Of all the saddest claims about the failed bailout is the Republicans saying that they had to do so because Nancy Pelosi delivered such a horrid, partisan speech.
I completely agree that Pelosi's speech was one of the saddest pieces of half-hearted garbage I have heard from any politician. But I expect Republican legislators to pay more attention to the economic fate of the nation than to whether the speaker of the house is hurting their exquisitely delicate feelings. As a friend notes, "I expect more maturity from my daughter and her fourth-grade classmates".
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I think the maturity is required on both sides. Maybe Pelosi might've had the sense to not use a measure she claims the nation needs so badly to grandstand when she knew the opposition was looking for any excuse to vote it down.
I must applaud Pelosi's stupidity. Unwittingly, she did the right thing for the wrong reasons.
It isn't about hurt feelings it is about playing politics.
The Republicans, after hearing her speech, figured that the Democrats were going to take 100% of the credit and blame Republicans for the whole thing...five weeks before the election, why would she think she could get away with such an action when 95 of her own party refused to vote for the bill in the first place?
Ummm.... If that speech explains why the Republicans didn't support the bailout then what explains why 1/3 of the Democrats didn't either? Seems to me if 1/3 of Republicans voted FOR it then they should have been able to pass the bill.
The text of Pelosi's speech is available at TPM.
Agreed totally. I don't care if Nancy Pelosi got up there and accused the Republican Congressional Delegation of being infested with pedophiles. If you voted either for or against a tremendously important bill based on what somebody from the other party said, you deserve to be expelled from Congress.
What if she knew the bill was going to fail, so she did her best to anger the GOP into not voting for the bill? All the while she was thinking that now would be the perfect time to re-introduce the same bill, but with many of the pieces the GOP wanted removed (the ACORN bit, etc), knowing that she can line up all her votes within her own party -- and make the GOP look even worse in the process?
This, I think, is why lack of "experience" in someone like Sarah Palin doesn't really bother a lot of people. They're just plain tired of politics and politicians, and someone who looks like maybe she shouldn't be there has a lot of Mr. Smith Goes to Washington-like appeal.
TED spread at 3.58.
The economy has a temperature of 106 and rising...
Ummm.... If that speech explains why the Republicans didn't support the bailout then what explains why 1/3 of the Democrats didn't either? Seems to me if 1/3 of Republicans voted FOR it then they should have been able to pass the bill.
Looks like most of the Blue Dogs voted against it. Guess they got blindsided by ideology.
Reaction to Pelosi's speech. I guess it could be a case of doing the right thing for the wrong reason.
OK, as I see it now, the bill will only make things worse. It increases economic risk. It will cause inflation which will only further burden home owners (it will likely not go into higher wages or house prices). It will decrease the goverments ability to borrow and increase the interest rate it must pay on debt. It also does nothing to change the dynamics of lending. Regardless of whether banks or the governement hold the existing risk, banks are faced with the same question, "Do they want to take on risk and probably make money, or not and watch their current wealth depreciate?"
On the other hand, it could hamsting the gov on future spending.
And, who will be buying the T-bills and where will the money come from. If it comes from people currently invested in commodities, it could ease costs and stimulate the economy. But I doubt it would come from there (which investors seem to have considered safe over the past couple years) rather than from capital ivestment.
Can someone point me at a cogent explanation of why a bailout, and in particular this bailout, is necessary to avoid the Great Depression - Part II (This time it's personal!)?
I don't understand why making banks whole on well-earned losses (by shifting them to the taxpayer) isn't just really big broken windows.
Those losses exist, someone's going to have to eat them. Making me eat those losses deprives the economy of capital that would otherwise be put to better uses.
If it truly becomes necessary to recapitalize the finance system, lets recapitalize banks that didn't overload on bad paper. You know, the smart ones...
Maybe if we didn't have career politicians grandstanding and worried about keeping their jobs, us average Americans wouldn't now be worried about keeping ours.
Pelosi and Frank and Dodd wrote this bill. They didn't involve House Republicans until the end of last week. The Republicans have given all they can--they've given the commitment that Bush won't veto the bill as drafted, and a significant number of Republicans supported the bill, including members of the leadership.
Now is the time for Obama to step up and lead. In particular, he should encourage members of the Black Caucus to vote for this bill. Those members are overwhelmingly in safe Democratic seats--they aren't taking a political risk to vote for this. The Democrats have the majority, and with that comes responsibility.
Barney Frank offers an olive branch to soothe their hurt feelings.
"That's an accusation against my Republican colleagues I would never have thought of making… Give me those 12 [Republicans'] names, and I will go talk uncharacteristically nicely to them." (TPM TV)
Let's cut this down to the basics.
1. This mess is largely the fault of the Democrats.
2. The Democrats have the votes to fix it on their own as well as the supposed mantle of responsibility that comes with leadership, but the fix is extremely unpopular.
3. Hence, the Democrats are going to let things go to shit because then they've got a better chance of keeping their jobs.
Sure, the Republicans are playing their interests, but in the end the Democrats were the cause of this mess and they happened to also be the guys in charge.
Someone explain to me the logic that says that, if the situation is so dire the Republicans should willingly commit suicide to prevent it, the Democrats shouldn't.
It's a classic ultimatum game from a strategic behavior perspective (and thus morally neutral), but if you factor in any sort of ethical notion of leadership and responsibility, it's pretty much a no-brainer that the Dems need to pass it even if it means taking it on the chin.
Why are people mad about the outcome? It was a truly bipartisan vote. Do we not trust the combined wisdom of many over the few? Don't underestimate the collective wisdom and knowledge of the American people. On any given issue, 40% are wrong, but the other 60% see things better. If the folks at the top were as smart as they want us to believe, we wouldn't be in this situation today. Best to let the cumulative efforts of the marketplace work this out.
The idea that the Republicans in the House--of all people--are offended by "excessive partisanship" is ludicrous.
It's obvious what happened here. The Republicans thought they could get the best of both worlds--having an unpopular bailout bill passed (so the financial markets wouldn't implode), but WITHOUT many Republican votes, so they could campaign against the Dems for having supported "big government handouts to their rich friends on Wall Street."
If Pelosi hadn't given her speech, they would have come up with some other excuse for voting as they did.
This is Bush's bill.
Paulson came up with it.
Democrat's put some oversight into it and other safeguards.
The House GOP said they would vote for it, then didn't.
Blame?
As a public choice dude, I love all this. Four lessons for today.
1. "public welfare" does not motivate politicians, self-interest always does. Buchanan/Tullock about 50 years ago, and eternal truth.
2. there's no free lunch. Politicians thought there was in promoting subprime mortgages, Fannie&Freddie, mark-to-market, raising leverage ceilings, and in selling us this dud bail-out bill. Well, duh, they were wrong, and wrong, and wrong again, and again, and again.
3. mind the moral hazard. Don't subsidize bad behavior, you'll only encourage it. Bridges to nowhere are cheap in comparison with subsidizing housing in hurricane, flood, or mudslide zones. Don't bail out excessive risk takers, or you'll see more of them.
4. sunk costs are sunk. Don't throw good money after bad. What matters is not the mortgage crisis, it will sort itself out, and it's only redistribution of assets anyway (the houses are still there, see?). What we should worry about is the liquidity of the lending sectors. Focus on incentivizing future behavior, not making up for past mistakes.
For all these reasons, the bill deserved to die. Power to Pelosi and the Republicans! What a glorious gang of nincompoops!
Ask not for whom the closing bell tolls. It tolls for thee.
Having read a transcript of Pelosi's speech, I found very little that could be considered partisan, much less insulting. She also praises Paulson once or twice. The offending text must be this:
While it is admittedly a bit of a stretch to lay the blame for the housing bubble/mortgage meltdown soley (or even mostly) on Bush, does anyone dispute that Bush's and the rubberstamp GOP Congress's economic policies and budgets were reckless and that this crisis has resulted in large part due to lack of government oversight and regulation? Pelosi slams Mr. 26% in one sentence, and doesn't directly criticize the Congressional GOP, and this is enough to cause a dozen (or more) GoOPers to vote against the bill? Spare me the tears.
Apparently, over the weekend, both sides worked out the terms and the numbers. The Democrats promised 140 yes votes while the Republicans promised no less than 80. Today, the Democrats delivered exactly 140 votes. Republicans came up well short.
pr9000 actually is probably onto something. The Democrats could see that the Republicans were going to try to force them to pass this all by themselves at the last minute. So, instead of watching the football get pulled out from under foot again, they set up a situation where Republicans are forced to share public blame leading into a revote.
Politics is a nasty soap opera.
There are two ways that the votes could have been organized for this, and only one way that makes sense; Republicans counted how many votes they thought they could get, and Pelosi maximized the number of "nay" votes she could get, based on that, and still pass the vote. No margin for error means that just a few Republican defections were enough to sink it.
Republicans didn't deliver, but there was no indication that their vote was solid to begin with. Pelosi gambled and lost.
No one knows if the "plan" will work.
If it works: great for everyone.
If it tanks and both parties were on board: well, we all tried.
If it tanks and only Dems are on board: all Dems fault.
If it works and only Dems on board: they spent $700B of taxpayer money that there is no proof we needed to spend.
And, before anyone knows if it works or not: $700B was spent. (not true, but that's what most people think)
So, the Republicans want the Democrats to pass the bill alone. The Democrats don't want to go it alone.
I don't know how the order of the vote went, but I guess it became apparent that the Republicans were going to leave the Democrats holding the bag and the Democrats scuttled the bill.
Bullshit politics all around.
The political way of doing things (in order of importance):
Do what's good for:
1. Yourself
2. Your constituents
3. Your state
4. Your country
5. Your world
Some politicians can get past 1. Not many.
I have seldom seen anything as remarkably dumb, and self defeating as Pelosi's speech. It wasn't so much that the GOP house members feelings were hurt as it was being stuck with 100% of the blame for it. This is very sensitive politically - house members are getting a ton of heat from their constituents. The thing is, many of those who did support it didn't do so wholeheartedly. It didn't take much to push some of them over the fence and oppose it.
It is a pretty poisonous atmosphere, and Pelosi did what she could to add to it. A pretty disheartening display.
Really, Megan? Speaker Pelosi's speech was "one of the saddest pieces of half-hearted garbage I have heard from any politician"? Seemed like pretty standard fare to me. Bush owns the category anyway.
After all of this time, why are you surprised that congressmen don't act like statesmen? Have you ever seen one do so?
1. This mess is largely the fault of the Democrats.
Because they rejected Paulson's initial plan? NO, that would be the House GOP who rejected the Paulson plan. Because Pelosi used one sentence to criticize the economic policies of the Bush adminstration? Sorry, that won't wash.
2. The Democrats have the votes to fix it on their own as well as the supposed mantle of responsibility that comes with leadership, but the fix is extremely unpopular.
Umm, what about the leadership of that guy in the White House who says bailout is urgently needed now? Or what about that mavericky guy who talks about leadership all the time and who wants to occupy the White House when Mr. not-so-popular leaves?
3. Hence, the Democrats are going to let things go to shit because then they've got a better chance of keeping their jobs.
Hmm, perhaps some Dems don't want to allow the GoOPers to use this bill against them in November. Review that vote tally 140 Democratic Yes votes and only 33 GOP Yes votes -- that doesn't sound like it's the Dems who want to let things "go to shit."
Sure, the Republicans are playing their interests, but in the end the Democrats were the cause of this mess and they happened to also be the guys in charge.
Again, it was the House GOP who rejected Paulson's plan and it was the House GOP who voted over two to one against this second version while most Dems voted for it. Last time I checked, the Executive is still a Republican (unfortunately), and he and his Treasury Secretary wanted this bill to pass. And it was also the GOP who controlled Congress while this "mess" was building until the Public tossed them aside for failing to do their jobs properly in 2006.
The issue is that it was the Democrats who caused this financial mess. Several years ago the Administration proposed regulating Fannie and Freddie and it was shot down by the very same Democrats who are now blaming Republicans for failing to act. They should be held accountable but they want Republicans to share blame, but get none of the credit if things work out.
Don't look now. Here's the shocking and offensively "partisan" speech by Nancy Pelosi.
Cover your eyes kids.
Give me a break. I've seen more rancorous debate over the naming of a post office. She talked about Bush pissing away Clinton's surplus, and talked about the roll that non-regulation had in bringing this situation. She spoke well of Paulson and explicitly mentioned that she wasn't blaming all Republicans. After the last 8 years, you'd think that the Republican party would be a little less thin-skinned than this.
If you're going to scuttle it, stand up and say why. Say it honestly. There are legitimate reasons to not vote for a bill like this that you can explain. Don't hide behind b.s. and try to blame someone for hurting your feelings. This is just cya for when it sinks in that Congress really might not do anything.
It's becoming ever more obvious what a stoopid beeyotch Nancy Pelosi is.
Do we want a one-party-dominated government? With what these chuckleheads want?
Gridlock is good.
Besides, more people are becoming aware of how deep the Dems and their people are implicit in this problem. Especially the race hucksters and CRA terrorists. Let Pelosi pretend the Dems are pure as the driven snow in the blame game...she better not whine too loud because the backlash will be a hot belch from hell.
Maybe more GOP Members finally realized that Wall Street is mostly a Democrat constituency? Think about it: reports leaked that Paulson's office was e-mailing inside dope to Barack Obama via Obama donors at Goldman Sachs; Obama supporter Warren Buffett put $5 billion into Goldman last week; and then we hear that the Dems had Warren Buffett on the phone Saturday night asking him for input on the legislation.
On top of that, the Dems have been (inaccurately) been placing all the blame for the crisis on the GOP. Maybe the GOP Congressmen thought, "if we're going to get blamed by this crap anyway, even though Dems ran Fannie and Freddie into the ground, why should we give Warren Buffett a put on his stake in Goldman? Let the chips fall where they may. Maybe the hedge fund where Chelsea Clinton works will manage to muddle through".
Who does Nancy Pelosi think she is? Instead of trying to heal hard feeling between the two parties and to help America, she decides to take it on herself to stab, slice and serve up Republicans in a time that is critical to this nation. This was neither the time nor the place to do this. These were not words to help and heal, these were fighting words. She is the one out of control. She is not helping our nation but she is stroking her own ego. Pelosi should be held responsible for her actions and keep her mouth shut. Her own party didn't not back her 100%. Come on something is wrong!
The backlash will be a hot belch from hell.
Posted by kentuckyliz | September 29, 2008 4:44 PM
More likely a small, whining fart from McCain. Bush made a hash of the national finances, aided by the slobbering idiocy of the Republicans. Now the adults will have to fix the GOP's mess - as usual.
Oh, please. This really isn't that complicated.
The Republicans wanted the bail-out to pass while claiming they were against it.
They're the equivalent of the yuppies who don't vaccinate their own children.
(See all Megan's previous remarks about "the herd" and vaccination and, um, just ignore it when she uses the word "sociopath" incorrectly.)
It's amazing how gullible McArdle is. Truly.
Pelosi's speech was a non-issue. Had no effect whatsoever.
In fairness to McArdle, she's busy ignoring the proverbial elephant in the room (the fact that the rote regulation and dweeb libertarian talking points she so espoused all these years have led to this historical crisis.) Better to lash out at the Democrats trying to clean up after her Wall Street buddies than engage in any self-examination.
Clinical denial must use up a lot of the poor gal's energy.
Very funny handle whosdumber. Best chuckle this hour.
Why do you use the words "garbage" and "half-hearted" to describe a sidewhow and "expect Republican legislators to pay more attention to the economic fate of the nation" to describe the Republican's actions?
If the Dems wanted it to pass, they could've had the votes to pass it......last I checked, they still control both houses......and if you believe them, they think they're going to expand those majorities.........not so fast there Nancy and Harry.
Let's look at it from the opposite perspective: Presume that some Republicans were inclined to not vote for the bill, but might be convinced if the speaker of the house made a gracious plea for unity and bipartisanship. Instead, she delivers a blistering attack on you. What Republican is going to give any more thought to "doing the right thing"?
Pelosi had the chance in her hand, and *she* is the only one who blew it.
I don't think Republicans refused to vote for the bill because they got their little feelings hurt. Instead, the tone of Pelosi's remarks were entirely at odds with the purported seriousness of the situation. If this really is a crisis, and if this bill really is the cure, then it is not the time for Pelosi to be scoring partisan points. (When the ship's sinking, you don't expect the captain to start complaining about the color of the dining room wallpaper. If he does, you might wonder whether or not the ship is sinking.) Pelosi's actions reinforced Republican doubts about whether the bill was a good idea. In the end, her words convinced enough of them that she didn't think the current situation was the crisis she claimed it to be and they voted accordingly.
Someone may need to point this out to me but I just skimmed the text of Pelosi's speech (from the TPM link provided by Ned Ludd above). I don't see anything outrageously partisan about it. Am I missing something here?
Am I missing something here?
Besides the fact that Congressional Republicans are sociopathic liars?
"Besides the fact that Congressional Republicans are sociopathic liars?"
Thanks Chet, how could I have missed that.
Oh come on! Does anyone seriously believe 12 Republicans would have changed their votes if Pelosi had just kept her mouth shut?
The bill was political poison. Polls show the public running at least 2-1 against. And the NO crowd is a lot more adamant than the yes crowd. Calls to congressional offices are running north of 20-1 against the bailout. The Democratic leadership was unwilling to swallow the poison unless they could blame it entirely on Republicans. The Republican rank and file hated it from the start, and were unwilling to swallow it all after it was "improved" by the House Democratic leadership.
Frankly, the refusal of the House to hand a 700 Billion dollar slush fund to the current & next Treasury secretary strikes me as a reasonable outcome.
If this tale is true, then this is the first time in the history of Congress that anyone has voted on the basis of a floor speech.
More likely, the GOP bailed because they felt like it, and this is a BS pretext.
Hey Bragan,
I'm curious, what color is the sky in the reality you inhabit?
Because here in the real world (sorry, Megan, you keep on saying this "ain't so", but refusing to provide any explanation for why), the housing bubble, and the toxic mortgages, are primarily the responsibility of the Democrat Party.
They were the people who fought tooth and nail against firmer regulation of Fannie and Freddie, they were the people who fought tooth and nail for more "affordable mortgages" to "poor people with bad credit" (which is to say, used the power of government to bully banks into making bad loans, and used their control of Freddie and Fannie to get those GSEs to buy up those poor quality loans, leading to mre of them being made).
In 2005 when President Bush tried to rein in the GSEs before it was too late, the Democrats in the Senate voted straight Party line against the move, causing the Senate to give up on trying to prevent this disaster.
The Republican response to Pelosi's speech should have been this:
Madam Speaker, your Party caused this problem, not ours. [Go over the complete history of the "Community Development" shakedowns, including the efforts by ACORN and Obama's support for those efforts, plus the speeches by Meeks and others in support of Raines' fraud at Fannie]
Therefore, we are offering an amendment to this plan, that will address the root causes of the problem:
1: Total ban on any Federal money going to ACORN, any other group that bullied banks into making these loans, or any future group that is run by anyone who had a significant position at any of the above groups.
2: Termination of ALL "Community Development" laws / regulations that pushed banks into making these bad loans.
Given these "reasonable regulations", we will provide you with yes votes from 99 % of the Republican caucus.
---
Because this mess is the fault of the Democrats, and if they're not willing to stop playing games, it's time for the Republicans to join Obama in "taking the gloves off" and hammering the Democrats for the easily foreseeable results of their policies.
I too fail to detect the "saddest pieces of half-hearted garbage I have heard from any politician" in Pelosi's speech, but I can appreciate the irony of the claim.
Here is my response to the Pelosi speech, and here is my response to the GOP response:
"Both you idiots screwed up. Bring me a viable third party (siddown you crazy Libertarians and dumbass Greens!) and I will see you all on the unemployment lines."
...any chance we can revive the Reform Party...?
Someone may need to point this out to me but I just skimmed the text of Pelosi's speech... I don't see anything outrageously partisan about it. Am I missing something here?
How about when Pelosi blames the entire credit crunch on Bush's irresponsible economic policies? Whether that's true or not, it's definitely partisan. If it had just been an aside, blaming Bush might not have been "outrageously partisan", but it wasn't a mere aside. She stressed the unprecedented size of the bill (700 BILLION DOLLARS!), contrasted Clinton's superlative management of the the economy with Bush's inept performance (Four consecutive years of budget surpluses turned into deficits within 2 years!), declared the "party was over" and that she and the Democrats were there to correct all the abuses imposed by Republicans while they were on their Bush-led drunken binge. Laying all the economy's problems at the Republican's door and doing so with the tone of a disproving Aunt ready to impose adult supervision on a bunch of naughty children was overly, even outrageously, partisan. You may believe everything she said was true -- the Republicans are to blame for everything -- but this was not the time nor the manner in which to speak such truths. That's particularly true when the Republicans have good reason for believing that at least some of the blame belongs at another door.
Megan,
Roger Kimball has written up a nice little post on the causes of the current crisis, laying the blame securely at the feet of the Democrats and ”The Community Reinvestment Act”. You've repeatedly claimed that we can't actually blame them for the problem, but never said why that is so.
Could you tell us what's wrong with his reasoning? Because if there's a real case to be made, I'd like to see it.
(Oh, in the past you said something like "we couldn't do that, it would keep lots of poor people from being able to buy houses, and that's not fair!" Um, what part of "poor" don't you get? Being "poor" means you have fewer opportunities than the "middle class", who have fewer opportunities than the "rich". That's what those words mean.)
Megan,
Roger Kimball has written up a nice little post on the causes of the current crisis, laying the blame securely at the feet of the Democrats and ”The Community Reinvestment Act”. You've repeatedly claimed that we can't actually blame them for the problem, but never said why that is so. Could you tell us what's wrong with his reasoning? Because if there's a real case to be made, I'd like to see it.
I'm not Megan, nor do I play Megan on TV, but until she responds allow me to offer my 2 cents: It is unfair to lay the blame entirely at the feet of Democrats. While it's true Republicans pointed out the risks that eventually materialized in the current crisis, it's also true that too many Republicans were enthusiastic supporters of CRA, CREs, and the rest. While it's true that ACORN and other community organizers used CRA to force banks to lend to the the un-creditworthy, too many banks were only too happy to make those loans once Freddie and Fannie agreed to buy them. Without the active assistance of these Republicans (even if it was a minority of Republicans) and the mortgage industry, the problem wouldn't have been as large as it is today. Indeed, the problem might not exist at all.
I believe Barney Frank was being honest when he claimed two years ago that he didn't see any problem and that the CREs' critics were blowing everything out of proportion. The CRA had been adopted in 1977 and we'd not had a catastrophe. The CRA's reach had been expanded in 1995 and, if anything, things looked better than they ever had. Why would you expect some Congress critter to spot a problem given those facts?
Even those of us who did see a problem on the horizon may not have expected it to materialize so soon. I didn't. I thought the mortgage market could absorb a reasonable amount of defaults on the sub-prime loans -- but I was relying on bad statistics and worse memory. I thought the subprime loans were no more than 5% (if that) of the total new loans. If I'd known they made up more than 20% of the market, I'd have panicked -- and I've started writing letters to my representatives in Congress. I didn't because I was caught napping.
So, yes, the policies championed by Democrats since 1977 made this disaster possible. But a lot of us helped if only by looking the other way.
David Walser will continue to hammer home the stupid Sailerite/GOP notion that loans to brown people caused the collapse, and nothing will stop him, even though no credible economists will accept his/their racist bullshit.
It's as credible as Hitler blaming the Jews for Germany's loss in WWI, and it comes from the same base motive.
So, Moe, do you have anything useful to say? Or are personal insults and straw-men all you're good for?
(BTW: The majority of poor people are white. So you're the main racist in this discussion.)
Moe, et al, I'll let our blog mistress judge whether your calling me a racist bigot violates her rules for civil discourse and whether my posts can in anyway be viewed as sufficient provocation for such a libel. However, I am unwilling to be lectured on the topic of bigotry by someone who represents himself to the world with a nom de guerre selected to offend and belittle the religious sensibilities of many if not most who read his posts.
Putting aside the incivility of your post, allow me to address what little substance there was: If no economists, credible or otherwise, accept that lending money to the un-creditworthy will not result in an unacceptable level of defaults, perhaps we should review the merits of an education in economics. Still, we don't need to look at economic theory, we can look at what people were saying at the time and see how well their predictions stood up. On September 30, 1999, the NYT printed an article on the Clinton administration's push to get Fannie Mae to ease credit requirements. The article noted the following:
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
That's pretty much spot on. The NYT's reasoning may have been racist, but as subsequent events have proven, it was also correct.
Here's the link: Fannie Mae Eases Credit...
You wanted that loan. You needed that loan.
But they had to give that loan to a minority. Because of some quota law buried in the Community Reinvestment Act.
Where's Jesse Helms when you need him?
Could you tell us what's wrong with his reasoning?
For one thing, mortgages made under the CRA have a lower rate of default, currently, than mortgages as a whole.
While it's true that, currently, default rates are somewhat higher among minorities, that has nothing to do with the CRA, and everything to do with predatory sub-prime and "exploding ARM" loans made to minorities (often under false pretenses) not to fulfill quotas, but to pull in huge commissions for (mostly white) loan officers.
I mean the CRA was passed, what, 20 years ago? 30? And we're supposed to believe that it's responsible for a credit crisis that's only 2 years old? 5, maybe? That's one hell of an action-at-a-distance.
Chet,
I take it you didn't bother to read Roger's article?
Esp. the line "In 1995, Bill Clinton’s administration made various changes to the CRA"?
So the problem really started picking up steam 13 years ago.
CitiJournal was warning about it in 2000. Bush tried to do something about it in 2003. McCain tried to do something about it in 2005, and 2007. Democrats blocked.
If you like, I could change it to "CRA started the mess, Fannie and Freddie jumped in the sub-prime market for the same ideological reasons." That make you happier?
Or are you going to claim that Fannie and Freddie going boom isn't a big part of the problem?
Oh, and WTF is "predatory lending"? It really sounds like you're saying "those poor innocent darkies were led astray, and the evil BusHitlerCo fired all the regulators who would have protected our little brown brothers from making those bad decisions."
You want to be treated like an adult? Great. Then you are responsible when you chose to sign a contract. No one else.
Otherwise you're not an adult.
I do love the Catch-22 you're proposing: if they don't lend to minorities, they're racists cutting minorities off from the American Dream. If they do, they're predatory lenders taking advantage of minorities.
I don't know why they all voted the way they did, but at least one didn't care what Pelosi said. He was doing what his constituants wanted. And he said it, invoking the words of Andrew Jackson AND Dostoevsky, and he made me weak in the knees. *swoon*
McCotter is almost enough to make me want ot move to Michigan. :D
Megan,
When I first heard what the Republicans were saying, I thought "man up and get a pair, babys. This is more important than your feelings."
But I've changed my mind. One of the issues with the "bailout" is concerns about moral hazard. And there's a big potential moral hazard in letting Pelosi get away with playing both sides of the street like that. She wanted to be the Speaker of the United States House of Representatives, and she got that position. Now she has to be a leader. She has to make good decisions, and follow through on them, or else the Democrats need to get rid of her and replace her with someone who can lead.
Barring that, the voters need to replace the Democrats as the majority party. Or else deserve the "leadership" they're getting.
IMHO, after Pelosi's speech, the Republicans should have huddled, and announced that not one Republican would vote for the bill unless Pelosi publicly retracted and apologized for her entire speech.
If she wants to play hardball with the nation's future, then she needs to have it shoved down her throat.
I have had the 1999 NYT article emailed to me like nine times as if it were some sort of smoking gun. In the same sentence it talks about pressure from the Clinton administration, it also talks about pressure from shareholders. Looser underwriting standards means more loans. More loans means more securities. More securities means more money. I don't understand how CRA requirements, either the 77 version or the 95 version can be to blame. Investment banks which no longer exist were not subject to CRA rules. Goldman and Morgan Stanley just switched to an entity that requires CRA oversight, presumably because the overall regulatory scheme gives them a better chance for survival.
People made these loans because at the time they were making money hand over fist and they convinced themselves that they would have no long term risk. Our government allowed it because who wants to be the person who tells somebody they are making too much money helping people own houses? THe Democrats are certainly not blameless, but to say that the whole thing is completely the fault of the CRA and democrats seems to ignore a lot of facts.
Regarding CRA rules, they don't apply to private banks. Most sub-prime loans were from private banks.
Also, nobody forced the finance industry to start using bundled mortgages as complex investments. That's new.
Finally, ask yourself the question; do you really think these bankers were issuing oodles of sub-prime loans to comply with the CRA rules, or to make lots of money? The latter sounds more plausible to me.
1: I'm not saying it's all the fault of CRA. I'm saying it's (almost) all the fault of the Democrats, between CRA, "Community Organizers" shaking down banks, and Fannie and Freddie diving into the subprime "market" and trading jobs and donations to Democrats for protection from regulation. I'm saying that the Republicans tried to avoid the disaster in 2003, 2005, and 2007, and the Democrats fought back in every way they could, and succeeded in "protecting" Fannie and Freddie so that they could grow into bigger disasters, and take a larger chunk of the economy with them.
People made these loans because at the time they were making money hand over fist and they convinced themselves that they would have no long term risk
And why did they do that? How much did CRA and F/F securitizing the subprime market lead to the housing bubble? What was the driver for those "ever growing" housing prices?
McCain tried to do something about it in 2005, and 2007.
What, exactly? If it was anything like his current efforts I'd surmise he actually caused the crisis.
Oh, and WTF is "predatory lending"?
You mean besides one of the primary causes of the current crisis?
Jesus, if you don't even know what predatory lending is, how can you even talk about this issue? Thanks for revealing yourself as completely ignorant, I guess. Sure saves a lot of time.
What, exactly [did McCain try to do to prevent the crisis in 2005 and 2007]? If it was anything like his current efforts I'd surmise he actually caused the crisis.
He co-sponsored a bill that would have created a regulator for Freddie and Fannie. The bill would have created minimum capital requirements for the two companies (which would have restricted their size) and would have imposed rules mandating minimum credit quality for Freddie and Fannie's mortgage pools (which would have reduced their exposure to sub-prime loans), and the bill would have given the new regulator the power to enforce these rules. At the time (2005), sub-prime loans made up less than 5% of new loans. By 2008, sub-prime loans were more than 20% of new loans.
Would these new rules have prevented this mess? We don't know. If nothing else, the problem would be smaller than it is today.
Predatory lending is lending to a borrower you expect to default. His payments are pocketed and you resell the property to someone else.
Thanks, David. Specifically what bill was that?
People made these loans because at the time they were making money hand over fist and they convinced themselves that they would have no long term risk
And why did they do that? How much did CRA and F/F securitizing the subprime market lead to the housing bubble? What was the driver for those "ever growing" housing prices?
I do not understand the first question. What other reason do you need for making a lot of money and passing on the risk do you need than "we were making a lot of money and there seemed to be no risk."?
Fannie and Freddie loosening their standards had a lot to do with the crisis. They were not the only companies originating these products. I am saying that the chasing profits played a much higher role than government political correctness rules.
The driver of higher housing prices was the availability of cheap money and a shortage of housing. In some markets, speculation played a significant role.
I completely agree that Pelosi's speech was one of the saddest pieces of half-hearted garbage I have heard from any politician.
Example-free assertions, per usual.
Thanks, knee-jerk pseudo-libertarian!
Up stream, Moe et al claimed "no credible economists" support the claim that the government's push to increase home ownership among the un-creditworthy was responsible for the current mess. Here's a link to an economist who does blame governmental policy for crisis: Bankruptcy, not bailout Moe might not find him credible; I do.
Here's a link to Thomas Sowell's take: Another incredible economist