What Fresh Hell Is This?

October 16, 2011

I Wonder What They're Talking About

Scaife's braintrust, I mean.

In one of today's editorials, they contrast the conviction of hedge fund billionaire Raj Rajaratnam (11 years, $64 million in fines) with "another class of cheats" namely:
We're speaking of economic cheats, those who think they can defy the fundamental rules of economics in pursuit of "social justice." Democrat members of Congress come to mind, specifically those whose legislation was directly responsible for sowing the seeds of The Great Recession.

Think of the bubble-creating/bubble-bursting federal mandates that forced lenders to flood the housing market with easy money for those who had quite little or actually no financial wherewithal.

The "Occupy Wall Street" types can blame "greedy bankers" for subprime mortgages all they want. But unless they recognize government's role in the mess -- and direct their protests accordingly -- their entreaties for an economic "re-set" will devolve into just more "progressive" chants for more free lunches.
Of course, they're talking about the immensely powerful Barney Frank (D-MA).

From Paul Krugman:
In the real world, recent events were a devastating refutation of the free-market orthodoxy that has ruled American politics these past three decades. Above all, the long crusade against financial regulation, the successful effort to unravel the prudential rules established after the Great Depression on the grounds that they were unnecessary, ended up demonstrating — at immense cost to the nation — that those rules were necessary, after all.

But down the rabbit hole, none of that happened. We didn’t find ourselves in a crisis because of runaway private lenders like Countrywide Financial. We didn’t find ourselves in a crisis because Wall Street pretended that slicing, dicing and rearranging bad loans could somehow create AAA assets — and private rating agencies played along. We didn’t find ourselves in a crisis because “shadow banks” like Lehman Brothers exploited gaps in financial regulation to create bank-type threats to the financial system without being subject to bank-type limits on risk-taking.

No, in the universe of the Republican Party we found ourselves in a crisis because Representative Barney Frank forced helpless bankers to lend money to the undeserving poor.
And after admitting that that last sentence was a little bit of an exaggeration, Krugman goes on to say:
Mr. Frank’s name did come up repeatedly as a villain in the crisis, and not just in the context of the Dodd-Frank financial reform bill, which Republicans want to repeal. You have to marvel at his alleged influence given the fact that he’s a Democrat and the vast bulk of the bad loans now afflicting our economy were made while George W. Bush was president and Republicans controlled the House with an iron grip. But he’s their preferred villain all the same.
Indeed Frank said as much while defending himself against Newt Gingrich, who wants to throw him in jail (see how this connects to the Trib's editorial?) for triggering the current bad economy. From Talkingpointsmemo:
Frank said Gingrich’s anger over his and Dodd’s role in the financial meltdown was absurd given that Republicans were in charge of the House and — excerpt for a brief period — Senate, from 1995 to 2007.He noted that he worked on reform legislation on mortgage in his first year as chair in 2007.

“It’s interesting, the charge is failure to stop Newt Gingrich and Tom Delay from deregulating,” he said. “This notion we caused the problem that started while they were in charge even by Gingrich’s standards is very odd.”
So most of the subprime loans were made when the GOP was in charge of the White House and the House of Representatives (and for most of that tine, the Senate) and yet, it's the "Democrat members of Congress" who are to blame and who should be feeling the wrath of the Occupy Wall Street folks.

This from the gang who still hasn't corrected itself for their $16 muffin mistake or the "Obama sought to apologize for Hiroshima but was turned down by Japan" mistake.

Yea, still waiting on those.


EdHeath said...

If I'm being honest I have to admit that Fannie and Freddie had problems that they themselves had created, first money issues around 2004 and in 2008 it ended up that they had bought up a lot of subprime mortgages (presumably the ones not sliced and turned into secularized instruments). Freddie/Fannie did not originate these subprime mortgages, and perhaps by buying them they made the eventually bursting of the bubble worse (since the mortgages might have collapsed sooner if Freddie or Fannie did not buy them).

But otherwise, would the housing bubble have occurred if Gore had taken office, and the Democrats retained control of the Senate? I can't say it is impossible, since a House controlled by Republicans might well have made new legislation nearly impossible. And who knows how Gore would have reacted to 9/11?

But Gore was not allowed to take office and the Republicans were in the driver's seat at least from January 2003 to January 2007 (House, Senate and the White House). There was at least one attempt (from Chuck Hagel, with McCain signing on after it didn't matter) to rein in Fannie and Freddie around 2005-2006, but both Democrats and Republicans cooperated to shoot down the bill.

Evidently Barney Frank did try to reform Freddie and Fannie from maybe 2005 to 2008, although only one bill (co-sponsored by a Republican) was passed by the House. It was doomed though because it was thought that Bush would veto it.

Who knows what would have happened in the Democrats controlled one of the chambers in Congress all along. The current administration is heavily seeded in its financial advisers with people who sit on boards of banks or were in the the financial industry in some capacity.

But the Republicans were in charge when the bottom fell out. Democrats are willing to do at least some (timid) reforms, but even those reforms and the mild stimulus Democrats are willing to try are being opposed by Republicans. Which is, at this moment, the bottom line.

Winding down said...

Ed, are you sometimes not honest?

If you are....pls indicate upfront on your posts.

If do not ...can I assume you are being dishonest?


BTW... NTCTS..the occupiers shud all be in DC...that's the source of the national problem...a pox on all of them...the pols.

Winding down said...

Sorry...I did not read my comment carefully before posting.

Shud read...in 3rd line: If you...