Jobs Report - Ouch
- Thread starter Bonestorm
- Start date
The real trouble is that we are at the beginning of what looks to be a really nasty upward trend, not peaking.
another famous Barny frank quote:
"These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''
Frank's fingerprints are all over the financial fiasco
By Jeff Jacoby , Globe Columnist * September 28, 2008
'THE PRIVATE SECTOR got us into this mess. The government has to get us out of it."
That's Barney Frank's story, and he's sticking to it. As the Massachusetts Democrat has explained it in recent days, the current financial crisis is the spawn of the free market run amok, with the political class guilty only of failing to rein the capitalists in. The Wall Street meltdown was caused by "bad decisions that were made by people in the private sector," Frank said; the country is in dire straits today "thanks to a conservative philosophy that says the market knows best." And that philosophy goes "back to Ronald Reagan, when at his inauguration he said, 'Government is not the answer to our problems; government is the problem.' "
In fact, that isn't what Reagan said. His actual words were: "In this present crisis, government is not the solution to our problem; government is the problem." Were he president today, he would be saying much the same thing.
Because while the mortgage crisis convulsing Wall Street has its share of private-sector culprits -- many of whom have been learning lately just how pitiless the private sector’s discipline can be -- they weren't the ones who "got us into this mess." Barney Frank's talking points notwithstanding, mortgage lenders didn't wake up one fine day deciding to junk long-held standards of creditworthiness in order to make ill-advised loans to unqualified borrowers. It would be closer to the truth to say they woke up to find the government twisting their arms and demanding that they do so - or else.
The roots of this crisis go back to the Carter administration. That was when government officials, egged on by left-wing activists, began accusing mortgage lenders of racism and "redlining" because urban blacks were being denied mortgages at a higher rate than suburban whites.
The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to "meet the credit needs" of "low-income, minority, and distressed neighborhoods." Lenders responded by loosening their underwriting standards and making increasingly shoddy loans. The two government-chartered mortgage finance firms, Fannie Mae and Freddie Mac, encouraged this "subprime" lending by authorizing ever more "flexible" criteria by which high-risk borrowers could be qualified for home loans, and then buying up the questionable mortgages that ensued.
All this was justified as a means of increasing homeownership among minorities and the poor. Affirmative-action policies trumped sound business practices. A manual issued by the Federal Reserve Bank of Boston advised mortgage lenders to disregard financial common sense. "Lack of credit history should not be seen as a negative factor," the Fed's guidelines instructed. Lenders were directed to accept welfare payments and unemployment benefits as "valid income sources" to qualify for a mortgage. Failure to comply could mean a lawsuit.
As long as housing prices kept rising, the illusion that all this was good public policy could be sustained. But it didn't take a financial whiz to recognize that a day of reckoning would come. "What does it mean when Boston banks start making many more loans to minorities?" I asked in this space in 1995. "Most likely, that they are knowingly approving risky loans in order to get the feds and the activists off their backs . . . When the coming wave of foreclosures rolls through the inner city, which of today's self-congratulating bankers, politicians, and regulators plans to take the credit?"
Frank doesn't. But his fingerprints are all over this fiasco. Time and time again, Frank insisted that Fannie Mae and Freddie Mac were in good shape. Five years ago, for example, when the Bush administration proposed much tighter regulation of the two companies, Frank was adamant that "these two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis." When the White House warned of "systemic risk for our financial system" unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing.
Now that the bubble has burst and the "systemic risk" is apparent to all, Frank blithely declares: "The private sector got us into this mess." Well, give the congressman points for gall. Wall Street and private lenders have plenty to answer for, but it was Washington and the political class that derailed this train. If Frank is looking for a culprit to blame, he can find one suspect in the nearest mirror.
Jeff Jacoby can be reached at jacoby@globe.com.
"These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''
Frank's fingerprints are all over the financial fiasco
By Jeff Jacoby , Globe Columnist * September 28, 2008
'THE PRIVATE SECTOR got us into this mess. The government has to get us out of it."
That's Barney Frank's story, and he's sticking to it. As the Massachusetts Democrat has explained it in recent days, the current financial crisis is the spawn of the free market run amok, with the political class guilty only of failing to rein the capitalists in. The Wall Street meltdown was caused by "bad decisions that were made by people in the private sector," Frank said; the country is in dire straits today "thanks to a conservative philosophy that says the market knows best." And that philosophy goes "back to Ronald Reagan, when at his inauguration he said, 'Government is not the answer to our problems; government is the problem.' "
In fact, that isn't what Reagan said. His actual words were: "In this present crisis, government is not the solution to our problem; government is the problem." Were he president today, he would be saying much the same thing.
Because while the mortgage crisis convulsing Wall Street has its share of private-sector culprits -- many of whom have been learning lately just how pitiless the private sector’s discipline can be -- they weren't the ones who "got us into this mess." Barney Frank's talking points notwithstanding, mortgage lenders didn't wake up one fine day deciding to junk long-held standards of creditworthiness in order to make ill-advised loans to unqualified borrowers. It would be closer to the truth to say they woke up to find the government twisting their arms and demanding that they do so - or else.
The roots of this crisis go back to the Carter administration. That was when government officials, egged on by left-wing activists, began accusing mortgage lenders of racism and "redlining" because urban blacks were being denied mortgages at a higher rate than suburban whites.
The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to "meet the credit needs" of "low-income, minority, and distressed neighborhoods." Lenders responded by loosening their underwriting standards and making increasingly shoddy loans. The two government-chartered mortgage finance firms, Fannie Mae and Freddie Mac, encouraged this "subprime" lending by authorizing ever more "flexible" criteria by which high-risk borrowers could be qualified for home loans, and then buying up the questionable mortgages that ensued.
All this was justified as a means of increasing homeownership among minorities and the poor. Affirmative-action policies trumped sound business practices. A manual issued by the Federal Reserve Bank of Boston advised mortgage lenders to disregard financial common sense. "Lack of credit history should not be seen as a negative factor," the Fed's guidelines instructed. Lenders were directed to accept welfare payments and unemployment benefits as "valid income sources" to qualify for a mortgage. Failure to comply could mean a lawsuit.
As long as housing prices kept rising, the illusion that all this was good public policy could be sustained. But it didn't take a financial whiz to recognize that a day of reckoning would come. "What does it mean when Boston banks start making many more loans to minorities?" I asked in this space in 1995. "Most likely, that they are knowingly approving risky loans in order to get the feds and the activists off their backs . . . When the coming wave of foreclosures rolls through the inner city, which of today's self-congratulating bankers, politicians, and regulators plans to take the credit?"
Frank doesn't. But his fingerprints are all over this fiasco. Time and time again, Frank insisted that Fannie Mae and Freddie Mac were in good shape. Five years ago, for example, when the Bush administration proposed much tighter regulation of the two companies, Frank was adamant that "these two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis." When the White House warned of "systemic risk for our financial system" unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing.
Now that the bubble has burst and the "systemic risk" is apparent to all, Frank blithely declares: "The private sector got us into this mess." Well, give the congressman points for gall. Wall Street and private lenders have plenty to answer for, but it was Washington and the political class that derailed this train. If Frank is looking for a culprit to blame, he can find one suspect in the nearest mirror.
Jeff Jacoby can be reached at jacoby@globe.com.
I can't stand Jeff Jacoby. And most of the tripe in the article above, is belied by the facts, but that's never stopped Jacoby before. I'm not inclined to debate this again (It seems that a lot of people continue to rehash the same old shit with me over and over again ad nauseum). I just direct you here:
http://www.mcclatchydc.com/251/story/53802.html
yah that's a nasty looking chart. I do think a lot is worry that this slowdown will last thru 2009. Companies are laying off in anticipation. It could be an overshoot especially if gas goes to a buck and obama infuses 700B into ready to go state infrastructure jobs. That could pull us right out of this recession.
You said it. After this morning, I absolutely cannot imagine no bailout. If Congress decides against it, they're completely incompetent.
I don't think it would be an act of incompetence, it'd be a pernicious and premeditated act of sabotage on the economy by the Republicans. And I really mean that. They need Obama and the Democrats to fail if they ever want to make electoral gains and I have no doubt that they'll do their best to make sure of it even if it means suffering among the middle and lower classes.
Cancel 2016.2
The Almighty
While I agree the bailout will likely occur and agree that at this time it probably should (though they should be bringing in new managment across the board if they are going to proceed)... bankruptcy does not mean complete loss of jobs for the sector.
Look at the airlines and the 436 times they have filed for chapter 11. They reorganize, dump debt, screw the shareholders and come right back out and do it all over again. Yet the bulk of their employees kept their jobs throughout the process. The autos would do the same thing.
I keep hearing the airlines comparison, but it's a bad one. An airplane ticket is nothing like a car. When people buy a car, it's for the long-term, with warranties & a need for consistent service. Bankruptcy will be a nail in the coffin for ailing sales.
There is so much tied to the car industry - people have absolutely no idea.
cawacko
Well-known member
Do you believe the Democratics felt different when Bush and the Republican congress were in control (for the most part) 2001 - 2006?
Chapter 11 and Chapter 7 are vastly different animals. In order to go through a Chapter 11 reorganization GM (which is the one of the big three that is most in trouble) would have to be able to secure substantial Debtor-in-Possession financing. With the current state of the credit markets, it would be virtually impossible for that to happen. Hence you have people like Mitt Romney, who would love love love to get rid of the UAW for good, arguing for a "managed bankruptcy" which at the very least would require the federal government to become the DIP lender.
In short, the auto would not do the same thing absent some sort of government assistance. Absent government assistance GM goes through a Chapter 7 liquidation which would likely result is very substantial layoffs not only at GM but through it supply chain. it wouldn't be pretty.
Cancel 2016.2
The Almighty
Your article is noting but a cop out. As Chap said, there are plenty of culprits and parties responsible.
But those private mortgage companies would not have been issuing those loans had Congress not pushed through the CRA, the Fair lending act and the repealment of Glass Steagall.
The only way those private companies could issue those loans was if they had a buyer for those loans. As they were not going to be able to hold those risky assets on their books. The main buyers of those loans? Fannie and Freddie. Just because Fannie and Freddie didn't originate the loans doesn't change the fact that they went under because of their massive purchases of the sub prime debt. Side note... Fannie and Freddie don't originate ANY loans. So to pretend that their not originating them means they are not to blame is kind of ignorant.
In the 2004-2007 timeframe (as your article states) the brokerage firms began participating in earnest as well in purchasing these subprime loans. But again, it was Congress that allowed them to merge via the repealment of Glass Steagall... which in turn eliminated natural firewalls between banking and investment banking.
Obviously Greenspan keeping rates at historic lows for two and half years didn't help matters either. A large portion of the blame can be dumped on him as well.
The individual borrowers and lenders are ultimately repsonisble for taking and making the loans. But had the government not interfered, the majority of the problem would not have occured. Between the Fed/Congress and a couple of Presidents lies the bulk of the responisbility for creating the environment
From your article....
"This much is true. In an effort to promote affordable home ownership for minorities and rural whites, the Department of Housing and Urban Development set targets for Fannie and Freddie in 1992 to purchase low-income loans for sale into the secondary market that eventually reached this number: 52 percent of loans given to low-to moderate-income families."
"Congress created the CRA in 1977 to reverse years of redlining and other restrictive banking practices that locked the poor, and especially minorities, out of homeownership and the tax breaks and wealth creation it affords. The CRA requires federally regulated and insured financial institutions to show that they're lending and investing in their communities."
Cancel 2016.2
The Almighty
which is why I stated that the government should provide the bridge loan to them. But even still as I stated, even if they filed for chapter 11, they would not be laying off 3,000,000 people as top suggested. Which was my point to him.
Another rehasher (serial). What is it with you folks? We've discussed this before. I've already addressed the bulk of the points raised above. Just go here and jump to roughly post #70 and onward. Then come back with any new questions and/or issues:
http://justplainpolitics.com/showthread.php?t=14548&highlight=economist
And blaming government for de-regulating is hilarious. I agree with you, but it is hilarious nevertheless.
If they filed for Chapter 11 and didn't get DIP financing from the government they would end up laying off lots and lots and lots of people because, regardless of how they filed, it would be converted to a Chapter 7.
Top apparently doesn't understand the difference between Chapter 7 and 11. My reading of your post was that you agreed with him by suggesting that "bankruptcy" would not result in massive layoffs and saying that the autos could do the same thing as the airlines. As it stands now, they couldn't.
Cancel 2016.2
The Almighty
No, you actually did not address the issues. You tried to pretend that you understood the article in the economist, just as you are pretending to understand your McClatchy article.
One issue you never addressed on the other thread was the fact that Fannie and Freddie WERE buying subprime debt in bulk. You pretend that the worst they were buying was A-.
SO tell us oh wise one... if that is true, WHY did they both have to be taken over by the government?
I'll start you off on the right trail... its because they bought a boat load of sub-prime debt packaged as CDO's or MBS's. The CDO's and MBS's were provided nice ratings from the bastards at Moody's and S&P (which are other culprits in this matter)... but that didn't change the fact that the underlying securities that Freddie and Fannie were buying were sub-prime.
Fannie and Freddie bought up about 50% of this debt until the 2004-2006 timeframe when that went down to 25%.... which was due to investment banks coming into the arena of CDOs and MBS's in bulk.
ALL of which could not occur without the CRA, Fair Lending act and repealment of Glass Steagall.
blackascoal
The Force is With Me
Imagine what this report will look like if the auto companies are allowed to fail?