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Darwin Denied – The Cost of Liberal Social Engineering

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Democrats in congress are trying to deny any blame in the credit crisis. The fact of the matter is they are wholly culpable and if they hadn’t succeeded in subverting what I’m going to term “lending to the financially fittest” none of this would have happened. Watch the video below the fold which I had published separately but decided fit better melded into this article.

In his short time in Congress Senator Obama received more campaign contributions from Fanne Mae than 48 other currently serving Senators had received in their entire careers. Obama is a charismatic crook in the best Chicago political tradition. The socialist policies he’s supported, even as a young Harvard lawyer representing the low-income housing lobby, nearly caused the ruination of the world’s largest economy. Want to see the U.S. crash into some REALLY crushing poverty like that which plagued the former Soviet Union? If so then by all means vote for Mr. Barack “Karl Marx” Obama. On the other hand, if you want to see more of the greatest peacetime economic expansion in history which occured under Ronald Wilson Reagan, the kind of economic expansion that brought the Marx inspired socialist Soviet Union to its knees, then vote for war hero John McCain. The choice is just that simple.

Who’s Responsible further in the past? Read on.

Obama was deeply involved in this first as a community organizer and then later as a lawyer representing the low-income housing lobby long before he became a US Senator.

It all goes back to 1977 with the enactment of the Community Reinvestment Act which encouraged banks to make sub-prime loans to unqualified borrowers in under-represented minorities with an implicit guarantee that the government would use taxpayer money to make whole the lenders on any sub-prime loans that defaulted.

This is social engineering in that liberals want to guarantee results where conservatives want to guarantee opportunity. America is a land of equal opportunity not equal results.

Anyhow, up until 1977, lenders were lending to the fittest. Your race didn’t matter. Your financial history was given the fitness test. A very Darwinian concept.

Study the history of the CRA. It was enacted in 1977 (Jimmy Carter’s watch). Democrats had a filibuster-proof 61/39 majority in the Senate. Democrats had a 292/143 (67%) majority in the House. Republicans were absolutely helpless to stop anything the dems wanted and what they wanted was some social engineering.

In 1995 Bill Clinton and the 104th congress vastly expanded the reach of the CRA. The 104th congress was barely a Republican majority of 54/46 in the senate and 230/204 in the house. With a democrat in the white house and a filibuster-vulnerable majority in congress they had to go along with a lot of what Clinton wanted.

In 2003 George W. Bush recognized the train wreck that was about to happen and tried to fix it.

In 2003, the Bush Administration recommended what the NY Times called “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.” This change was to move governmental supervision of two of the primary agents guaranteeing subprime loans, Fannie Mae and Freddie Mac under a new agency created within the Department of the Treasury. However, it did not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enabled them to issue debt at significantly lower rates than their competitors. The changes were generally opposed along Party lines and eventually failed to happen. Representative Barney Frank(D-MA) claimed of the thrifts “These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.” Representative Mel Watt (D-NC) added “I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing.”

In 2003, Republicans again had such a slim majority in congress (51/49 senate; 229/205 house) that they weren’t able to get Bush’s reform enacted. The 109th congress was still not a solid Republican majority and the 110th congress (the one we have today) is of course Democrat majorities in both house and senate. So Bush never got the reforms pushed through and in 2008 the train wreck finally happened.

HT to Bill Dembski who emailed me this Investor’s Business Daily article Congress Tries To Fix What It Broke which prompted me to check out which presidents and congresses were to blame in all this.

Among other interesting things IBD had this to say:

The regulation grew to monstrous proportions during the Clinton administration, obsessed as it was with multiculturalism. Amendments to the CRA in the mid-1990s dramatically raised the amount of home loans to otherwise unqualified low-income borrowers.

The revisions also allowed for the first time the securitization of CRA-regulated loans containing subprime mortgages. The changes came as radical “housing rights” groups led by ACORN lobbied for such loans. ACORN at the time was represented by a young public-interest lawyer in Chicago by the name of Barack Obama.

HUD, in turn, pressured Fannie Mae and Freddie Mac to purchase more subprime mortgages, and Fannie and Freddie, in turn, donated to the campaigns of leading Democrats like Barney Frank and Pelosi who throttled investigations into fraud at the agencies.

Soon, investment banks such as Bear Stearns were aggressively hawking the securities as “guaranteed.” Wall Street’s pitch was that MBSs were as safe as Treasuries, but with a higher yield.

But they weren’t safe. Everyone in the subprime business — from brokers to lenders to banks to investment houses — absolved themselves of responsibility for ensuring the high-risk loans were good.

The mortgage lenders didn’t care, because they were going to sell the loans to other banks. The banks didn’t care, because they were going to repackage the loans as MBSs. The investors and traders didn’t care, because the MBSs were backed by Fannie and Freddie and their implicit government guarantees.

In other words, nobody up and down the line — from the branch office on main street to the high-rise on Wall Street — analyzed the risk of such ill-advised loans. But why should they? Everybody was just doing what the regulators in Washington wanted them to do.

Go McCain Palin in 2008!

I guess debating the direction of the economy is like debating the afterlife. One never knows until it is here. Here’s my problem. Paulson and Bernanke told us last summer that the economy was fine. Everyone was a pessimist or doomsayer who said otherwise. And now this. I think the economy is in bad shape. People are flat broke. Many are in debt up to their yankee doodles. The boomer generation has squandered their savings (and that of their parents) by buying stuff they don’t need with money they don’t have. Corporations have been posting record earnings because people were buying things on credit. The government can bail out the housing industry, the car industry, the airlines, anybody they want, but it still leaves people flat broke. I say we are in for a recession that will be very surprising. It will surprise even me. It will look and feel a lot like 1929. Remember when Chrysler was bailed out in 1980? It was a shocker. The marriage of a corporation with government was a strange thing. Today (and I mean today, September 25th), the government announced it was handing $25 billion to the auto industry. They call it a loan. But it is a bailout. The much ballyhooed 1980 Chrysler bailout was about $4 billion in today’s dollars. Today’s bailout gives $5 billion to EACH of the three automakers. And there’s more to come. This is a very dangerous thing. The marriage of corporate America with the government is about as fascist as fascist gets. This is exactly what happened in Nazi Germany. Corporations (like Vokswagen) were all privately owned, but heavily subsidized by tax revenue. Eventually, tax money was given to all German corporations. There was no competition during Nazi Germany. Corporations had incredible power. They were making policy, telling Hitler what to do and when on their behalf. By the time Berlin was invaded by the allies, Germany had already fallen. The corporations had eaten through Germany like some kind of uncontrollable malignancy. We shall see. Barrett
If these CEOs really believed they were nearing insolvency they wouldn’t be worried about a reduction in pay, they’d be worrying about having NO pay and no hope of getting hired somewhere else. This is a sham. Follow the money.
Indeed. This is nothing more than the Administration throwing one last party for their banker pals. The only good thing about it is that this is probably the first party that didn't have Halliburton on the guest list. terry fillups
Paulson to congress: "Companies won't participate if there are limits on CEO Pay" I'm really beginning to smell something foul here. Something is rotten in the state of Denmark. If these CEOs really believed they were nearing insolvency they wouldn't be worried about a reduction in pay, they'd be worrying about having NO pay and no hope of getting hired somewhere else. This is a sham. Follow the money. DaveScot
Warren Buffet is one of the bottom fishers. In the same breath he used to call this "financial Pearl Harbor" he says he just sunk all his free capital, $5 billion, into buying a chunk of Goldman Sachs. He said if he had $700 billion to buy up all the sub-prime loans he'd do it himself because he thinks the federal government is going to end up making a handsome profit on it in the long run. Yeah, he's in a panic alrighty. Spreading FUD and buying financials at fire sale prices. http://www.bloomberg.com/apps/news?pid=20601087&sid=aRef_DUx6AcU&refer=worldwide I've been through enough of these so-called meltdowns before to know a lot of the doom and gloom vendors are just trying to start a panic, watch prices plunge, and then swoop in like vultures to dine on the carnage knowing the crisis wasn't half as bad as it was cracked up to be. I bet more than just a few crooked congress critters are dragging their feet while instructing their brokers to buy too. DaveScot
I just checked the share price in a couple financial institutions that I have a vested interest in seeing remain solvent. Both are down 50% from 52 week highs. Both popped up 5% today. The bottom fishers are already in the market. Fundamentally sound companies are being bought at bargain prices. In a real scare everybody runs for cover and everything goes down. In one that's blown out of proportion there are winners amongst the losers. And gosh, I forgot to mention the Asian Financial Crisis of ten years ago as another situation that was going to bring down world capital markets. Everyone survived that too. DaveScot
In the immortal words of US Senator Dirksen in the 1960's talking about congressional pork: "A billion here, a billion there, pretty soon it adds up to some real money." 40 years later I suppose it's still operative but takes the form of "A hundred billion here, a hundred billion there, pretty soon it adds up to some real money." I guess it added up. Again. History repeats itself. DaveScot
Barrett The doomsayers don't have much credibility anymore. The earth started cooling, all the world's computers didn't stop working at 12:00AM on January 1, 2000, and the stock market survived the bursting of the ridiculous valuations in the 1990s tech bubble. Adjustments happen in inflated markets. This too shall pass. Every home purchased with a defaulted subprime loan is still standing. Someone well end up owning it and somone will end up living in it same as always. Ownership changes but the house continues to do its job of providing shelter. I've been expecting the Dow Jones Industrial Average to visit 8000 before it visits 12000 again. But I've never been very good at calling bottoms. Much better at calling tops. Here's what's going to happen, IMO. Already is in California housing market. The bottom fishers come out. Moneyed individuals are still out there sitting on the sidelines. When the bargains get too good to resist they rush in buying stuff up and in the process (supply and demand didn't stop working) run the prices back up. I mean look at me. I'm salivating like Pavlov's dog over the possibility of buying Dell at $17. Capital gets put to work sooner or later. Smart money sits on the side when stuff like this is happening waiting for a good reentry point. And the Arabs. They have so much bloody money they don't know what to do with it all. They're so heavily vested in the smooth functioning of world capital markets they'll never let it collapse. All they gotta do is let the price of crude slide back to $20/bbl for few years and BOOYAH, happy days are here again. I think the price of crude the last few years is what did the real damage. Virtually everything has a major cost component that can be traced back to crude oil. I mean, c'mon. Crude went up 600% in five years. That was too much too fast. Greedy bastards. Fortunately they know we still have plenty of capacity for fielding invincible stealth aircraft that can reduce any country in the world to rubble in a matter of weeks if not hours. If we go down they're going down ahead of us. They know it and we know it. The downside of capitalism is boom and bust cycles. Most people prefer it because the booms are bigger and longer lasting than the busts. So the tech bubble turned into a housing bubble. Wasn't the first time and won't be the last. I have to admire Japan. Their domestic financial situation was in the toilet for what seems like decades and just day before yesterday they announced they're going to build a space elevator. A SPACE elevator! That was something I dreamed my country would build. But hey, better Japan than nobody at all. Unfortunately we had to spend our blood and treasure being the world's peacekeepers since WWII. While we were reinvesting 20% of GDP every year to become the only superpower most of the rest of the industrialized world got a free ride under the umbrella of US protection. I wish they'd at least say thanks. But noooooooo... DaveScot
By the way, there was a bank run in Hong Kong today. Barrett
Dave, now don't puke as a I direct you to a Bill Moyers site, but I highly recommend the following link which is a discussion between Kevin Phillips (an old Nixon protege) and Bill Moyers (simply an old liberal). I actually think Kevin Phillips is one of the most underrated thinkers of our time. And he is right about this current financial crisis. http://www.pbs.org/moyers/journal/09192008/watch2.html Barrett
I just checked out my 10 year old Yahoo financial tech-stock watch list. Dell is trading at the best value I've seen in more than 10 years. Price to sales 0.50 Profit to earnings growth 0.97 Price to earnings 12.48 Wow. This is what pre-1990 blue chip financial fundamentals were expected to look like. ~$16 is a hard floor with a lot of resistance for this stock. It bounced off it like a rubber ball today. If you're looking for a 12-month double this is one to take a close look at. It's trading way too cheap due to no more than FUD (fear, uncertainty, and dread). I spent years in intense study of this homegrown Austin favorite. It's the only stock I ever bought. I got a 4,000% (no typo) return from it between 1995 and 2000. Got completely out of it in 2001. Lowest price I sold any of it at was $20 shortly after it bounced off of $17 post-911. Lot of FUD then too. FUD, in hindsight, is always a buying opportunity. Let the bottom fishing begin! DaveScot
Barrett I think the banking industry will right itself. A lot of balance sheet repair needs to done but what doesn't kill it only makes it stronger. I mentioned property taxes and that brings up something else I'm wondering about. I expect home values to take a big hit, maybe 20% or so across the board, worse in some markets and less in others. When that happens it's going to put a big crunch on municipal and school district budgets which have grown fat in recent years from the rapid rise in property values. The U.S. has on average one of the highest property tax rates in the world. In many if not most tax districts the tax rates are capped (for example I remember when Proposition 13 in California was voted into law capping the maximum rate at 1% of assessed value). What happens when counties, cities, and schools get pinched by a rapid decline in property tax revenues? You can't draw blood from a stump so the taxpayers, already stressed to the breaking point, can't or won't take up the slack. I've NEVER known a government of any kind to actually slash a budget to make up for a shortfall in revenue. What I expect, after a massive offering of US treasury bonds which is now writ in granite due to the toxic debt bailout, is a secondary massive wave of bond issues from local governments. Even more public debt. Where it all ends I have no idea. What I do know is that all debts must eventually be paid and ultimately the only way to pay them is through increasing income or decreasing expenditures. If you dance to the music you have to pay the piper. A common sense thinker like Sarah Palin knows this. I fear no one else in Washington does anymore. Certainly Obama doesn't who seems to think there's a bottomless pit of tax revenues he can squeeze out of the wealthy. That doesn't work because those are the same people who underwrite economic expansion. You can't kill the goose that lays the golden eggs. All Obama's plan will do is transfer wealth from the productive class of taxpayers to the unproductive class who don't pay any taxes at all while adding a fat lot of government employees to oversee the transfer and make capitalism work even less efficiently. It's a recipe for disaster. The government simply can't keep borrowing to help people live above their means. It has to, if anything, figure out a way to help them live below their means. The only way to get out of this mess is to grow the economy which means lower taxes and financial incentives to stimulate growth while at the same slashing government expeditures for do-nothing pork projects. Obama will never do that. Not in a million years. All he's interested in doing is appealing to personal greed and envy by offering people something for doing nothing. Encouraging sloth is no answer. Eventually everyone is going to be living less affluent lifestyles unless something big happens like a breakthrough in fusion power which drastically lowers the cost of energy or a breakthrough in nanotechnology which makes manufactured goods dramatically cheaper. In the past technology has always come to the rescue. I hope the trend continues. Computers and networks made manufacturing, distribution, and management a lot cheaper but that card has been played out. You can grease a wheel to make it turn easier but once it has enough grease more grease doesn't help. And just to bring this back on topic for the blog, I'm pretty damn sure it won't be evolutionary biology that comes to the rescue. DaveScot
Yowser! Be careful! And we agree. Barrett
Barrett I too have been close to the real estate market for a long time - 33 years. 80% of my net worth is currently tied up in illiquid real estate although 80% of that is in undeveloped land which isn't so sensitive as developed properties. I also don't have any liens on the undeveloped land so if push comes to shove I can finance a buyer myself and in the current banking environment that's a huge advantage. Land can't be damaged so as long as I hold a lien to recover the property in case of default I'm in the catbird's seat especially when any permanent improvements become mine too in case of default. I guess there really is a silver lining behind every cloud. I've never missed paying a bill on time in my entire life. I got hit pretty hard by the current crisis in that all my liquid assets, which pay my day to day living expenses, were in Auction Rate Preferred Stock (ARPS). The money lent in the form of these par value shares, in my case, are used as leverage for increasing common stock value in a taxable fund composed of mostly AAA corporate bonds. Thus I am in the position of a lender lending to a mutual fund. ARPS, which has existed for over 30 years and is a $300 billion industry, aren't traded on the open market but rather in private auctions. In the past a number of banks have upheld the auctions by stepping in as buyers when sellers outnumber buyers. When the subprime crisis hit Citibank, who was the largest bank underwriting the auctions, pulled in its horns and the auctions began failing. In all the past 33 years there has never been a failed auction and these instruments were considered highly liquid as auctions take place daily, weekly, or monthly depending on the particular fund. In case of any failed auction the interest payed to the lender increased quite substantially, in theory enough so that the underlying debtors (corporate bonds, municipal bonds, student loans, housing loans) would be inspired to call in the debt and refinance it elsewhere. When the bottom fell out of the subprime lending market hit, and banks knew they were going to be bleeding massive amounts of red ink, they stopped supporting the smooth running of the ARPS market to conserve capital, and at the same time also virutally stopped lending to the underlying creditors who needed to call in their debts for refinancing to avoid the punitive rates of failed ARPS auctions. This ARPS crisis all began about 10 months ago. I lost a lot of sleep wondering how to pay my bills next year, the largest of which by far is property taxes. That particular portion of the crisis was solved, at least for the time being, by new SEC rules which allowed ARPS shares to carry a put option guaranteeing liquidity and allowing money market funds to purchase them which they hadn't been allowed to do in the past. I believe today about half of the $300B ARPS market crisis has unwound by selling the new instruments and calling in the old. About half of my ARPS holdings were called in just a week ago and replaced with cash so I don't foresee any problem in the rest of it unwinding as these are really good instruments for everyone involved - lower than long term lending rates to the debtors and better than short term lending rates to the creditors and rates adjusted frequently for the lender to reflect a market driven yield curve. Now with the U.S. promising to back up the money market with taxpayer dollars I'm in the clear except for wondering what the hell my new liabilities are as a taxpayer. Anyhow, going back to before the CRA... back in 1975 when I was an 18 year-old lance corporal in the United States Marine Corps stationed at Marine Corps Air Station El Toro in sunny coastal, urban southern California, all the older guys freshly back from tours in 'Nam with lots of accumulated hazardous duty pay were heavily into the real estate market buying mostly single condominiums and duplexes, and selling them within a few months at profits of 30% or more. In my experience in good housing market times there has always been "creative financing" deals offered by lenders - low initial interest rates, low down payments, and/or balloon payments in subsequent years. Before the vastly expanded CRA came along in 1995 that creative financing in the deregulated thrift market quickly led to the S&L crisis of the 1980's. A massive taxpayer bailout fixed that and thrifts became regulated enough so it didn't happen again. Then along comes Bill Clinton and a democratically controlled congress who in 1995 rewrote the banking rules so that unqualified borrowers had to be given credit in the name of social equity and diversity. Worse, this time there was an implicit guarantee of a government bailout when things went sour again. But what did Clinton care - he'd be out of office before the shit hit the fan. Slick Willy and his marxist wife, failed in their government grab for power by nationalizing the health care industry, which at the time was 14% of gross domestic product, and would have been the biggest single power grab by the federal government since the 14th amendment in 1868 which made the U.S. constitution superior to state constitutions, and the 16th amendment in 1913 which established the authority for a federal income tax. But Bill and Hilly belatedly got what they wanted by engineering what looks to be the unavoidable nationalization of the mortgage industry. The federal government is out of control. About 8 years of no-nonsense reform by a common sense hard-working budget-minded middle class hockey mom/state governor with a veto pen and willing to use it, completely disconnected from the beltway politics of the rich and richly funded special interest groups is just what the doctor ordered. I'd vote for the devil himself if I knew Palin would be his successor. McCain is far from the devil but it's still Palin I want. As for experience, she actually has more experience with executive office than McCain, Obama, and Biden combined since they're all legislators seldom if ever faced with making independent decisions without months of study by committees before making it and lots of others with which to share the blame when those decisions are poor ones. Executives have to make quick decisions and the buck stops there. Military experience? Again, she's ahead of McCain, Obama, and Biden combined. Palin has 2 years experience as commander-in-chief of 4000 active duty members of the Alaska national guard. How many and for how long have any of the others been a military commander? Palin I think has enough common sense to let the Pentagon and the secretary of defense make the judgement calls. Foreign policy experience? Obama is almost as lacking. McCain and Biden admittedly have all the experience there. That's just a consequence unavoidable consequence of recruiting someone from the American middle class who's a beltway outsider. There's no one in that position with foreign policy experience. Again I think Palin has the common sense to listen to her secretary of state and U.S. ambassadors on foreign policy judgement calls. That said I'd love to have a president who just comes right out and tells the president of Iran that he can't be both batsht crazy AND have nuclear weapons - destroy them or we will. Palin would probably do that - cut straight though all the undending, uselss diplomatic doubletalk and resolve the problem one way or another while it's still manageable. DaveScot
I'm actually frightened about all this. But then again, I'm a Jew. And we're always scared. Look at this from the NYT. It is illustrative of how clueless our leaders are. Socialist fools, the lot of them. "It was a room full of pople who rarely hold their tongues. But as the Fed chairman, Ben S. Bernanke, laid out the potentially devastating ramifications of the financial crisis before congressional leaders on Thursday night, there was a stunned silence at first. Mr. Bernanke and Treasury Secretary Henry M. Paulson Jr. had made an urgent and unusual evening visit to Capitol Hill, and they were gathered around a conference table in the offices of House Speaker Nancy Pelosi. “When you listened to him describe it you gulped," said Senator Charles E. Schumer, Democrat of New York. As Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Banking, Housing and Urban Affairs Committee, put it Friday morning on the ABC program “Good Morning America,” the congressional leaders were told “that we’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.” Mr. Schumer added, “History was sort of hanging over it, like this was a moment.” When Mr. Schumer described the meeting as “somber,” Mr. Dodd cut in. “Somber doesn’t begin to justify the words,” he said. “We have never heard language like this.” Barrett
Barret If by that you mean that a vote for Obama is a vote to move the United States towards a socialist state like the former Soviet Union then I agree. At least they come right out and express their devotion to Marx. No, they don't. That's a problem. If they actually came right out and said it they'd get run out on a rail. So they couch it with phrases like "Hope and Change". Where's Joe McCarthy when you really need him, eh? DaveScot
Barrett, My wife and I were in Ireland two months ago and all the talk was of the Celtic Tiger and how it has recently fallen and Ireland was in the grips of a recession. You would never know it by the prices as I once paid the equivalent of $12 for a diet Coke. We took a bus tour of Dublin and the driver went through some neighborhoods where the guide said these houses are going for 12-16 million euros. They were nice but not too big town houses, usually about 3,000 sq. feet and little ground. At the time the euro was 1.60 to the dollar so we are talking about 20-26 million dollars per house in a nice but not too spectacular part of Dublin. The guide said that some who were trying to sell their houses because they could not make the payments on them also could not find new buyers. In other words there was the beginning of a real estate crash in Dublin and to a lesser extent in the rest of Ireland. There was a similar article in the Irish news paper about the problems in British real estate. Relatively low new mortgages were being issued. With all the talk about McMansions the last few years I can see where a lot of dinks got caught up in the trend for elaborate new houses and if the people were from Bear Stearns, Citibank, Merrill Lynch, Lehman Bros. etc then the New York area should be flooded with expensive real estate. I am sure a lot of people were counting on year end bonuses to pay for their homes. jerry
Yes, it started in poor sections. But then this from the Lansing State Journal on September 8th. Again, when the history books are written, we will see that a huge chunk of the problem was not poor people getting loans they couldn't afford, but Middle America. "The Mortgage Bankers Association said Friday more than 4 million American homeowners with mortgages - a record 9 percent - were behind on their payments or in foreclosure at the end of June. "The problem that policymakers and Wall Street once assured us was 'contained' to subprime mortgages has proven to be anything but," Mike Larson, a real estate analyst with Weiss Research, said in a research note. As the economy falters and home prices keep falling, concern is building about a second wave of mortgage defaults flooding the market through 2010. Barrett
Barrett, Thank you for all your great input, it is an eye opener. Let me give you my maybe inadequate understanding of the problem which meshes with all that I have read this week. I live north of New York City which may not be very typical for this housing problem. I knew nothing about a sub prime mortgage other than I thought it meant someone got a mortgage below prime with the idea that it would be increased in a year or two to a higher rate. My impression was that the higher rate would make the total pay-out somewhat more expensive for the buyer over the long haul but it enabled them to get equity in their house and get started with paying a mortgage. The risk was that the rates might go up substantially depending upon the current discount rate and that was the real risk. T he fixed part may end up much higher than what was current. Then I saw two things. The first was a very funny parody by two British comedians on how the whole process played out. http://www.youtube.com/watch?v=mzJmTCYmo9g It points the finger at several people in this whole fiasco. The interesting thing is that this parody came out several months before Bear Stearns collapsed. The next was a list of all the foreclosures in our area by town and over 2/3 of the foreclosures were in the poor areas. So while I am sure that the range goes all over the economic spectrum and everybody wants a handout it will be interesting to see just where all the money went. The interesting thing is that someone has the money. For every dollar the banks and finance giants loss someone got the money for the property. Who has that money? By the way in case anyone is interested the great depression was mainly started by a real estate collapse (especially in the new paradise of Florida) similar to what went on in the past couple years. What caused the depression and extended it was not the stock market crash nor this real estate crash but the several bad economic decisions first by Hoover and then by Roosevelt. jerry
BarryA, Thanks for the information. If you are interested in the Closer episode, it can be downloaded for a small fee from either Itunes or Amazon. Needless to say it follows your scenario and there is a 3-4 minute sequence on Darwin. jerry
With all due respect, this isn’t right. The CRA was just one policy decision among many, many policy decisions (in the hundreds) past and present. Looking at the CRA as the source of our problems makes for a great literary device, but it is in error. The IBD article characterizes Clinton’s expansion of the CRA as being of “monstrous” proportions. I’m afraid this isn’t true. Clinton certainly expanded the program (wrongly) but it wasn’t monstrous by any stretch. The IBD article goes on to say that Barack Obama and his ilk pressured Congress to allow banks to securitize these RCA mortgages. It is true that Obama did support this provision, but his support was insignificant, eclipsed by the overwhelming bipartisan support for its passage and a whole host of similar legislation opening the door for all kinds of weird securitized loan trading. The IBD article then goes on to say that Fannie and Freddie had been “pressured” to purchase more subprime mortgages. The article implies that HUD and bigwigs in the Democratic party were doling out this pressure. Now, if you believe this then you will believe anything. There is always plenty of Republican support whenever any piece of legislation expands the role of Fannie and Freddie because it means that more homes will be built. You and I agree that government intervention in the marketplace needs to stop. But explain something to me. How is it that we’ve had only one Democratic president since 1980 and we still have this insane march toward Marxism? I’ll tell you why. It’s because people like Marxism. Always have. And they like Capitalism, too. They like them both. It takes a very smart person to walk this fine line in Washington. My heart is in love with your rhetoric. I turn on AM radio and I like the rhetoric I hear from them, too. Who can disagree? But my brain says it’s more complex. And when I see articles like the one from IBD I almost want to vote Democrat. At least the Democrats acknowledge that socialism is a popular and permanent fixture in America. At least they come right out and express their devotion to Marx. Barrett
Jerry, I can answer your question. Having represented several of the Columbine families, I am very familiar with the details. And the answer is, "Yes, Columbine was a failure with respect to the killers' plans." The plan was to set off propane canister bombs during the lunch hour and then pick off survivors with small arms fire as they staggered out of the building. The fuses failed. If either Harris or Klebold had been able to make an effective fuse for their propane bombs, the death toll would have been in the hundreds. As to your second question, the answer is also "yes." Both Harris and Klebold were self consciously acting out their Darwinian ideas. They believed (or at least said they believed) they had evolved to a higher plane of existence and owed no more duty to respect the lives of their fellow students than they might owe to livestock (which is to say "none"). BarryA
Barret What you say is certainly true but the fact remains that until Bill Clinton vastly expanded the reach of the CRA with taxpayer guaranteed loans banks were the ones who took the hit when a loan defaulted and so they were cautious enough in lending practices to keep bad loans a small enough percentage of their loan portfolios so that they remained solvent. If you think McCain is a Bush clone, whether it's true or not, that's a helluva better than electing a Clinton clone. It's bad enough that Clinton set in motion the largest transfer of public wealth in history which almost, and still might, bring the whole house of cards crashing down. To ask for more of the same is lunacy. The democrats, with Osama being the penultimate example, believe in punishing success and rewarding failure. This is why they want these huge transfers of wealth. I can't think of a more bass ackwards policy. America is a land of equal opportunity. The democrats want it to be a land of equal results. Who the hell wants to work and prosper by it when one can sit on one's ass doing nothing and live just as well? Not me that's for sure. DaveScot
Dave, as someone who has spent a number of years in close proximity to the housing industry, I can say with authority that this article from IBD is a devil's lie. The devil, you see, sprinkles his lies with truth. Yes, the push to provide affordable housing had something to do with the mortgage mess we are in. And yes, it was spearheaded by Democrats. But here's the deal. The middle and upper classes in America have been the beneficiary of massive (and I mean massive) subsidies from the federal government for decades. The housing industry has literally floated on a sea of welfare since the sixties. The housing industry is unquestionable the most subsidized industry in America. Federally backed corporations like Fannie Mae and Freddie Mac, little ditties in the tax code that give housing an advantage in attracting private and public investment, various federal insurance programs for people who live on the water, all add up to the most outrageous government hand out system to the middle and upper classes one could possibly imagine. The entire system was a house of cards waiting to collapse. Believe me, the Master Builders Association, Board of Realtors, and developer organizations, collectively outspend just about every other industry group in America trying to persuade Congress to funnel money into housing for the middle and upper classes. So yes, the unraveling of this mortgage mess has something to do with poor people getting loans they couldn’t afford. But you will see in the coming years as the data is broken down that the biggest problem was Middle America getting loans they couldn’t afford. Last fall, Ben Stein missed the boat on this completely. He wrote a well circulated article explaining in some detail how limited the mortgage crisis was going to be. He was unaware of how many loans were made to middle class and upper class home buyers who frankly couldn’t afford them. What I find amazing is the building community is the most ardent group of free market enthusiasts in America. We now have an America where people own two and sometimes three homes, many of which sit vacant as vacation homes. The artificial demand created by these subsidies has led to the explosion in the size of homes that nobody will be able to heat or maintain the coming years (let alone pay for). I've known for some years that the building industry has had a love affair with Marx and Engels. Don't believe me? Try limiting federally subsidized FEMA insurance for mansions on the Florida coastline. You'll see first hand the building industry muster up every real estate agent, mortgage broker, title company, and developer to fight it tooth and nail. And they do this with impunity, amidst the din of hammers knocking and Rush Limbaugh playing in the background. I can't help but think of that often quoted ditty by Phillip Johnson “Freud is dead, Marx is dead, and Darwin is not feeling very well.” In reality, Marx is not dead. He actually enjoys widespread support in America. Sure, the Republicans have limply suggested modifying this or that program. I can give you examples of efforts by Democrats as well. But this is all political theatre. These subsidies are popular among the voting middle and upper classes and they weren't going anywhere until the whole thing collapsed. Anyway, enjoy your thread and all the contributors. Back to lurking. Barrett
This might not be the best place to post this but on last Monday's episode of the Closer the theme was that Darwin's evolutionary thought leads to nilhism as young men try to reenact the Columbine shooting but plan on greater success. The episode claims that Columbine was a failure and that the shooting in the school was only after the grand plan had failed. I have no idea if this was true but it made good tv drama. jerry

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