09 November 2008


Scooter and I don't see eye to eye a lot. This is one of those times. I asked him what exactly it is that W screwed up. Since most people are just content to blame everything from Katrina to the economy on him, I wanted specifics. Here is his original comment for those too lazy to click on the post below to read the comment.

"Well, his partial privatization of social security scheme went over like a dead skunk on a Thanksgiving platter.

His deregulation of wall street, enacted by congress, has come to bite us on the ass.

Iraq's strategy was a piece of shit until after the 2006 elections, when he started listening to what people like John McCain were saying.

It doesn't help that he's socially awkward and says things that are inappropriate. I think he is mildly autistic. Kim doesn't want to give him that much credit.

The partial privatization was a great idea. I think total privatization is needed and the gub needs to keep their hands off. Anyway.

The deregulation of Wall Street is biting us in the ass how? Last I checked it was the financial sector that was failing. And in the entirety of his tenure he never once deregulated the financial sector. In fact with the addition of Sarbanes-Oxley he actually put in place financial and Wall Street regulations to help protect investors from accounting scandals. On top of that the current housing/lending/financial crisis dates back to carter, then picked up again by Clinton. Allow me to explain:

The community reinvestment act of 1977 told the banks that received FDIC money they had to lend to low and moderate-income borrowers. People deemed too high risk for the taste of the banks. It went largely unnoticed throughout the 80s and then in 1993 Billy Boy wanted to ease up the paperwork, deregulate the industry, and "improve" the CRA, Thus creating the Subprime market. When the bill was enacted there were many critics. Basically it eased up the lending restrictions and told lenders that they HAD to lend to people who most likely can't pay back their loans.

Look at the time after 1995. Lenders started lending 100% uncapitalized loans. When you don't need to come in with any money down, how can you be expected to do everything in your power to repay your loan? You stand to lose nothing. It’s like walking away from an apartment. Aside from that, what the act truly did was falsely inflated the market. When you have a 2.5 million homes for sale and 1.9 million buyers you can count on housing values to continue to increase at a standard trend as it has done for decades. Now, along comes the CRA and now your purchaser pool has just tripled. Now you have 2.5 million homes for sale and 5.7 million buyers. So, housing prices artificially inflate due to a glut in buyers, and a willingness to pay more than the house is worth. In real estate they teach you that a house is worth what the market will bear. When you suddenly drive up housing prices by creating the glut of buyers you create an unstable situation that cannot be sustained. People bought houses over and above what they should have. Builders were scrambling to build new neighborhoods at a rate that was staggering to behold, and builders just kept popping up. New home sales at one point actually passed existing home sales in this area, times were going so good. Then, reality had to set in.

See, the way lending works, is that a lender loans the money. In an amazing act of benevolence Fannie Mae and Freddie Mac like to buy up those loans from the banks. Aren’t they nice little semi private institutions? THEN, in another even more amazing act of benevolence in 1997, $384.6 million of CRA Loans were offered up as securities. Those very securities were guaranteed by Freddie Mac and had an implied "AAA" rating. The public offering was several times oversubscribed, by money managers and insurance companies (read: AIG).

So, with artificially inflated housing prices, deregulated lending practices and constant republican harping to rein in Fanny/Freddie, and lenders screaming that people were defaulting on loans the gubmint told them they had to make, and fanny/Freddie realizing that the loans they bought and secured were all bunk due to the high rate of default we end up where we are. A busted housing bubble, people "upside down" in their mortgages and a record number of vacancies and foreclosures. Why did we have to bail out Fannie/Freddie? Cuz the Dems needed to cover their asses. Why did we bail out AIG? That one, I still don't agree with but since they owned a significant amount of CRA securities guaranteed by Fanny/Freddie I guess the Dems felt they owed it to them. BTW, Fanny/Freddie both created by Dems.

On March 8th 1995, before the Subcommittee on Financial Institutions and Consumer Credit Committee on Banking and Financial Services United States Senate, William A. Niskanen chairman of the CATO institute had some choice words to say,

The Community Reinvestment Act should be repealed--not reformed or restricted but repealed! For no conceivable set of regulations on a bank is consistent with the objective of the Act to meet "the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with safe and sound operation of such institution."

... The proposed new regulations would be very costly to the economy, to the banking system, and to the communities they serve... The primary long term effect of such measures would be to further contract the banking system,(emphasis mine) increasing the number of neighborhoods dependent on check cashing outlets and pawnshops.

The Community Reinvestment Act was the wrong solution to a genuine problem, for the most part created by other government regulations. Until recently, federal restrictions on interstate banking and state restrictions on intrastate branching severely restricted bank competition in local markets and the potential for geographic diversity of loan portfolios. These restrictions have been substantially reduced, promising a more competitive banking system that is more responsive to the interests of both depositors and borrowers and less vulnerable to adverse economic conditions in specific regions. Another effect of considerable importance: competition among banks is also the best discipline on discrimination among loan applicants on any basis other than credit risk.

Don't try to fix the Community Reinvestment Act. It can't be done. Repeal it.

Boy, did the press lambast him. Turns out, the man was right.

As far as Iraq the strategy worked. We unseated the government and beat the army. Unfortunately the Geneva Conventions stop us from being able to break the will of the people and then build them back up. Instead we have to take a kid gloves approach and have congress second-guess every move and the media and populace give their insight. As though they're qualified. If you've got a better strategy then I suggest you go to the next meeting of the JCS.

As for awkwardness, meh. Unimportant. It gave some comedians a good 8 years of material. And THAT is good for the economy.

On January 20th 1981 a very wise man had this to say,

In this present crisis, government is not the solution to our problem; government is the problem. From time to time we've been tempted to believe that society has become too complex to be managed by self-rule, that government by an elite group is superior to government for, by, and of the people. Well, if no one among us is capable of governing himself, then who among us has the capacity to govern someone else? All of us together, in and out of government, must bear the burden. The solutions we seek must be equitable, with no one group singled out to pay a higher price.

We've come a long way haven't we...

05 November 2008

Stupid is as stupid does.

Reap what you sow people.

reap it.

i am dissappointed in my fellow Americans right now.

BTW, i hope you're all good with paying for me, since i don't pay income taxes. i appreciate your hard earned money.