<<The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970 . . . >>
I get it. The "ill-conceived federal policy chartered Fannie Mae in 1938" but the policy was so fatally ill-conceived that it took a mere 70 years for the whole thing to go belly-up.
<< . . . these two mortgage lending institutions [Fannie and Freddie] are at the center of the crisis. >>
Centre of the crisis, left field of the crisis, third base of the crisis - - BFD. This collapse is not even close to being limited to Fannie and Freddie. The collapse involves them AND AIG AND Merrill Lynch AND Wachovia AND Bear Sterns and many more. Blaming this all on two federal entities is like picking out two locusts in a swarm and claiming "THERE'S the problem, them two in the 2,398th and 2,399th positions in the 10,832rd line of the swarm."
<<The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.>>
Which Fannie was apparently able to hide for about 70 years and Freddie for only about half as long. Anyone with half a brain has to be able to figure out that their problems are of much more recent origin. Moreover this absurd theory completely ignores the identical fates of similar lenders and investors whose debts were NOT implicitly or explicitly guaranteed by the Federal Government.
<<Worse, beginning in 1977 and even more in the 1990s and the early part of this century, Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared.>>
Congress PUSHED to have the restrictions loosened on sub-prime lending? Seems to me there was some lobbying going on by the lenders themselves to be free of irksome Federal government restraints on their lending practices. Besides, the absence of restraints does not shift the blame for the foolish decisions made by the lenders once their restraints were loosened. Corporations remain profit-making institutions and their officers and directors remain responsible only to their shareholders for maximising corporate profits. While some blame for the failure of tightly-regulated private corporations can be assigned both to the corporate management AND the regulators, in a loosely regulated business environment, blame for failure becomes obviously more concentrated on management than on the Federal regulators.
The failure of the credit-granting institutions in America today is a failure of the capitalist system, not a failure of government regulation.<<http://online.wsj.com/article/SB122204078161261183.html?mod=special_page_campaign2008_mostpop
- The Federal Reserve. The original sin of this crisis was easy money. For too long this decade, especially from 2003 to 2005, the Fed held interest rates below the level of expected inflation, thus creating a vast subsidy for debt that both households and financial firms exploited. The housing bubble was a result, along with its financial counterparts, the subprime loan and the mortgage SIV.>>
WRONG! Wrongwrongwrongwrongwrong. The loosening of credit-granting restrictions gives more freedom of action to the lenders' managers, but it does not excuse faulty judgment on their part. Failure to evaluate risk competently is the root cause of the crisis. Because I
CAN spend all my discretionary food budget on crystal meth does not mean I
SHOULD spend all of my discretionary food budget on crystal meth.
[...]
<< Banking regulators. In the Beltway fable, bank supervision all but vanished in recent years. But the great irony is that the banks that made some of the worst mortgage investments are the most highly regulated. The Fed's regulators blessed, or overlooked, Citigroup's off-balance-sheet SIVs, while the SEC tolerated leverage of 30 or 40 to 1 by Lehman and Bear Stearns.>>
Ahh,
now we're getting somewhere. So the Republican administration and its administrators and regulators looked the other way while lenders ignored regulations that were still on the books? Why am I not shocked that a Republican administration declined to protect the interests of ordinary Americans while the Fortune Top 500's lending and credit-granting institutions made out like bandits with their homes and life savings/
[...]
<<Meanwhile, the least regulated firms -- hedge funds and private-equity companies -- have had the fewest problems, or have folded up their mistakes with the least amount of trauma. >>
Oh no! What a huge surprise!! and who do you think are the primary investors in hedge funds? What do you think a hedge fund does, anyway? It bets both ways, so it's always covered. It doesn't make spectacular profits, but it's safe and meant to be safe. Hedge funds are for folks who don't NEED spectacular profits anyway because they are already wealthy.
<<All of this reaffirms the historical truth that regulators almost always discover financial excesses only after the fact.>>
LMFAO. All it reaffirms is that when regulators don't regulate, businessmen will steal the farm and the whole fucking country if left alone long enough.
[...]
<<The Community Reinvestment Act. This 1977 law compels banks to make loans to poor borrowers who often cannot repay them. Banks that failed to make enough of these loans were often held hostage by activists when they next sought some regulatory approval.
<<Robert Litan, an economist at the Brookings Institution, told the Washington Post this year that banks "had to show they were making a conscious effort to make loans to subprime borrowers." The much-maligned Phil Gramm fought to limit these CRA requirements in the 1990s, albeit to little effect and much political jeering...>>
That is just total bullshit. The act itself can be found here:http://www.fdic.gov/regulations/community/community/12c30.html
There is no requirement anywhere in the act that it make loans to subprime borrowers; in fact, "subprime borrowers" are not even mentioned in the act. The key requirement of the act is that banks be assessed by federal regulators on a periodic basis:
" the appropriate Federal financial supervisory agency shall - (1)
assess the institution's record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods,
consistent with the safe and sound operation of such institution"
<<This is not a crisis of too little government. Any one who says it is, is ignorant, a liar or a fool.>>
More fucking bullshit. This is an obvious consequence of deregulation and almost every responsible commentator recognizes it as such. Robert Litan, who is associated with the Kauffman Foundation, a so-called "think tank" associated with two primary objectives, the promotion of education and of entrepreneurship, obviously comes to the problems of the financial crisis with the POV of an entrepreneur and represents nothing more than the entrepreneurial reaction to increased government regulation. Most of the crooks, thieves and liars who have been ripping off the American people since the days of the Keating Five are entrepreneurs, and as such are a part of the problem and not a part of the solution.
