Say Anything Blog

Tim seems to be a nice enough guy, but he’s not the sharpest cookie in the shed.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

Tim Mathern’s worst fear is having to earn a living in the private sector.
Hoeven shares Tim’s nightmare, along with most residents of North Dakota.

Honestly, what business of Tim Mathern’s is it if someone wants to put their money into “privatization schemes”?

That’s the biggest problem so-called “liberals” have - minding their own gawddamn business.

“We can’t risk letting our state investments go the way of our financial markets,”

That’s just rich. The financial market consistently returns. Not every time, but on the whole the market shows a positive gain. Can the same be said of “state investments”?

The “reality based community” inverts reality. A government failure set up by Democrats somehow becomes a free market failure set up by the “deregulating” Republicans.

Ok, so a huge assumption is made among conservative circles that the Community Reinvestment Act is the only cause of this problem and government backing of Freddie and Fannie is at the root of this issue, but it is only part of the issue… and not the main problem.  Trying not to put words into Mathern’s mouth, I am assuming by ‘privatization’ he means deregulation.  Before I get into the details, keep the following in mind:

1.  A very short time ago mortgage companies were doing their very best to loan as much out as they possibly could.  I qualified for about double of what I could afford as a middle class normal guy.  I am sure that I was not alone.

2.  Many people are walking away from this disaster with bucket loads of cash at the expense of the non-privatized bailout.

3.  Many of the mortgages in question were NOT a loan included in the CRA requirements.  I think that history will show that it will be a fairly small percentage of the bad loans.

4.  At NO point in the 2000-2006 complete control of house, senate and presidency was this changed.  Soo.... that definitely says something to accountability.

5.  McCain is tooting up a storm about regulation now.  Does that mean that the GOP has changed its tune and your apparent stance against privatization, or deregulation, is certainly in conflict with what McCain has been hemorrhoiding from his pie hole.

Details, here we go.  The Community Reinvestment Act (originally signed in the Carter years)was expanded in 1995 to encourage lower income and less fortunate people to have a house.  This is a program whose intent was to better the lives of those who had a tough time getting credit.  Namely the poor.  Evil liberals.... trying to help people out.

Then, in 1999 the Gramm-Leach-Bliley Act was signed into law (yes, by Bill Clinton) and this is where the real problems started.  At the second this bill was signed we moved from trying to help people out to trying to help the rich people out.  This bill repealed parts of the Glass-Steagall Act and basically allowed different types of banks, insurance companies, and securities companies to merge.  This had been previously illegal since it was first passed in 1933 following a banking meltdown mid-depression.  Ironic huh?  I can only assume this bill was implemented to keep some form of REGULATION over the banks and investment firms.  Without the repeal of this bill, AIG, Lehman Brothers and several of these huge companies could not exist today in the same manner and most likely would not have gone belly up.

Then there is the Commodity Futures Modernization Act of 2000 which basically distances the mortgage originator from the asset.  Basically, it created the derivative/credit default swaps which all these banks/insurance companies/security firms started buying.  At this point, people were selling secured loans that existed on paper only with no real property behind it.  Selling bridges to no-where.

All of a sudden, its a freaken corporate free for all!  The very reason that Glass-Steagal Act was implemented in the first place had been undermined.  Oh, there were alot in profits being made by everyone.  Home prices were being inflated which means they could lend more.  Different exotic loan instruments were showing up every year.  I even remember Amway style pyramid schemes based on ARMs and Interest Only loans.  I could have taken out far more than I could pay.  I heard of shady lenders who might be able to get a guy the loan he might not be able to afford.  This was no matter of helping out the little guy… it was a complete free for all.  Like a visit to the Golden Corrall after Lent.

Well, the economy started sucking hind tit and bam - people start foreclosing and all of these air backed mortgages are not so valuable.  Suddenly, we have companies like AIG (who should have never been in the business anyways) that are too big to fail.  Should any company be too big to fail? So, corporate welfare steps in and ALL of a sudden, non-privatization isn’t so bad.  They made stupid ass choices and should really be out of business, but we are sending them a paycheck anyways.  Whats the incentive to make the right decisions.  We are still in the midst of a free for all, except its a corporate free for all.

Meanwhile, small to medium sized businessess suffer.  Folks with mortgages suffer.  We all suffer.  Don’t worry though… Wal-Mart will survive.  Also know that there is some CEO pulling his brand new Jag into his mansion somewhere with his heart going out to the mass of people he foreclosed on that day.

To say that the reason the economy tanked is because Freddie and Fannie having government backing is shortsighted and incomplete.  Its an insult to the American people to only blame that, probably an insult to FDR who created Fannie Mae, to the 1970 government who chartered the creation of Freddie Mac and even an insult to the 2000-2006 Bush admin/congress/senate who allowed it to exist in the manner you suggest.

Rant is over, but to pull it back to Tim Mathern.  And exactly why is it a bad thing to keep State pensions?  To me, state pensions are a draw to the positions and a reason why many people stay in the jobs.  That is a benefit that is not found much these days. Why is it a bad thing to ask for accountability for our investments from Gov. Hoeven?  I think Tim Mathern hit it dead on.

Finally, you mention that there has only been a $27 fluctuation in the Dow since the “beginning of this fiasco.” Please define “beginning of this fiasco.” If you mean since GW took office, you are pretty close.  Dow was 10,587.60 on the day GW took office.  It ended at 10831.07 today.  By conventional wisdom, it should have doubled by now.  In the past year, we have seen about a 25% correction.

Tim Mathern fears having to live in the private sector?  One could say that John Hoeven never really lived in the private sector, but inherited it.  zwing.

Despite my going ons in the comment, I really do like the reads here.

DakBen:

Thanks for the comments.  I don’t have time to go into them all.

Certainly the “free money” of Fannie Mae and Freddie led to the bubble.  I would say that the rules mandated by CRA were still the enabling piece of the puzzle.

I mean if you had to make loans to minorities that were dubious and were able to sell the risk to someone else, why wouldn’t you do the same to non minorities as well.

AND if you’re following the rules and getting rich at the same time what’s wrong with that?

But when it comes down to it, Fannie and Freddie are creations of the government, not private enterprise.  The problem here is a failure of government, not of the private sector nor simply greed.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

"I would say that the rules mandated by CRA were still the enabling piece of the puzzle. “

True, but pre-1999 CRA would not have allowed this to happen.  The perversion of the CRA with the bills mentioned above created the corporate feeding frenzy.  I am all for people getting rich, but the moment companies become too big to fail, they have at a minimum a moral responsibility to make prudent choices for our nation and not just the stockholders.  I would imagine that they have a legal responsibility to do so also, and if they do not, then they should.  When they get that big, they start removing themselves from what I see as a normal competitive marketplace and enter into the arena of National Security.

Since the nature of corporations is generally to appease stock holders, and not preserve America or worry about morals, I do not thing we can rely on companies uber big to self-regulate.  The bills above un-tied nasty regulation intelligently put in place during the depression.  It perverted the intent of the CRA from helping the less fortunate to helping the already fortunate.