Lois & Clark Forums Forums General Discussion Off Topic Possible reason for Wall Street crisis

Roger, look around you. Does the economy look that good to you right now?

When was the last time it looked so bad? I know that the word 1929 has been mentioned many times in the media lately.

I know that proponents of supply side economics, like you, claim that today's crisis has nothing to do with supply side economics, but instead it is a creation of Democrats, who kept interfering in the economy when they shouldn't.

Well, I'm fifty-three years old. I know enough, and I remember enough, to say say that the supply side economics was created by Ronald Reagan. All right, perhaps you could say that it was created as a theory by people like Milton Friedman, and then it was Ronald Reagan who turned it into reality, much like it was Marx who created marxism as a theory and Lenin was the one who turned it into reality. The thing is, supply side economics, with its aggressive tax cuts, didn't exist before Reagan. And it is supply side economics that has been the guiding principle of the economy that is taking a severe tumble now.

Ronald Reagan, implementor of supply side economics, was triumphant for a lot of reasons - because of his uniquely charming and charismatic personality, and because he was elected President in the most powerful country in the world by far and dared take advantage of his country's many strengths. He overwhelmed America's traditional enemy, the Soviet Union. And he did so without going too far, without starting a war.

But as Francis Fukuyama said in that article which I gave you a link to, and which you haven't commented on, it was Ronald Reagan who implemented the idea that America can lower taxes especially for rich people, and yet its government can spend beyond its means by borrowing from abroad. According to Fukuyama, it was Reagan who created the American budget deficit. Clinton, incidentally, wiped that deficit out, partly by rasisng taxes, and created a mighty budget surplus instead. But George W. Bush immediately cut taxes aggressively after he succeeded Clinton, and the budget deficit was back with a vengeance.

According to Fukuyama and many other voices that have been heard during the present crisis, supply side economics has created the current conundrum by teaching wishful thinking economics instead of teaching realism. The one enemy of supply side economics has been taxes. Balancing federal income and federal spending has never been much of a problem for the supply side, since they have argued that you can always create additional revenue by cutting still more taxes and borrowing from abroad if revenue for whatever reason isn't rising as it should.

So, yes, Roger. I argue that the current mess is evidence that your economic theory, as it is articulated by Econ 101, teaches things that are not true. I does so because it teaches that government should matter as little in the economy as possible, and the only things we need to understand about the economy is what works best for private interests. It is this kind of thinking that has ruled much of the world since the days of Reagan, thanks to the mighty influence of the United States. Unfortunately this theory is so much wishful thinking. It doesn't work. It is designed to pamper the supply side, not to worry about reality.

You say that it is the Democratic Party that has created the crisis with its unwanted interference in the affairs of the supply side. But it is supply side economics that is the new thing, historically speaking, not Democratic interference. When was an economic theory allowed to rule supreme without the slightest interference from its critics?

Supply side economics wasn't there before Reagan. Reaganomics has been so successful that the Democrats have embraced it too, more or less, although they have tried to be a little more cautious about it.

To me, however, the idea of blaming Democrats for a situation that has happened after a Republican has been President for eight years, and after this Republican President inherited an extremely strong economy with a super-strong dollar and a mighty budget surplus, is not the sort of position I can take seriously. Particularly if you remember that this mess has happened not only after a Republican has been President for eight years, but also after Republicans have ruled the country for twenty of the last twenty-eight years.

But ultimately is not that interesting to blame Republicans or Democrats. Why talk so much about individual people? People come and go. There will never be person exactly like George W. Bush again. For that matter, there will never be a person like Bill Clinton again, and never another one exactly like Ronald Reagan.

No, I think we should talk less about individual people and more about the ideas they lived by and the ideas they bequeathed to posterity. That is why Reaganomics is so much more interesting to me than Reagan himself. Reagan was successful and triumphant, yes. But Reaganomics lived on after Reagan's term was over, and it lived on after he died. It shaped so many of the rules that has governed Western economies for a few decades now. It has created stupendous wealth, at least for those who were wealthy from the beginning, and also for a few smart entrepreneurs like Bill Gates and for a few dedicated go-getters from humble beginnings. It has created a feeling that in the world of economics the sky is the limit, and anything that prevents hungry capitalists from reaching for the sky is harming the economy as a whole. It has papered over the fact that in the Western world where Reaganomics has ruled supreme, and perhaps particularly in the United States, most people have not made any economic gains at all. I recently saw a figure which claimed, I think, that the richest 1% of the American population has increased its income by 228% since 1979, whereas the median American male has hardly had a raise at all since then. The fact that most American families earn more money today than they did in 1970 is almost exlusively due to the fact that today most women are also breadwinners.

Reaganomics created a mighty and magnificent bubble that almost exclusively benefitted the rich. Admittedly it also created a festive feeling in much of society.

Now we are waking up. The bubble has burst. It proved impossible to live so much beyond ones means. Remember, too, that we have been living beyond our means not only in an economic sense, but also when it comes to exploiting nature. We are facing an ecological crisis. The climate change may or may not be created by humanity, but other ecological problems are certainly mostly man-made. A recent report that every fourth mammal is threatened by extinction says something about how humanity has been using up natural resources, leaving less and less for the other species. And, ultimately, we are going to be emptying the coffers of nature for ourselves, too.

We can't go on the way we have. Indeed, I think we are seeing the end of Reaganomics.

Ann

I haven't read the above comments and responses to the original topic (that seems like too much intellectual stimulation for me at the moment ). But I think I've figured out the reason for the wall street crisis and I can sum it up in a single word: greed.

ML

I can sum it up in another word: power. Democrats have realized for years that buying votes is the only way they have of obtaining power since their economic theories are so toxic to the economy. The attempts to eliminate redlining was solely intended to buy votes, to get as many people as possible to buy homes they couldn't afford and to use the force of government to force institutions to loan money to people who couldn't pay it back. Organizations like ACORN, the organization that employed Barack Obama, was famous for putting pressure on banks to loan to minorities. To avoid the power of government or to avoid the negative publicity that organizations like ACORN could generate, banks rolled over and gave out these bad loans, with a guarantee that Fannie Mae would buy them. Fannie Mae, in turn, would buy these mortgages, create mortgage-backed securities and label them as AAA grade, and then would sell them to unsuspecting investment banks, who didn't do enough to verify the risks on the loans.

Even you've admitted this isn't true in the past. You recognized that the dot com bubble burst under Clinton's watch in early 2000 which was promptly sending the economy into the tank. Yet you try to claim Bush was handed an extremely strong economy. The economy had begun to slide long before Bush won the 2000 elections, tax revenues had already begun to decline, and growth had already disappeared. Bush economic policies had not even taken effect yet as of October 1, 2001 (beginning of the fiscal year) and the economy was already in recession. Many were talking recession long before January 20, 2001 when Bush took the oath of office. Yet you're trying to paint a completely different picture where Bush screwed things up with a marvelous economy, one that you've admitted yourself was on the decline after the dot com bubble burst. So which is it? Was Bush handed a growing, strong economy on the rise, or a declining economy on the brink of recession? Did 9/11 have any impact on the economy as well after the transportation industry went into decline?

You're also blaming Ronald Reagan, whose presidency ended in January of 1989, yet absolving Bill Clinton, who btw lowered capital gains taxes in 1997 from 28% to 20%, which resulted in huge new flows of revenue to the Treasury? You seem to forget entirely that Reagan really WAS handed the worst economy in 50 years from the inept Jimmy Carter, who gave him 21% inflation, over 10% unemployment, turtleneck sweaters that we had to wear because we couldn't turn our thermostats above 68F, malaise, and the misery index. It was Bill Clinton who was handed a growing 4.7% economy on a silver platter despite his demagoguery about the "worst economy of the last 50 years." Nothing of any significance happened on his watch, so he was able to coast for eight years as he didn't have a 9/11 or a bubble burst on him, let alone two that hit President Bush, both of which formed during the Clinton years. Clinton even had the benefit of the "peace dividend" where he sliced a hundred billion from the defense budget, something which we didn't have the luxury of doing after 9/11. It was supply-side economics that had to save the economy from the disasters of Carterism and the dot com bubble, which I'll repeat again I do not blame Bill Clinton for. I don't see you knocking Bill Clinton for either bubble forming on his watch, though, yet you hit Bush for a bubble that began to form before he entered office.

I remember back in 1998, right after I left San Diego, I had just sold my house there to move to the northwest. I had sold my house for about $210,000 for a 1600 sq. ft. attached home. Two years later, my friend who had bought the house, had resold it for about double the price he had paid for it. The bubble was real and it had already begun to form during the Clinton Administration. I know that because I was kicking myself for not being able to hold onto the house for even one more year to reap the gains I would have gotten. Unfortunately I didn't have the money to keep it while getting a home in Oregon at the same time. While I don't blame Clinton for the dot com bubble, I do blame him strongly for the real estate bubble as his Justice Department threatened companies who didn't give out bad loans. So again, how is Bush to blame?

I still haven't seen a shred of evidence from the other side how President Bush could be in the least responsible for the real estate bubble and the current financial disaster while I've provided ample links and evidence showing how the president had recognized a problem and was stymied every way possible by people like Barney Frank, Christopher Dodd, and other Democrats. We even have an article from the New York Times from September 11, 2003 that showed when Treasury Secretary John Snow and President Bush pushed for a radical overhaul of the oversight over Fannie Mae and Freddie Mac. We also have John McCain's floor speech from 2005 warning about the danger Fannie Mae and Freddie Mac presented to the economy if something isn't done to reform them. The same cast of characters, at the threat of a filibuster, stopped all action in the Senate where it had passed out of committee on a party-line vote. The bill had already passed the House.

The same bill was presented in 2006 after Democrats took control of both houses. It never even got a committee vote. Where's your outrage at Democrats, first for lining their own pockets at the expense of taxpayers while committing fraud at Fannie Mae, then for stopping any and all attempts to rein in these out-of-control GSE's? instead we get another broadside at supply-side economics, which has only succeeded in saving the economy twice, first in 1982, then again in 2002.

We know FHMA/FHMC (Fannie Mae/Freddie Mac) were the root cause behind the economic disaster. Those were run by Democrats where Democrats raked in millions through fraud and deceit. Did you know Barney Frank's significant other, Herb Moses, was a top executive of Fannie Mae at the same time he was chairman of the Banking Committee overseeing them? Can we say conflict of interest?

So we have lots of evidence that Democrats are solely responsible for the financial disaster, so I don't buy it when you're trying to blame President Bush and his policies, which tried to stop it. Nobody here or in the mainstream press has been able to point the blame at President Bush or any of his policies outside of a generic wave at the term, "deregulation," without ever saying how deregulation could have caused this problem. I can name names and say what they did. Can you do the same?

Even in tonight's debate, Obama, who fiddled while Fannie Mae burned while pocketing more money from Fannie Mae than anyone except Chris Dodd despite his short tenure in the Senate, tried to again blame Republican deregulation without any support whatsoever. Finally McCain started to name names, though it was so early in the debate that I doubt anyone would remember it. What needs to happen now is to tell the truth over and over until the press is forced to face it and forced to report on it. Time will tell if there's enough time to save us from the disaster Obama will be if he wins. Like the Smoot-Hawley Act, an act of protectionism that turned a recession into the Great Depression, Obama will try to raise taxes, which could plunge the globe into another depression.

My jaw dropped at this one. I think you'll find hatred of Reaganomics, not an embrace, if you talk to any Democrat. I think you'll find that most Democrats will experience the same jaw drop at this statement.

As for Fukuyama, he has some interesting things to say. But he is wrong in two parts. No where in supply-side economics does it say you spend until the cows come home. Conservative economics, not supply-side (which does not address government spending at all) requires spending to be cut and not the phony cuts Washington uses with its current services baseline budgeting which takes 8% increases and somehow defines it as a cut. The Republicans in control of Congress from 2003-2007 (they only controlled the whole thing for four years as the Dems held the Senate in 2001-2003) angered their own constituents by acting like Democrats in spending. That's why so many conservatives were so angry in 2006. Turnout was heavy even among Republicans, who came out in 2006 to fire the GOP for breaking their word.

Fukuyama was also wrong that Clinton's tax increases balanced the budget. He was handed a growing 4.7% economy. Right after his retroactive tax increase, growth basically stopped. In the quarter afterwards, growth was registered at 0.7%. The economy stagnated until roughly late 2004, early 2005 when the dot com bubble began to form in earnest, and also coinciding with the rise of the GOP Congress, which held down spending. They were actually conservative back then. The budget did not balance until 1999, several years down the road after the economy had fought off the negative effects of his tax increases and not until after Clinton signed a very large capital gains tax cut passed by the GOP Congress in 1997 at the urging of Robert Rubin. The tax cut produced enormous revenues, helping to balance the budget. Since you are someone who doesn't believe in supply-side tax cuts, how can a huge capital gains tax cut result in a balancing of the budget? If you were correct, that tax cut would have blown a hole in the budget.

I give Bill Clinton a lot of credit for being pragmatic. He has never been dogmatically liberal, so he was able to be convinced to sign that tax cut. Where's Fukuyama's analysis of that tax cut?

As for tax cuts being self-financing, they have shown that to be the case. Revenues poured into the Treasury between 1982 and 1989, doubling from $500 billion to over $1 trillion. In 2004, the economy grew an astounding 6.4%, due to Reagan's economic policies, helping Reagan win 49 states in his re-election bid (He only lost Minnesota and I guess the other seven states that Obama says we have but hasn't visited yet). I've already shown that a large capital gains tax cut in 1997 preceded the balancing of the budget in 1999. Revenues also increased between 2002-2006 as the deficit that resulted from the dot com bubble and 9/11 was cut in half, yet no taxes were raised. The capital gains tax rate was cut even further from 20% to 10% or 15%. So how did Bush cut the budget deficit in half without raising taxes and without cutting spending and by cutting capital gains taxes, I ask? In fact, that was the height of spending on Iraq. By your criticisms of supply-side, that should not be possible. You can say that the economy was doing well and you would be correct and would therefore be validating supply-side economics, which grows the economy. Supply-side tax cuts do not create more tax revenue in a vaccuum. They expand the economy so that additional tax revenues are generated because of it. You have the cause right, but the effect wrong. The direct effect of tax cuts is not more revenue. That is a side-effect of the growing economy.

Don't believe me on the effect of capital gains tax cuts? See here . Reducing the capital gains rate from 20% to 15% somehow resulted in a doubling of revenue to $110 billion. Note the part about the rich paying a higher share than ever. Every time we have a supply-side tax cut, the share of taxes paid by the rich goes up, which I'd think liberals would support.

In 2006, things began to go south as Clinton's real estate bubble began to burst. With Democrats in control of Congress, though, the only thing that got passed was a demand-side tax cut that I predicted would do nothing for the economy. And I was absolutely right. I'm sure you remember I predicted that. With Democrats continuing to hold Congress into 2009, the odds of a supply-side tax cut are near zero. If Obama gets in office, we'll see how his tax increases strangle the economy.

So, history does match theory. When taxes are cut, revenues rise because of a growing economy. The budget doesn't always balance, but much of that has to do with spending.

How strong or weak was the economy that Bush inherited from Clinton? Check out the link that Alcyone posted here earlier. Scroll down a bit and you will find a graph showing how the American economy has been doing on average during the last forty years, in terms of federal outlays, revenues and deficit, between 1968 and 2008, as percentage of GDP. You can see from this graph that the American economy was really exceptionally strong during the Clinton years, far stronger than during any other part of this forty-year period. By contrast, America was really very much running a deficit during the Reagan years. As for the deficit/surplus graph, Clinton inherited a bad deficit, but during his term the deficit was eliminated and turned into a strong surplus. Take a look at the graph. It shoots upward like an arrow almost all throughout the Clinton years. Doesn't it show how magnificently strong the American economy was when Clinton was President?

And look at what George W. Bush did to the economy. No, he didn't leave it in the worst shape it has been during the last forty years, if the estimated figures for 2008 turn out to be correct. And that is a big "if" indeed. Chances are that the economic situation will be a lot worse than what was predicted when this graph was made. But in any case, no President has done so much damage to the economy during the last forty years as George W. Bush, if we think of how strong the economy was when he took office and how much it deteriorated in terms of deficit during his Presidency. Again I'm reading this from the graph.

So think again, Roger. Yes, the dot com bubble started during the Clinton years. It was, all things considered, a somewhat bad bubble, but not a historically bad one. It wasn't in any way comparable to the housing and banking bubble we are seeing now.

Or if you think it was, Roger, why don't you find statsistics proving that it was?

Ann

So let me explain what I mean. I mean that even Democrats automatically start talking about tax cuts as soon as they need to fix the economy. Never mind that a tax cut most definitely risks leading to decreased revenue and less money for things like pensions and Medicare and other kinds of support and help to people who don't have enough. But those who already earn a lot of money will certainly benefit from tax cuts for the rich. Or, as Jesus said in Matthew 25:29:
That is how tax cuts for the rich works. But today even Democrats think that tax cuts is the big Solution, with a capital 'S', to the problems of the economy.

Ann

You keep blaming Clinton for everything that went wrong in the economy - indeed, you put all the blame on the Democrats. So explain this to me. When George W. Bush was elected, he had a solidly Republican Congress to work with. Why couldn't he fix any of the problems that you insist that Democrats had created all on their own? Or are you telling me that Republicans are so powerless, so paralyzed, that they can't do anything at all to rectify what the Democrats messed up, even when they, the Republicans, at least nominally had all the power?



What, you mean I should do something about the situation just because I know what the problem is and just because I have been elected to deal with things?

Ann

Here is an interesting link to a Fox editorial on last Thursday's vice presidential debate. The most interesting part of it to me was the allegation that FactCheck.org failed to comment on several of the allegations from Senator Biden. It makes me wonder how non-partisan FactCheck really is, or if Fox News is that biased towards McCain and Palin. If the latter is true, it would be the first time I've noted it, since the commentators on the network spend much of their air time telling McCain what he's doing wrong.

Ann, once again, you continue to slam the Bush Administration with absolutely nothing to back it up. You immediately discount the disappearance of trillions of dollars of wealth as all the major stock indices lost anywhere from 40-60% of their value in 2000 and expect it has no effect on the economy. That is a remarkable statement to make. You claim tax cuts were responsible. Well, where's the proof?

Here's the GDP by quarter as you wanted to see:

GDP By Quarter

You'll see that in 1999, GDP growth was rather astounding. First, the dot com bubble was reaching its height and was just about to pop in early 2000. Second, growth was being fueled by a capital gains tax cut, which I noticed you've ignored as well since it conflicts with your theories. That capital gains cut, by all your theories, should have blown holes in the budget and would cripple growth. Yet between 1997 and 2000, we had pretty decent growth.

Fast forward to 2000 before George W Bush took office.

The first quarter had 1.01% growth.
The second quarter had 6.28% in real growth. The bubble popped in the second quarter with the height of the stock market in March 2000.
The third quarter growth was -0.46%. Yeah, no effect from the dot com bubble here since we only lost nearly 7% annualized growth in one quarter.
The fourth quarter growth was 2.08%, a slight recovery.

Now let's go to 2001. Bush took office in January 2001 but his policies were not implemented until October of 2001 since government fiscal years run from Oct. 1-Sept. 30. So in Jan-Oct. 2001, we were operating under Clinton's last budget.

The first quarter showed -0.49%. Again, no measurable impact from the dot com bust, right? You can't even blame the Bush tax cuts since they weren't even voted on until the end of May, more than midway through the second quarter.
Second quarter showed 1.23%. A slight improvement, but still pathetic compared to the 6% quarter we had just as the bubble burst.
Third quarter showed -1.41% decline in real GDP. Hmm, what happened in the third quarter? A couple of planes crashed into a couple of New York buildings and another into the Pentagon, killing 3000 people and crippling the nation's transportation industry as over a million jobs disappeared. According to you, this was due to Bush economic policies and not Osama bin Laden. But wait, Bush's policies had only started to go into effect, a few weeks after 9/11 and hadn't had time to work yet. The third quarter encompasses July 1-September 30, while Bush's economic policies took effect on October 1.
Fourth quarter recovered to 1.58%, which encompasses Oct-Dec, where Bush policies took effect on Oct. 1. It seems a recovery is underway from the hit we took from 9/11, a reversal of 3% from the previous quarter. One quarter by itself is not a trend, but subsequent quarters show an increasing recovery.

From the data I see, it's pretty plain that the dot com bubble bursting had a significant effect on the nation's economy that you simply blame on President Bush, but HE WASN'T IN OFFICE YET. Still think the dot com bubble was just some minor thing where a couple trillion dollars here or there make no difference? Where's the roaring economy you claim Bush inherited from Bill Clinton? Between third quarter of 2000 and third quarter of 2001 under Clinton economic policy, the economy grew a "staggering" 0.59%.

Once again, you exonerate the Democrats from the current financial disaster without a shred of proof. You also claimed Bush had a solid grasp on Congress during his term. Well, let's see if that's true. In 2001, Senator Jim Jeffords (VT-I) jumped ship on May 30, 2001 and turned control of the Senate over to Tom Daschle and the Democrats. Democrats held a 51-49 effective (including Independent Jeffords) majority whereas before the GOP held nominal control with a 50-50 margin with only Dick Cheney casting the tie-breakers. Nope, no solid control there. In 2002 elections, Republicans gained two seats and took control of the Senate with a razor-thin 51-49 margin, far shy of the 60 votes needed for solid control due to Senate rules that give much control to the minority. In 2004, the GOP won four seats in the Senate to have a 55-45 majority. That's a decent majority, but still not enough to stop filibusters. It was during this time that Christopher Dodd and company killed McCain's bill that would have reformed oversight on Fannie Mae/Freddie Mac. The bill passed the House but failed to reach the floor of the Senate with Majority Leader Bill Frist knowing the bill would be filibustered. In 2006, the GOP lost control of both houses of Congress.

So, you postulate that Bush had solid control of Congress. By my count, he had a minority in the Senate for half his eight years, a minority in the House for 2 years, a razor thin majority in the Senate by 51-49 for 2 years, and decent control of 55-45 for 2 years. Again, your accusations hold no water, especially since he had a minority in the Senate in most of his first two years in office, contrary to your claim that "When George W. Bush was elected, he had a solidly Republican Congress to work with." Wrong again. A 51-49 Democrat majority in the Senate doesn't qualify as "solidly Republican."

I also took a look at the House majority in 2001. Republicans controlled 222 seats (incl. one independent), Democrats controlled 212 seats (incl. one independent), and there was one vacancy. The GOP had basically a five seat majority in a body with 434 seats occupied. Again, "solidly Republican" it was not.

As for Bush having a terrible economic record, let's take a look at this piece from the Wall Street Journal:

Bush Has a Good Economic Record

I guess the usual disclaimer would be that naturally, Factcheck, Politifact and the Washington Post's factchecker are not perfect. They get corrected and updated quite a bit (how often can you say that about editorials, articles, though), which is why it's good to keep checking them and to email them when something is off. My own experience has been seeing stuff getting worked out and corrected on partisan sites (left and right) waaaay before it hits any of the non-partisan sites.

Still, I think mistakes and a lack of non-partisanship are two different things (disclaimer: not saying anyone went there).

Also I'm not sure the coverage of one debate is convincing enough to challenge Factcheck's neutrality. By neutrality, I need to state, I mean in comparison to other sources where partisanship is more frequently questioned. Fox being a case in point.

I'll say it--it's difficult for me to disregard Factcheck in favor of an editorial by a known conservative writer on Fox (how much are conservatives inclined to trust NYT's Paul Krugman?). I imagine if I cited Media Matters to refute the errors Factcheck found in Obama-Biden speeches, others would be equally skeptical.

I've actually heard of Factcheck being accused of being biased before, by the right. Interestingly enough, some from the left have accused Politifact of partisanship as well. And Washington Post's Dodd, gets regularly slammed by pretty much everyone.

Let me put it this way: I just can't imagine doubting any other sources less than I doubt these, especially not in this polarized environment. YMMV



On Pro-McCain/Palin bias on Fox:

Oh? Really? As for me, I\'m not so sure Fox lives up to its slogan

Don't get me wrong it was my impression though that commentators on Fox did criticize McCain in last night's debate, but to me it had echoes to how conservatives have criticized him as well. So imo, it has very little to do with fair and balanced. As I said before, a person's milleage might vary.

alcyone (who cannot wait for the election to be over so she can go back to getting her news from TDS)

Poor Bush. He had a razor-thin majority against him in the Senate for a whole year. And he had a slim majority of only ten Congressmen for him in the House for only six years. How on Earth could the poor man get anything done at all, when Congress was so much not for him?

Like you said, no wonder that the reform of Fannie and Freddie didn't happen since the evil Democrats had decided they would stop it by filibustering. The Republican controlled the Senate by 51-49, and the bill had already passed the House, but the super-powerful Democrats stopped it all by threatening to filibuster!



How can we expect this big man to win when the small man is against him?

Tell me, Roger. Since you know about McCain's brave battle against Fannie and Freddie and I don't, can you explain to me why the Democrats didn't want to pass McCain's reform? Did they say, "No, we want Fannie and Freddie to keep on giving crazy subprime mortgages to people who are sure to default on them, and we want Fannie and Freddie to sell those bad mortgages as assets and allow those 'assets' to fester and blow up and take the rest of the economy with them!"?

Tell me. The Democrats must have disliked McCain's proposed reform for some reason. What was it? Was it simply that the Democrats are going to oppose anything that a Republican proposes, and they will filibuster until they are blue in the face just to make the Republicans lose?

I think it would be a very good idea to find that McCain proposal and the Democratic reply. If the Deomcrats said anything like what I have suggested above and that becomes common knowledge, then that must be the best reason to vote for McCain in November that I can think of. Because it isn't possible that that the Democrats voted against other things that came attached to that McCain proposal, is it?

I looked at that Wall Street Journal article you gave us a link to. This article compares the U.S economy during the Bush era with the economy of other countries. But it is an extremely well-known fact that the United States has for a long time been the world's economic superpower. What I have tried to discuss is how the younger Bush economy compares with the Clinton economy, which is something the WSJ article doesn't talk about at all. Well, the article does say that Bush will leave to his successor an economy 19% larger than the one he inherited from Clinton. However, Roger, may I suggest that much of that growth has been the mad swelling of a bubble? You keep saying that the U.S. economy grew during the clinton years thanks to tax cuts and the dot com bubble.

When the economy grew during Clinton's presidency, it was a bubble. But when the economy grew during the younger Bush's presidency, it was all because of his wise tax cuts.

Ooops, where did that bubble come from? Oh, now I know. It came from those filibustering Democrats. Of course.

Ann

To state the biases of the Fox News panel, Fred Barnes and Bill Kristol are conservatives as they are the co-editors of the Weekly Standard. Morton Kondracke of Roll Call (the Capitol Hill newspaper) and Nina Easton of Fortune Magazine are liberals. Brit Hume is also a conservative. Charles Krauthammer is partly liberal, mostly on social issues but partly conservative on international issues. Overall, I wouldn't know where to place him.

It's a refreshing change from the typical 4 liberals to 1 weak conservative on the other news channels.

I bet. I feel the same way about MSNBC. Well, reversing some stuff, of course.

Would never call it unbiased, however.

alcyone

Still can't refute anything I say, Ann?

I've already covered this ground, it seems like zillions of times. But I'll do it again if you wish.

The reason the Democrats opposed reform of Fannie Mae and Freddie Mac is because they wanted to continue promoting home ownership among the poor and minorities, knowing many of those people would never have been able to afford their mortgages. The reasoning behind that is that they wanted power. That is how Democrats buy votes. Fannie Mae was also their private piggy bank, complete with hundreds of thousands of dollars in campaign donations. Whenever Republicans proposed these bills, they would be slandered by the Democrats with their usual class warfare rhetoric claiming that Republicans only wanted to keep poor people and minorities from owning homes. They are still doing it today. Just listen to what Barney Frank is saying all over the airwaves.

Frank says GOP housing attacks racially motivated

Around the web, you can find direct quotes from various Democrats like Maxine Waters, Barney Frank, and others saying there was nothing wrong at all at Fannie Mae. Maxine Waters even praised Franklin Raines for his wonderful leadership at Fannie Mae, all while Raines is bilking the taxpayers of $90 million through fraud and deceit. Then instead of acknowledging problems, they attacked the regulator who was warning of the dangers.

Let's listen to these Democrats and Republicans in their own words, with the Republicans asking repeatedly for oversight and the Democrats claiming there's nothing wrong:

YouTube video

Here is the bill that McCain co-sponsored and the text of his warning to the Congress that the American people were exposed to significant dangers due to Fannie Mae and Freddie Mac:

Federal Housing Enterprise Regulatory Reform Act of 2005

You were the one who brought up the inaccurate claim that Bush entered office with a "solidly Republican Congress" and then get hostile when proven wrong. I'm simply responding to what you said. All I said was that Democrats stopped the bills through the use of filibusters, which is true. Oh, and just to correct what you said here, he had a razor-thin majority against him for four years, actually, not one. Remember it was Democratic majorities of 51-49 for 2001-2003 and 51-49 in 2007-2009 with a window where Republicans controlled the Senate by 50-50-1 between January 20, 2001 and May 30, 2001.

Apparently you don't understand the power of the filibuster, which requires a 60-vote supermajority to cut off debate. That's not surprising since you're not an American. It's an unusual parliamentary rule. Under Senate rules, debates are unlimited in length and can only be terminated by a cloture vote, i.e. a 60-vote majority. This rule does not exist in the House of Representatives.

The prime example of the use of the filibuster is with appointed federal judges. Democrats used the power of the filibuster to stop numerous federal judicial appointments even though the candidates had majority support. They were opposed merely because they were conservative. Just look at judges like Charles Pickering who was called a racist despite risking his life in prosecuting a member of the KKK and having the endorsement of the Mississippi NAACP, or Miguel Estrada who was opposed because he was a conservative Hispanic (a Democratic memo was discovered indicating that they had to stop Estrada at all costs since he was Hispanic, which threatened their hold on the Hispanic vote), all highly qualified judges with top ratings from the American Bar Association. Appointees often waited for years and never got a vote on the floor because of threatened filibusters. Neither Pickering nor Estrada ever got a vote on the floor despite being voted favorably out of the Judiciary Committee several times in several different Congresses. A determined minority of 41 Senators can stop pretty much anything on the floor of the Senate.

Interesting, Roger. I don't have time to check out those YouTube videos now, because I have to rush off to work in about five minutes, but I checked out that bill that McCain co-sponsered. I certainly agree with the concerns he voiced there.

I noted that in the article about Barney Frank that you posted a link to, Frank was reported to say this:

Is there any truth to that claim? Maybe I should ask Alcyone, who, I must say, is going to extremely great pains to listen to both sides and be as unbiased as possible. No one else here comes close to her approach. So how about it, Alcyone? Is there any truth in what Barney Frank said in that article?

Me, I'm wondering why Democrats would wield the filibuster weapon just to defeat a bill that might hurt poor people and black people. Let me put it like this. In the United States, between 50 and 60% of those eligible to take part in national elections like the upcoming one actually vote. That is a really low figure compared with many other Western democracies. Among those who rarely vote in America are the poor and the black. So how much would Democrats really gain from hauling out the filibuster weapon to defeat a bill that would only harm the interests of people who are not likely to vote anyway?

I can't help thinking that the Democrats must have had a better reason to fight so hard to defeat McCain's bill. And if they did fight so hard, they must have said something about it. Roger, you said,

Bill Frist, the Majority Leader of the Senate and a Republican, knew that the bill would be filibustered? How did he know? What had the Democrats said?

How about it? Is there anyone here who isn't dead set against the Democrats from the beginning who can explain that to me?

Ann

The video was taken from House committee hearings and not from the Senate, but the opposition was essentially the same.

You'll see many Democrats complaining that there's nothing wrong with Fannie Mae and Freddie Mac and criticizing the critics. They're not complaining about the contents of a bill, but rather that the problem doesn't exist.

The reason why the Senate bill is highlighted is because one of the co-sponsors was John McCain, who showed foresight that a crisis was pending and tried to do something about it. Meanwhile, Obama, who was completely silent on the issue, blames McCain for causing the crisis through rampant deregulation. The video should settle the argument about who was really for regulation and who was for deregulation of FHMA/FHMC, the primary instigators of the failed subprime lending market.

I would also suggest searching for Countrywide Mortgage, one of the biggest lenders of subprime mortgages, who gave numerous sweetheart deals to prominent Democrats like Christopher Dodd and Jim Johnson, head of Obama's VP selection committee. These guys had a big incentive to keep the subprime mortgage market going as they were lining their own pockets with campaign cash and loans none of the rest of us could get.

Here's a link to Democratic Senators Chris Dodd's (D-CT) and Kent Conrad (D-ND) sweetheart deal with Countrywide:

Senators Appear to Be Friends of Countrywide

Here's one for Jim Johnson:

Sweetheart loan flap sends Obama vice president-vetting aide packing

And another for Jim Johnson:

Top Talent Scout for Obama Tied to Subprime Lender

And one for Barack Obama, who got another sweetheart deal:

Obama Got Discount on Home Loan

The Democratic corruption runs deep. And the cost of these sweetheart deals and the protection they gave to Fannie Mae/Freddie Mac is $2 trillion in lost pension funds and 700,000 jobs and counting. When Obama talks about failed economic policies, he should be pointing a finger at his own party, not at President Bush.

As for Frank's comment about unregulated entities, nobody really knows what he's talking about. There are no unregulated entities that are permitted to issue mortgage loans.

Alcyone? I would really appreciate hearing from you regarding why the Democrats threatened to filibuster MCain's bill, if indeed that was the case. Do you know, for example, if Factcheck has any information about it?

Ann

Wow! Sorry, I can't resist this. Thomas L. Friedman, who used to be fairly Bush-friendly in the beginning of Bush's presidency, comes out here in favor of taxes in a way I find totally refreshing!

Ann

My toughest days are Wed to Thurs so I haven't had time for a comprehensive post (I will after I get out of work today)--especially because it entails digging through legalese. The circumstances around the bill are really murky and do suggest that people fell along party lines(I need to dig, because what happens in the House not what happens in the Senate, etc.) where lobbying and fear of making constituents angry was an issue. I will post links later with more details.

That said, the use of that argument to blame the Democrats for the entire financial crisis is as much an oversimplification as blaming deregulation exclusively. Factcheck weighs in:

Who Caused the Economic Crisis?

So I was wrong in jumping to the conclusion that deregulation was to blame as the end all (a partisan moment ). It's not. Neither is the Dems' opposition (more on that later) to the bill. That was a mistake, true, but not enough to pin the blame for the financial crisis on the Democrats on anything other than partisan grounds--especially considering White House opposition (more on that later as well). There is plenty of evidence that Fannie & Freddie were just the tip of the iceberg in a perfect storm.

Factcheck concludes:

Lastly, I don't feel comfortable posting without challenging the idea that minorities and the poor should get the brunt of the blame, which is unsettling to me on so many levels. But I'll let the lefties at Newsweek respond.

Be back later,

alcyone

FactCheck falls down on this by saying that Dems aren't to blame because the bill didn't reach the floor of the Senate. They didn't bother to explain why it didn't reach the floor. I've read that article several times over the last few days and it basically exonerates them because it didn't reach the floor, saying they didn't have the chance to oppose the bill, but fail to explain that it was Democratic opposition that essentially shelved it with Frist knowing it couldn't pass filibuster. This is a common occurrence where the mere threat of one is enough to kill a bill. From things I've read, and I can't confirm it since it came from non-news services, is that the leadership was one vote short of cloture with only four Democrats in support of shutting off debate.

Filibusters aren't the same as they used to be back in the days of "Mr. Smith Goes to Washington," a wonderful movie, btw. In the old days, an active debate had to actually happen. Senators would stand up and tell stories or read from the phone book just to keep debate going. Now, all you have to do is say there's a filibuster and there is one, while they all sit in their comfortable offices. No actual debate needs to occur. It used to be the case that the requirement for 24-hour real debate would kill a filibuster. Unfortunately, that's not the case today. Several years ago, the GOP tried to change those rules for filibuster to make it easier to break them (back when the controversy was the filibuster of judicial appointments) but couldn't muster the 60 votes necessary to change the rules. Eventually we had the Gang of 14 to get around the matter.

FactCheck failed to dig deep enough, which apparently isn't the first time if Terry's link is any indication as they missed quite a few of Joe Biden's whoppers, especially his total ignorance on the role of the vice presidency. He's been in the Senate for 36 years and doesn't know what the President of the Senate does? And he doesn't know the difference between Article I and Article II of the Constitution? Meanwhile, the newb got it right. How does the Chairman of the Senate Foreign Relations Committee make the mistake that "France and the US kicked Hezbollah out of Lebanon?" Huh? When did that ever happen?

I'm disappointed they didn't dig further, leaving a gaping question that they failed to answer. Why would a bill with majority support with four Republican co-sponsors die in a Senate controlled by Republicans with a 55-45 majority? The fact that they failed to look into it is a wonder. The answer is obvious to anyone who's studied how the Senate works but the fact they didn't say is strange. The fact that the bill was brought up again in 2007 and failed to get a committee vote in a Democratically-controlled Senate should tell you who really stopped the original bill.

Fannie Mae and Freddie Mac also participate in approximately 80% of the mortgages in the country and roughly 40-50% of subprime loans. They essentially encouraged bad loans from lenders with the promise that they'd buy them up and package them into marketable securities. Then they'd resell them to investment banks who trusted the AAA rating they slapped on the securities. It's the fault of the investment banks for not checking further, but if you can't trust a AAA rating, then what can you trust these days?

Alcyone, why would the poor or minorities be blamed?

Alcyone, thank you very much for your information. Of course it makes perfect sense that the Democrats wouldn't be blameless. A crisis this large must percolate for a while to really burst open, and that alone guarantees that some of its roots must be found in the Clinton era.

Anyway, I think that the very idea that mortgages must be given to poor people is in itself a sprout from a Reaganomic tree trunk. It starts from the idea that private ownership is always the best thing and should be fought for by politicians, and it differs from standard Republican thinking by insisting that poor people, too, should be able to own their own house. The Democrats tried to use the idea of private (home)ownership and make it work for poor people too, which I find commendable. On the other hand, one of the things I have tried to say in this debate is that the Democrats have taken over many Republican ideas. Instead of asking themselves how society can be improved if a little more collectivism is used and a few more taxes are raised, they asked themselves how privatization could work for the poor, too.

I thought that the Newsweek article (or opinon-piece or whatever) that you gave us a link to was excellent. It is so easy to blame the poor, when it was really the big loan sharks that turned bad loans into supposed assets and sold them to others as assets, who in turn sold them on to others at a profit, making the whole economy rest on clay feet.

I appreciate how that Newsweek article points out that the law that the Democrats pushed through didn't force anyone to act recklessly when giving out mortgages. Those who did act recklessly did it because they could make a profit that way.

Another great thing about that Newsweek article is that it points out that poor people usually pay back their loans, assuming that the rent they have to pay doesn't suddenly rise shaply. In Swedish newspapers, that has been described as an important reason for the crisis: a lot of people were forced to default on their subprime loans, because the interest rate suddenly rose so much. Anyway, again according to Newsweek, it is usually the rich people that play fast and loose with their money. And not only with their own money, but with other people's money as well.

Roger criticized Factcheck for not delving into the filibuster issue. To me, that is what I find so puzzling in the first place, that the Democrats should threaten the Republicans with a filibuster if they didn't drop McCain's reform of Fannie Mae. From my Swedish horizon, I have gotten the impression that filibusters happen extremely rarely, but it is also uncommon that the minority party can force the majority to drop a bill by threatening a filibuster. That is why I think that if the Democrats really did that on this occasion, their move must have raised more than a few eyebrows, and there should be ample records of this rare occurrence. In other words, it should be comparatively easy to find if a filibuster was threatened, and it should also be easy to find records where the Democrats explain why they took this rare step.

Roger, you are the one who insists that there was a threat of a filibuster. Please point me to one video or one written source where this can be verified. If at all possible, please point me to a source where the Democrats explain their reasons for their filibuster threat.

Let me add one more thing. It seems to me that many Republicans insist that the crisis is almost all about Fannie Mae and Freddie Mac. That seems to be a very partisan position to me.

Ann