Have you guys been following?

[Lurker]

I suggest people listen to this Michael Greenberger interview from April which explains how the dereglation brought by the Gramm-Leach-Bliley Act of 1999 and the Commodity Futures Modernization Act of 2000 are directly responsible for our current crisis.

[Harlowe]

I'd hardly call holding those two acts accountable "ignorance" - quite the opposite, it's absolutely at the foundation of this issue.

[Lurker]

For some reason Embar, the Republican Party, and the deregulation crowd in general, remind me of the shopkeeper from the Python dead parrot sketch. I don't know why.

[Harlowe]

Well it really is the end of an era, the last of the investment banks are going commercial. Not that we didn't see this coming this week, but seeing it truly unfold is another story.

http://money.cnn.com/2008/09/21/news/co ... /index.htm

[Ddrak]

That's a crazy huge shake-up. I can't even begin to think what it's going to mean and how insane the regs are going to come in to stop corruption between different parts of the same bank.

Dd

[Embar Angylwrath]

For some reason Embar, the Republican Party, and the deregulation crowd in general, remind me of the shopkeeper from the Python dead parrot sketch. I don't know why.

Who was the President that signed those two acts?

[Lurker]

Who was the President that signed those two acts?

I pointed that out last week. The 1999 bill was passed over the objections of Democrats in the Senate and then signed by Clinton. The 2000 bill was hidden in an appropriations bill and then signed by Clinton.

Does this mean you are backing off your absurd claim that the deregulations in these two bills prompted no changes in banking and investment vehicles, and that they have little to do with our current crisis?

Just as Bush was the worst possible person to have in office on 9/11, McCain would be the worst possible to handle our current economic meltdown. For the same reasons. He's clueless, reckless, and has surrounded himself with the architects of the problem.

[Harlowe]

It's not at all surprising to see more and more conservatives speaking out against him for behaving in a knee-jerk fashion and making reckless choices out of his desire to win this at all costs. It does not give the impression that this man can become presidential material. It's irresponsible and bull-headed.

I think he's probably being so reckless because he knows this is the only chance he's getting. He wasn't the party sweetheart before (it took years of sucking up and stepping in line to get to this point) and won't be afterwards considering the way he's handled himself. I believe it's his last chance, not just for age reasons, but after how he's behaved through-out this campaign and the choices he's made - I don't believe a pragmatic Republican would want him there again.

[Embar Angylwrath]

http://www.bloomberg.com/apps/news?pid= ... KSoiNbnQY0

[Harlowe]

Fact check

http://politicalticker.blogs.cnn.com/20 ... d-freddie/

Also from Bloomberg: Obama, Not McCain, Shows Steady Hand in Crisis

http://www.bloomberg.com/apps/news?pid= ... r=politics

[Lurker]

Embar,

I'm not going to fact check the McCain advisor op-ed you linked since he didn't source any of his material. Let's just assume that everything he said was true. Are you saying that the financial meltdown was caused by Fannie and Freddie buying junk investments and not by the deregulation that allowed the banks, with no regulation or oversight, to sell the junk in the first place?

[Embar Angylwrath]

The meltdown couldn't have occured if Fannie/Freddie had not been either buying or insuring crap mortgages. By doing so, they helped create the momentum to write ever more riskier loans.

[Lurker]

Given the relatively small percentage of bad debt held by Fannie and Freddie when compared to the big players in the investment and insurance industries, I think you (and the McCain advisor that fed you the info) are wildly overstating their role in the meltdown.

I'll ask it again.

Are you saying that the financial meltdown was caused by Fannie and Freddie buying junk investments and not by the deregulation that allowed the banks, with no regulation or oversight, to sell the junk in the first place?

[Embar Angylwrath]

I'd say it was a combination of that (the deregulation), the artificial propping up of the mortgage market by Fannie/Freddie, and trading of CDOs as bundled packages that contributed to the meltdown.

[Tarfang_Trubasher]

An article I got today...

White House warned 17 times about problems with Fannie and Freddie

September 22, 2008 - 11:07 ET

For many years the President and his Administration have not only warned of the systemic consequences of financial turmoil at a housing government-sponsored enterprise (GSE) but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties. President Bush publicly called for GSE reform 17 times in 2008 alone before Congress acted. Unfortunately, these warnings went unheeded, as the President's repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems.

2001

April: The Administration's FY02 budget declares that the size of Fannie Mae and Freddie Mac is "a potential problem," because "financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity."

2002

May: The President calls for the disclosure and corporate governance principles contained in his 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac. (OMB Prompt Letter to OFHEO, 5/29/02)

2003

January: Freddie Mac announces it has to restate financial results for the previous three years.

February: The Office of Federal Housing Enterprise Oversight (OFHEO) releases a report explaining that "although investors perceive an implicit Federal guarantee of [GSE] obligations," "the government has provided no explicit legal backing for them." As a consequence, unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market. ("Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO," OFHEO Report, 2/4/03)

September: Fannie Mae discloses SEC investigation and acknowledges OFHEO's review found earnings manipulations.

September: Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend that Congress enact "legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises" and set prudent and appropriate minimum capital adequacy requirements.

October: Fannie Mae discloses $1.2 billion accounting error.

November: Council of the Economic Advisers (CEA) Chairman Greg Mankiw explains that any "legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk." To reduce the potential for systemic instability, the regulator would have "broad authority to set both risk-based and minimum capital standards" and "receivership powers necessary to wind down the affairs of a troubled GSE." (N. Gregory Mankiw, Remarks At The Conference Of State Bank Supervisors State Banking Summit And Leadership, 11/6/03)

2004

February: The President's FY05 Budget again highlights the risk posed by the explosive growth of the GSEs and their low levels of required capital, and called for creation of a new, world-class regulator: "The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore…should be replaced with a new strengthened regulator." (2005 Budget Analytic Perspectives, pg. 83)

February: CEA Chairman Mankiw cautions Congress to "not take [the financial market's] strength for granted." Again, the call from the Administration was to reduce this risk by "ensuring that the housing GSEs are overseen by an effective regulator." (N. Gregory Mankiw, Op-Ed, "Keeping Fannie And Freddie's House In Order," Financial Times, 2/24/04)

June: Deputy Secretary of Treasury Samuel Bodman spotlights the risk posed by the GSEs and called for reform, saying "We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System." (Samuel Bodman, House Financial Services Subcommittee on Oversight and Investigations Testimony, 6/16/04)

2005

April: Treasury Secretary John Snow repeats his call for GSE reform, saying "Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America… Half-measures will only exacerbate the risks to our financial system." (Secretary John W. Snow, "Testimony Before The U.S. House Financial Services Committee," 4/13/05)

2007

July: Two Bear Stearns hedge funds invested in mortgage securities collapse.

August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying "first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options." (President George W. Bush, Press Conference, The White House, 8/9/07)

September: RealtyTrac announces foreclosure filings up 243,000 in August – up 115 percent from the year before.

September: Single-family existing home sales decreases 7.5 percent from the previous month – the lowest level in nine years. Median sale price of existing homes fell six percent from the year before.

December: President Bush again warns Congress of the need to pass legislation reforming GSEs, saying "These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I've called on Congress to pass legislation that strengthens independent regulation of the GSEs – and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon." (President George W. Bush, Discusses Housing, The White House, 12/6/07)

2008

January: Bank of America announces it will buy Countrywide.

January: Citigroup announces mortgage portfolio lost $18.1 billion in value.

February: Assistant Secretary David Nason reiterates the urgency of reforms, says "A new regulatory structure for the housing GSEs is essential if these entities are to continue to perform their public mission successfully." (David Nason, Testimony On Reforming GSE Regulation, Senate Committee On Banking, Housing And Urban Affairs, 2/7/08)

March: Bear Stearns announces it will sell itself to JPMorgan Chase.

March: President Bush calls on Congress to take action and "move forward with reforms on Fannie Mae and Freddie Mac. They need to continue to modernize the FHA, as well as allow State housing agencies to issue tax-free bonds to homeowners to refinance their mortgages." (President George W. Bush, Remarks To The Economic Club Of New York, New York, NY, 3/14/08)

April: President Bush urges Congress to pass the much needed legislation and "modernize Fannie Mae and Freddie Mac. [There are] constructive things Congress can do that will encourage the housing market to correct quickly by … helping people stay in their homes." (President George W. Bush, Meeting With Cabinet, the White House, 4/14/08)

May: President Bush issues several pleas to Congress to pass legislation reforming Fannie Mae and Freddie Mac before the situation deteriorates further.

* "Americans are concerned about making their mortgage payments and keeping their homes. Yet Congress has failed to pass legislation I have repeatedly requested to modernize the Federal Housing Administration that will help more families stay in their homes, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance sub-prime loans." (President George W. Bush, Radio Address, 5/3/08)
* "[T]he government ought to be helping creditworthy people stay in their homes. And one way we can do that – and Congress is making progress on this – is the reform of Fannie Mae and Freddie Mac. That reform will come with a strong, independent regulator." (President George W. Bush, Meeting With The Secretary Of The Treasury, the White House, 5/19/08)
* Congress needs to pass legislation to modernize the Federal Housing Administration, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance subprime loans." (President George W. Bush, Radio Address, 5/31/08)

June: As foreclosure rates continued to rise in the first quarter, the President once again asks Congress to take the necessary measures to address this challenge, saying "we need to pass legislation to reform Fannie Mae and Freddie Mac." (President George W. Bush, Remarks At Swearing In Ceremony For Secretary Of Housing And Urban Development, Washington, D.C., 6/6/08)

July: Congress heeds the President's call for action and passes reform of Fannie Mae and Freddie Mac as it becomes clear that the institutions are failing.

(White House Press Release)

[Lurker]

Thanks for posting that, Tarfang.

Very interesting that the White House puts out a press release erroneously blaming Fannie and Freddie for the meltdown on the same day that a McCain advisor writes an op-ed with the identical spin. That's like blaming the crack addict for the degradation of society when you produced and distributed the crack and started a dozen other shady ventures.

[Ddrak]

Blaming either side is stupid. Seriously stupid.

Dd

[Tarfang_Trubasher]

I'm getting worn out by all the finger pointing and bad mouthing.

You know what? I just wish someone would come out and say what they mean, and mean what they say. Tell me how YOU want to see it fixed. Show us how YOU plan to do it. I don't care who messed it up, I really don't. The fact is, it IS messed up, no one will take the blame. Create a new system, define accountability, and let's move the hell forward.

Everyone is so wrapped up in who's to blame...I'm more curious as to who's going to be the one to fix it. It took years and multiple bad ideas to get us to this point. All it'll take is one good idea and a few years to put us back on track. Show me the one, two, ten, whatever politicians that want to make a healthy stride to solving our issues, and I'll show the support those people are going to need and possibly deserve.

Desperate times call for desperate measures. None of these candidates has any substantial to say, so they say nothing and just do their best to point out the "flaws" of the other. This doesn't just extend to the Presidents, either. Congress has been do nothing under both Rep. and Dem. control. I would go so far as to say they've been do nothing under a President from each side as well. Doing what is right for a nation should hardly be part of partisan politics. It should be common sense. Special interest groups, greed, and lack of personal accountability have put us here. If only "we the people" could find a way to break through.

-TF

[Lurker]

Blaming either side is stupid. Seriously stupid.

It's impossible to solve the problem without figuring out the cause.

I don't care who messed it up, I really don't.

If you don't care who messed it up then you can't make an informed decision on who you trust to fix it. You could be picking the same moron or the same failed ideology that messed things up in the first place.

Desperate times call for desperate measures.

Again, this is exactly the wrong attitude. A crisis is not the time for panic.

Hopefully Congress puts the brakes on the ridiculous plan put forth by the Bush administration. The plan floated by Dodd this weekend seems much more reasonable and has protections for tax payers as well as help for people in danger of foreclosures.

[Embar Angylwrath]

Not true Lurker.

If a patient is deposited in the ER with massive wounds, doctors don't worry about if the wounds were sustained in a fight, or a car wreck, or a fall off a building. You absolutely can solve the problem by identifying what is wrong with the situation, and moving to fix it, without pointing the balme finger. They'll be plenty of time for that later.