believed they had priced the risk appropriately. Sadly, the rating agencies agreed. Both were wrong.

Should the housing bubble have been obvious? Yes, as is apparent in the graph below from mid-2007.

http://graphics8.nytimes.com//images...n/27graph1.gif

Why didn't the administration intervene to try to curb the growth of this bubble? Because the housing boom was the primary engine behind the economic recovery during the first Bush term -- not tax cuts. Increased housing prices allowed consumers to maintain and expand personal spending by tapping into the new wealth created by the boom in prices. Home equity loans became the new credit cards, fueling economic growth through consumer debt. Turn off the boom, turn off the spigot on growth.

In mid-2005, Paul Krugman of the NYT wrote:

"Meanwhile, the U.S. economy has become deeply dependent on the housing bubble. The economic recovery since 2001 has been disappointing in many ways, but it wouldn't have happened at all without soaring spending on residential construction, plus a surge in consumer spending largely based on mortgage refinancing. Did I mention that the personal savings rate has fallen to zero?Now we're starting to hear a hissing sound, as the air begins to leak out of the bubble. And everyone - not just those who own Zoned Zone real estate - should be worried." (http://www.nytimes.com/2005/08/08/op...08krugman.html)

4-5 years of wild-assed speculation in housing fueled the economic boom heralded by the administration as proof of the effectiveness of it tax cutting and deregulatory posture. That same growth fueled the bust as it became more and more apparent that the emperor was stark naked. In 2004 and 2005, more than 20% of all mortgages issued were in the subprime market, and 50% of those had variable rates soon to be reset as the Fed began to increase rates to curb inflation. And the problem continued to grow until the first banks began to close down.


Would you agree with this statement made by Obama last night

http://www.realclearpolitics.com/vid...ited_debt.html


To be honest there may be more context, I believe Obama to be so unethical that I cannot stand to listen to him. Poor excuse for not watching the entire speech I know, but it is the truth

It seems to me that Greenspan didn't have any problem taking responsibility for his actions, the dems act like they were not even on the planet .
  • 02-25-2009, 09:59 AM
    YardleyLabs
    Quote:

    Originally Posted by K.Bullock View Post
    * I actually believe it began with Carter.



    Would you agree with this statement made by Obama last night

    http://www.realclearpolitics.com/vid...ited_debt.html


    To be honest there may be more context, I believe Obama to be so unethical that I cannot stand to listen to him. Poor excuse for not watching the entire speech I know, but it is the truth

    It seems to me that Greenspan didn't have any problem taking responsibility for his actions, the dems act like they were not even on the planet .

    When Clinton took over the White House, the national debt was about $4.3 trillion. When he left it was about $5.7 trillion, and actually had gone down relative to GDP. When Bush took over, it was about $5.7 trillion and when he left it was over $10.5 trillion (we won't know the actual number for a while, but it was over $10 trillion before the bank bailout). Virtually all of this deficit growth is attributable to the budgets submitted by Bush, not to the relatively small changes in budgeted spending levels adopted by Congress after the Democrats gained control. In fact, the rate of growth in the deficit actually slowed down when the Democrats took control of Congress. It was higher when Republicans controlled Congress. When Bush took over there was an annual budget surplus. This was turned into a massive deficit caused by unfunded tax cuts, massive unfunded increases in defense spending, and an economy wrecked by profligacy both in government and in the private sector.

    I think the word inherited describes it kindly.

    As I noted in another thread, neither party has histoprically done well when it has had control of both the White House and Congress. From that history, Democrats are now in a position to mess things up royally. For the sake of all of us, I hope they do not. If they do, they will lose control of Congress in 2010 and, if nothing else, the sharing of power may mitigate the damage.

    Unfortunately, Republicans remain completely uncommitted to actually balancing the budget; they only object to the fact that the deficits being incurred in the stimuls act come from increased spending rather than lowered taxes. Once the economy begins to stabilize, the budget must be balanced. This will require a mix of massive spending cuts and substantial tax increases. There is no way to undo the deficits created under Bush without both.
  • 02-25-2009, 10:23 AM
    K.Bullock
    Quote:

    Originally Posted by YardleyLabs View Post
    When Clinton took over the White House, the national debt was about $4.3 trillion. When he left it was about $5.7 trillion, and actually had gone down relative to GDP. When Bush took over, it was about $5.7 trillion and when he left it was over $10.5 trillion (we won't know the actual number for a while, but it was over $10 trillion before the bank bailout). Virtually all of this deficit growth is attributable to the budgets submitted by Bush, not to the relatively small changes in budgeted spending levels adopted by Congress after the Democrats gained control. In fact, the rate of growth in the deficit actually slowed down when the Democrats took control of Congress. It was higher when Republicans controlled Congress. When Bush took over there was an annual budget surplus. This was turned into a massive deficit caused by unfunded tax cuts, massive unfunded increases in defense spending, and an economy wrecked by profligacy both in government and in the private sector.

    I think the word inherited describes it kindly.

    As I noted in another thread, neither party has histoprically done well when it has had control of both the White House and Congress. From that history, Democrats are now in a position to mess things up royally. For the sake of all of us, I hope they do not. If they do, they will lose control of Congress in 2010 and, if nothing else, the sharing of power may mitigate the damage.

    Unfortunately, Republicans remain completely uncommitted to actually balancing the budget; they only object to the fact that the deficits being incurred in the stimuls act come from increased spending rather than lowered taxes. Once the economy begins to stabilize, the budget must be balanced. This will require a mix of massive spending cuts and substantial tax increases. There is no way to undo the deficits created under Bush without both.


    Spending cuts? How about just not giving away billions in entitlements and spending billions on what amounts to awarding special interests with our tax dollars?

    Has raising taxes ever worked when the nation was in an economic crisis? Why would it work now when in 1937 it did nothing but deepen the depression?

    Don't the dems/marxists already plan on letting the Bush tax cuts expire next year? So... spend friggin trillions, raise taxes, then let let tax cuts expire. Then when everyone is bringing their groceries home in a goat cart they can pin bumper stickers on their rear ends about how if "Bush hadn't been in office I would be driving". Ar least we will have gotten rid of the "evil" rich people.

    I cannot believe what we are willing to accept in the name of party politics. Sheeple is too nice a word for this.
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