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> Everything you say is accurate except the insinuation that Democrats are mostly at fault. George W. Bush was in office for the worst of it In this matter, B

by anamax 17y ago

> Everything you say is accurate except the insinuation that Democrats are mostly at fault. George W. Bush was in office for the worst of it In this matter, Bush's sins are sins of omission - as you point out, he didn't do anything. Dems did something, but what they did was wrong. For example, they actively protected Fannie and Freddie. Those are sins of comission. Note that Bush didn't change the regulatory structure - he went with what Clinton left him. Again - omission vs comission. It's the difference between manslaughter and murder. And, that's ignoring ACORN's role. Among other things, they picketed banks that didn't make enough loans to folks who couldn't afford them. They tried to intervene with regulators. And so on. Yes, Bush might have been able to keep this from happening, but he would have been fighting Dems the whole way. He didn't fight. They pushed bad policies. There is a difference. And, I note that Barney Frank is still in office and Gorelick, among others, are in the Obama administration. Bush? Not in office.

btilly 17y ago
There is plenty of blame to go around, but one of the biggest mistakes leading up to the financial crisis was significantly lowering the amount of cash reserves the investment banks needed to keep on hand. That happened on Bush's watch with Republicans in charge of every branch of government. And the revoking of Glass-Steagall under Clinton? That was introduced by Republicans in both the House and Senate, with the Senate vote being almost entirely on party lines. Yes, Clinton signed it, but it was a Republican bill.
- grandalf 17y ago
  As for the issue of reserves, I think if you make the argument you are making you have to state what you think the optimal reserve requirement is. If the recent crisis had been a bit smaller, existing reserve levels would have been fine. If the crisis had been a bit bigger, then it's not certain whether even the previous reserve requirements would have been sufficient. The only way you get 100% security is to have a 100% reserve requirement. Anything less is gambling. So if you critique the lowering of reserve rates you are obligated to state what sort of odds you think are more reasonable.
- anamax 17y ago
  > And the revoking of Glass-Steagall under Clinton? Irrelevant because it didn't have any effect on the crisis. In fact, it allowed some transactions that had some hope of slowing things down. Note that the non-regulated institutions did better, as did the non-regulated arms of regulated institutions. AIG was regulated up the wazoo.
  - btilly 17y ago
    Some of the "too big to fail" issues we saw was definitely because companies got into multiple lines of business that Glass-Steagall would have prevented.
    - anamax 17y ago
      > Some of the "too big to fail" issues we saw was definitely because companies got into multiple lines of business that Glass-Steagall would have prevented. Those "other lines of biz" provided some diversification that gave them some chance of survival. It also made it possible for banks to save some of the trading firms. You clearly disagree, so let's have names.
grandalf 17y ago
It was in Bush's clear interest make the economy appear to be strong in spite of the war and the resulting extremely high gas prices. The only way he could do this was by creating a bunch of paper wealth for average Americans via a housing bubble. That we were in a period of historically exceptional housing price growth was obvious to everyone at the time. I heard many people claiming to be the next Warren Buffet b/c their house had appreciated 20% in the past year. The question we need to ask is, why were there initial calls to attend to the GSEs in 1999, 2000, 2001 but none after? I'd argue that it's because a) the extent of the problem was realized and those in power figured they'd let another president deal with it, b) those in power wanted to focus on their own agenda which didn't involve cleaning up the GSEs, or c) both.
- anamax 17y ago
  > It was in Bush's clear interest make the economy appear to be strong in spite of the war and the resulting extremely high gas prices. Yet he did nothing, except that he did (see below), and what he did was counter to the above claim. > The question we need to ask is, why were there initial calls to attend to the GSEs in 1999, 2000, 2001 but none after? I'd argue that it's because a) the extent of the problem was realized and those in power figured they'd let another president deal with it, b) those in power wanted to focus on their own agenda which didn't involve cleaning up the GSEs, or c) both. You're forgetting Bush's bid in 2003 and McCain's bid in 2005. (The 2005 bill was actually considered in 2006.) So much for the "none after" theory. (Google "2005 mccain fannie freddie") The evidence suggests that neither of the above theories was a major factor, that the driving factor was that every effort to deal with GSEs showed that it was an unwinnable fight. The populists wanted folks to get mortgages even if they couldn't afford them. FWIW, during their brief tenure in the senate, Senators Obama and Clinton got more money from Fannie and Freddie than the chairmen of the relevant committees. In fact, their totals (over their entire tenure) were approaching the totals of those chairmen, even though the chairmen had been getting such donations for decades longer.
  - grandalf 17y ago
    I don't give campaign promises much weight in this discussion. You are correct that both McCain and Bush paid lip service to the idea, but Bush, the guy who could do something about it, didn't do anything. You can try to argue that Bush -- the guy who had control of both houses of congress and was able to sell an unpopular war -- was politically powerless do do anything, but that's just not persuasive. He decided not to make it a major issue... and he benefited tremendously from that decision... America felt rich while we waged a very expensive war and paid $5 per gallon for gas. To use an analogy, maybe it was a Democrat who lit the cigarette and fell asleep, but it was Bush who saw the smoke, mentioned that a fire might start and then completely ignored it until it became a blazing inferno. (I am not a member of either party so I am not intending to absolve Democrats of their share of the blame... but in this case I think most of it rests firmly on Bush's shoulders). By the way, this was right before Mankiw got fired: http://www.marketwatch.com/story/bush-adviser-warns-of-fannie-mae-freddie-mac-risks http://www.marketwatch.com/story/bush-adviser-warns-of-fanni...

by anamax 17y ago

btilly 17y ago

There is plenty of blame to go around, but one of the biggest mistakes leading up to the financial crisis was significantly lowering the amount of cash reserves the investment banks needed to keep on hand. That happened on Bush's watch with Republicans in charge of every branch of government. And the revoking of Glass-Steagall under Clinton? That was introduced by Republicans in both the House and Senate, with the Senate vote being almost entirely on party lines. Yes, Clinton signed it, but it was a Republican bill.

grandalf 17y ago
As for the issue of reserves, I think if you make the argument you are making you have to state what you think the optimal reserve requirement is. If the recent crisis had been a bit smaller, existing reserve levels would have been fine. If the crisis had been a bit bigger, then it's not certain whether even the previous reserve requirements would have been sufficient. The only way you get 100% security is to have a 100% reserve requirement. Anything less is gambling. So if you critique the lowering of reserve rates you are obligated to state what sort of odds you think are more reasonable.
anamax 17y ago
> And the revoking of Glass-Steagall under Clinton? Irrelevant because it didn't have any effect on the crisis. In fact, it allowed some transactions that had some hope of slowing things down. Note that the non-regulated institutions did better, as did the non-regulated arms of regulated institutions. AIG was regulated up the wazoo.
- btilly 17y ago
  Some of the "too big to fail" issues we saw was definitely because companies got into multiple lines of business that Glass-Steagall would have prevented.
  - anamax 17y ago
    > Some of the "too big to fail" issues we saw was definitely because companies got into multiple lines of business that Glass-Steagall would have prevented. Those "other lines of biz" provided some diversification that gave them some chance of survival. It also made it possible for banks to save some of the trading firms. You clearly disagree, so let's have names.

grandalf 17y ago

It was in Bush's clear interest make the economy appear to be strong in spite of the war and the resulting extremely high gas prices. The only way he could do this was by creating a bunch of paper wealth for average Americans via a housing bubble. That we were in a period of historically exceptional housing price growth was obvious to everyone at the time. I heard many people claiming to be the next Warren Buffet b/c their house had appreciated 20% in the past year. The question we need to ask is, why were there initial calls to attend to the GSEs in 1999, 2000, 2001 but none after? I'd argue that it's because a) the extent of the problem was realized and those in power figured they'd let another president deal with it, b) those in power wanted to focus on their own agenda which didn't involve cleaning up the GSEs, or c) both.

anamax 17y ago
> It was in Bush's clear interest make the economy appear to be strong in spite of the war and the resulting extremely high gas prices. Yet he did nothing, except that he did (see below), and what he did was counter to the above claim. > The question we need to ask is, why were there initial calls to attend to the GSEs in 1999, 2000, 2001 but none after? I'd argue that it's because a) the extent of the problem was realized and those in power figured they'd let another president deal with it, b) those in power wanted to focus on their own agenda which didn't involve cleaning up the GSEs, or c) both. You're forgetting Bush's bid in 2003 and McCain's bid in 2005. (The 2005 bill was actually considered in 2006.) So much for the "none after" theory. (Google "2005 mccain fannie freddie") The evidence suggests that neither of the above theories was a major factor, that the driving factor was that every effort to deal with GSEs showed that it was an unwinnable fight. The populists wanted folks to get mortgages even if they couldn't afford them. FWIW, during their brief tenure in the senate, Senators Obama and Clinton got more money from Fannie and Freddie than the chairmen of the relevant committees. In fact, their totals (over their entire tenure) were approaching the totals of those chairmen, even though the chairmen had been getting such donations for decades longer.
- grandalf 17y ago
  I don't give campaign promises much weight in this discussion. You are correct that both McCain and Bush paid lip service to the idea, but Bush, the guy who could do something about it, didn't do anything. You can try to argue that Bush -- the guy who had control of both houses of congress and was able to sell an unpopular war -- was politically powerless do do anything, but that's just not persuasive. He decided not to make it a major issue... and he benefited tremendously from that decision... America felt rich while we waged a very expensive war and paid $5 per gallon for gas. To use an analogy, maybe it was a Democrat who lit the cigarette and fell asleep, but it was Bush who saw the smoke, mentioned that a fire might start and then completely ignored it until it became a blazing inferno. (I am not a member of either party so I am not intending to absolve Democrats of their share of the blame... but in this case I think most of it rests firmly on Bush's shoulders). By the way, this was right before Mankiw got fired: http://www.marketwatch.com/story/bush-adviser-warns-of-fannie-mae-freddie-mac-risks http://www.marketwatch.com/story/bush-adviser-warns-of-fanni...