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dugo

Posted: Sat Sep 27, 2008 7:16 pm

dithers wrote:

Let us not forget that many of these loans were forced on the lenders in the name of 'fairness". An opportunity, if you will, for the more unfortunate among us to experience the joys of home ownership.

Janet Reno as AG during the Clinton administration threatened to take to court any lending entity that didn't extend credit and/or mortgages to the lesser priviliged among us. Liberalism and Socialism run amok. And this is what it's wrought.

If that was just a liberalism/socialism home giveaway program it would have crashed years ago. The banks were allowed to hide all trouble by means od securitisation of mortgages and credit default swaps. A large portion of the trouble has been shipped overseas that way, very smart move, my Dutch pension fund is now eating part of the bill for that free home.. Ofloading the trouble was Greenspans game, he was the master of finding new ponzis without anyone noticing to keep the eternal deficit spending by the usaians going. If the world is going to call this we need to do something shit bernake is pulling it is going to be all over i'm afraid.

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Alexandria

Posted: Sat Sep 27, 2008 7:22 pm

dugo wrote:

What (of course, in your opinion) could the "powers that be" do????

Joined: 09 Jan 2008
Posts: 445

dugo

Posted: Sat Sep 27, 2008 7:36 pm

Alexandria wrote:

What (of course, in your opinion) could the "powers that be" do????

Oh, bail out the absolute minimum to prevent a systemic crisis and let the rest crash just like any other business that goes bankrupt. Cherrypick some institutions and loan packages in such a way that it mostly favors domestic opposed to foreign investors. China paying for free homes for the win.

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Alexandria

Posted: Sat Sep 27, 2008 7:40 pm

dugo wrote:

Thank you for responding.

I would guess they probably will not do what makes the most sense.

Joined: 09 Jan 2008
Posts: 445

Trixie

Posted: Sat Sep 27, 2008 8:08 pm

This is a good article that explains how the mortgage meltdown grew into a world wild financial crisis....credit derivatives.

Although America’s housing collapse is often cited as having caused the crisis, the system was vulnerable because of intricate financial contracts known as credit derivatives, which insure debt holders against default. They are fashioned privately and beyond the ken of regulators — sometimes even beyond the understanding of executives peddling them.

Originally intended to diminish risk and spread prosperity, these inventions instead magnified the impact of bad mortgages like the ones that felled Bear Stearns and Lehman and now threaten the entire economy.
http://www.nytimes.com/2008/09/28/business/28melt.html?pagewanted=1&em

Joined: 23 Mar 2006
Posts: 6728

CancunMole

Posted: Sat Sep 27, 2008 8:18 pm

dugo wrote:

Yes, that is what deregulation does.. you kill laws and regulations that protect people with a lack of common sense and let the free market do whatever it pleases. Just like we have seen communism go bankrupt, this is the bankruptcy of unreigned capitalism.

Yet, IMO, dugo, this is NOT a result of 'unreigned capitalism' but of the result of Democrat imposed socialism, "take care of all, whether they work or not, whether they are legal or not, etc." policies that supported that ALL [living in the USA] HAVE the RIGHT to the AMERICAN DREAM whether they could afford it or are entitled to it or not.....

There are many of us who have played by the "RULES", worked hard, saved, NOT BORROWED more than we knew that we could afford to pay back, have NOT been a burden upon Society yet we should cough up MORE......??????

I do believe you may have captured the essence of it all above, "Just like we have seen communism go bankrupt...", IMO. My husband and I pay +/- $30K in Federal Taxes, living in an income tax free State, NH. I'm retired and he works PT.

We have always paid our own mortgage and other living expenses. Why should we have to pay to bail out some else's beyond their capabilities?
Where are Clinton and Janet Reno NOW?

Now. take a look at this 2008 Poverty Guidelines For Immigrant Affidavit of Support (Immigrant Support???, HELLO) against what we are paying:

http://travel.state.gov/visa/immigrants/info/info_1327.html

Last edited by CancunMole on Sat Sep 27, 2008 8:43 pm; edited 1 time in total

Joined: 24 Mar 2006
Posts: 1900

CancunMole

Posted: Sat Sep 27, 2008 8:35 pm

Alexandria wrote:

Again, the 30 year old MBA's making big decisions.
And the 60 year old CEO's who want another few million to line their already over-stuffed pockets.

There is much to be said for remembering the past, for knowing the past.

Ah, believe me, I'm not, and never, ever was one for any CEO lining their pockets on the coat-tails of of middle management or labor BUT having sat in MBA classes with those now close to if not exceeding the 30 yo mark, I shook my head then at their pie-in-the-sky-book-knowledge only knowing that they had no practical, hands-on experience in the work force so I don't want them making decisions for me either.

So, please spare me as I REMEMBER the MOST RECENT PAST OF THE STENCH of DEATH coming from GROUND ZERO, overpowering Manhattan when Bill Clinton had done NOTHING through THREE DOCUMENTED attacks upon our COUNTRY, all before. I want to feel SAFE and NOT have to PAY for anything I myself haven't previously, knowingly BUDGETED to pay, LOL.

Last edited by CancunMole on Sat Sep 27, 2008 8:54 pm; edited 1 time in total

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Posts: 1900

Trixie

Posted: Sat Sep 27, 2008 8:49 pm

This is before the global economy, but this is what happened to Sweden and how they handled the crisis.

A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. Sound familiar?

It does to Sweden. The country was so far in the hole in 1992 — after years of imprudent regulation, short-sighted economic policy and the end of its property boom — that its banking system was, for all practical purposes, insolvent.

But Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing.
http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html?em

Joined: 23 Mar 2006
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dugo

Posted: Sat Sep 27, 2008 9:10 pm

I completely understand what you are saying ccm .. but try to understand this

.. if it was just reno/clinton pushing frannie and freddy to borrow people with a low income money too that would be ok.

.. if they pushed the banks to borrow people more money than they are able to pay back plus interest, that would be somewhat wrong, i think there should be laws against this even, eg. never give someone more than 5x their annual income. But if it was just that things would have ended quickly because nobody would give frannie and freddie the money to borrow it out to people who don't pay it back. It would have ended quickly, no crisis, because that is just not sustainable for a bank.

Due to the huuge deregulation of the financial sector iirc around 1993 banks who didn't have any kind of social fibre found a way to make money by selling mortgages to people who can't afford it, they were more than happy to do it. They bundled these mortgages into packages (securitisation into MBS .. mortgage backed securities) coupled them partially with credit default swaps (insurance) to cranc up their Moody’s rating artificially and sold them to other banks and instituions for a profit.

That way the usaian banks have been able to borrow out cash to the tune of 1.3 trillion!

Fundamental capitalism, the freedom to cook up whatever financial product you can dream of, that's what allowed a socialist idea to grow out into a huge soap bubble, the financial sector has blown itself up completely disproportional to the size of the reel economy and is colapsing as we type.

This 700bln plan is not to bail out these people that could not afford a home ccm ..they are going to be evicted .... it is to bail out the bankers, it is a way to let the ordinary people pay the bill for fundamental capitalists to keep their game going instead of letting real capitalism do its work and let them fail.

The federal government will need to get deeper and deeper into debt for this, and there are only few ways to recover/sustain

default at some point, like what happened with soviet bonds, let the whole thing explode, turn off the federal government and thank everybody for the fish.

go into receivership an make some plan under the wings of the world bank

pray everyone keeps trusting you and let the dollar slide down in value in a controlled fashion.

In any case the normal guy, you know, the ones that have to save for a pension, will end up eating the bill, either by more taxes or worthless savings/bonds. /rant

Last edited by dugo on Sat Sep 27, 2008 9:23 pm; edited 1 time in total

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dugo

Posted: Sat Sep 27, 2008 9:14 pm

CancunMole wrote:

So, please spare me as I REMEMBER the MOST RECENT PAST OF THE STENCH of DEATH coming from GROUND ZERO, overpowering Manhattan when Bill Clinton had done NOTHING through THREE DOCUMENTED attacks upon our COUNTRY, all before.

oh now don't get me into another rant about madefuckinglein notbright please, i'll be typing all of sunday..

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dugo

Posted: Sat Sep 27, 2008 9:31 pm

Alexandria wrote:

Thank you for responding.

I would guess they probably will not do what makes the most sense.

They'll come up with something, just pray that they will let the people that risked/invested money into these institutions pay first.

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Alexandria

Posted: Sat Sep 27, 2008 9:33 pm

Ok, deregulation of the financial sector indicates that there used to be regulation.

Were there controls in place prior to this deregulation that would have made the current situation aviodable?

Joined: 09 Jan 2008
Posts: 445

CancunMole

Posted: Sat Sep 27, 2008 9:53 pm

dugo wrote:

It is quite possible dugo that you understand much more on a global front than me and maybe other USers as well as to what is going on within our own Country. Maybe complacency and too much trust along with not having to "supposedly have to worry about THOSE things" have put us at a disadvantage and we only 'awaken" when threatened more in our individual pocketbooks... BUT, I consider myself fairly well read and UP on issues yet until this "crisis" I was unaware of the magnitude of the problem from any front... I wonder WHY this has become an ISSUE/PROBLEM NOW????

IMO, there is no doubt that our Democrat brothers fostered this in its conception, as yet another "equality, help the helpless give-away" that now, since its failure was imminent during election scrutinies and did surface, is another easy blame on the current administration because the majority of the US populaton can barely recall what happened yesterday let alone within the past 15 + years.

Last edited by CancunMole on Sat Sep 27, 2008 10:44 pm; edited 1 time in total

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gwen

Posted: Sat Sep 27, 2008 10:08 pm

McCain's scary economic advisor

Not only is former Texas Sen. Phil Gramm a shill for special interests, his deregulation policies helped spur the mortgage crisis, among other financial disasters.

May 30, 2008 | Even as John McCain struggles to preserve his image as a reformer by dismissing a few of the Washington lobbyists who dominated his presidential campaign, the futility of that effort suddenly became painfully obvious. Dire bulletins in the financial media warned of many billions in rotting mortgage paper held by UBS, the financial conglomerate that just happens to employ former Texas Sen. Phil Gramm, McCain's campaign chairman and chief economic advisor. Until two months ago UBS listed Gramm as a federal lobbyist on housing and mortgage issues.

So there at the shoulder of the Arizona maverick is perched yet another special-interest shill, in this instance not merely an errand boy for various dictators but the vice chairman of a Swiss bank whispering advice on how to cope with our economic woes. Or how not to cope, as in McCain's do-nothing approach to the foreclosure crisis, which displayed the strong influence of the financial lobby on his campaign.

Undoubtedly Gramm is promoting the agenda of those who subsidize him, as he has done ever since he entered politics as a servant of oil interests in his home state. He took hundreds of thousands of dollars from energy and financial interests as a congressman and then as a senator, rising to the chairmanship of the Senate Banking Committee, where he could really perform major favors. He is famed for slipping in an amendment desired by Enron Corp. back when his wife was on that doomed company's board. His employment by UBS, a company that recently warned some of its executives to avoid entering the United States for fear of criminal prosecution, demands fresh scrutiny of him as well as McCain.
But if Gramm's role as a banker and lobbyist is embarrassing to McCain, the greater harm is likely to be done by his economic advice. He and McCain have been friends since they were young congressional "foot soldiers in the Reagan revolution," as both like to say, and he is often touted (or was until lately) as a likely candidate for Treasury secretary should McCain win the White House.

Now that Gramm has resurfaced in national politics, he surely deserves to be arraigned for his long history of service to powerful interests, dating from the Enron scandal and beyond. But for most Americans, the dubious connections of McCain's lobbying pals, including Gramm, should be less worrisome than the likely results of yet another four years of Republican economic nostrums. Gramm's career stands for the false promises of right-wing ideology and the troubles that such schemes, embodied in legislation, have repeatedly inflicted on us.

The former Texas senator is less voluble these days than he used to be, perhaps unsurprisingly, but in years past he has boasted of his central role in key conservative legislation, especially in liberating major sectors of the economy and finance from public oversight and skewing taxation in favor of the wealthy.

So how has that worked out over the past few decades?

Back in the '80s, Gramm smiled upon the abrupt deregulation of the savings-and-loan industry, described by his idol Ronald Reagan as America's opportunity to "hit the jackpot" of growth. He used his political clout to protect the Texas operators whose crooked machinations eventually helped to bankrupt the S&L industry. In fact, the S&L debacle cost taxpayers hundreds of billions of dollars.

Meanwhile, Gramm had lent his name and energy to passage of the first Reagan budget in 1981, whose sweeping tax cuts failed to prevent recession -- and eventually required a long series of tax increases, beginning in 1982, to stanch the enormous deficits they created. At the same time he coauthored the Gramm-Rudman Act, which supposedly placed sharp constraints on federal spending but in reality had little impact.

When Bill Clinton came into office and found that the Reagan and Bush administrations had left the nation in deep deficit, he got no help from Gramm in cleaning up their mess. When Clinton bravely demanded a tax increase on the wealthiest Americans, who had profited hugely from Reagan policies skewed to their benefit, Gramm and his fellow Republicans bawled piteously about the nation's impending doom.

"I want to predict here tonight," he said on the evening that Clinton's budget passed in the spring of 1993, "that if we adopt this bill the American economy is going to get weaker and not stronger, the deficit four years from today will be higher than it is today and not lower ... When all is said and done, people will pay more taxes, the economy will create fewer jobs, the government will spend more money, and the American people will be worse off."

Is it necessary to point out how utterly wrong that prediction turned out to be? Most Americans did not pay more taxes, the economy created millions more jobs, the deficit was sharply reduced, and people were better off by every measure of economic progress, from productivity and profits to homeownership and reduced poverty.

But Gramm was not the kind of economist whose convictions are shaken by evidence, no matter how compelling. So obsessed with protecting bankers from government oversight was he that when Clinton tried to place stronger controls on terrorist money laundering, Gramm opposed even that measure as a "totalitarian" incursion.

Before he retired from the Senate in 2002, he wrote the Gramm-Bliley bill, an act broadly deregulating the financial industry -- and now blamed by many economists for the epidemic of speculation and fraud that has shaken the global economy.

Touting those changes as a way to "modernize" American finance for a global future, Gramm said they would bring wonderful new efficiencies and savings to consumers. As with the energy deregulation that he sponsored -- which was supposed to bring lower prices and better service, but led to blackouts and price gouging -- those economic wonders never quite appeared. The damaging effects of banking deregulation took nearly a decade to be felt, but whether we have experienced the worst still remains to be seen.

Over and over again, from the savings-and-loan fiasco to the Enron shock to the global banking meltdown, the golden promises of deregulation have turned to leaden ruin. Perhaps nobody cares about the lobbyists surrounding McCain, but someone should ask him why he would cherish the advice of a man whose devotion to ideology has already done us so much damage.

Sen. John McCain speaks in Phoenix on March 3, 2008. At left, former Sen. Phil Gramm

http://www.salon.com/opinion/conason/2008/05/30/mccain_gramm/

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CancunMole

Posted: Sat Sep 27, 2008 10:12 pm

Alexandria wrote:

Ok, deregulation of the financial sector indicates that there used to be regulation.

Were there controls in place prior to this deregulation that would have made the current situation aviodable?

And while many of us were most probably occupied with day-to-day survival in 1999:

Gramm-Leach-Bliley Act
http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act

Last edited by CancunMole on Sat Sep 27, 2008 11:06 pm; edited 1 time in total

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Posts: 1900

gwen

Posted: Sat Sep 27, 2008 10:16 pm

McCain Defends, Obama Blames Deregulation
Monday, September 22, 2008
By Staff, Associated Press

Washington (AP) - Sen. John McCain defended deregulation on Wall Street even as he endorsed a $700 billion bailout of financial firms in an interview broadcast Sunday.

His opponent in the presidential race, Democratic Sen. Barack Obama, said an inadequate regulatory system was partly responsible for the crisis. Both candidates were interviewed on CBS' "60 Minutes."

McCain, the Republican presidential nominee, has long supported fewer regulations for businesses. But as the financial crisis on Wall Street worsens, McCain is calling for more government. Obama said McCain is late in calling for better oversight after years of supporting fewer regulations.

McCain was asked if he regretted supporting a 1999 law that removed barriers between investment banks and commercial banks that were erected in 1933, in response to the 1929 stock market crash.

"No," McCain said. "I think the deregulation was probably helpful to the growth of our economy."

In the same interview, McCain defended the Bush administration's proposed bailout of financial firms as necessary, though he acknowledged it could get expensive.

"We're going to take over these bad loans," McCain said. "And we're going to have the taxpayer help you out. But when the time comes and the economy recovers, then anything that's gained back is going to go to the taxpayers first.

"I'm not saying this isn't going to be messy. And I'm not saying it isn't going to be expensive. But we have to stop the bleeding," McCain said.

Last week, McCain called for the firing of Securities and Exchange Commission Chairman Christopher Cox. In the CBS interview, which was taped Thursday, McCain said he would consider New York Attorney General Andrew Cuomo, a Democratic, as a replacement for Cox.

"I think he is somebody who could restore some credibility, lend some bipartisanship, to this effort," McCain said.

The administration proposal would be the biggest government intervention since the Great Depression. It would dole out huge sums of money to financial firms to purchase their holdings of bad mortgage-backed securities so that these firms can resume normal lending operations.

In a separate interview on "60 Minutes," Obama said, "There were a lot of factors involved" in the crisis. "But I think there is no doubt that if we had had a regulatory system that had kept pace with the changes in the financial system, that would have had an enormous impact in containing some of the problems that are out there."

Obama also challenged McCain's credentials on increasing government oversight.

"I think that I've got a track record of actually believing in this stuff," Obama said. "And, you know, Senator McCain, fairly recently, said, 'I'm a deregulator.'"

Obama also pointed out former Sen. Phil Gramm, one of McCain's economic advisers, was a chief sponsor of the 1999 bill that removed restrictions on investment and commercial banks. The law, which repealed the Glass-Steagall Act, was also supported by President Clinton.

http://www.cnsnews.com/public/content/article.aspx?RsrcID=36063

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gwen

Posted: Sat Sep 27, 2008 10:23 pm

Foreclosure Phil

Who's to blame for the biggest financial catastrophe of our time? There are plenty of culprits, but one candidate for lead perp is former Sen. Phil Gramm. Eight years ago, as part of a decades-long anti-regulatory crusade, Gramm pulled a sly legislative maneuver that greased the way to the multibillion-dollar subprime meltdown. Yet has Gramm been banished from the corridors of power? Reviled as the villain who bankrupted Middle America? Hardly. Now a well-paid executive at a Swiss bank, Gramm cochairs Sen. John McCain's presidential campaign and advises the Republican candidate on economic matters. He's been mentioned as a possible Treasury secretary should McCain win. That's right: A guy who helped screw up the global financial system could end up in charge of US economic policy. Talk about a market failure.

Gramm's long been a handmaiden to Big Finance. In the 1990s, as chairman of the Senate banking committee, he routinely turned down Securities and Exchange Commission chairman Arthur Levitt's requests for more money to police Wall Street; during this period, the sec's workload shot up 80 percent, but its staff grew only 20 percent. Gramm also opposed an sec rule that would have prohibited accounting firms from getting too close to the companies they audited—at one point, according to Levitt's memoir, he warned the sec chairman that if the commission adopted the rule, its funding would be cut. And in 1999, Gramm pushed through a historic banking deregulation bill that decimated Depression-era firewalls between commercial banks, investment banks, insurance companies, and securities firms—setting off a wave of merger mania.

But Gramm's most cunning coup on behalf of his friends in the financial services industry—friends who gave him millions over his 24-year congressional career—came on December 15, 2000. It was an especially tense time in Washington. Only two days earlier, the Supreme Court had issued its decision on Bush v. Gore. President Bill Clinton and the Republican-controlled Congress were locked in a budget showdown. It was the perfect moment for a wily senator to game the system. As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act. Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (R-Ind.), the chairman of the agriculture committee, the measure had been considered dead—even by Gramm. Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. "Nobody in either chamber had any knowledge of what was going on or what was in it," says a congressional aide familiar with the bill's history.

It's not exactly like Gramm hid his handiwork—far from it. The balding and bespectacled Texan strode onto the Senate floor to hail the act's inclusion into the must-pass budget package. But only an expert, or a lobbyist, could have followed what Gramm was saying. The act, he declared, would ensure that neither the sec nor the Commodity Futures Trading Commission (cftc) got into the business of regulating newfangled financial products called swaps—and would thus "protect financial institutions from overregulation" and "position our financial services industries to be world leaders into the new century."

It didn't quite work out that way. For starters, the legislation contained a provision—lobbied for by Enron, a generous contributor to Gramm—that exempted energy trading from regulatory oversight, allowing Enron to run rampant, wreck the California electricity market, and cost consumers billions before it collapsed. (For Gramm, Enron was a family affair. Eight years earlier, his wife, Wendy Gramm, as cftc chairwoman, had pushed through a rule excluding Enron's energy futures contracts from government oversight. Wendy later joined the Houston-based company's board, and in the following years her Enron salary and stock income brought between $915,000 and $1.8 million into the Gramm household.)

But the Enron loophole was small potatoes compared to the devastation that unregulated swaps would unleash. Credit default swaps are essentially insurance policies covering the losses on securities in the event of a default. Financial institutions buy them to protect themselves if an investment they hold goes south. It's like bookies trading bets, with banks and hedge funds gambling on whether an investment (say, a pile of subprime mortgages bundled into a security) will succeed or fail. Because of the swap-related provisions of Gramm's bill—which were supported by Fed chairman Alan Greenspan and Treasury secretary Larry Summers—a $62 trillion market (nearly four times the size of the entire US stock market) remained utterly unregulated, meaning no one made sure the banks and hedge funds had the assets to cover the losses they guaranteed.

In essence, Wall Street's biggest players (which, thanks to Gramm's earlier banking deregulation efforts, now incorporated everything from your checking account to your pension fund) ran a secret casino. "Tens of trillions of dollars of transactions were done in the dark," says University of San Diego law professor Frank Partnoy, an expert on financial markets and derivatives. "No one had a picture of where the risks were flowing." Betting on the risk of any given transaction became more important—and more lucrative—than the transactions themselves, Partnoy notes: "So there was more betting on the riskiest subprime mortgages than there were actual mortgages." Banks and hedge funds, notes Michael Greenberger, who directed the cftc's division of trading and markets in the late 1990s, "were betting the subprimes would pay off and they would not need the capital to support their bets."

These unregulated swaps have been at "the heart of the subprime meltdown," says Greenberger. "I happen to think Gramm did not know what he was doing. I don't think a member in Congress had read the 262-page bill or had thought of the cataclysm it would cause." In 1998, Greenberger's division at the cftc proposed applying regulations to the burgeoning derivatives market. But, he says, "all hell broke loose. The lobbyists for major commercial banks and investment banks and hedge funds went wild. They all wanted to be trading without the government looking over their shoulder."

Now, belatedly, the feds are swooping in—but not to regulate the industry, only to bail it out, as they did in engineering the March takeover of investment banking giant Bear Stearns by JPMorgan Chase, fearing the firm's collapse could trigger a dominoes-like crash of the entire credit derivatives market.

No one in Washington apologizes for anything, so it's no surprise that Gramm has failed to issue any mea culpa. Post-Enron, says Greenberger, the senator even called him to say, "You're going around saying this was my fault—and it's not my fault. I didn't intend this."

Whether or not Gramm had bothered to ponder the potential downsides of his commodities legislation, having helped set off an industry free-for-all, he reaped the rewards. In 2003, he left the Senate to take a highly lucrative job at ubs, Switzerland's largest bank, which had been able to acquire investment house PaineWebber due to his banking deregulation bill. He would soon be lobbying Congress, the Fed, and the Treasury Department for ubs on banking and mortgage matters. There was a moment of poetic justice when ubs became one of the subprime crisis' top losers, writing down $37 billion as of this spring—an amount equal to its previous four years of profits combined. In a report explaining how it had managed to mess up so grandly, ubs noted that two-thirds of its losses were the fault of collateralized debt obligations—securities backed largely by subprime instruments—and that credit default swaps had been "key to the growth" of its out-of-control cdo business. (Gramm declined to comment for this article.)

Gramm's record as a reckless deregulator has not affected his rating as a Republican economic expert. Sen. John McCain has relied on him for policy advice, especially, according to the campaign, on housing matters. The two have been buddies ever since they served together in the House in the 1980s; in 1996, McCain chaired Gramm's flop of a presidential campaign. (Gramm spent $21 million and earned only 10 delegates during the gop primaries.) In 2005, McCain told a Wall Street Journal columnist that Gramm was his economic guru. Two years later, Gramm wrote a piece for the Journal extolling McCain as a modern-day Abraham Lincoln, and he's hailed McCain's love of tax cuts and free trade. Media accounts have identified Gramm as a contender for the top slot at the Treasury Department if McCain reaches the White House. "If McCain gets in," frets Lynn Turner, a former chief sec accountant, "we'll have more of the same deregulatory mess. I like John McCain, but given what I know about Phil Gramm, I wouldn't vote for McCain."

As a thriving bank exec and presidential adviser, Gramm has defied a prime economic principle: Bad products are driven out of the market. In John McCain, he has gained an important customer, so his stock has gone up in value. And there's no telling when the Gramm bubble will burst.

http://www.motherjones.com/news/feature/2008/07/foreclosure-phil.html

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woebedamned

Posted: Sat Sep 27, 2008 10:23 pm

CancunMole wrote:

And while many of us were most probably occupied with day-today survival in 1999:

Gramm-Leach-Bliley Act
http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act

edit -- too negative

Last edited by woebedamned on Mon Sep 29, 2008 6:02 pm; edited 1 time in total

Damn it All!!!!

Joined: 15 Aug 2006
Posts: 6309

dugo

Posted: Sat Sep 27, 2008 10:31 pm

Alexandria wrote:

Ok, deregulation of the financial sector indicates that there used to be regulation.

Were there controls in place prior to this deregulation that would have made the current situation aviodable?

Prior to 1993 I guess, then things started to crumble down. Hard to pinpoint a specific one, but a good example might be Gramm Leach-Bliley act repealing Glass-Steagall..

http://mises.org/story/3098

But an insidious form of "market-based policy" is also a real culprit in the current mess. In 1999 a bill was passed by a Republican Congress and signed by Democratic President Bill Clinton that rescinded the Depression era's divorce of commercial banking activities from investment banking, called the Glass-Stegall Act of 1933. That opened a floodgate of "creative" financial instruments backed by notes and other commercial paper. Much of the banking regulation of the Roosevelt administration — including abandonment of the gold standard — made absolutely no sense, but markets can fail with dire short-run consequences under a fiat monetary system. With Glass-Stegall, Congress put its finger on and mitigated the tendency and temptations of banks to create massive costly externalities to society, in this case, by holding bundled mortgage-backed securities which were deemed safe by rating agencies but which ultimately failed the market test.

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gwen

Posted: Sat Sep 27, 2008 10:59 pm

McCain Aide's Husband Headed Trade Group Lobbying on Bailout

It looks there's another John McCain adviser with a personal background that doesn't exactly jibe with the candidate's recent effort to portray himself as a populist crusader for ordinary folks.

Last week in Green Bay, McCain declared: "At the center of the problem were the lobbyists, politicians, and bureaucrats who succeeded in persuading Congress and the administration to ignore the festering problems at Fannie Mae and Freddie Mac."

Of course, as Barack Obama has pointed out, McCain's campaign is a virtual who's who of former lobbyists for Fannie and Freddie.

But another McCain adviser has close personal ties to one of the industries that, like Fannie and Freddie, spent too long assuring the public that the housing market was in good health, and thereby forestalling efforts that might have protected homeowners and staved off a crisis.

Nancy Pfotenhauer, a senior economic adviser to McCain, has been all over the airwaves in recent days touting McCain's decision to "suspend" his campaign over the bailout. But her husband, Kurt Pfotenhauer, worked until late last year as the top lobbyist for the Mortgage Bankers Association, a trade group that in recent years downplayed fears of a housing bubble, only to be proved spectacularly wrong.

When MBA released a report in 2005 on the state of the housing market, its chief economist told reporters: "There are risks but they're far less dramatic than the hyperbole of recent months." An MBA vice president added: "We're trying to dismiss the overheated rhetoric on bubbles." Part of the purpose of the ho-hum rhetoric, it would appear, was to discourage government regulators from looking more closely at the problems in the market, and ultimately taking action to protect homeowners. And many experts blame that regulatory inaction in the housing market for the current financial crisis now shaking the country.

Since January, Kurt Pfotenhauer, who did not immeduately respond to a detailed request for comment, has served as the CEO of the American Land Title Association, a trade association representing the title insurance industry. But during the current crisis, his old employer, MBA, has been at the center of lobbying efforts -- successful it appears -- to oppose a provision, sought by Democrats, that would allow bankruptcy judges to modify mortgages on primary residents. The lending industry has long fought such measures, arguing that it would force lenders to increase mortgage rates. In a statement issued yesterday, the MBA asserted that the provision "would throw into question the value of the collateral that backs every mortgage made in this country -- the home." According to one Democratic lobbyist, MBA's current top lobbyist, Francis Creighton, has lately been "living in the halls" of Congress in an effort to influence lawmakers on the bill.

Allies of Kurt Pfotenhauer have lately been willing to tout his ties to the McCain campaign, through his wife, to bolster his professional credentials. An advanced notice of a speech Kurt was to give last week to the Indiana Land Title Association (ITLA), an ALTA affiliate, published in an Indiana newspaper and seemingly written by the ITLA, noted that he would "provide a public policy update from the nation's capital, with an emphasis on the housing and mortgage finance crisis." It added: "His wife, Nancy, is a senior advisor and national spokesperson for presidential candidate John McCain."

Of course, there's no reason why Nancy Pfotenhauer's career should be limited by her husband's lobbying work. But at the very least, Kurt Pfotenhauer's recent role as an advocate for banking interests that discouraged regulators from paying closer attention to the problems in the housing market raises questions about the backgrounds of the advisers John McCain surrounds himself with -- especially in light of the recent populist turn of his campaign rhetoric.

http://tpmmuckraker.talkingpointsmemo.com/2008/09/mccain_advisers_husband_heads.php

AKA Gagal_05

Joined: 24 Feb 2007
Posts: 15275

dugo

Posted: Sat Sep 27, 2008 11:00 pm

CancunMole wrote:

sowwie, I have a job at a big bank that forces me to be current on economics, law and IT at the same time.. I love soaking up things too.

Why? Well, because banks start to fail. If it is an airliner or a steelcompany another one can do the job. Financial institutions can take eachother down when they fail and things can go domino. If that happened to the whole airline industry we could take the train. If the whole financial sector goes belly up all other industries get into difficulties too, it would be the end of economics as whe now it.

There are plenty of people shouting that the fed. gvt. can't sustain its ways of deficit spending, but is only going to be an ISSUE/PROBLEM NOW when it starts defaulting its bonds.

CancunMole wrote:

IMO, there is no doubt that our Democrat brothers fostered this in its conception, as yet another "equality, help the helpless give-away" that now, since its failure was imminent during election scrutinies and did surface, is another easy blame on the current administration because the majority of the US populaton can barely recall what happened yesterday let alone within the past 15 + years.

LOL

Dashing Dutch Dynamo Dude

Joined: 12 Apr 2006
Posts: 6129
Location: L4L

CancunMole

Posted: Sat Sep 27, 2008 11:22 pm

dugo wrote:

sowwie, I have a job at a big bank that forces me to be current on economics, law and IT at the same time.. I love soaking up things too.
Why? Well, because banks start to fail. If it is an airliner or a steelcompany another one can do the job. Financial institutions can take eachother down when they fail and things can go domino. If that happened to the whole airline industry we could take the train. If the whole financial sector goes belly up all other industries get into difficulties too, it would be the end of economics as whe now it.

There are plenty of people shouting that the fed. gvt. can't sustain its ways of deficit spending, but is only going to be an ISSUE/PROBLEM NOW when it starts defaulting its bonds.
LOL

1st bold: For some reason I am not surprised in the least!!! Your posts always have reflected insights into these areas, IMO.

2nd bold: Easy for you to say re taking the train Vs an airplane, LOL!!! There's no train from where I am (immediate to a train station) to get me even out of the State that I'm in!!!!!

I understand and appreciate what you are saying. Thank you.

Joined: 24 Mar 2006
Posts: 1900

Trixie

Posted: Sat Sep 27, 2008 11:24 pm

Well, so far we have deregulated the savings & loans, energy (as in the Enron loophole) and then banking. We, Dems, Rep, and Ind, should have learned our lesson.

Dugo, just on CNN, Congress has Warren Buffet on a conference call with for advice. They are trying to get a deal before the Asian markets open tomorrow night.

None of the options are good. What do you think is the best (least harmful) action that can be taken?

Joined: 23 Mar 2006
Posts: 6728

Trixie

Posted: Sat Sep 27, 2008 11:26 pm

O/T....there is a hurricane headed towards New England?? Good grief! What next?

Joined: 23 Mar 2006
Posts: 6728

gwen

Posted: Sat Sep 27, 2008 11:35 pm

On CNN now - it looks like they have some kind of agreement. They all are patting themselves on the back for their patience and saying that they will have something on paper tomorrow...

AKA Gagal_05

Joined: 24 Feb 2007
Posts: 15275

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