Judging from the Sunday shows, it looks like Congressman Frank, thank goodness, still has his wits about him:
But Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, said on Sunday that legislators were told that “we were reaching the point where people wouldn’t be able to get auto loans or home loans.” He foresaw “a very substantial reduction in economic activity.”
Mr. Frank said earlier that Democrats were particularly intent on limiting the huge pay packages for corporate executives whose firms seek aid under the new plan, raising the prospect of a contentious battle with the White House.
“They should accept some compensation guidelines,” he said, “particularly to get rid of the perverse incentives where it’s ‘heads I win, tails I break even.’ ”
But Mr. Paulson said he hoped to defer such an effort. “Pay should be for performance, not for failure,” he said. “But we need the system to work, so the reforms need to come afterward.”
Secretary Paulson, along with the Bush Administration, have their priorities backwards, as usual. Their proposed solution, like so many Bush Administration efforts of the past, will strengthen an unaccountable Executive office, reduce the power of Congress and the courts to conduct oversight over the Executive branch, and funnel billions in taxpayer money from American families into the hands of the very richest.
Congressman Frank, like Barack Obama, recognizes that we have arrived at a defining moment. Since Ronald Reagan’s time, the dominant mantra of politics has been that too much government is the major problem we face. Deregulation and a smaller and smaller government would lead to prosperity for all. This philosophy has now been thoroughly repudiated by reality. Now, with a financial crisis in the midst of a red-hot election, we can and should have a critical discussion. Who needs to be bailed out more? The family about to be foreclosed on and become homeless, or Goldman Sachs? Bush says Goldman. McCain and Paulson say Goldman.
If leaders like Frank and Obama play their cards right, the Democrats can dominate the discussion and create a true bailout with accountability. To do so will require some bravery, especially at first. The mainstream media will side with the Administration. Peter Canellos — whose writing I usually like — got the story backward, writing in the Globe that the crisis will severely tie the hands of the new president.
With political courage, exactly the opposite is true. Because of the crisis, the next President will have a freer hand, if Congress shares his daring, to rebuild America. Serious tax reform will be needed to shrink the yawning gap between rich and poor and make the top 1% finally pay their fair share. A green jobs and infrastructure rebuilding revolution — the action we will need to defeat global warming and staunch the flow of America dollars into the pockets of Saudi oilmen — will require boldness on a scale not seen since FDR. We can do it. Republicans have long used crises to advance their values, as Naomi Klein so powerfully demonstrates in her book, The Shock Doctrine. If Congressman Frank, Barack Obama, and progressives bring our A game this week and through the months to come, we can and should do the same.
If the Paulsen plan goes forward, the ability of the federal government to borrow money, or support programs other than the Bush agenda is zero.
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p>I have taken the time to speak to insiders in the financial services industry. The consensus of pros who are not in the Greed Gang is that the Paulsen Plan is a panic reaction which will further lead to the rich getting richer, and everyone else moving towards surfdom.
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p>Barack, and the rest of us, need to support Barney Frank in saying “NO”.
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p>While I could give you links, and so forth, my position on this is based on doing “due diligence” with real people I know personally and trust. My opinion does NOT come from reading newspapers and academic journals.
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p>The problem with Adam Smith’s analysis and theory of capitalism, is that he premised his theory on the assumption of honesty, frugality, and that the elite would have the “public weal” as their goal. He did not predict the Czars of Greed. So Smith was correct that goods would be produced where it was cheapest to produce them; he did not predict the dishonest and greed driven manipulation of the market.
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p>Stick to the word “NO” Barney! Don’t give in to the Bankster Conspiracy. While action needs to be taken, what is needed is competent regulation and reinstitution of oversight by the Federal Government of the banking industry and financial markets.
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p>Deregulation of the thrifts gave us “thriftgate”.
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p>Deregulation of Fannie, Freddie and mortgages gave us “mortgage gate” and historic foreclosure rates and failures of prettily packaged undercapitalized securities.
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p>Deregulation of banks and the markets is giving us the current “Bonfire of the Vanities”.
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p>Bring back structure, oversight, and competent government regulation – NOW.
“Deregulation” of Fannie and Freddie … gee, wasn’t it Republicans who have been agitating to impose better oversight? The NYT reported this in 2003.
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p>Here’s the money quote from that article:
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p>Bottom Line: FNMA and FHLMA, used by DEMOCRATS to produce affordable housing, are now ruined, and taxpayers will pay. No need to regulate! Let’s write “stated income” and “no-doc” loans to poor people! Let’s twist commercial banks’ arms using the Neighborhood Reinvestment Act, get them to give loans to low income borrowers!
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p>Reform Fannie and Freddie? Barney Franks sez “no way.”
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p>Amber, you don’t have a clue what you’re talking about.
we’ve been there already many times before. Hint, it wasn’t the Democratic party.
Whenever things are grave in the United States, any good conservative thinks only one thing: how can I use this situation to my advantage?
I’d like to clean up this mess, as you do. I would prefer to do it without making all action by Washington subject to secondary policy fights.
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p>The credit market is in peril. Do you think we can fix that in the next week without tax increases, home-owner mortgage relief, affordable housing add-ons, or executive pay show trials?
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p>Does anyone at BMG have funds in a money market? $180 billion in money market redemptions occurred last Thursday.
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p>Anyone see a problem with this?
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p>Or maybe we should get Eliot Spitzer back to prosecute Hank Greenberg instead, just to feel good.
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p>How I am using the shoring-up of the US credit market for political advantage?
… is what?
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p>Barney Frank, on Face the Nation:
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p>Yes, passing an income surtax is a pressing national issue. (Does it apply to Barbra Streisand, too?)
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p>Can’t we wait until next month to do that? Or, after Barack is elected, you can soak the rich all you want. But for now, can we avert a credit meltdown?
Typical of the new breed of “borrow and spend Republicans”. Let’s throw $700 billion and more at these companies and not worry until later where we’re going to get that kind of money.
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p>I know! Let’s not worry until after the election; that way, we can make the new President raise taxes. If it’s McCain, we’ll sigh and say, “It’s a necessity to save our economy.” But if it’s Obama we get to jump up and down and say, “see, we told you he was gonna raise taxes!”
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p>Brilliant. And morally bankrupt.
Mike Oxley:
http://losangeles.craigslist.o…
This term has appeared in the past few days and is even better than banksters IMO
Are you guys experts in the financial services world? Did you see any of the Sunday talk shows today? Listen to Paulson or Bloomberg? Read Saturday’s WSJ which has a comprehensive analysis of what’s happening?
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p>Do progressives fathom what’s going on, or are you just screaming “re-regulation” because that’s the counter-solution to deregulation you can grasp?
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p>Paulson & Bernanke & Bloomberg have the short term fix about right. It’s needed next week. Not next month.
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p>This is a crisis of the financial system, not an opportunity to redistribute income:
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p>This is not a problem that demands the “rebuilding” of America. America neither needs nor wants your vision of a re-distributionist “rebuilding.” And it would be political suicidal for Obama to campaign in this direction.
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p>Although, kudos to you, nothing like wrecking the US financial system for political advantage:
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ha ha ha ha ha …… good one!
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p>Only from us to the financial services industry and its executives.
I’m pissed off. I didn’t want any bailout. But bailout is the price taxpayers now must pay — have to pay — to salvage the US financial system and avert this credit crisis.
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p>All this thanks to progressives’ removal of MORAL HAZARD. Job well done.
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p>It was YOU and liberal politicians, not me and Republicans, who removed the downside risk in Fannie and Freddie, FSLIC, and probably the FHLB, too, by providing GOVERNMENT GUARANTEES to these entities, then using them to promote social policy.
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p>Barney Frank has been running interference on better oversight for 10 years.
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p>And all he can say about reform … “no way.”
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p>Yes, some high ranking executives are walking away with millions, executives that include Franklin Raines and Jim Johnson, formerly of the Obama campaign.
Better oversight = Oversight by the executive.
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p>Seriously. That NYT article you’re so fond of linking to, with Barney’s money quote… he was fighting a land grab by Bush to wrap up Fannie Mae and Freddie Mac in a new executive-controlled regulatory agency instead of Congressional oversight as it currently (well, until very recently) is.
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p>If it had been a Democratic President making a similar proposal to a Republican Congress, you bet your ass they would have squealed out similar protestations. I’m not saying he was right or wrong; I’m just saying that you’re wrong to cite him as being anti-regulation just because he opposed a bill with the phrase “oversight modernization” in the title. We all know bill titles are about as accurate as advertising campaigns.
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p>Now, you may certainly argue that the Congressional oversight scheme didn’t work out very well, given where we landed, to which I’d only argue two points: firstly, it was a Republican Congress doing the overseeing, and secondly, Franklin Raines, then-chairman of Fannie Mae, is quoted as being in favor of the bill. Surely he didn’t need this bill to impose greater oversight? Couldn’t he have just imposed it himself?
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p>In summary, it’s impossible to know what would have happened if that bill had passed. Maybe the executive regulators would have done a better job and stopped us from coming to this point. Given the Bush administration track record, though, I doubt it.
I don’t think we need knee-jerk regulation of everything in sight. The pigs are out of the barn. We could have avoided that with a little bit better care for the barn door over the past seven years. We won’t get them back in the barn by building a double gate, timed lock, NSA clearance and retina eyescan to verification system for the barn door.
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p>But by the same token, this whole idea that the Bush administration has suddenly come up with a brilliant rescue plan that, if not enacted immediately and in exactly the form proposed, will result in a global depression, well, that’s just hooey.
I wouldn’t say that any of the proposed regulations floating around out there are NSA-retina-eye-scan-comparison worthy. Public companies opening up their pocket books seems pretty reasonable, doesn’t it? Or enforcing that companies not take on debts they can’t afford to pay. Or that we prevent the sort of lending practices that gave mortgages, most especially sub primes, to people who couldn’t afford them.
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p>Tangently related (this could really be its own diary): If we want to make housing affordable in this country, the answer to that isn’t adding never-ending amounts of loans (and most especially bad loans). Without proper legislation, that has only lead to booming prices, wasted life savings and economic disasters. Better to put legitimate and renewed efforts into affordable housing units that are truly affordable. If we want everyone to be able to be homeowners, we need to look at it with a fresh perspective that won’t lead to over speculating and soaring prices. There are ways to do it that may even help keep the market in check – and it’d cost a helluva lot less than $700 billion.
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p>The problem at hand ISN’T affordable housing. No reasonably sane person should be talking about affordable housing in today’s market. Want a cheap house? Call the bank and ask for their REO list. (real estate owned).
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p>The problem at hand is the credit market in which i) banks won’t lend and ii) banks’ assets are nonperforming,
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p>Banks assets are nonperforming because a) banks loaned to unqualified borrowers and b) house prices are falling.
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p>House prices are falling because I) there was an over-building bubble and II) Demand is down.
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p>Demand is down–in part–because banks won’t lend.
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p>Note the circularity.
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p>The means to interrupt the feedback loop is to i) take over the nonperforming assets (Paulson’s $700B) ii) Intervene by subsidizing homeowners (the Ryepower12 plan).
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p>The problem with the Ryepower12 plan is twofold. First, it’s political death. If you subsidize the homeowner down the street who lied about his income to get the loan, the homeowner up the street who worked hard and saved is going to be very angry. AND, there’s more of the latter than the former. Further,it punishes the innocent at the hand of the irresponsible. “vote for me, I bailed out stupid guy.” Political death.
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p>Second, it’s economically dumb. Housings bubbles pop slowly and any kind of price support will be long, and guaranteed expensive. That is, the money to the homeowner is gone. $700B down the chute. Money to the bank to purchase its nonperforming assets MAY be gone, but, if the economy improves and default rates stabilize, we may see a return on the money spent.
The REOs are still dropping in price. Houses in many areas of the country are still overvalued, even in REO sales.
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p>The housing bubble was created by excessive lending that allowed people to pay more for a house with the same monthly payment. Banks accepted lower down payments and longer repayment terms (with introductory interest-only periods) iin order to lower the monthly payments.
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p>The housing bubble is popping because we have returned to normal credit market conditions. Up until 2-3 weeks ago, you could easily get mortgages on what used to be standard terms with standard requirements to qualify. It is just the past week that normal lending has been stopping. This is probably a temporary crisis that does not require a bailout to fix. The same thing happened briefly in the jumbo mortgage market last August/September too, which led to the fed doing an emergency rate cut between regular meetings.
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p>House prices will fall until they return to affordable levels. We don’t need to change how we are building houses, we just have to recognize that they became overpriced for a few years. In the Boston area, houses should eventually fall about 50% from their peak prices to get back to historically normal levels (in terms of house price to income ratios).
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p>Purchasing the non-performing assets has the same problem as helping people stay in their homes, except that people get more angry about it. A much better plan would be to find banks that aren’t insolvent and encourage them to make more good loans. That is what Fannie Mae and Freddie Mac do, at least in theory. Banks make mortgages to people, then sell them to the agencies, so that they have money to make more mortgages. The insolvent banks can just go bankrupt.
In my comment, I wasn’t endorseing the Paulson plan. I was contrasting the Paulson proposal to Ryepower’s suggestion that we bail out homeowners.
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p>If you apply the Treasury plan to the loop I created, Treasury is trying to intervene at (ii) by making the bank assets whole, hoping that will create a healthier balance sheet and jump-start the bank to lend again.
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p>You’re exactly correct that REO is continuing to languish, and inventory is still very large. The democrat plan to intervene into foreclosures, or any other plan to shore up housing prices will merely prolong the problem.
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p>I’m rapidly coming to the conclusion that the Paulson plan will work–in the short run. But, in the longer term, housing prices will continue to slide, and so long as they continue to slide, banks will be reluctant to lend. And we’ll be out about $700B.
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Now treasury wants to bail out essentially anyone who made bad leveraged bets with credit.
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p>And the great idea of backstopping money market funds has banks, which offer lower rates of return because they have tighter regulation and pay for insurance, concerned about depositors taking their reserves out of banks and putting them into money funds.
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p>Treasury has hit the panic button without a carefully considered plan. They’re now part of the problem.
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p>So why exactly should we be throwing $700 billion to the money managers who made bad leveraged bets, rather than offering equity credit to money managers whose balance sheets are in better shape so they can expand the credit they’re able to offer? Why not let the bad apples rot, and offer any funds or regulatory assistance to be offered to firms with better track records?
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p>And why bail out the complex leveraged CDOs, whose value can’t be accurately assessed.
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p>Why not backstop the individual mortgages, supporting homeowners who want to stay in homes they purchased with adjustable rate mortgages, say by offering favorable loan terms for three years, and if the owner continues to occupy the home then the loan is converted to a fixed rate loan under comparable favorable terms; and offering similar terms to foreclosed properties?
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p>You’d be helping to shore up those bad bankers balance sheets by stabilizing the property values, but getting double value for the bucks spent by helping the individuals and supporting the neighborhoods most impacted by foreclosures.
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p>The Fed tried that by opening up lines of credit to the Investment bank. There’s plenty of liquidity available, but because the assets continue to drop in value, the investment banks become less solvent. Trading partners won’t deal with them, won’t invest in them, and without deals or money under management, they can’t conduct business. Hence the correct meme that’s floating: it isn’t liquidity, it’s insolvency that’s the issue.
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p>They aren’t bailing out CDOs. They’re proposing a purchase of CDOs which are on books at anywhere between 7% to 50%. They do have value, but no one can sell them. Potentially a valuable asset with no market right now.
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p>We may just have to agree to disagree here. First, politically speaking, I’d be rather peeved if I saved, put down 20% and got a conventional bank loan while my neighbor undertakes a 80/20 loan with a broker and buys the house he can’t afford, and because he can’t meet the mortgage gets a welfare package. Second, economically speaking, if the home market must adjust to lower values, the welfare you propose just stalled the downward correction, which probably is inevitable. Get it over quick.
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Most people are peeved about helping corporations that ought to have been much better able to do the due diligence necessary when structuring these packages to know the risks involved.
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p>I don’t think most people object to supporting people who bought homes with the intention of living in them, but saw the value of the homes fall below equity and their payments ballon when adjustable rate mortgages they were advised to get into (by the federal reserve chairman!) have a rate adjustment. Certainly not if the alternative is to bail the financiers who sold them the mortgage but leave them stuck with a hobsons choice of walking away from their property or trying to keep making payments they can’t afford.
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p>As for the instruments being potentially valuable assets, the free market is much better at evaluating value than the government. So, either the government is going to buy overpriced assets and get stuck with the bill, or the assets will be bought privately at their true value. The individual mortgages are a lot easier to evaluate than the CDOs, aside from the complexity of the number of them to evaluate.
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p>Most people don’t want to have unoccupied homes in their towns. It kills the tax base; it devalues other homes; and it’s a security risk. If we’re going to spend $700 Billion bucks to support the failures of the financiers to assess risk, half of the bailout funds should target the visible part of the problem – supporting individuals and communities, as that will also give trickle-up support to the financiers who gambled and lost.
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p>I’m peeved about government welfare to homeowners or banks. The housing bubble must correct, and the quicker the better. To that end, option 3, do nothing for now rather than rush into legislation by Friday, is in my mind a course worth persuing.
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p>Isn’t this just a rehash of the Bush Doctrine?
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p>Do you trust
colin powell’sHenry Paulson’s assessment of the impending threat, to sign a blank check, absent some clearer articulation and verification of that threat.The vast majority of people don’t care what interest rate their bank is paying them. I would guess that most people don’t even know. There have been FDIC insured accounts that pay as well as most money market funds for years now. People still mostly leave their money in the local bank or big bank because it is easy. And the interest rate only matters if you have tens of thousands of dollars in cash equivalents.
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p>You can still get an FDIC insured account that pays 5%. With a bit of effort, you can get one that pays 6% (although most the accounts that paid 6% earlier this year have dropped to 5%). Anyone that still has their money in a regular bank is not going to move to a money market fund just because they are suddenly insured.
you’re clearly ignorant of affordable housing policies (not to mention the historical trends of housing costs versus wages, but I’ll get to that later). Yes, people with low income get access to homes that cost less, but they can’t sell them for massive profits either. Most affordable housing stays affordable one owner to the next. That means there’ll be less equity when all is said and done. If there’s an angry person down the street, it’s third rail-type anger – not the real kind. Why? That person will have better access to later move on and afford something much nicer.
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p>I was commenting on something that was only tangently related to the current crisis. It’s a different problem. The only reason why I brought it up is because I think we have to make sure that things like sub prime loans are never used to get people who can’t afford property into that property to begin with. That needs to be heavily regulated. We can’t use the excuse of cheap loans to get people into homes because, gee whiz, that inflates the cost of homes and puts the economy at risk at two fronts – people who can’t afford to live here, so move and people who go bankrupt trying to make the mortgage.
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p>There’s got to be things like down payments, etc. that keep the industry honest. And for the few who can afford to be making a mortgage payment, but need a little assistance in getting their first home, we can create measures to serve as a stopgap. Hence affordable housing, etc. But the bottom line is we can’t employ the same policies that have simultaneously led to millions of foreclosures and sky-high (still too high) prices on real estate. Even in today’s market, Massachusetts homes are not worth the price compared to Massachusetts salaries. They’re just not worth it. But there’s a reason why they went this high… and it’s not because of Ryan’s ‘two fold plan’ as you put it.
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p>First, I must question why feel compelled to toss out the customary insult you dispatch to preface your comments.
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p>And second, affordable housing as government policy is, for the most part, rental. So typically there is NO “equity when all is said and done” for the dweller. However, for wealthy or not-so-much, it is human nature for those homeowners who saved and bought to feel resentment for a bailout for those who who scammed and bought or were scammed and bought.
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p>Nice sentiment. Any support for that rosy conclusion? Most people, in fact, don’t favor foreclosure bailouts. You’ll find some polls with greater support, but in general there’s a lot of folks who don’t like the government bailing people out of foreclosure. That’s why politicians aren’t rushing in to stall foreclosures, particularly at the federal level. There’s support yes, but a groundswell, no.
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p>Thank you. That, was precisely the point. It was tangential, nearly irrelevant to the issues within this thread.
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p>And finally, if you’d merely read before typing, I said nothing whatsoever of your two fold plan. I said “The problem with the Ryepower12 plan is twofold.” ?
You don’t revel in your insults. You just package them in a smug arrogance. Honestly, what I said wasn’t even meant as an insult. Your post obviously showed a lack of understanding on affordable housing policy.
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p>You continue to show it here, dumbing it down to rental. We set the policies – both good and bad – that determine affordable housing. A lot of government, as you should well know, exists in the permitting committees and the policies that come out of there. You of all people I would expect to have an understanding that most policy that actually make impacts in our lives happen in the shadowy rooms where there’s little chance to stop it before it happens.
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p>Plus, what does affordable housing have to do with bailouts? Focus, Gary, focus. No bait and switch here, Gary. The bailout is completely different than affordable housing.
Limiting CEO welfare ought to be a no-brainer, and good for Barney for putting his stake in the ground.
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p>However, in terms of the bailout, it’s just pretty symbolism. That’s worth something in an election year, but the main question ought to be, How do we avert catastrophe while (at minimum) not further enriching the top 20% at he expense of the bottom 80?
So now we know…
barney Franke and Chris Dodd are equally culpable on the legislative level. All fiddling while Rome burns.
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p>Behrnanke and Paulson are really going to have to pull the magic out of this hat. No matter what the taxpayer is screwed.
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p>I cannot foresee how Berhnanke can prevent escalating inflation after pumping hundreds of billions of Monopoly Money into the system.
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p>There is unfortunately many politicians in congress who are lining their own pockets while exhorting Americans that they must “sacrifice” for the “greater good”. What hogwash. Politicians and banks gave “free money” who had no idea how to invest wisely in a wise investment home or how to manage the money. These people had no idea how to balance a check book, refrain from using their home as a piggy bank, or to put the brakes on their craving to use their credit cards. When I got my first VA homeloan I had to jump through fifty hoops for VA and then fifty more for the bank.
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p>If congress doesn’t pass a bill in a few days, you’re going to see runs on banks and money markets and then the fun really begins.
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p>You’ll be selling apples on the streedt corner with a PhD or a JD.
the rush to get this thing done. Don’t get me wrong – if companies could close next week, then we do need to do something soon. That said, why not place a stop gap measure – that doesn’t cost $700 billion (as the first installment) – and allows us to fully research this, come up with a solution and allows our next president to have a stake in this. From everything I’ve read so far, this measure doesn’t look like it solves the fundamental problems that exist – and we could be talking another $700 billion a year down the road.
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p>I suspect one of the reasons why this is being rushed is that, should we wait a little longer, an Obama administration with more democrats in the House and Senate may come up with a solution that isn’t unapologetically corporate welfare.
If you want your guy to come in on a true FDR platform (collapsed markets and unemployment double what we’re looking at now), then sure let’s wait to take action. Don’t think that is the best way to go.
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p>As an aside, Chris Dodd has been trying that with the Federal Reserve over the last year. Notice that we only have 4 members in the board of governors, plus a holdover that expired last January, out of 7 right now? Talk about playing politics with finances…
I didn’t say wait and do nothing. I said stop gap so we could have time to think this thing over. There’s a huge difference. It’s much worse to overreact and not solve the fundamental problems than bandaid while we gain the time and resources to fix this thing the right way. There’s only so many $700 billion dollar checks this government can right. I’d rather it be a check we can sign in good conscience – especially given the fact that this is intensely political right now (which, in reality, means there’s all more the reason for a bandaid and research/react approach).
Every huckster I’ve ever heard wants you to put down your money before you can think about the consequences. These hucksters are no different.
You GOPers trying to pin this on the Democrats are wasting your breath. You won’t find many people who don’t recognize the Clinton Admin with the Gingrich Congress laid some of the groundwork. But the GOP held all the power from 2000-06, using it to deregulate the industry and defang enforcement.
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p>And, if you really want to blame the homeowners, nobody pushed expanded homeownership like Bush – it was a centerpiece of his domestic policy. He called it “the ownership society.”
Here:
http://www.whitehouse.gov/news…
Barney worries me with this focus on exec compensation. It’s small ball and he’ll never get it if he’s already given up the big principle. He should begin from the position of demanding an equity stake for taxpayer investment, like any other investor would get.
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p>BTW, Paulson’s talking-point on Fox News tonight was the need to have a “clean bill.” As in, bailing out corporations only, with no strings = “clean.” Adding anything else – even real OVERSIGHT, for Chrissakes – will be framed as political meddling. Sen. Schumer is already on board with this language, promising not to “Christmas tree” the bill.
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p>Hasn’t this happened? Hasn’t Treasury received warrants for their “investment?”
with respect to the big bailout. Just because it happened with AIG and Fannie/Freddie doesn’t mean it will continue to happen.
Do you agree with Krugman that the government should actually take over the companies at issue, rather than just buy out their liabilities at face value? It seems to me Paulsen’s plan takes $700 billion of moral hazard off the table.
…to the companies that got themselves into this mess without some sort of guidelines strikes me as a recipe for disaster for working families in this country. Perhaps you could call it the PR China Full Employment Act of 2008. Let me explain.
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p>The concern is that the continued contraction of the credit markets will hurt the real economy. Credit worthy firms will not be able to borrow money and this will dampen the economy (the same way an increase in interest rates by the Federal Reserve). Credit worthy consumers will not be able to borrow to buy a home, car or resonable purchase providing another contraction in the economy. The same is true for state and local governments (and quasi government authorities) and their debt.
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p>So to help the real economy we take steps to free up credit. But the good questions are why $700B? How much is really required to prop up the credit markets? Why this week? What firms are in danger of failure if we take some time to find out the real depth of the problem? Do we really care if these financial services firms fail? If so how do we do this without making a huge transfer of wealth from average taxpayers to the stockholders of the firms?
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p>So commercial banks and investment banks and non-bank banks get this infusion of money in the purchase of their mortgages (and perhaps other financial assets?). What are the firms going to do with the money? Are they going to expand credit markets in the US? Or invest/lend the money to those areas of the world economy that offer the highest rate of return? Are US taxpayers going to buying less than optimal mortgages so investment bankers can support factories in China?
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p>PS: I like how in this thread the liberals are talking about the best way to resolve this crisis, while the conservatives are talking about the best way to find political profit from it.
In the minds of the commenters herein, the best way to resolve the crisis also happens to be for Democrats to derive maximum political profit from it, rendering this statement meaningless, and demonstrating the self-serving and self-flattering nature of politics, and the capacity for political partisans to exist in a bubble.
The best way to resolve the crisis is to protect the taxpayers from the Communist tendencies of the current Administration. True, this will benefit from the Democratic Party, if only for the reason that it seems to be the only game in town whose focus even includes the taxpayer.
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p>If McCain woke up tomorrow and stopped backing the 700 billion dollar free check “plan”, I’d cheer him on.
Barney Frank is saying philisophically, ‘. . . wait a minute, no you don’t. Not with our money . . .’
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p>While President George W. Bush and Treasury Secretary Paulsen are saying, ‘. . . there’s the cash draw. Take as much as you guys want . . .’
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p>My vote is for Barney Frank’s way. He is telling them that they have to put their greed in check to get the bailout.
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p>Once again, Bush wants a blank check. This time to give it away to the robber barons of the financial services industry!
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p>Government contractors? Military industrial complex? Big oil? Now the financial services industry? Who is next? There’s not much time to line the pockets of the rich!
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Oops. I spelt it incorrectly.
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Let’s face it, Kennedy’s Senate seat will sooner or later go vacant. Of the nine MA representatives only two, in my opinion, have a chance of filling it, and they are Frank and Markey. As much as I like Markey, frankly, he hasn’t done anything major recently. This is a perfect fight for Barney to pick up. Even if he loses it, it will be remembered positively here in MA.
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p>However, I do support the substance of his position.