Clinton, Bush, Obama: All Responsible for Economic Collapse

Bill Mattocks

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Fascinating interview. Well worth watching/reading:

http://www.pbs.org/newshour/bb/politics/july-dec12/bair_10-19.html

SHEILA BAIR: Oh, there's plenty of blame to go around.

I think at the end of the day, it was greed. It was just greed that was unchecked by government and government regulators. This idea that this is all caused because the government wanted poor people to have mortgages, that's just not true.

I think expanding access to homeownership for low-income people was a rationalization, but it was not a driver. A lot of people were making a lot of money, making a lot of irresponsible loans to frankly the vulnerable parts of our population that didn't understand these mortgages to begin with, and regulators didn't step in to stop it.

JUDY WOODRUFF: And, broadly, what is it that you believe the Bush and the Obama administrations did right and did wrong to deal with it?

SHEILA BAIR: Right. Well, I think the missteps going up to the crisis really were both the Clinton and Bush administrations.

I think that the three big ones are we didn't raise bank capital requirements. We didn't constrain the ability of large financial institutions to use leverage, to use borrowed money to support their risk-taking.

Instead, government took a lot of actions to allow investment banks in particular to take on even more leverage and fund their operations with borrowed money, instead of their own equity capital.

The Federal Reserve Board had the authority to set mortgage loaning standards across the board for everyone, banks, non-banks, mortgage brokers. They didn't do that.

And then, finally, of course -- and this was in the Clinton administration -- Congress just said that nobody is going to regulate derivatives. The SEC couldn't regulate them. The CFTC couldn't -- over op-exchange derivatives.

The SEC, the CFTC, even state insurance regulators were told hands off op-exchange derivatives market, so we don't think they need be to regulated.

JUDY WOODRUFF: So, are you saying government had its own share of responsibility for what happened.

SHEILA BAIR: They did.
 

WC_lun

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Even the rules that were in place were almost impossible to enforce. The SEC did not have enough people to audit what was going on and that was done on purpose.

I don't believe Obama had anything to do with the collapse. The collapse happened before he took office. It is argueable that he helped with the recovery or not, but not that he had much of anything to do with the circumstances that led to the colapse.
 

granfire

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Obama followed the Bush agenda, and let the chosen perpetrators flourish.

That may be true, but that was after the fact....


Having said that, I don't think the alternative would change a damn thing about it either....
 
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Bill Mattocks

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That may be true, but that was after the fact....


Having said that, I don't think the alternative would change a damn thing about it either....

Did you read the article? There was more than just one alternative - prop them up or let them fall. They also could have exacted much more control, as a condition of propping them up; they even said they would. They didn't. Hmmm?
 

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Even the rules that were in place were almost impossible to enforce. The SEC did not have enough people to audit what was going on and that was done on purpose.

I don't believe Obama had anything to do with the collapse. The collapse happened before he took office. It is argueable that he helped with the recovery or not, but not that he had much of anything to do with the circumstances that led to the colapse.


There is a tendency to focus only on the Presidents and forget the importance that the legislative branch plays, especially in regards to domestic policies. Obama took office as a senator in 2004. Obama was also member of the majority party that controlled both the House and Senate in the year or so leading up to the financial crisis. I wouldn't consider congress completely blameless.
 

Xue Sheng

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I am not a financial person and my view could be wrong and is likely an over simplification, but I said this when the bail outs started…it is pay me now or pay me later and the government opted for pay me later… look at the history of the Great Depression and you will see a similar pattern

And on a side note:

And I am so sick of the term “Going forward” all it means to me is they have no clue what is going to happen next but it makes it sound like they do and it gives them a little tie to think of what to say…..sorry I have heard that term thrown around a lot lately in government and few times to questions I asked, as they apply to a major merger of government offices, that were answered with “Going forward” and followed by a whole lot of subterfuge

JUDY WOODRUFF: Going forward, Sheila Bair, what is it that you see in the prescriptions of either President Obama or Gov. Romney that will fix the problem as you see it today?
 

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In my opinion non of the presidents are direclty responsible for our economic situation. The buy now pay later thinking of the average american is directly responisible combined with a system that seems to thrive on enabling that kind of behavior.

Who do I blame for my finances, the man in the mirror. As far as money goes, the buck stops here.
 
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Bill Mattocks

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In my opinion non of the presidents are direclty responsible for our economic situation. The buy now pay later thinking of the average american is directly responisible combined with a system that seems to thrive on enabling that kind of behavior.

Who do I blame for my finances, the man in the mirror. As far as money goes, the buck stops here.

You did not engineer backroom bailouts of the major financial institutions and then throw taxpayer money at them without demanding accountability and instituting reform. You are responsible only the same sense all of us are; we failed to elect leaders who are not crooks and failed to throw them out of office once it became clear that they were crooks. But this issue itself does not rest on your shoulders or mine. The powers in office at the time; presidents and congress, as well as heads of departments and the Federal Reserve, failed us utterly and they get the blame for it. No party escapes; they are all equally culpable.
 

billc

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Here is some more on what happened...

http://www.americanthinker.com/2012/09/so_obama_inherited_a_mess_did_he_from_whom.html

But then the next question has to be, "Where did all that extra money come from?"

It was due in large part to the passage of the Community Reinvestment Act (CRA) in 1977. The CRA was amended in 1989 -- and again in 1991, and 1992, 1994, 1995, 1999, 2005, 2007, and finally 2008. While much of the CRA is concerned with technical matters, the key component that impacts the housing bubble of 2003-2007 was the relaxation of lending standards that were in turn the result of accusations of "red-lining" certain neighborhoods -- a practice deemed to be de facto racial discrimination.
In 1995, Barack Obama was the lead attorney in an anti-discrimination lawsuit filed against Citibank for alleged "red-lining" practices which the plaintiffs claimed denied equal access to mortgage loans for African-Americans.
Claims of racial discrimination were frequently aimed at banks in the mid-1990s by community activists who, through judicial actions or by producing demonstrations by irate citizens, embarrassed banks into lowering their lending requirements to the point where, in common parlance, banks began issuing "sub-prime" mortgages. In an effort to both protect the financial integrity of local community banks and provide access to enormous amounts of cash for mortgages, Congress instructed Fannie Mae and Freddie Mac to purchase such mortgages from the original lender, returning the original lender to his original state of liquidity.
Fannie and Freddie then offered institutions such as Lehman Brothers and other major Wall Street firms a chance to "bundle" these mortgages and sell derivative securities, with their value basis predicated on such bundles.
What everyone in this chain of perhaps well-intentioned decisions overlooked was the impact on housing prices when more and more money was made available to enter the market in search of fewer and fewer houses. Yes, that's right: the housing market began to overheat, and the price of both new and existing homes started to climb.
The sub-prime market allowed people to borrow large sums for their mortgages with little money down, and that is a key factor in what followed. Borrowers were offered adjustable-rate mortgages (ARM) that charged them far lower interest rates for the first few years of their mortgage, to ease their ability to secure the loan in the first place by lowering their monthly payment to be more in line with their actual income. Neither lenders nor borrowers seemed particularly concerned about the two words that would help start the avalanche of collapse -- Adjustable Rate.
As the rate on ARMs was pushed upward (in accordance with the mortgage structure agreed to by each borrower), the mortgage payments for many borrowers rose to a level that they could barely support.

Making matters even worse, property taxes for states, counties, municipalities, school districts, and so on were all being adjusted upward to cash in on the (apparently) endless increases in home values that all that cheap mortgage money was causing. Those taxes were added to the already higher basic mortgage payments, and they made the homeowner stretch his or her paycheck even further to cover all these costs.

But most borrowers felt that since their own homes would increase in value the longer they held onto them, they should keep trying to meet their obligations with a view toward "flipping" the property and making a profit if their ability to make their payments became impossible.
Like most economic bubbles, this belief exacerbated the problem. Instead of selling out and at least walking away unharmed, buyers kept offering their homes at higher prices, assuming that since all housing prices were rising, their houses must be worth more as well.
Well, in late 2006-early 2007, prices started to tumble. Homeowners began to find themselves "underwater," owing more on their mortgages than they could generate from the sale of the property at prevailing market prices. Those who found themselves in this situation faced a binary choice: they could continue to pay the post-adjustment interest rate on their ARM as well as the inflated property taxes that climbed along with rising housing prices or, if they had little or no money invested in their down payment, they could simply walk away and let the bank repossess the property.
Since the foreclosed properties often had market values below the mortgage value, the mortgage itself was not actually "worth" its face value. Therefore, the worth of all sub-prime mortgages became suspect, and the value of derivatives based on bundles of those mortgages became questionable. The financial collapse followed.
The president blames the Bush administration and Republicans for this state of affairs. But as we have seen, George W. Bush surely wasn't president in 1977, when the original CRA was passed.
Bush wasn't president when Obama himself was pushing and suing to get more cash into the hands of marginally qualified purchasers.

 

granfire

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I am not a financial person and my view could be wrong and is likely an over simplification, but I said this when the bail outs started…it is pay me now or pay me later and the government opted for pay me later… look at the history of the Great Depression and you will see a similar pattern

And on a side note:

And I am so sick of the term “Going forward” all it means to me is they have no clue what is going to happen next but it makes it sound like they do and it gives them a little tie to think of what to say…..sorry I have heard that term thrown around a lot lately in government and few times to questions I asked, as they apply to a major merger of government offices, that were answered with “Going forward” and followed by a whole lot of subterfuge


Well, yesterday we stood at the edge of the abyss...today we took a big step forward.

Is that what you are thinking?
 

Xue Sheng

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Well, yesterday we stood at the edge of the abyss...today we took a big step forward.

Is that what you are thinking?

Nope, I'm just sick and tired of the phrase "Going Forward" the only one I dislike more is "Looking Forward"

Basically, in my world at the moment, all it means is the person talking really does not have an answer but is also not going to admit that
 

Cryozombie

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Going forward Xue, do you think it's possible we could start looking forward at the future endeavors?
 

Xue Sheng

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Going forward Xue, do you think it's possible we could start looking forward at the future endeavors?
:disgust: Now isn't that cute....BUT ITS WRONG! :angry:

So.... how long you worked for the Governor's office :uhyeah:

After I posted that.... it came to me...that someone wass going to hit me for it :D
 

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