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This crisis could have been avoided
I missed last week's discussions on the whole financial industry's collapse. Sorry if this is a rerun of previous discussions. I just have to get this out. Also, sorry for the length.
Congress needs to be taken to task for failing to reform Freddie/Fannie. We wouldn't be in the mess we're in now if the housing bubble had never burst. I blame that mostly on the Fed. But it would never have become the epic crisis it is now except that HUD ignored Freddie/Fannie's rampant corruption and mismanagement, and Congress repeatedly ignored HUD's failings.
There were at least 2 recent GSE reform bills that I've found, one in 2003 (see NYT link below for an article on that one), another one in 2005 that were both shot down by congress. The 2003 article contains this amazing quote, "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''
Democrats voted down the reform bills in committee and republicans lost their gonads after realizing this was a partisan issue, probably b/c they too were too afraid to piss off low-income voters.
There was ample evidence that Freddie/Fannie were doomed. Greenspan warned about it. here's a quote from him in 2005, "If Fannie and Freddie ``continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. ``We are placing the total financial system of the future at a substantial risk.'' In 2004 the SEC's chief accountant said Freddie/Fannie's accounting wasn't even "on the page" of allowable interpretations.
I'm at thet point of wanting every single person in congress voted out of office. I find their ineptitude sickening. Since that won't happen, I think it's important to highlight the best of the worst and the worst of the worst. Barney Frank and whoever else followed him are the worst of the worst. Surprisingly (yes I was actually surprised), McCain is one of the best of the worst.
Here's a link to the 2005 reform bill I mentioned, which was co-sponsored by McCain.
http://thomas.loc.gov/cgi-bin/bdquery/z?d109:SN00190:@@@P
McCain gave a great speech at the time about Freddie/Fannie in which he accurately predicted the taxpayers would be exposed to enormous risk without GSE reform and that Freddie/Fannie would hurt the entire economy unless congress acted. After reading about this speech I decided to vote for McCain.... and then I signed on here and read about his desire to appoint Andrew Cuomo to the SEC. *sigh* (McCain keeps taking 2 steps back for every 1 step forward, in my view) Still, I love that McCain was a leader in this reform. If he doesn't push this over the next month then he deserves to get his ass kicked in November. It couldn't be an easier softball to slam out of the ballpark.
Here's an editorial about it.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSKSoiNbnQY0
ETA: I think placing blame where it's due is important b/c it shows who had good foresight/judgment on this issue, but I'm also interested in seeing this resolved in the best way possible. So as soon as I hear the details of the upcoming legislation I'll rant about that too.
Re: This crisis could have been avoided
my read shelf:
"As of page 2 this might be the most boring argument ever. It's making me long for Rape Day." - Mouse
You're so nice
I spent last week fuming about congress and had nowhere to rant. So now I'm past the point of being nice about it. If I had any free time I would start a group whose goal was to vote out every single incumbent in office. our congress = worst ever. it's one thing to eff up spending (which they've done), education (which they've done), entitlements (which they've done), etc etc. But it's quite to allow our entire economy to nearly collapse and then stick us with the bill. That is truly unacceptable.
Tomorrow, after I cool down a bit, I think I will express my displeasure to my morAn senators.
Not on this issue he hasn't. He isn't about propping up these failed monoliths of the bygone New Deal era. I think he's just ignorant of Andrew Cuomo's role in the HUD's epic failure. McCain still realizes how badly reforms are/were needed. I think he just wants to look all bipartisan/ above the fray and someshit and name dropped a person with experience in this area. I haven't read that he's now against reforms, which is the issue at hand.
I wish I could type out my entire conversation with my colleagues and friends since last week. There are too many factors involved to pinpoint it all on just one single entity. While I agree that the government played a large role in the mismanagement of the GSEs, the rest of the world (i.e. banks, home buyers, and anyone in between) is also to blame. IMO the bailout out, as proposed, does not even address the fundamental issue of declining home prices. It merely slaps a bandaid on a bleeding artery.
It's been an ugly day for me at work but I hope to post my own thoughts and rants later tonight.
Really? What about this then?:
http://www.drudge.com/news/112683/mccain-deregulation-helpful-economy
"As of page 2 this might be the most boring argument ever. It's making me long for Rape Day." - Mouse
I'm sorry I didn't click your links, but I hope they included the quote by the Rep (I think Frank) who said that there was nothing at all wrong with Fannie Mae and Freddie Mac. Good work, Congressman.
Oh yeah, here it is:
''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee.
I agree jlaj. The bailout is treating the symptom - mortgages instead of the real problem - decline in home prices. I don't actually think the gov't can or should stop the housing bubble burst. Once it grounds out on its own we can put the pieces back together. Trying to stop it will only prolong it IMO.?
Also, I didn't mean to give the impression I only blame the gov't. I just think they were the main factor, but there were several. There's plenty of blame to go around. That said, banks never would have made so many super risky mortgages (and they didn't in the past) except that the gov't pushed freddie/fannie to promote low-income home owners and those GSE's bought up the risk. WDYT?
That comment had nothing to do with Freddie/Fannie. It was in regards to removing a barrier between investment and?commercial?banks and it was right to repeal that act. Investment banks that have failed lately (Lehman, etc) didn't want to merge with commercial banks. Now I bet they regret that decision. It would have made them much more stable. So McCain was right. Here's an article about it:
http://www.npr.org/templates/story/story.php?storyId=94825333&ft=1&f=1006?