Bankruptcy, not bailout, is the right answer

[Bonestorm]

She's on some kick about how several prior acts did or did not cause the events of today. We can be discussing whether the bailout is good or bad but she can only post from wikipedia info on how she believes we got here.

Desh's point is perfectly relevant. The economist cites government meddling in the form of Fannie and Freddie and the CRA as the root of the problem and as a result:

The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

Pointing out that the premise is false is perfectly legitimate.

 

[Timshel]

"Learning a few things" is not sufficient reason to send us into depression, Desh. There are people here who oppose this bill who are going to lose not only their 401k, but their jobs, and then their houses in the next few years.

You are nuts.

 

[FUCK THE POLICE]

You are nuts.

I was nuts in 1928 too.

 

[cawacko]

Desh's point is perfectly relevant. The economist cites government meddling in the form of Fannie and Freddie and the CRA as the root of the problem and as a result:



Pointing out that the premise is false is perfectly legitimate.

A. I didn't write the second part.

B. I believe the other day when someone brought up something off topic you said start a new thread that it was not relevent to the debate. The discussion of this thread is whether the bill should pass or not. If she wants to talk about how we got here go start a new thread.

 

[Timshel]

Desh's point is perfectly relevant. The economist cites government meddling in the form of Fannie and Freddie and the CRA as the root of the problem and as a result:



Pointing out that the premise is false is perfectly legitimate.

She failed to do that, but CRA was obviously not the entire problem.

 

[Bonestorm]

A. I didn't write the second part.

B. I believe the other day when someone brought up something off topic you said start a new thread that it was not relevent to the debate. The discussion of this thread is whether the bill should pass or not. If she wants to talk about how we got here go start a new thread.

The topic of the thread is the content in the linked article. The quote that I have above is the central premise of the linked article. Desh was attempting, no matter how poorly, to point out that she believes the premises of the author's argument are flawed and that Fannie, Freddie and the CRA are not the root causes of the problem.

 

[Good Luck]

approximately half of the subprime loans were made by independent mortgage companies that were not regulated by the CRA and thus had no government obligation to offer credit to minorities. In the later part of the crisis, these mortgage companies made subprime loans at twice the rate of CRA banks. Another third of the major subprime lenders were regulated but had very little CRA involvement.[21] Gordon also makes the argument that the weakening of the CRA in 2004 was followed by intensified subprime lending.


Pretty easy to see I think.

But CRA helped to opened the way. Along with CRA came some adjustments to banking regulations to make CRA feasible. Without those adjustments, CRA would have failed. And without CRA, there would have been no justification for making the adjustments.

But once those adjustments were made (and other adjustments made later under both Clinton and Bush Sr.) the high risk lending market - to include sub-prime mortgages - became profitable. And once profitable, of course lenders of all types were going to take advantage of the newly opened market.

Of course, there were other factors prior to CRA. High risk lending was pushed by both republican and democratic congresses to shore up shaky economies. It is all a part of the credit economy culture we have been developing since WWII.

This is relevant to the topic because understanding the scope as well as the base cause of the crisis is paramount to determining how to deal with the crisis. Being we are dealing with something far deeper and far more entrenched than a bank failure crisis brought about by sub-prime lending, the conclusion is that avoiding the bank failure crisis is not going to fix the problem. In fact, no direct action available to the U.S. government is going to fix the problem. We are well beyond the point of "fixing" the problem. The only viable option is to let things go the way they are going to go with a major banking failure, and start over with a better economic foundation than comes from a credit economy.

 

[cawacko]

But CRA helped to opened the way. Along with CRA came some adjustments to banking regulations to make CRA feasible. Without those adjustments, CRA would have failed. And without CRA, there would have been no justification for making the adjustments.

But once those adjustments were made (and other adjustments made later under both Clinton and Bush Sr.) the high risk lending market - to include sub-prime mortgages - became profitable. And once profitable, of course lenders of all types were going to take advantage of the newly opened market.

Of course, there were other factors prior to CRA. High risk lending was pushed by both republican and democratic congresses to shore up shaky economies. It is all a part of the credit economy culture we have been developing since WWII.

This is relevant to the topic because understanding the scope as well as the base cause of the crisis is paramount to determining how to deal with the crisis. Being we are dealing with something far deeper and far more entrenched than a bank failure crisis brought about by sub-prime lending, the conclusion is that avoiding the bank failure crisis is not going to fix the problem. In fact, no direct action available to the U.S. government is going to fix the problem. We are well beyond the point of "fixing" the problem. The only viable option is to let things go the way they are going to go with a major banking failure, and start over with a better economic foundation than comes from a credit economy.

Good Luck, what kind of economy would you envision where there is little or no credit/lending?

 

[Bonestorm]

One more thing for the people that are completely anti-bailout: what makes you think the FED won't just keep bailing people out on a case-by-case basis or otherwise pump money into the current system?

One of the benefits of the bailout was that it was a systemic approach as opposed to this willy nilly ad hoc shit that doesn't work and costs, cumulatively, even more money and without any of the benefits that the bailout bill, however meager, contained.

It was a bad bill, but the alternative is worse.

 

[Timshel]

One more thing for the people that are completely anti-bailout: what makes you think the FED won't just keep bailing people out on a case-by-case basis or otherwise pump money into the current system?

One of the benefits of the bailout was that it was a systemic approach as opposed to this willy nilly ad hoc shit that doesn't work and costs, cumulatively, even more money and without any of the benefits that the bailout bill, however meager, contained.

It was a bad bill, but the alternative is worse.

Of course, they will do more of that, especially the money pumping. They pumped in 630 billion today.

I don't see benefits from the bailout plan.

 

[Good Luck]

Good Luck, what kind of economy would you envision where there is little or no credit/lending?

People would not buy things until they could afford them. The same levels of income would produce significantly more buying power because people would not be spending significant portions of their income maintaining their debt.

Not all lending would go away. Housing and automobiles would still be bought primarily on credit. But TVs, stereos, and nights out at the steak house would be purchased with available funds instead of put on revolving credit accounts. But as people save enough to buy those items, they would be purchased, plus more.

Commercial lending would and should probably be maintained at only slightly diminished rates than we see today, enabling continued development of products and services.

At first it would be a slow economy, as people would be busy paying down debt. We would face some lean years.

But within a decade or so it would pick up again - and stay high if not higher. Again, money that is currently being spent simply maintaining individual debt would be freed for purchase of goods and services. Buying power of the individual would increase over what we see today, stimulating the economy in a long term and stable manner, which in turn would stimulate steady, stable growth. With growth would come higher incomes, and higher purchasing power. Growth would not be unusually high, but it also would not go in spurts and down trends like we see today. It would be steady, reacting relatively slowly to new factors, thus adding to the overall stability. Market forces would work better because of the slowed reaction.

Best of all government would not need to be constantly involved, adjusting rates here, adding stimulus packages there, and basically adding to the instability by using positive feedback. it would naturally be a more hands-off economy needing only those minimal regulations to protect consumers from illicit business activities, and little else in the way of interference.

 

[Good Luck]

One more thing for the people that are completely anti-bailout: what makes you think the FED won't just keep bailing people out on a case-by-case basis or otherwise pump money into the current system?

One of the benefits of the bailout was that it was a systemic approach as opposed to this willy nilly ad hoc shit that doesn't work and costs, cumulatively, even more money and without any of the benefits that the bailout bill, however meager, contained.

It was a bad bill, but the alternative is worse.

So instead of a bail out bill, we get congress to pass a law preventing the feds from taking a patchwork approach. Ultimately congress controls the purse strings, including those of the fed.

 

[FUCK THE POLICE]

I am the right answer.

 

[Timshel]

So instead of a bail out bill, we get congress to pass a law preventing the feds from taking a patchwork approach. Ultimately congress controls the purse strings, including those of the fed.

Funny how so few Dems call for that kind of oversight or regulation. They only want kinds they can dream up in the aftermath to create new bureaucracies that go on virtually unchecked.