House Republicans Fail To Pass Bill

[Lounge Daddy]

[quote name='Domine ut Videam' post='1666594' date='Sep 29 2008, 09:19 PM']Question?

Just how bad is the economy right now?
What would it take to be as bad as 1929? How close are we to that reality?[/quote]

The economy will recover. It always does. As long as the government doesn't socialize the economy (which is very close to happening) the US economy will be fine.

And we are nowhere close to Great Depression level of catastrophe. [url="http://www.marketwatch.com/news/story/dont-call-bailout/story.aspx?guid={0A2E0398-2E89-4F7F-B8C7-4150783B1B2E}"]Irwin Kellner wrote a very brief article[/url] addressing just that:

[indent] Newspapers have run stories using the word "depression" more times than I care to count.
Now, don't get me wrong, I am not saying things aren't serious out there, but another Great Depression? I don't think so.
If you look at the data, you will see more differences than similarities between the 1930s and today:

* $INDU 10,365.45, -777.68, -7.0%) plunged 40% in two months; this time around it has taken a year to fall 22%.
* The jobless rate jumped to 25% by 1933; it is little more than 6% today.
* The gross domestic product shrank by 25% during the early 1930s; it is up over 3% during the past year.
* Consumer prices fell by about 30% from 1929 to 1933; and the last time I looked they were still rising.
* Home prices dropped more than 30% during the Depression vs. about 16% today.
* Some 40% of all mortgages were delinquent by 1934 compared with 4% today.
* In the 1930s, more than 9,000 banks failed compared with fewer than 20 over the past couple of years.

Remember also it was policy errors, not the stock market crash, that caused the Great Depression:
* Instead of increasing the money supply, the Federal Reserve of that era reduced it by one-third.
* Instead of lowering taxes, Herbert Hoover raised them.
* And to channel whatever demand was left into U.S.-made goods, the government enacted the Smoot-Hawley Tariff Act to keep out foreign products; this only provoked our trading partners to do the same.[/indent]


[quote name='fidei defensor' post='1666608' date='Sep 29 2008, 09:35 PM']But alas, it did not pass.[/quote]
Thank God that bill didn't pass, eh?

[quote name='Aloysius' post='1666629' date='Sep 29 2008, 10:02 PM'][url="http://www.youtube.com/watch?v=NU6fuFrdCJY"]http://www.youtube.com/watch?v=NU6fuFrdCJY[/url][/quote]
That video is sweet.

[philothea]

[quote name='Lounge Daddy' post='1666682' date='Sep 29 2008, 11:11 PM']The economy will recover. It always does. As long as the government doesn't socialize the economy (which is very close to happening) the US economy will be fine.

And we are nowhere close to Great Depression level of catastrophe. [url="http://www.marketwatch.com/news/story/dont-call-bailout/story.aspx?guid={0A2E0398-2E89-4F7F-B8C7-4150783B1B2E}"]Irwin Kellner wrote a very brief article[/url] addressing just that:

[indent] Newspapers have run stories using the word "depression" more times than I care to count.
Now, don't get me wrong, I am not saying things aren't serious out there, but another Great Depression? I don't think so.
If you look at the data, you will see more differences than similarities between the 1930s and today:

* $INDU 10,365.45, -777.68, -7.0%) plunged 40% in two months; this time around it has taken a year to fall 22%.
* The jobless rate jumped to 25% by 1933; it is little more than 6% today.
* The gross domestic product shrank by 25% during the early 1930s; it is up over 3% during the past year.
* Consumer prices fell by about 30% from 1929 to 1933; and the last time I looked they were still rising.
* Home prices dropped more than 30% during the Depression vs. about 16% today.
* Some 40% of all mortgages were delinquent by 1934 compared with 4% today.
* In the 1930s, more than 9,000 banks failed compared with fewer than 20 over the past couple of years.

Remember also it was policy errors, not the stock market crash, that caused the Great Depression:
* Instead of increasing the money supply, the Federal Reserve of that era reduced it by one-third.
* Instead of lowering taxes, Herbert Hoover raised them.
* And to channel whatever demand was left into U.S.-made goods, the government enacted the Smoot-Hawley Tariff Act to keep out foreign products; this only provoked our trading partners to do the same.[/indent][/quote]
I note you cut the part where Keller very strongly supported the bill:

[quote]Folks, this is not a bailout of anyone, not Wall Street, not Main Street, and certainly not the so-called "fat cats." It's an infusion of liquidity, designed to unclog the financial markets. In doing so, it will benefit everyone, business and consumers alike.

Also, the $700 billion bandied about will not be immediately handed over to the Treasury secretary; he will simply have a line of credit, similar to what the typical business might have.
Finally, this package may not even cost $700 billion. For that matter, it may wind up costing nothing. It all depends on the price the government pays for these distressed assets and what it winds up selling them for.[/quote]

[Aloysius]

no one's claiming we're at the level of another great depression yet... but even Bernanke is saying we are on the precipice of a potential depression... it is clearly not near that point yet but people are starting to recognize that deeper problems exist and we could be facing something worse than the great depression coming up.

the housing crisis is just the beginning.

this is a much bigger problem than one you can just say "oh, the market will recover" to... i mean eventually it will, it recovered after the great depression you know... but I personally think things are going to get astronomically worse before they get better.

[CatherineM]

[quote name='Aloysius' post='1666663' date='Sep 29 2008, 09:44 PM']yep. this current crisis was a direct result not of de-regulazation, but of bad regulating... it was regulation that forced banks into sub-prime lending (because democrat's hearts bled for the people who couldn't afford mortgages so they decided banks should give them mortgages even if they couldn't afford them)[/quote]

I realize I've slept a few times in the last 8 years, but when this housing stuff started, the Republicans were in the majority in Congress, and it was one of Bush's big projects to help everyone become a homeowner without a thought to the fact that not everyone can or should own a home.

[Aloysius]

did you watch the video I linked to? it was Clinton in 95 expanding a Carter bill. Bush proposed an oversight comittee specifically to oversee Fannie Mae and Freddie Mac.

now, the blame goes all around and I don't claim Bush is blameless, but in 2003 he was actually proposing something that could've helped nip this (with its roots in 95) in the bud

[CatherineM]

[quote name='Aloysius' post='1666703' date='Sep 29 2008, 10:40 PM']did you watch the video I linked to? it was Clinton in 95 expanding a Carter bill. Bush proposed an oversight comittee specifically to oversee Fannie Mae and Freddie Mac.

now, the blame goes all around and I don't claim Bush is blameless, but in 2003 he was actually proposing something that could've helped nip this (with its roots in 95) in the bud[/quote]

No, I don't watch any videos people on Phatmass post. I have low speed broadband, and videos just don't work good.

I agree there is plenty of blame to go around, it just seemed like you only wanted to blame bleeding heart Democrats, like me. I think historians will be debating the blame on this for many years to come.

[Aloysius]

well, essentially it was the Community Reinvestment Act which actually required banks to offer sub prime mortgages; that's where it started. the video I posted really is the best thing I have which compiles all the sources as to why this problem has its roots in Carter and Clinton and how Bush himself tried to stop it by increasing regulation of Fannie/Freddie et cetera

[url="http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print"]http://query.nytimes.com/gst/fullpage.html...agewanted=print[/url]

there's one of the sources shown in the video

anyway, the Community Reinvestment Act of '95 is the closest immediate cause

the housing crisis IS primarily the fault of democratic and liberal policies aimed at helping people who had no business getting mortgages to get mortgages. what I'm mostly trying to establish is that it wasn't this generic boogey-man of "bush deregularization" that let the free market run wild. these sub-prime mortgages were basically MANDATED by the government since the expanison of the CRA under clinton.

[Lounge Daddy]

[quote name='philothea' post='1666694' date='Sep 29 2008, 11:29 PM']I note you cut the part where Keller very strongly supported the bill:[/quote]
Yes, because that wasn't at all the point of my post. I was responding to the question of Depression-era calamity. And we are seeing nothing of the sort.

Yes, Irwin Kellner supported the bill. And the bill in it's original form, as requested by President Bush, was a very simple and very clear 3 page bill that gave a line of credit up to $700 billion, only to be used as needed to achieve a specific goal: to "unclog the financial markets," as Kellner put it.

Of course,[url="http://news.yahoo.com/s/ap/20080926/ap_on_bi_ge/bailout_paper_trail"] that 3 page bill became a 47 page bill [/url]within days, and then by Monday it was 102 pages. It was loaded with earmarks, because Palosi and the others in congress wanted to be sure that the entire $700 was spent. A lot of that money was earmarked for ACORN and other leftist thugs. Additionally the finished product allowed Paulson to use very broad terms for calling on that line of credit. The leadership in congress, in both parties, just do not get it.

Still, Kellner did agree with the idea of a line of credit to be used by Paulson. Of course, I think that the market should "unclog" its self. And given time, it would on it's own, and be more stable in the end.

[Lounge Daddy]

[quote name='CatherineM' post='1666708' date='Sep 29 2008, 11:47 PM']No, I don't watch any videos people on Phatmass post. I have low speed broadband, and videos just don't work good.

I agree there is plenty of blame to go around, it just seemed like you only wanted to blame bleeding heart Democrats, like me. I think historians will be debating the blame on this for many years to come.[/quote]
From a [url="http://articles.latimes.com/1999/may/31/news/mn-42807"]Monday edition of the LA Times[/url], praising bleeding heart Democrat President Clinton, for using the government to force the market to issue high-risk housing loans in the name of social justice:

[indent]Minorities’ Home Ownership Booms Under Clinton but Still Lags Whites’

By Ronald Brownstein
May 31, 1999 in print edition A-5

It’s one of the hidden success stories of the Clinton era. In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded. The number of African Americans owning their own home is now increasing nearly three times as fast as the number of whites; the number of Latino homeowners is growing nearly five times as fast as that of whites.

...

All of this suggests that Clinton’s efforts to increase minority access to loans and capital also have spurred this decade’s gains. Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat “redlining” by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws. The bottom line: Between 1993 and 1997, home loans grew by 72% to blacks and by 45% to Latinos, far faster than the total growth rate.

Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac–the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more.

In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains. It has aimed extensive advertising campaigns at minorities that explain how to buy a home and opened three dozen local offices to encourage lenders to serve these markets. Most importantly, Fannie Mae has agreed to buy more loans with very low down payments–or with mortgage payments that represent an unusually high percentage of a buyer’s income. That’s made banks willing to lend to lower-income families they once might have rejected.

...

The top priority may be to ask more of Fannie Mae and Freddie Mac. The two companies are now required to devote 42% of their portfolios to loans for low- and moderate-income borrowers; HUD, which has the authority to set the targets, is poised to propose an increase this summer. Although Fannie Mae actually has exceeded its target since 1994, it is resisting any hike. It argues that a higher target would only produce more loan defaults by pressuring banks to accept unsafe borrowers. HUD says Fannie Mae is resisting more low-income loans because they are less profitable.

Barry Zigas, who heads Fannie Mae’s low-income efforts, is undoubtedly correct when he argues, “There is obviously a limit beyond which [we] can’t push [the banks] to produce.” But with the housing market still sizzling, minority unemployment down and Fannie Mae enjoying record profits (over $3.4 billion last year), it doesn’t appear that the limit has been reached.

All signs point toward a high-velocity collision this summer between two strong-willed protagonists: HUD’s Cuomo and Fannie Mae CEO Franklin D. Raines, the first African American to hold the post. Better they reach a reasonable agreement that provides more fuel for the extraordinary boom transforming millions of minority families from renters into owners.[/indent]

Edited September 30, 2008 by Lounge Daddy

[Lounge Daddy]

[quote name='Aloysius' post='1666695' date='Sep 29 2008, 11:29 PM']... but I personally think things are going to get astronomically worse before they get better.[/quote]
And Washington will see to it that it does. Get worse, I mean.

[CatherineM]

We can look at each and every economic bill passed since FDR was in office, and the bottom line to me is that this problem is the same as the S&L crisis. Both were about GREED. There are no poor people in Congress on either side of the aisle. Poor people don't contribute to campaigns, and their votes rarely matter. These bills were being pushed by people looking for new ways to make money.

We can look for someone to blame, or we can look for bi-partisan ways of fixing it, and preventing it from happening again. We didn't learn from the S&L crisis/bailout, and we won't learn from this either if all we do is point fingers, and draw battle lines.

[eagle_eye222001]

The title of the thread is misleading. It sounds as if Republicans were solely responsible for the bill's defeat.

Reality is both parties were [url="http://www.nytimes.com/interactive/2008/09/29/business/20080929-CONGRESS-VOTE-GRAPHIC.html"]divided over the bill[/url]

Ah, good ol U.S. economy. Already [url="http://www.nytimes.com/2008/10/01/business/01bailout.html?hp=&adxnnl=1&adxnnlx=1222787003-AN1JK41TCpwISe2LwqYEcg"]bouncing back![/url]

I know it's not fully back, but its a start.

People forget that one of the negative effects of capitalism is that you go through periodic slow periods where the market corrects itself. Obviously this correction is going to be a bit bumpier than normal. Sending money to Washington is not a solution.

Vote NO. I think we should call the bluff this time.

[dairygirl4u2c]

fannie etc are only one group from the ppl geting bailed out though, so bush wanting to regulated them doens't mean he had crisis prevention in mind etc, perhaps only hand out prevention.

[quote]t was under the Clinton Administration that they removed safeguards that were put in place after the great depression for the sake of trying to help poor people get housing[/quote]

good call. this issue gets thicker and thicker as i learn more.

[Madame Vengier]

[quote name='aalpha1989' post='1666616' date='Sep 29 2008, 09:47 PM']Why are you always so sarcastic and mean?[/quote]

WHAT??? What on earth are you talking about?? When I said "Really? I didn't know that. Thanks" it was because I DIDN'T KNOW THAT and I THANKED Al for pointing out that the filters change the words even in a link, which I did not know. And for that I'm called sarcastic and mean??

Check yourself. Stop seeing things that aren't there.

[Aloysius]

[quote name='eagle_eye222001' post='1666860' date='Sep 30 2008, 12:06 PM']The title of the thread is misleading. It sounds as if Republicans were solely responsible for the bill's defeat.

Reality is both parties were [url="http://www.nytimes.com/interactive/2008/09/29/business/20080929-CONGRESS-VOTE-GRAPHIC.html"]divided over the bill[/url]

Ah, good ol U.S. economy. Already [url="http://www.nytimes.com/2008/10/01/business/01bailout.html?hp=&adxnnl=1&adxnnlx=1222787003-AN1JK41TCpwISe2LwqYEcg"]bouncing back![/url]

I know it's not fully back, but its a start.[/quote]
hahaha well... it really isn't a start so much as it is a bump during a downward trend. ppl seem to be reassured on wallstreet that the house is going to be able to push the bill through the next time and couple that with the continued artificial rally caused by the SEC's ban on shortselling (which expires thursday) and what you have is a bump along a downward slope. brilliant of course... not like we didn't just recently place a lot of expectations upon the passing of this bailout bill in congress and go into massive freefall when it didn't happen. good idea, let's rebuild expectations that it'll happen right after this Jewish newyear so we can tumult even further (because the artificial rally will be over then unless the SEC extends the ban on shortselling)

since there really isn't a basis to the gains on the Dow today, I don't think we can really consider it the basis of a recovery from yesterday. it's a catharctic rally, tends to happen the day after a panicky freefall.

[quote]QUOTE (dairygirl4u2c @ Sep 30 2008, 01:14 PM) *
fannie etc are only one group from the ppl geting bailed out though, so bush wanting to regulated them doens't mean he had crisis prevention in mind etc, perhaps only hand out prevention.[/quote]
which is why I said it's a good video except all the annoying political posturing it did. the point, of course, is that this generic "bush deregulated so everything fell apart" is wrong; bush tried to regulate two of the most significant perpetrators of the subprime problems more and was blocked by democrats. that doesn't mean bush had a brilliant plan to avoid the disaster, he didn't. McCain's attempt to reign in Fannie Mae and Freddie Mac was also not some brilliant plan that could've stopped it all, but it also shows that their plans were in the general right direction.