Duking It Out over the Debate and the Bailout
All in all it was a rather remarkable achievement for House Republicans who were in danger Thursday of being steamrolled by the White House and Democrats. That would have occurred — if Nancy Pelosi were willing to pass the measure purely with Democratic votes. But she was looking for cover, and therefore, was forced to listen to and actually negotiate with her Republican opponents in the House.
The votes will be rounded up, but barring another surprise the bill will pass and a feared Monday market meltdown may be avoided. The bill is hugely unpopular, but this is a rare instance in which politicians had no choice but to disregard the howls of their base and the voices urging intransigence and obstruction. In short, having eliminated all other possibilities, they were forced to be responsible.
Now the race to grab credit for the bipartisan bill is clearly on.The Democrats will claim that they prevailed despite the “disruptive” involvement of John McCain who rushed back to the Capitol and briefly suspended his campaign last week. The problem with that: it doesn’t mesh with the facts. It was Harry Reid and Hank Paulson who had summoned McCain to Washington. And it was McCain who surmised that the House GOP was definitely not on board — a requirement which Pelosi herself had set for a successful deal. McCain will also argue that the principles he laid down last week — greater transparency and oversight and limits on executive compensation — were in fact achieved.
Barack Obama played no role, it appears, in the deal making. But he may well benefit in the short and long term from the refocusing of the race on our economic woes. Certainly his standing in the polls has improved since the crisis began. The counterargument — that the Democrats and he specifically contributed to the crisis by averting their eyes and indeed blocking needed reforms of Fannie Mae and Freddie Mac – has not yet penetrated to average voters.
So in the week ahead the fight will be over who won and who lost in the bailout bill, whether all incumbents are in mortal danger of a voter backlash and whether in the wake of a deal both the markets and the presidential race will return to “normal.” The Obama camp hopes the race has permanently been altered, with him in the lead. The McCain camp is betting this is the beginning of the final sprint, one in which the public is going to learn a whole lot more about Obama’s past connections and present liberal views.
And then on Thursday Sarah Palin and Joe Biden will face off. Conservatives are nervous — will this be a disaster? But Democrats have much to fear from the gaffe-prolific Biden.
Based on the course of events to date, the crowd which assumes we now have certainty in the race is, frankly, daft. If we have learned anything in this contest it is that just when everything is clear — it isn’t.
To “refocus the race on our economic woes” can greatly aid John McCain’s campaign.
One of McCain’s strengths has been fiscal restraint (as compared to others on Capitol Hill); in the debate he mentioned the idea of a spending freeze as one response to this economic situation (i.e. he actually answered the question…).
In contrast, Zerobama proposed even more spending, when asked in the debate how he would alter his overall program in light of the economic situation we are in.
Should McCain’s camp hammer home this stark contrast over the next few weeks, it should benefit McCain – and not Mister-Socialist-Agenda – in November.
I heard Obama trying to claim that McCain should get NO credit for this deal while he had been on the phone for two weeks trying to get it done and to put in protections for people.
This crisis wasn’t known two weeks ago!
Tool.
How well does Barack Obama manage a budget? Does he know how to get anything done? Wasn’t he given a LOT of MONEY to improve EDUCATION in Chicago? What was the outcome? Where did the money go?
Gee, I think the Republicans could have a field day with this one!
McCain is letting Obama trump him on taxes. The reduction in capital gains tax and the Bush tax cuts actually brought in more money to the government in revenue.
It doesn’t just help the rich, it helps all of us. Start hitting him with facts.
Also, the Dems are largely responsible for the Fanny / Freddy debacle and if it were republicans there would be criminal investigations.
I don’t know what debate CNN voters were watching but this isn’t American Idol with he who texts the most wins
I liked Obama trying to raise his hand to speak. Looked kindergarten-ish to me.
Most the Dems watched CNN (after all they were text messaged to do so) so the numbers were higher. Fox News had McCain winning on their text votes 84% to 14% for Obama. Fox is a more unbiased voting in my opinion.
I’m a Democrat for MCCAIN!! gogo John and Sarah!
The New York Times amazingly put out this September 11, 2003 article about Bush working to overhaul Fannie Mae & Freddie Mac because the housing programs needed oversight and regulating. In this article, it even quotes that idiot hypocrite, Barney Frank, as saying there was nothing wrong with Fannie/Freddie: ”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
Below this article is the Congressional Record for May 25, 2006 which recorded McCain’s warning of a coming Fannie/Freddie financial crisis: “For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.
I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.”
http://sweetness-light.com/archive/bush-mccain-tried-to-reform-housing-finance
This is a matter of judgment, character and leadership.
The link of ACORN & Obama
http://article.nationalreview.com/?q=ZTcxMDhjOTc2MGI0OTE1Y2QyMDYwYWE5MGY3OWJmY2I=
You should check out a quick interview I did with Obama and McCain.
http://janelake.blogspot.com/
the 2 existed – and no proof of risk was given.
Provide some proof , not just talking points!
but 888 does not know how to do that!
888:
That’s a really interesting article. It just shows that you never know what’s going to happen or how the media (of both sides) will spin the issues to make their point. And also that we are quick to forget the past good things but willingly bring up the bad in the past.
Jennifer:
On To the Point today you suggested that the voters who were pressuring Congress to vote against the bailout were ill informed. Does that include the Director of the Congressional Budget Office who, according to the Washington Post, said it might makes things worse? http://www.washingtonpost.com/wp-dyn/content/article/2008/09/24/AR2008092402799.html
The Government-Created Subprime Mortgage Meltdown
by Thomas J. DiLorenzo
The thousands of mortgage defaults and foreclosures in the “subprime” housing market (i.e., mortgage holders with poor credit ratings) is the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers. The policy in question is the 1977 Community Reinvestment Act (CRA), which compels banks to make loans to low-income borrowers and in what the supporters of the Act call “communities of color” that they might not otherwise make based on purely economic criteria.
The original lobbyists for the CRA were the hardcore leftists who supported the Carter administration and were often rewarded for their support with government grants and programs like the CRA that they benefited from. These included various “neighborhood organizations,” as they like to call themselves, such as “ACORN” (Association of Community Organizations for Reform Now). These organizations claim that over $1 trillion in CRA loans have been made, although no one seems to know the magnitude with much certainty. A U.S. Senate Banking Committee staffer told me about ten years ago that at least $100 billion in such loans had been made in the first twenty years of the Act.
So-called “community groups” like ACORN benefit themselves from the CRA through a process that sounds like legalized extortion. The CRA is enforced by four federal government bureaucracies: the Fed, the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation. The law is set up so that any bank merger, branch expansion, or new branch creation can be postponed or prohibited by any of these four bureaucracies if a CRA “protest” is issued by a “community group.” This can cost banks great sums of money, and the “community groups” understand this perfectly well. It is their leverage. They use this leverage to get the banks to give them millions of dollars as well as promising to make a certain amount of bad loans in their communities.
A man named Bruce Marks became quite notorious during the last decade for pressuring banks to earmark literally billions of dollars to his organization, the “Neighborhood Assistance Corporation of America.” He once boasted to the New York Times that he had “won” loan commitments totaling $3.8 billion from Bank of America, First Union Corporation, and the Fleet Financial Group. And that is just one “community group” operating in one city – Boston.
Banks have been placed in a Catch 22 situation by the CRA: If they comply, they know they will have to suffer from more loan defaults. If they don’t comply, they face financial penalties and, worse yet, their business plans for mergers, branch expansions, etc. can be blocked by CRA protesters, which can cost a large corporation like Bank of America billions of dollars. Like most businesses, they have largely buckled under and have surrendered to their bureaucratic masters.
Consequently, banks in every community in America have been forced to hold a portfolio of bad loans, euphemistically referred to as “subprime” loans. In order to compensate themselves for the added risk of extending these loans, many lenders have increased the lending fees associated with mortgage loans. This is simply an indirect way of doing what banks always do – and what they must do to remain solvent: charging effectively higher rates of interest on riskier loans.
But this is discriminatory!, complained the “community organizations.” Thus, if one browses the ACORN web site, one can read of their boasts of having “predatory lending laws” passed in numerous states which outlaw such fees, prohibiting banks from protecting themselves from the added risk involved in making forced loans to “subprime” borrowers.
These are price control laws, and price controls always cause shortages. Normally, banks would respond to such laws by extending fewer riskier loans. But in this case the banks are forced to continue making the marginal loans by their bureaucratic masters at the Fed and the other three federal bureaucracies mentioned above. So-called predatory lending laws therefore force the banks to “eat” the losses. This is undoubtedly a contributing factor to the bankruptcy of dozens of mortgage lenders over the past year.
Then of course there is the issue of the Fed’s monetary policy having created the housing bubble, characterized by a spectacular escalation of real estate values in every American city over the past decade or so. This created a further problem for the financial institutions that are victimized by the CRA. They are forced to make a certain amount of bad loans, but because of the Fed-created explosion in housing prices, many thousands of subprime borrowers no longer qualified, by a long stretch, for conventional mortgages based on their incomes.
The only way these borrowers could qualify for their mortgage loans (even ignoring their bad credit ratings) was to take out adjustable rate mortgages, some of which had astonishingly low first-year rates in the 3 percent range, and sometimes lower. This is what has largely fueled the subprime mortgage meltdown – the inability of thousands of subprime borrowers to afford their mortgages now that their rates have adjusted upward. Thus, the combination of the Fed’s enforcement of the CRA (with the help of political pressure groups like ACORN) and its post 9/11 monetary policy in general are the reasons for the bursting real estate bubble and the “subprime” mortgage meltdown.
Don’t expect to read about this in the “mainstream media,” however, which generally views groups like ACORN as heroic champions of the poor, laws like the CRA as anti-discrimination laws, and places all of the blame for the subprime mortgage meltdown on greedy capitalists, especially mortgage brokers. Encouraged by such reporting, the odious Senator Charles Schumer of New York has promised federal legislation that will reign in these miscreants, while the Bush administration is proposing an indirect bank bailout by having the Federal Housing Administration cover many of the bad “subprime” loans. This will create what economists call a “moral hazard” by encouraging even more bad loans to be extended in the future. Every banker in America will be glad to extend loans (at high rates of interest) to the most uncreditworthy borrowers if he thinks there is no possibility of default with the FHA effectively guaranteeing the loan.
September 6, 2007
Thomas J. DiLorenzo [send him mail] professor of economics at Loyola College in Maryland and the author of The Real Lincoln: A New Look at Abraham Lincoln, His Agenda, and an Unnecessary War, (Three Rivers Press/Random House). His latest book is Lincoln Unmasked: What You’re Not Supposed To Know about Dishonest Abe (Crown Forum/Random House).
Copyright © 2007 LewRockwell.com
Banks were not forced it was their own free will
to write 125% loan to value
and noone made them write ARMs
May 2006, I wonder who ran COngress?
Could it be , let me think,
the REPUBLICANS!
Yes, nick, the Repubs held Congress, which is why the GOP image is so tarnished. But make no mistake, during the hearings, the Pubs were expressing concern, and the Dems were run-blocking for F/F. The Pubs had to be careful not to get painted as racist. You know,”denying homes to disadvantaged minorities” blah, blah, blah….
Btw, the Pubs got beaten in 2006, and nothing changed… except, spending increased even more!