Sweet weeping Jesus, what a flustercuck.
Yesterday I mentioned a short post by Mark Krikorian at The Corner that said:
I have no way of judging whether the Wall Street bailout is a necessary evil or an impending disaster. But we’re in this mess, ultimately, because our political elites thought it was good social policy to encourage banks to give mortgages to uncreditworthy people, resulting in what Sailer months ago called the “Diversity Recession” (if this doesn’t work, make that the Diversity Depression). In other words, if poor people in general, or blacks or Hispanics in particular, were less likely to be approved for a mortgage, the only possible reason was racism or classism or whatever. Thus “creditworthiness” was an illegitimate, dead-white-male concept, like middleclassness. Because, after all, isn’t everyone entitled to credit? Therefore, I propose any bailout bill start with these words: “It is the sense of Congress that credit is not a civil right.”
I don’t know why it surprises me, but in his followup post today, he says he got a lot of “shame on you” emails about that.
Huh??? What exactly is he supposed to be ashamed about?
What he said is true. It is what happened; it’s factual. Is there a serious, informed person out there who thinks that anything he said was not the truth? Or are we still “shaming” people for saying anything remotely critical of anyone except white men? God, people. Grow up.
Economics professor Stan Liebowitz explains, and this is only a small part of what he writes:
How did America wind up in its worst financial crisis in decades? Sen. Barack Obama explained it this way last week: “When sub-prime-mortgage lending took a reckless and unsustainable turn, a patchwork of regulators systematically and deliberately eliminated the regulations protecting the American people.”
That’s exactly backward. Mortgage lending took that “reckless and unsustainable turn” because of regulation - regulation driven by liberals and progressives, not free-market “deregulators.”
…The mortgage market was humming along just fine when, in the late 1980s, progressives decided that it needed to be “fixed.” Their complaint: Some ethnic groups got approved for mortgages at lower rates than others.
In reality, mortgage lenders were simply being prudent - taking care to provide mortgages to those who could best afford to make the payments.
The shift began in 1989, when Congress amended the Home Mortgage Disclosure Act to force banks to collect racial data on mortgage applicants. By 1991, critics were using that data to paint lenders as racist by showing that minority applicants were approved at far lower rates. Banks were “Shamed By Publicity,” as one 1993 New York Times headline put it.
…[In 1993] the Boston Fed announced new requirements for banks - rules that have now turned out to be monumentally catastrophic: Adopt “relaxed lending standards” or risk being labeled as racists, and face serious penalties under the federal Community Reinvestment Act.
Gone (as “arbitrary” and “outdated”) were traditional lending requirements such as requiring a down payment or limiting mortgage payments to 28 percent of income. (Of course, the loosened lending standards weren’t limited to poor and minority applicants - that would be discriminatory.)
…Time after time, Fannie and Freddie trumped criticism by pointing to how they were helping broaden homeownership. Because of the subject’s racial overtones, they beat back calls for reform even after financial irregularities were found.
None of this means it’s all minorities’ fault. As Liebowitz points out, the loosened standards weren’t limited to just poor and minority borrowers; in fact, all uncreditworthy people were now able to buy houses they couldn’t afford. Thus taking a gargantuan smelly dump over all the rest of us.
So are either of these guys wrong? I would very much like to know. I keep seeing articles blaming the mess on “poor regulation” - are they talking about something else? Do I miscomprehend the meaning of “regulation”?
Edited later to add this link to another piece by Liebowitz along the same lines. Commenter Mont posted it on the last thread.
Ed Morrissey has more:
The heart of this failure came from a mandate by members of Congress from both parties that demanded easier loan terms for marginally-qualified buyers. At first, this meant working-class families, but it also resulted in easier terms all the way through to the highest income levels. Lower qualifiers meant more buyers, and buyers buying bigger houses. The net effect of this was to create a much higher demand for housing and for mortgages.
This produced two other effects. First, the government had Fannie Mae and Freddie Mac sponsor many of these questionable loans and convert them into investment products, which essentially infected the entire investment community with massive, poorly-secured loans. Second, the demand touched off a residential building boom as people attempted to provide inventory for the massive amount of buyers coming into the market.
Unfortunately, this created a big Ponzi scheme, one dictated by Congress and two administrations. It only worked as long as housing prices continued to increase. When the bubble finally popped late last year, it was analogous to the margin calls of 1929, only in slow motion. Once homeowners realized that their houses would not increase in value, they knew that they were stuck in ARMs that they wouldn’t be able to afford. The defaults would not just sink the banks but also the investors who bought the securities.
Who created this Ponzi scheme? Congress did. Who demanded lower qualifiers for home mortgages and then insisted on having Fannie/Freddie turn them into investments to support the lenders? Congress did.
We are so screwed. Screwbiddy screw-screw-screwed.
I thought I was done but here’s some more. Mont’s comment on the last thread got me Googling, and I found this:
The most egregious part is the appointment by the Clinton administration of individuals with zero experience in the mortgage business to head Fannie Mae, who proceeded to cook the books in order to make sure they received their full bonuses for hitting Earnings Per Share targets — and whose actions were shielded by Rep Barney Frank (D, MA), Sen. Charles Schumer (D, NY), Sen. Christopher Dodd (D, CT), and others. These folks — including Frank Raines, James Johnson, Jamie Gorelick (she of the infamous Wall from the 9/11 Commission), and Deval Patrick — made off with millions. There’s no defensible difference between what happened at Fannie Mae and what happened at Enron. Where are the investigations?
And this, which explains that though the Democrats want to blame it all on Bush McHitler Chimpy, he’s actually been trying for years to fix things but was thwarted by…Congressional Democrats. Including this from the New York Times in 2003:
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.
The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
…Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.
”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.”
What a douche. What was Mr. Frank doing/saying last week?
House Speaker Nancy Pelosi announced a set of congressional hearings on the recent federal government intervention on Wall Street Wednesday night, while delivering a blistering indictment of President Bush’s ability to manage the economy.
Appearing at a press conference alongside Pelosi, House Financial Services Committee Chairman Barney Frank said his committee would begin hearings next week on the matter.
Frank said the latest bailout was “confirmation of the irresponsible failure to regulate” on the part of the Bush administration.
Great. Congress will duck and responisble taxpayers will foot the bill.
Yay.
Oh, and the MSM will brownshirt their Obama into office by blaming everything on anyone except those with a (D) after their name.
September 24th, 2008 at 12:58 pmYeah, I don’t want to pay $700 Bil - like I don’t really want to pay the tab after a particularly sumptuous dinner, but that’s what we’re looking at. And, to torture the analogy, it’s especially jarring that lots of other folks ate better than I did.
Good article in the WSJ today suggesting that many distressed properties fall into geographic ‘hot zones,’ in Florida and the SW, for example. The government could simply buy a raft of these empty houses and burn them down - ‘bail out’ thousands of properties instead of millions of investors (and think of the symbolism!). Then, the US Govt makes itself the ‘buyer of last resort’ for derivatives and other instruments - if you can’t sell it anywhere else, we’ll buy it for 25 cents on the dollar. A hand, not a handout, the market readjusts over time, and this might even cost a -lot- less than $700 Bil. I yield to no one in my ignorance of the intricacies of the banking system, but this actually makes sense, at least to me.
September 24th, 2008 at 1:07 pmHell, my generation is already saddled with trillions in debt that cannot possibly be repaid. What’s another trillion or two?
Also, has anyone noticed that ammo costs have gone way up? Coincidence?
September 24th, 2008 at 1:11 pmEvan Sayet said it best. By accepting some applicants and rejecting others based on a criteria, these lending houses committed the Ultimate Evil: the evil of having discriminated. Thus, they had to be brought in line, and damn the cost.
September 24th, 2008 at 1:15 pmThe entire Democrat congressional membership should be shipped to Siberia, immediately, for their part in this debacle.
Given Obama’s comments on the subject, which clearly prove either: a) he’s a shamlessly shameless lying liar, or b) he’s a complete imbecile who couldn’t manage two toothpicks, much less an economy, it is clear that America’s only “Hope” for real “Change” is CaribouFrankenBarbie and The Old Guy.
I wonder how difficult it would be to shove Jamie Gorelick and her 26 million dollar bonus straight up Barney Frank’s ass. I further wonder whether Barney would feel punished by the effort, or . . .
September 24th, 2008 at 1:19 pmDebt is no problem. It can be paid with more debt!
Except… Would you be inclined to lend your money to a person who already has 10 000 dollars worth of debt, or a person who has 20 000? Remember, there are many countries in the world that would like to have that money. At what point do the creditors decide that they will have better returns by lending to some other country? For every dollar of debt, the creditors will be less inclined to lend more.
Then, finally, creditors start saying “no”. At this point, other creditors who might still have trusted USA with that money will see where this is headed, and they will say “no”. Eventually everybody refuses to lend.
Butthurt.
September 24th, 2008 at 1:33 pmI read a lot of this out loud to my husband and son. My son just said it best: “Multiculturalism is racist.”
Yes, son, it is - of the worst sort because it is pious in it’s “diversity” and yet deaf, dumb, and blind to it’s own evil.
September 24th, 2008 at 1:40 pmI think you just answered your own question.
September 24th, 2008 at 1:43 pmWell, it fails now or it fails later.
The best we could hope for with the bail-out is inflation marginalising it over the next few decades. The problem being that (like with the S&L bail-out) we stop believing in the rod (Prov. 13:24) and a decade or less later we get to pony up again.
The worst case with no bail-out is a few years of tightened belts, a couple of draconian executions, and we all live in our Ford Mondeos eating dog food and wearing lots of leather.
September 24th, 2008 at 1:49 pmMore verbal diarrhea from the left I see. Don’t they make Imodium AD for this kind of thing?
The American tax payers are going to get screwed up the ass, and we’re not even going to get a kiss afterward.
I am livid over the finger pointing, the fear mongering, and the overall situation in which we have been THROWN into. I feel certain, and am almost sick over the fact that by the end of the week $700 billion of my tax money will have been spent to encourage greed, bad behavior, and give incompetent CEO’s their “golden parachutes”. Jesus!
My hubby and I bought a house almost 3 years ago. It’s not big or fancy, and it wasn’t as much house and they would have let us buy, but it was what we could AFFORD!!!!
The way I see it, if you are big enough to play with other people’s money and take the risk, then you are big enough to fail and take the consequences that come with it. Bluntly put, Wall Street, Fannie, Freddie, AIG, etc. put on your big boy undies and deal with it! You fucked it up, and fucked it up royally.
I don’t think a bailout is what is right or necessary. So these people took our bigger mortgages then they could afford, so we have several companies that played with fire. Let these people get burned and learn their lesson. Don’t do them the favor of pissing on them (and us while in the process) to put out the flames.
September 24th, 2008 at 2:01 pmI do wonder how much of this is due to low-income/minority focused loans. The other thing that’s been going on over the last few years, of course, was the huge housing bubble on both coasts and in certain other non-coastal areas across the country.
I grew up in Santa Barbara, CA, where the average home price - AVERAGE - is now close to a million bucks. Once when we were thinking of moving back there I asked a realtor how people afford to buy houses at those prices. She said (paraphrasing here) that everyone gets no-doc loans b/c it’s generally understood that if they have trouble paying they will almost certainly be able to sell for more than they paid.
I wonder if you added up the defaults of all the speculators in the SF Bay and NYC areas, and threw in the overambitious urban yuppie defaults as well, you’d come up with sum bigger than the defaults of all the low-income/minority people in the whole country put together.
Just wondering…
September 24th, 2008 at 2:02 pmLook up the “American Dream Commitment” which was started in 1994 or the lovely keyword “Historically Underserved”. The truth is that the Government (both the libs and yes Bush too) have over the years increased “goals” (what amounts to quotas) in mortgages issued in “historically underserved” communities. With the “goals” ever increasing, the agencies had no real choice to meet their “goals” than to keep lowering standards . . . Link to 2000 Article that discusses the “6 Point Plan”
I’m with Robyn. I’d love to move to San Diego, but instead one of the reasons we live in Houston? Because nice houses are AFFORDABLE. And yet, we still had to restrain ourselves to buying an older home that needed work in a less perfect neighborhood, because, of course, the bank approved us for a LOT more expensive house. It comes down to what WE wanted to be responsible for paying every month, not what we were approved for. Having an affordable mortgage payment makes us more flexible in so many other ways . . . do I wish I had granite countertops and a beautiful master suite? YES! But I like knowing that we could make our mortgage if one of us lost our job a LOT better.
This subject gets my blood boiling because it’s the responsible taxpayers like us that will be paying for this bailout, necessary or not. And it was the government that got us into this in the 1st place.
Sure, there was fraud, and predatory practices, and that should be prosecuted, but are people seriously saying that they didn’t know the terms they were signing? When you get a mortgage you have to sign your name ABOUT 100 TIMES, literally — and they explain the terms to you AT LEAST 3 separate times! Too freakin’ bad if you didn’t read it!!!!!!
I’m no economist but I get really pissed when I see shit that any 5 year old could have told you would cause a problem - like making “targets” for minority home ownership. I think it’s great to help people get into houses and give them opportunity BUT YOU STILL HAVE TO QUALIFY. When you start relaxing the standards to meet “targets” then everyone knows it’s a free ride, whoohoo!
September 24th, 2008 at 2:04 pmNo most people don’t read the contracts and things are often setup so there isn’t much time to.
There is also the mentality these days in our country that the government and realtors/mortgage type folks should look out for people. Read a quote from one gal in NJ earlier this year where she was upset that the brokers hadn’t looked out for them. “They should have told us this was risky!”. This gal and her husband cleared something like 6k after taxes a month and couldn’t afford their 500k home anymroe. Sure, many brokers were shady as hell, because there was no regulation and UncleSam was pushing it for racial/income quotas (Dems/Clinton) and as a bump to the economy (Repubs/Bush) but ultimately the buyer has to do their own dillegence and if unsure hire a RE lawyer and an accountant to go over it.
Also, granite counter tops are vastly overrated. Apparently you have to re seal them every year. I’ll take tile, quartz or the standard laminates.
September 24th, 2008 at 2:33 pmNo surprise, really, that they’re going to fuck up and then try to point fingers. I’m sending my readers to you.
September 24th, 2008 at 2:34 pmHere’s a link to Freddy Mac explaining how it was established by Congress. It includes this quote:
To address this issue, Congress found an ingenious way to stimulate long-term investment in housing without exposing the public fisc to the risk of substantial loss: it created government-sponsored enterprises with Congressional charters, and gave them the singular job of making markets stable, liquid and affordable in all economic environments.
Note that the link is a Google cache, and that the webpage was deleted 9/13/08.
So much for not exposing the public to risk of substantial loss. Also, isn’t “created government sponsored enterprises with Congressional charters” similar to regulation, particularly when the charters have a “singular job of making markets” do anything?
September 24th, 2008 at 2:39 pmwhat I would really REALLY like to know is why I keep seeing the same incompetant government “officials” names in the news associated with all these disasters.
Jamie Gorlick? Yep … just think back to the investigation on why the intell that should have prevented 9/11 was so friggin’ bad. There’s that bitch right there … the stupid twit selected by Clinton to destroy the US gov’t intelligence community. Her reward for making sure that the agencies couldn’t talk to each other…. she gets to fuck us over again with this mortgage fiasco. Golly, gee … thanks Mr. Clinton. I’m really thinking I should promote you over Carter as the worst possible president EVAH!.
Why is Gorlick not already on Death Row?
September 24th, 2008 at 2:41 pmThe Dems are despicable, but I don’t think the Republicans are clean in this either. Their willingness to print money and drive our national debt through the roof the last several years are a big part of this problem, IMHO. Greenspan lowered interest rates too much, then the FED fired up the printing presses, both of which resulted in a flood of cheap money that went to finance homes, home equity loans, credit card debt, etc. Now we all must pay for all that excess. For those of us who acted responsibly and lived within our means, I guess the joke is on us.
September 24th, 2008 at 2:52 pmYeah, but sausage mcmuffins are 2 for $3.
Can you get that without the muffin?
For the dogs, of course…
September 24th, 2008 at 2:54 pmGreat Quote…via Volokh
September 24th, 2008 at 2:57 pmSeems this is what happens when policy is based on compassion instead of standards.
September 24th, 2008 at 3:24 pmThank you, Rachel, for putting this all together. It’s starting to come together in my head, and I can now see how things are connected/related to eachother.
Also,
This shows me the Democrats’ attitude toward a) the economy; b) the lives of us serfs. Some things are not “managed”. They just run, and you let them run because they run better without constant fiddling.
September 24th, 2008 at 3:31 pmcompassion? You think that the fascist policies of the Democrats had ANYTHING to do with compassion? If so, I have a housing crisis to sell you.
September 24th, 2008 at 3:34 pmRebecca … one could argue that although we allegedly ‘borrowed a trillion on the ‘unjust’ war’, that defense and our military are part of what keeps us free as Americans. As a percentage of GDP it’s not out of range with historicals, in fact lower.
Rather, we would argue that we ‘borrowed a trillion on welfare, aid to dependant nations, bilingual education and other welfare to non-Americans, etc.”
September 24th, 2008 at 3:51 pmGood point, BerthaMinerva - I do wonder how many of the folks ‘about to lose their homes’ are yuppies who couldn’t flip the third condo.
September 24th, 2008 at 3:52 pmYeah, what they all said. But I’ll add something else. It always seemed strange to me that any mortgage banker would give a home loan to someone who obviously couldn’t pay for it. SOMEBODY or SOMETHING was holding a gun to their heads on it. I still don’t buy the hogwash that ‘Oh, they (being the mortgage bankers) gave out all these subprime loans because they knew they’d make a bundle off them.’ Hogwash. Who lends somebody any amount of money, knowing full well the borrower won’t be able to pay it off, and still thinks they, the lender, are going to make a killing off it? Yeah, that’s right, either the MORONLENDER or the honest lender who’s being told, ‘Lend them that money or you’re fired.’ Since the lenders I’ve gone to in the past were far from being MORONS, I’m leaning toward Door 2, Monte.
September 24th, 2008 at 4:06 pmI paid off my mortgage 20 years ago. 20 yr mtge paid off in 2. haven’t bought a new car since 1980. have probably saved close to a million dollars in interest.
September 24th, 2008 at 4:12 pmThe most valuable asset for a young person today is a bad credit score.
+1
EXCELLENT POINT.
Gorelick has done quite a lot all on her own to endanger our nation - few others have done more. I blame her personally for the decimation of our intelligence services and the resultant 3,000 dead on 9/11. I’m not surprised her filthy fingers are all over this financial ruin - everything she touches dies, while she gets more rich and powerful off her corruption. Evil bitch. Fuck her.
September 24th, 2008 at 4:12 pmI wholeheartedly agree with you. I wasn’t taking a jab at the war I never said anything about that. If it were up to me I’d actually increase our defense budget and do away with other unneeded expenditures, many of which have been mentioned here (foreign aid, etc.).
September 24th, 2008 at 4:21 pmAs long as we’re piling on Gorelick, let’s not forget that Duke University hired her to defend them in the Lacrosse Rape Hoax case.
Is there any scandal that this woman’s name isn’t on?
September 24th, 2008 at 5:14 pmAre you for real, Squid? From ignorance, I can’t tell if you’re telling the truth or being sarcastic. Maybe I should just google it and find out for myself.
Wow. It’s true. I would ask why Duke would want to hire her, but I think I know.
September 24th, 2008 at 5:44 pmThis whole debacle illustrates perfectly two of my favorite sayings:
The road to hell is paved with good intentions.
No good deed goes unpunished.
Yes, I am cynical.
September 24th, 2008 at 6:04 pmOh, and don’t forget what McCain’s doing to help out.
September 24th, 2008 at 6:09 pmFord’s Iron Law of Government Intervention:
“Every time any government interferes with a market, it fucks it up.”
September 24th, 2008 at 6:33 pmInvestors should have stop/loss orders in place before the market opens in the morning. It’s going to get ugly real fast, real soon. You better believe that the governing class is maneuvering for maximum political advantage in the face of crisis. They fiddle; we burn. The answer, our answer, should be to wipe out the incumbants regardless of party. We’re already fucked. We have a choice between bad and worse. Voters can send a message in five weeks. CLEAN THEM OUT AND SPARE NONE. Our professional political class is willing to practice scorched earth on the nation in pursuit of power. I say we turn the tables and scorch them. Tar and feathers is too good for this lot. I want scalps.
September 24th, 2008 at 6:34 pmWatcher> Yeah, what they all said. But I’ll add something else. It always seemed strange to me that any mortgage banker would give a home loan to someone who obviously couldn’t pay for it.
September 24th, 2008 at 7:37 pm–
Lenders bundle and sell the right to ’service’ those loans (at some discount to present value). They make their wad on the origination fees.
I heard a little bit of Glenn Beck today, and he believes that an economic crash is unavoidable by now. He said that he thinks the purpose of the bailout is to make it happen more slowly than it would without the bailout. Maybe an argument could be made for doing that but I’m still against the bailout. I believe that postponing the day of reckoning will only make it worse.
This has long been my nightmare scenario about the 2008 election. Not that I foresaw this situation specifically, but just the idea of a serious economic downturn before the election. Frightened people who are ignorant about economics (a large percentage of the American people) are especially susceptible to being stampeded towards socialism. They’ll even demand it.
A couple of weeks ago I thought that McCain/Palin might win by a landslide. Now I’m increasingly concerned about their prospects. McCain needs to start explaining the history of this fiasco and start hammering the Democrats and naming names. But for some reason he has always been more comfortable with criticizing Republicans instead.
Right now, this election is McCain’s to lose. Unfortunately he is very capable of doing just that.
For years Rush Limbaugh has said that “What’s good news for America is bad news for Democrats, and what’s bad news for America is good news for Democrats.” He’s exactly right, and that has me worried right now.
September 24th, 2008 at 8:28 pmno bailout until the Dems admit their complicity, i.e., Hell Freezes Over.
September 24th, 2008 at 11:52 pmThis is the essential problem with programs targeted at “official victim groups.” Once you can’t have the same standards of performance for everyone, how do you tell anyone they have to meet a standard?
However, I do have a couple of ideas on what to do with the properties the govt is about to own. “Hello, Mr./Mrs./Ms. Disabled American Vet. Here’s your new house. We’ve marked the value to the local market, and then discounted the price based on your percentage of disability. 100% disabled? Free house. Oh, and if that disability was the result of combat injuries, we double the percentage. Killed in the line of duty? Free house for your estate. Thank you for your service.”
September 25th, 2008 at 5:00 amYes Pete, I know it’s a stretch, but I actually believe that there is some degree of compassion behind Democrats in general wanting more of the poor to be able to own their homes.
In fact, Democrats yearn to apply micro values– compassion being a micro value– to macro issues. This, in conjunction with human nature, is why their policies turn out badly at best and brutal at worst.
September 25th, 2008 at 5:29 amGreat post Rachel! Very good summary on how we got into this housing mess.
September 25th, 2008 at 10:16 amThanks for posting these links and quotes.Of course the MSM won’t report on any of this.
I have an Army wife friend of mine telling me we need to be like Canada,and adopt higher taxes and universal healthcare.Well Canada doesn’t have the 1st amendment either..sooo.They regulate apparently and do bail outs ALL THE TIME.
Yes,lets be like Canada…what a fantastic idea.
I’ll email this stuff to my husband while he is deployed.He is worried.
I do know…
We should’ve gotten 5 credit cards,if only we knew we were going to be bailed out on tons of crap.Instead my husband and I were responsible,and knew our limits on maintaining debt.So now we gotta pay for all the other dumbasses out there.
September 25th, 2008 at 10:18 pm