Is it possible that one of the most radically-right governments in ages is advocating one of the biggest step towards socialism that this country has taken in generations? President Bush has nationalized the nation’s largest mortgage provider and insurance company. (For contrast, imagine President Obama demanding that Congress approve the government take over and nationalize the country’s largest health insurance company.) Now Bush wants $700B—more than we’ve spent on Bush’s war in Iraq—to pay the debts of a bunch of private businesses, presumably gaining an ownership stake in them in the process. Anybody forecasting this in 2000 would have been laughed off of the campaign trail.
Is the problem that our markets are too free? Or is it that they’re not free enough?
The problem is that we’re trying to fix socialism with more socialism.
For one, I have no idea what “democratic capitalism” is. To have 95% of America bail out the 5% of bad loans and the financial institutions that spawned them to the tune of $700 billion dollars doesn’t seem like capitalism or democracy. More accurately, the financial firms are holding those 5% hostage… because they knew those loans couldn’t get paid, and they were counting on the fact that Washington would say they were too big to fail.
$700 billion on schools. On roads. On beefing up our intelligence community. On preventive medicine. On fixing or replacing Social Security. On lower taxes for working families. All of these great plans… now mortgaged to my kids and grandkids…
…and all on loans that may or may not come back to the taxpayer in the end.
The worst part? What Freddie Mac and Fannie Mae presumed to have (federal backing on loans), they now have. So now there’s a precedent, and now this can happen again — if it passes, that is.
I am absolutely shocked… I have long argued the Democratic and Republican Parties shared a common thread of classical liberalism. With the swing towards progressivism on the left and neoconservativism on the right, is there any room left?
End rant. But boy am I angry.
I was walking past the new book section in the library last week and decided to pick up a book called “The Big Con” by Jonathan Chait, published in 2007.
I’m only 70 pages into the book, but I’m sure the author isn’t suprised at all by the current “crisis”.
If half of what he reports is true about washington, it is no wonder the current administration led us to this point.
This is way out of my usual genre of reading, I recommend it to anyone.
To answer your question, the markets have favored those businesses who pay the lobbyists to write the laws that support big business, at the expense of the country.
All of this is why I miss regular old Republicans. Those in power now decry big spending, but have increased our national debt beyond anything the country has ever seen before, running annual deficits without any plan for getting back into the black. The hypocrisy is as angering to lefties like me as it is to traditional righties like you, Shaun. Maybe one of the results of this will be a return to power from genuine small-government, balanced-budget conservatives. The tension between them and traditional Democrats leads to good governance. The current arrangements just ain’t working.
I don’t understand how one can privatize profit and socialize risk/debt. You take on risk in the market and it could result in loss or gain. And a market growing out of control will eventually correct. Stopping that correction will basically equate to the market number not changing, but a massive reduction in the purchasing power of the dollar.
Tangentially, playing the market != savings. And capitalism requires *capital* aka savings.
Maybe it’s actually angering to Shaun. I don’t know. But I have a very hard time believing that Shaun’s actually surprised at this. This is the natural output of all the people Shaun’s been flacking for. You had your own small part in making this happen, Shaun. So excuse me if I laugh you out of the room if you profess anger over it.
It was the Clinton Administration that loosened the rules, MB.
Feel free to talk to me directly. No, this is not high school, so we can dispense with the high-gloss generalizations. Yes, I am angry over this. One could just as easily throw the blame at Congressional Democrats for muscling through the relaxed regulations… and laugh them and their blind supporters on either side out of the room… but what does that solve?
The problem is that while Democrats helped relax the lending rules, Republicans propped up the housing bubble as the short path to economic growth. Both sides profited, and now leadership on both sides wants the taxpayer to bail these lenders out.
Believe it or not, I don’t have horns (despite what you see on Perseverando).
The debate here, in Washington, etc. should really focus on a single question, “How do we best fix this immediate problem?” Cast ideology aside (on both sides) and put on a pragmatic, problem-solving hat.
The immediate problem in this case is, “What immediate investment(s) by the government will best stabilize the economy and prevent what could be an even greater loss of taxpayer dollars due to a severe economic downturn?”
Is $700b the right number? I honestly don’t know. What I *do* know is that the fleecing has *already occurred* and that our Treasury will have to invest *something*–either up front by purchasing distressed assets or long term by losing tax receipts as the economy tanks. (For perspective, $700b is less than two years’ budget deficit at this point.)
One of the worst traps decision-makers fall into is worrying over what can’t be changed, in this case who made what money leading up to this point. Sunk costs are just that: sunk. They should be ignored during the decision-making process, as that process should focus entirely on how to best proceed from our current point.
Going forward, we should attempt to a) stabilize the economy by whatever means looks to be most effective; b) impose measures to prevent a recurrence and minimize the moral hazard inherent in this sort of government intervention; and c) prosecute individuals and institutions whom we determine have behaved fraudulently or otherwise illegally.
Items not on that list include: a) worrying about who got what; b) assigning blame to individuals, ideologies, political groups, etc.; and c) doing nothing and hoping everything works out.
It was the *Clinton Administration* that systematically dismantled market oversight? Or are you feeding us “the Community Reinvestment Act caused it all” line?
One *could* just as easily throw blame at Congressional Democrats, but that doesn’t make it true that both sides are equally to blame. No, this sits quite neatly at the feet of the GOP dereg fetishists that never saw a regulation they couldn’t try to remove. It’s not an exclusively Republican problem (see, e.g., Biden’s affinity for MBNA), but it’s one that is quite clearly owned by them. C’mon, the GOP – at every level – has been running on this stuff since ’94 (and many since the early 80s), and all of a sudden it’s something that both parties have been doing? Uh, no.
As to what pointing fingers does, right now? It’s a reminder that those that were part of the problem ought not be trusted to fix it. That’s the most important bit. (Secondarily, it’s the reason I find your anger laughable. You don’t go all in with the GOP anytime in the past decade and then get to be justifiably angry with this result. This is what they’ve been working toward, and you helped them do it.)
That’s nice, Jeff, but sorting your first a) certainly is affected by the second a) and b). For example, I don’t think that stabilizing the economy needs to include a bulwark against a drop in housing prices. In that case, I’m pitted against politicians who are concerned about “worrying who got what” in that they think they’re politically on the hook for their constituents’ home equity. And I’m further pitted against the b) ideological groups who think the politicians *should* be on the hook for that home equity.
The approach you’re advocating (and many are) strikes me as the equivalent of a situation in which you’ve punched me hard in the nose, and then urge me to sit down and let you examine me, because you’re a doctor and you can stop the bleeding.
To which I’d respond that it’s much more equivalent to having been punched in the nose anonymously in a crowd, and now someone from that crowd, a doctor, is offering to patch you up. Do you refuse the doctor’s services simply because he or she *might* have been the person who punched you?
Jeff —
One of the worst traps decision-makers fall into is worrying over what can’t be changed, in this case who made what money leading up to this point. Sunk costs are just that: sunk. They should be ignored during the decision-making process, as that process should focus entirely on how to best proceed from our current point.
To a point I would agree… there’s no reason to start looking around for rocks to throw and people to blame.
OTOH, when the misgovernance of what the federal government is now apparently ready to shoulder — that there really are some institutions to big to fail — means that as a businessman, if your business impacts our economy and the taxpayer has to bail you out, this is not a matter of the public trust.
Meaning that if you speculate and are backed by the feds, and fail, one could very easily make the argument that large amounts of capital being squandered is a form of theft.
That’s corporatism in a nutshell. Last I checked, I didn’t live in that sort of society, nor do I consent to do so.
Beyond that — I generally agree with your sentiments. Political one-upmanship should have very little to do with the prescriptions in this instance.
MB —
How precisely did I cause this? Either this is pure hyperbole, or it’s a level of influence I never knew I had!
Flip it back: Democratic voters supported the congressmen who loosened the deregulation on mortgage lending in the first place. Ergo, does that mean you aided and abetted this crisis? That’s hyperbolic nonsense… you know this.
As for the deregs, you can’t reasonably point to a Democratic Party washing it’s hands as fast as it can and cry innocence. The shorthand history on this (if folks cast blame) is that the Democrats opened the hole, Republicans held it open for the sake of “economic expansion”, and both parties used the threat of 5% of America’s mortgage debt to force the other 95% of taxpayers to bail out the folks on Wall Street — in short, we took out yet another loan on the future of America for short-term gain.
I can keep repeating my reasons for being outraged. It’ll never satisfy the partisans in either camp — never has, but it’s where I’m at and what I believe.
I’m sure we’ll find something substantial and tangible to disagree on, MB. This time, we just probably agree more than we disagree.
To be clear – I’m calling your anger silly because of your work as communications director. You went all in for the party who’s ideology revolved around creating exactly this situation. It would be like me agreeing to work for the Dems as a rally producer, and then profess shock and anger that candidates wanted me to make sure that I had a black person, white person, woman, kid, gay couple, etc. sitting up on stage. It’s what.we.do. And then to turn around and claim anger or offense over it? Mmkay.
In any event, I didn’t really have three posts worth of annoyance over it. So I’ll leave that part of it right here.
~
What I won’t leave, though, is your attempt to isolate this problem as simply one of bad subprime mortgages, sourced to Dem efforts to increase homeownership. You never answered my question as to whether you were trying to feed us the CRA line, but it sounds like it. No one forced the banks into CRA programs, and to the extent that banks in existing areas were subject to some of its requirements, they can blame their own redlining for that. But that’s almost all irrelevant. We are where we are because of (in large part) 1) the massive institutional appetite for CDOs (creating the downward pressure for ever-expanding loan portfolios) and 2) the removal of any meaningful market oversight (or fear of oversight), creating an environment in which it seemed entirely okay to create instruments that *nobody* seems to understand. How many times are we told that “no one knows what’s in these CDOs” and that the leverage ratios are obscene? We have a market in which so much cash is tied up (what appears to be) mystery boxes that the financial markets are threatening to come to a grinding halt, and that’s all due to Dems pushing for some home ownership programs in the late 90s? Nothing to do with the “dereg! dereg!” mantra that the GOP has been running with at fullspeed for 15 years? Nothing to do with a faith-based approach over at the SEC?
Ok.
Let’s try and keep our eye on the ball about how much of this is also Jimmy Carter’s fault and not the responsibility of the compassionate conservatives who had been running the country for the last eight years.
What’s in those CDO’s, Mr. Blacknell?
You know the answer just as well as everyone else does: Bad. Subprime. Loans.
As for the rest, you’re dealing in partisan snark. I’ve seen my share, but be serious for just five seconds. Bad home loans are driving the crisis.
And I certainly didn’t go around selling Rep. Frank’s bill or the dereg policies. Sounds more like federal stuff to me… not state level politics.
And thus Shaun illustrates why it’s useful to point fingers. He characterizes criticism of the utter lack of meaningful regulation as “partisan snark.” It’s as if he’s constitutionally incapable of acknowledging reality. Vote Republican if you want more like that.
Ah, good to see we’re back to problem-solving again! :)~
(I’m one of those “regular old Republicans” whom Waldo misses. Oddly enough, that means I’ve been voting for Democrats lately….)
Nice, MB — dodge the problem, blame the other side, attack ad hominem until you turn blue in the face.
I didn’t expect less from ya. Just hoped for a bit more.
Jeff —
As one of those “old Republicans”, it will be the progressive wing of the Democratic Party that will more than likely forever bar me from ever returning. Republicans spent decades trying to root out the progressive wing and the “America First” crowd, just to see it spring up in the Democratic Party?
Yuck.
In any event… I think Waldo touched on it nicely. It used to be that Democrats and Republicans would argue over a budget much as a family would — we need this, we can’t afford that, etc. Now? Government has grown so large, done too much, involved itself in too many places (domestically and abroad) to where the system is being gamed by extremists in both sides.
It’s old. This isn’t a Redskins-Cowboys game. Partisanship is healthy to a point, but not to the point where it makes you either hate the other side or knuckles you under the Leviathan. Way too much nonsense… and it’s not going away anytime soon.
You realize, Shaun, that you just described yourself? A bit of intellectual honesty would do you well.
It was government intervention in the free market and purposeful social engineering that caused this mess and there is no reason to think the government is the answer to fix it. More bailouts and more “oversight” will just lead to bigger messes.
Here’s how it all began in 1999…
http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=print