Who do you blame the current financial mess on??? - Tilted Forum Project Discussion Community

ASU2003 · 11-25-2008, 10:06 PM

There are a few suspects, but I would be interested in some media company doing some real investigative journalism and finding out what or who is to blame. Or are there multiple guilty parties?

Who do you think caused it:

Flippers & speculators getting interest only loans and trying to make a quick buck off the people who want to move.

Oil companies or countries manipulating the price of oil giving companies an excuse to raise prices.

Hedge funds throwing their money around in order to increase the price of a stock to sell it later even if the news is good.

American consumers buying too much, going into debt. Or buying things made in China/Taiwan/Saudi Arabia/OPEC instead of from America/Canada/UK/Australia/NZ/Brazil

Poor Americans buying houses they couldn't afford, received ARM loans and when rates went up they couldn't afford it.

Banks lending too much money

AIG default credit swap scheme

Mark to market accounting (Too much regulation) - http://www.forbes.com/home/2008/09/2...9gingrich.html

Expose hedge fund and private investors practices (Not enough regulation)

Globalization hasn't worked or won't work. Third world countries won't buy from the US/Canada/Europe/Australia/NZ

Eight options not on the list:

Government taxing us too much

Federal Reserve manipulating interest rates to try and get the stock market to go up.

Too many workers and not enough jobs.

Too many people on welfare/retirement/pensions not enough tax/profits to cover them and still grow a business.

Media over selling things and making them seem better than they are, and then making things seem worse than they are.

Secret organization that is trying to control the population

Free trade (That's not really fair)

Home builders built too many homes too fast and no one wanted the old homes.

Any others you can think of?

I think it was like a bunch of dominoes falling over, one thing happened then the next thing happened until we get to where we are today. But, I think one of the first things was the banks creating interest only loans for people in California and New York to be able to afford to live there. Then they were offered at other banks. Soon, people started talking about buying homes they never intended on living in, just to watch them go up in price. The Federal Reserve tried to manipulate interest rates to get rid of the speculators in the housing market that was creating an artificial demand. But today, all of those items played a role in our current economic situation.

Borla · 11-26-2008, 11:33 AM

Primarily on American consumers. The sense of entitlement that my generation and younger have about material things is mostly to blame. When I moved out, I expected to maintain and improve on my living standards, which got me into trouble with debt eventually. I didn't take into account the fact that both of my parents had successful careers and had worked hard to get a nice house, nice/new cars, be able to go out to nice restaurants, buy nice clothes, etc.

I just think that nowadays young adults aren't willing to build their life from the ground up, so they borrow and live over their heads instead, usually never catching up. I think that mentality has been one of the biggest unspoken factors of the current crisis we see. Young families are getting foreclosed on because they were more worried about having things and having people see the things they have, instead of whether they can pay for it or it is a smart decision to get it. I guess it just irritates me because I started down that road, saw where it was going, and got myself out of it without bankruptcy, without getting sent to collection, without getting bailed out, but by simply STOPPING MY SPENDING on things I didn't need until I could start affording to pay cash for those things and by working my freaking tail off to improve my career and earn more.

Selfish people feeling entitled to a standard of living above what they could afford or were willing to work for is primarily the issue, the secondary issue is lenders willing to give loans and credit to people who didn't deserve it. Now they are strapped, people are strapped to make their payments, so the money they are spending is going towards items they already possess, not new things.

Slims · 11-26-2008, 11:44 AM

It's our own fault. Regardless of what we *want* we cannot afford to keep spending the way we are without serious negative consequences. I live a fairly simple lifestyle. I bought a renovated military barracks because though it was ugly, I could afford the payments. Why are we not blaming the people who purchase 200,000 dollar homes with a 30,000 dollar income? How can you be that stupid? Granted, the banks should have known better than to take the note, but the first people in line for blame are those that signed along the dotted line and promised they were able to make the payments.

And now this bailout has become absolutely ridiculous. We need to cycle through a recession and credit crunch without artificial and unsustainable support from the government. It will force everyone to start living within their means, wether they want to or not. Of course, we also need to force the government to not overspend.

Oh, and I am crying crocodile tears for people who are *stuck* because they are putting their money towards paying their contractual obligations, and I have even less sympathy for those who duck those obligations altogether simply because their house has declined in value. I can't express in words how much I resent MY tax dollars going to help bail people and companies out of this mess because they were irresponsible and we dont' have the spine to let them reap what they have sewn. I feel like those who have not been fiscally irresponsible are being penalized.

Cynthetiq · 11-26-2008, 11:57 AM

People want to live particular lifestyles without the hard work and effort it takes to gain those lifestyles. This is not just limited to individuals but to encomapasses as far and wide as companies, whole industries, and governments.

Vigilante · 11-26-2008, 12:03 PM

We move money instead of goods. That's the problem IMO. I think we'd be alot better off acting less like a bank and more like a factory.

Amaras · 11-26-2008, 02:25 PM

I blame it on human greed, lack of realism, and shortsightedness.
Clinton's admin. screwed up when they wanted everyone to have access to credit to purchase
a house.
Quite frankly, not everyone should or can have a house. Take me, for instance.
There is no way I could pay off a $200, 000 with the way I live now.
I'll probably die in an apartment.

Tully Mars · 11-26-2008, 08:08 PM

I was going to take the poll but notice there was no "all of the above and them some" option.

jewels · 11-27-2008, 04:05 AM

I agree with the posts above about consumerism, but there's something that brought us all to this point. We have to take responsibility for the choices we've made, but what is it that turned us from "free love" and communes to gotta-have-a-Porsche and Dolce & Gabbana?

The banks aren't at fault because they simply responded to demand.

I blame the media, including television marketing, popular TV shows -- the images we've been surrounded by that have slowly evolved from that anti-materialism mindset in the 60s/70s to total materialism twenty years later. If there's planned obsolescence, there's definitely planned materialism. It's a conspiracy, I tell ya

Tully Mars · 11-27-2008, 04:34 AM

Quote:

Originally Posted by jewels

The banks aren't at fault because they simply responded to demand.

I think the banks own some responsibility. They were loaning money to literally anyone and everyone. I know, I know the damn Clinton Admin. forced banks to give home loans people who didn't really qualify. I haven't looked into that claim that much, not sure I buy it. What I do know is credit cards were being handed out like social security cards. If you we're breathing you could probably get one. Hell, I had 10-15 offers showing up in my mail each week. And seriously who hasn't seen a news story where the family dog was issued a Master Card?

Not only did the banks issue cards to just about anyone they made credit limits on those cards way beyond what I would consider responsible. I had three cards at one time with credits limits that would have allowed me to purchase a house on them if I wanted. I did in fact use one to buy my daughter a new Toyota on one once. I paid the bill off when it came but it was nice to get the air miles. I was watching Suzy Orman the other night and one of her call in questions came from a lady who said she had over 100K on her credit cards. She was having trouble making the min. payment (really, no shit?) and wanted to know what to do. Suzy basically told her to file bankruptcy, something I rarely hear her advise.

Basically unless your name is Bill Gates you should a credit card with a limit of about 10% your annual income and you should keep little to no balance. Use it and pay it off each month. If an emergency arises and you need a new washer, dry, stove etc... use it. If you can't pay it off right away do so as soon as you can. Pay it off over 6-12 months, but pay it off asap.

dc_dux · 11-27-2008, 06:23 AM

IMO, banking deregulation is the prime suspect which opened the floodgates that led to the greed and irresponsible behavior in housing finance lending, investment practices and spending habits at both the corporate and personal levels.

Yes, I am suggesting that sometimes we benefit from having the government protect us from ourselves.

jewels · 11-27-2008, 07:08 AM

Quote:

Originally Posted by Tully Mars

I think the banks own some responsibility. They were loaning money to literally anyone and everyone...
Not only did the banks issue cards to just about anyone they made credit limits on those cards way beyond what I would consider responsible.

I agree, but it all comes down to consumer choices. We (hey I'm guilty too!) should know our own limits. Just 'cause they offer it doesn't mean we have to buy into it.

I know many who are in dire situations now who still feel they have to make sure their kids have what they want for Christmas. That ain't no bank's fault.

-----Added 27/11/2008 at 10 : 08 : 48-----

Quote:

Originally Posted by dc_dux

IMO, banking deregulation is the prime suspect which opened the floodgates that led to the greed and irresponsible behavior in housing finance lending, investment practices and spending habits at both the corporate and personal levels.

Yes, I am suggesting that sometimes we benefit from having the government protect us from ourselves.

True. We need educating.

Tully Mars · 11-27-2008, 07:25 AM

Quote:

Originally Posted by jewels

I agree, but it all comes down to consumer choices. We (hey I'm guilty too!) should know our own limits. Just 'cause they offer it doesn't mean we have to buy into it.

I know many who are in dire situations now who still feel they have to make sure their kids have what they want for Christmas. That ain't no bank's fault.

True. IMO, people in general think the NEED way more then they actually need. If epople sat down and did an honest assessment of actual needs they'd likely find they could cut a surprising amount of their budget.

And yes that is not the banks fault. People with mac and cheese incomes have been living steak and lobster lives for way too long. And for way too long banks have been letting them use their homes as credit cards to continue doing so.

I've done it too. I spent a ton of money in my 20's on crap I didn't need and really didn't start living more sensibly until I was nearly 30. A lot of that crap went on a card and instead of paying 2K for that big screen TV I didn't need I ended up paying over 3K for once I paid the interest. My old TV was working fine, but hey I bought the TV on sale. I can assure you any money I saved on the sale price was wasted in interest 10 times over.

dc_dux · 11-27-2008, 07:28 AM

Quote:

Originally Posted by jewels

I agree, but it all comes down to consumer choices. We (hey I'm guilty too!) should know our own limits. Just 'cause they offer it doesn't mean we have to buy into it.

I know many who are in dire situations now who still feel they have to make sure their kids have what they want for Christmas. That ain't no bank's fault.

-----Added 27/11/2008 at 10 : 08 : 48-----

True. We need educating.

Yep....Education is the best remedy and I would suggest that laws against predatory or deceptive lending practices or laws that provide credit card consumers bill of rights can contribute to that education.

roachboy · 11-27-2008, 07:31 AM

it seems to me that the enabling condition behind most of this is neoliberalism, the assumption that markets magically regulate themselves and that the state introduces irrationality, that growth is a steady state, that people suddenly become rational actors when money's involved and that in the aggregate the actions of rational actors armed with cash money and credit extensions (think hair weave) function to serve the greater good. this is the ideology that surfaced across the thatcher-reagan period and which has formed the logical center of globalizing capitalism.

it has been the rationale behind deregulation in all its various forms, from taking the breaks off the banking and traffic in debt derivatives to the imf/world bank various experiments in "structural adjustment" to the doctrine of "free trade" that has been used to justify it.

if you assume that people are not stupid, particularly not people who find themselves in positions of power (which is to some extent arbitrary, as assumptions go) but they do things that make no sense, what that generally indicates is that the framework they use to make sense of the world and to think through actions/agency in the world are fucked up. that's why neoliberalism is important to think about in this context. without it, i don't think the elements that we can list as being involved with the present massive trainwreck would be in place, and if they were, they'd not have the same impact.

from there, you can fit together any number of trajectories that explain one or another aspect of the present trainwreck. in the most local sense, folk seem to find in the decision to let lehmann brothers tank a turning point, more than the decision to bail out a.i.g.--but the moment that framed the a.i.g. action seems to me the first to indicate that this was actually a crisis of the global financial order and not only the american.

you also have to factor in the political weakness of the bush administration in all this. but that's another story.

Amaras · 11-27-2008, 08:03 AM

Lest we forget, there is also a cycle in economic theory that predicts eventual downturns. Growth seems
to occur until rampant spending and credit exceeds true wealth, and factors like the Bush admin.'s
wild spending and Clinton's credit free for all make it worse.
In Canada, we did not change our banking laws in accordance with yours (for once, thank god).
Also, during the late 90's early 00's we paid down some of the national debt with the surpluses of the
time. Our negative effects are primarily due to the fact that your economy is so vastly important to our
survival that as the old saying goes "When the US sneezes, Canada catches a cold."

ASU2003 · 12-01-2008, 12:24 AM

I'm still thinking that the manipulation of the housing market was a big factor in it. People had a bunch of money they wanted to have grow at 8%-11% and housing was the way to do it (until oil came along).

I read this on Slashdot a few minutes ago and thought that it describes my feelings on this pretty well.

Quote:

I live in Manatee County, Floriduh, one of the places Real Estate Madness hit hardest and that has, hence, been hit hardest by its end.

I do not recall seeing a whole lot of poor and/or minority taxpayers pulling mortgage frauds in order to buy little houses for themselves in not-great neighborhoods like East Bradenton.

I do, however, recall seeing lots and lots and lots of speculators and slumlords, the vast majority of them good white Republicans, bidding up the prices on little working-class houses to the point where none of the people who actually do the Real Work (trash collection, policing, teaching, retail sales, etc.) could possibly buy them. And oh weren't those white Republicans just so proud of the Free Market System and big on boasting about how much money they were making and on laughing at the suckers who actually worked at jobs like teaching or writing for newspapers or cleaning the streets or doing carpentry instead of being Investors, as if Investors were the highest possible form of life and should be bowed down to by all others.

'Course then a local mortgage company called Brasota went broke because it was essentially a ponzi scheme -- and shockingly, it was not run by poor and/or minority working liberals but primarily by (I know this is hard to believe) Rich White Republicans, hardly any of whom lived in the neighborhoods where they loaned mucho bucks to "investors" who didn't live in them, either.

And some local banks have failed, and a lot of local businesses, and now all the Rich White Republicans who ran their ponzi schemes and created their silly tulip-bulb bubble, except with houses, are running around blaming Democrats and liberals who thought that, just maybe, it might be a good idea to stop Rich White Republicans from discriminating against poor and/or minority workers when it came to making home loans.

The CRA (Community Reinvestment Act) that is being blamed by the Rich White Republicans for the collapse of their house of cards was all about ending discrimination in mortgages. Those Free Market Rich White Republicans had long had a bad habit of happily approving loans for white people in white neighborhoods while denying loans to black people in black neighborhoods even if the black people happened to have more stable jobs and wanted to borrow less than their white equivalents.

Listen, Rich White Republicans (and libertarians/Somalians and the rest of your crowd), if you want to see who created the current economic crisis, get a mirror and look in it. Don't keep trying to blame your problems on the blacks or the Jews or the liberals or whatever other group you're in the mood to victimize this week. It wasn't a "homosexual agenda" that created the obviously-insane (and unregulated) derivatives market, and it wasn't pro-choice agitators who ran the rating companies that assigned silly-high values to "bundled" mortgages.

Y'all ran our country for a good while, and basically you screwed it up big-time.

Quit whining. You had your chance. A lot of you got rich, and many of you will stay that way.

But don't try to pass your failures off on others. Man up, and face the fact that most of you got most of your money from some sort of scam, and that you have no right to complain now that you've been caught out.

Cynthetiq · 12-01-2008, 07:28 AM

Quote:

Originally Posted by ASU2003

I'm still thinking that the manipulation of the housing market was a big factor in it. People had a bunch of money they wanted to have grow at 8%-11% and housing was the way to do it (until oil came along).

I read this on Slashdot a few minutes ago and thought that it describes my feelings on this pretty well.

really? you can tell who is buying or bought a property's political leanings and affiliations???? or is the implication that democrats don't invest in property?

Tully Mars · 12-01-2008, 08:37 AM

Quote:

Originally Posted by Cynthetiq

really? you can tell who is buying or bought a property's political leanings and affiliations???? or is the implication that democrats don't invest in property?

Not only that but apparently only white GOP voters engage in property investment.

tisonlyi · 12-04-2008, 07:50 AM

The entire economic model.

Houses are not investments.
Money as debt, rather than value.
Fantasyland faith in efficient markets.
The systematic dismantling and shipping overseas of the value-creating elements of an economy. (Hint: Industry/Manufacturing)
Finance as end to itself.
Tainted economic figures. (Inflation figures that measure nothing of tangible worth, for example)
Corrupt politics, based on a fantasy.
Redistribution of wealth in the wrong direction.
Destruction of value on the altar of consumption.
Exponential growth rates being acceptable, necessary and encouraged.

All of the above and more.
-----Added 4/12/2008 at 10 : 59 : 39-----
As RB says, this Chicago-esque wet dream exploded in the Reagan/Thatcher era (but it started with Chile, a decade earlier and then New Zealand took to the doctrine with gusto), but in fairness, other than wholesale surrender of power by financial and industrial powers and the re-basing/revolutionising of all the industrialised nations, what the hell else but incredible indebtedness could possibly have driven their capitalist world out of the 70's slump/stagnation?

I think that was pretty much the one option left/available and it was taken to with the relish and zeal of fanatics - which both Reagan and Thatcher most certainly were.

As of now, I don't think there are any options left. At least not in the west.

(but hey! Just as Marx said; You must exhaust Capitalism before Communism can take hold.)

Lasereth · 12-04-2008, 08:04 AM

A big one that sticks out to me is the banks lending too much. When I bought my house this past March I went in and they told me I was approved for a $300,000 house. In reality, I can afford a $150k house at max. I told the lender I wanted to keep the loan under $150k and she argued with me that I could afford $280k easily. It's absolutely ridiculous that we have bankers arguing with consumers that they can afford more than they really can. All the banks do is take your fixed monthly bills and subtract it from your monthly income and then say the rest can be spent on big gigantic house. They don't take into account FOOD, miscellaneous bills, entertainment, stuff you need around the house, gas, car maintenance, varying bills, etc.

I checked that and oil companies.

raeanna74 · 12-04-2008, 07:57 PM

I primarily view the predatory lenders as the instigators of the economy crises. But there are a host of other contributors. Not the least of which is the media who were screaming "Housing Crises" last year. There was NO Housing crises in Middle America until the media started scaring away home buyers. The only "housing crises" was in California, Florida, and the East Coast. The biggest reason being, over-pricing, going on by Appraisers who worked for lending companies. Appraisals were being made to more than double the actual bulding cost of the homes just so people would 'qualify' for a large enough loan (again predatory lending)...
I could name dozens more, right down to all Americans forgetting the lessons of the depression. Not building safety nets, not living within their means, and not planning for the future.
Stocks did not start dropping until the Media 'Prophesied' a Recession. If the media had SHUT the HELL UP, we probably would have pulled through the 'housing crises' without shut and all out shutdown of our economy.
I expect in another 3 generations we'll have another recession. I just hope it's nothing worse.

Cynthetiq · 12-04-2008, 08:10 PM

Quote:

Originally Posted by raeanna74

I primarily view the predatory lenders as the instigators of the economy crises. But there are a host of other contributors. Not the least of which is the media who were screaming "Housing Crises" last year. There was NO Housing crises in Middle America until the media started scaring away home buyers. The only "housing crises" was in California, Florida, and the East Coast. The biggest reason being, over-pricing, going on by Appraisers who worked for lending companies. Appraisals were being made to more than double the actual bulding cost of the homes just so people would 'qualify' for a large enough loan (again predatory lending)...
I could name dozens more, right down to all Americans forgetting the lessons of the depression. Not building safety nets, not living within their means, and not planning for the future.
Stocks did not start dropping until the Media 'Prophesied' a Recession. If the media had SHUT the HELL UP, we probably would have pulled through the 'housing crises' without shut and all out shutdown of our economy.
I expect in another 3 generations we'll have another recession. I just hope it's nothing worse.

Detriot was deteriorating last year as peoples mortgages reset to ARMs. That wasn't media hype it was the reality of what lenders were doing 3-5-7 years prior.

People started to default on those payments because suddenly their monthly payments tripled. The housing market was cooling, and there were less buyers.

I was looking to buy property in Detroit and was seeing REO homes for less than $10,000.

Willravel · 12-04-2008, 08:43 PM

I blame a combination of things.

First, I have to blame the bizarre economic pseudoscience that became popular around the time I was born. Deregulation is not a magic wand, it's something that should only happen when the market can sustain itself. Only an idiot would think that the banking and lending industries could function without any regulation.

I suppose next I have to blame the education system for buying in to this nonsense. Why is it so difficult to teach economics without praying at the altar of Ayn Rand or Mises?

I don't know if I'd say greed is to blame, but perhaps a system that glorifies greed overtly should be blamed. Accumulation of wealth should be tempered with ethics and an understanding that our species hasn't survived for hundreds of thousands of years by competing with ourselves but by cooperating. Competition means an adversarial system, and in an adversarial system, someone loses.

I blame Congress for not doing their damned jobs, again. They were so scared about the fragile housing bubble that they didn't do their job. And they should be fired.

Also these:

Quote:

Originally Posted by tisonlyi

The entire economic model.

Houses are not investments.
Money as debt, rather than value.
Fantasyland faith in efficient markets.
The systematic dismantling and shipping overseas of the value-creating elements of an economy. (Hint: Industry/Manufacturing)
Finance as end to itself.
Tainted economic figures. (Inflation figures that measure nothing of tangible worth, for example)
Corrupt politics, based on a fantasy.
Redistribution of wealth in the wrong direction.
Destruction of value on the altar of consumption.
Exponential growth rates being acceptable, necessary and encouraged.

QFT. Damn well said.

Flow · 12-10-2008, 04:07 PM

Quote:

Originally Posted by raeanna74

The only "housing crises" was in California, Florida, and the East Coast. The biggest reason being, over-pricing, going on by Appraisers who worked for lending companies. Appraisals were being made to more than double the actual building cost of the homes just so people would 'qualify' for a large enough loan (again predatory lending)...
I could name dozens more, right down to all Americans forgetting the lessons of the depression. Not building safety nets, not living within their means, and not planning for the future.

Unbelievable that there aren't reasonable guidelines for appraisers. They control so much of our economy...
I know I probably wouldn't have had to run my credit up for groceries and car repairs if rent prices weren't so disproportionately high

NoSoup · 12-10-2008, 04:56 PM

As in insider, here's my opinion on the appraisals - there is a common misconception they often inflated them. However, keep in mind that their job is to determine "market value" - basically, the price that someone would buy it for. Remember when houses were increasing hundreds of percent a year? It wasn't because appraisers were typing in some artificial number on an arbitrary report that noone ever sees, it's because consumers were actually paying those prices, causing the true market value to be increased exponentially....

Just food for thought.

Cynthetiq · 12-10-2008, 05:01 PM

Quote:

Originally Posted by NoSoup

As in insider, here's my opinion on the appraisals - there is a common misconception they often inflated them. However, keep in mind that their job is to determine "market value" - basically, the price that someone would buy it for. Remember when houses were increasing hundreds of percent a year? It wasn't because appraisers were typing in some artificial number on an arbitrary report that noone ever sees, it's because consumers were actually paying those prices, causing the true market value to be increased exponentially....

Just food for thought.

that's correct!

I looked at lots of comparable properties to determine if what I was about to make an offer on was "fair market" or "bargain".

Ultimately it became smarter to follow the rule of thumb that one uses in apartment shoppingin Manhattan.... price/square foot. Once you saw that number you realized just how much you were paying for something bringing it back down to a bit more reality.

aceventura3 · 12-11-2008, 09:50 AM

I selected "Mark to Market Accounting" primarily because our current crisis is mostly physiological or self-induced. Under normal circumstances if there is a loan on an asset, and the asset declines in value it is a non-event unless there is a need for a forced sale. If the market gets flooded with forced sales, prices fall further in a frenzy of panic selling. So, given leveraged financial institutions with assets on the books that declined in value and then the need to "mark to market" affecting reserve or capital levels, prompting forced sales and then more forced sales and more forced sales, you end up with a "crisis". If some of these financial institution had an opportunity to operate normally during the normal market correction the situation would have been much more orderly.

ASU2003 · 12-13-2008, 11:48 AM

Quote:

Originally Posted by aceventura3

I selected "Mark to Market Accounting" primarily because our current crisis is mostly physiological or self-induced. Under normal circumstances if there is a loan on an asset, and the asset declines in value it is a non-event unless there is a need for a forced sale. If the market gets flooded with forced sales, prices fall further in a frenzy of panic selling. So, given leveraged financial institutions with assets on the books that declined in value and then the need to "mark to market" affecting reserve or capital levels, prompting forced sales and then more forced sales and more forced sales, you end up with a "crisis". If some of these financial institution had an opportunity to operate normally during the normal market correction the situation would have been much more orderly.

I agree with you, but I think the current thinking is that the banks have to have enough cash on hand in order to prevent the bank from failing in case of a run of people pulling out all of their savings.

They learned there lesson in the 30s, but I'm not sure that is what is happening today. The FDIC didn't insure your savings back then, so if I saw a bunch of these banks failing and people losing all of their savings, I would be pulling my money out too. Causing a real big problem.

But, they should look at the regulations. Should these banks be able to be so extended that they are forced to sell at whatever price? Would it limit their ability to make money and stimulate the economy? And how likely is a 1930s style run on the banks now that the federal government insures people's savings?

mixedsubstance · 12-18-2008, 07:34 PM

I honestly feel it's a combination of American consumers spending frivolously, Banks lending way too much, and the Bush Admin putting too much into the war. Can't just blame one group or source.

roachboy · 12-20-2008, 02:53 PM

this is a kind of long article from today's ny times that outlines the linkages between bush
s "ownership society" idea. the comportments of the administration and the present fiasco. i'll quote the whole thing because i think it's an interesting and important bit of infotainment to have here:

Quote:

White House Philosophy Stoked Mortgage Bonfire
By JO BECKER, SHERYL GAY STOLBERG and STEPHEN LABATON

“We can put light where there’s darkness, and hope where there’s despondency in this country. And part of it is working together as a nation to encourage folks to own their own home.” — President Bush, Oct. 15, 2002

This article is by Jo Becker, Sheryl Gay Stolberg and Stephen Labaton.

WASHINGTON — The global financial system was teetering on the edge of collapse when President Bush and his economics team huddled in the Roosevelt Room of the White House for a briefing that, in the words of one participant, “scared the hell out of everybody.”

It was Sept. 18. Lehman Brothers had just gone belly-up, overwhelmed by toxic mortgages. Bank of America had swallowed Merrill Lynch in a hastily arranged sale. Two days earlier, Mr. Bush had agreed to pump $85 billion into the failing insurance giant American International Group.

The president listened as Ben S. Bernanke, chairman of the Federal Reserve, laid out the latest terrifying news: The credit markets, gripped by panic, had frozen overnight, and banks were refusing to lend money.

Then his Treasury secretary, Henry M. Paulson Jr., told him that to stave off disaster, he would have to sign off on the biggest government bailout in history.

Mr. Bush, according to several people in the room, paused for a single, stunned moment to take it all in.

“How,” he wondered aloud, “did we get here?”

Eight years after arriving in Washington vowing to spread the dream of homeownership, Mr. Bush is leaving office, as he himself said recently, “faced with the prospect of a global meltdown” with roots in the housing sector he so ardently championed.

There are plenty of culprits, like lenders who peddled easy credit, consumers who took on mortgages they could not afford and Wall Street chieftains who loaded up on mortgage-backed securities without regard to the risk.

But the story of how we got here is partly one of Mr. Bush’s own making, according to a review of his tenure that included interviews with dozens of current and former administration officials.

From his earliest days in office, Mr. Bush paired his belief that Americans do best when they own their own home with his conviction that markets do best when let alone.

He pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent — and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards.

Mr. Bush did foresee the danger posed by Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants. The president spent years pushing a recalcitrant Congress to toughen regulation of the companies, but was unwilling to compromise when his former Treasury secretary wanted to cut a deal. And the regulator Mr. Bush chose to oversee them — an old prep school buddy — pronounced the companies sound even as they headed toward insolvency.

As early as 2006, top advisers to Mr. Bush dismissed warnings from people inside and outside the White House that housing prices were inflated and that a foreclosure crisis was looming. And when the economy deteriorated, Mr. Bush and his team misdiagnosed the reasons and scope of the downturn; as recently as February, for example, Mr. Bush was still calling it a “rough patch.”

The result was a series of piecemeal policy prescriptions that lagged behind the escalating crisis.

“There is no question we did not recognize the severity of the problems,” said Al Hubbard, Mr. Bush’s former chief economics adviser, who left the White House in December 2007. “Had we, we would have attacked them.”

Looking back, Keith B. Hennessey, Mr. Bush’s current chief economics adviser, says he and his colleagues did the best they could “with the information we had at the time.” But Mr. Hennessey did say he regretted that the administration did not pay more heed to the dangers of easy lending practices. And both Mr. Paulson and his predecessor, John W. Snow, say the housing push went too far.

“The Bush administration took a lot of pride that homeownership had reached historic highs,” Mr. Snow said in an interview. “But what we forgot in the process was that it has to be done in the context of people being able to afford their house. We now realize there was a high cost.”

For much of the Bush presidency, the White House was preoccupied by terrorism and war; on the economic front, its pressing concerns were cutting taxes and privatizing Social Security. The housing market was a bright spot: ever-rising home values kept the economy humming, as owners drew down on their equity to buy consumer goods and pack their children off to college.

Lawrence B. Lindsay, Mr. Bush’s first chief economics adviser, said there was little impetus to raise alarms about the proliferation of easy credit that was helping Mr. Bush meet housing goals.

“No one wanted to stop that bubble,” Mr. Lindsay said. “It would have conflicted with the president’s own policies.”

Today, millions of Americans are facing foreclosure, homeownership rates are virtually no higher than when Mr. Bush took office, Fannie and Freddie are in a government conservatorship, and the bailout cost to taxpayers could run in the trillions.

As the economy has shed jobs — 533,000 last month alone — and his party has been punished by irate voters, the weakened president has granted his Treasury secretary extraordinary leeway in managing the crisis.

Never once, Mr. Paulson said in a recent interview, has Mr. Bush overruled him. “I’ve got a boss,” he explained, who “understands that when you’re dealing with something as unprecedented and fast-moving as this we need to have a different operating style.”

Mr. Paulson and other senior advisers to Mr. Bush say the administration has responded well to the turmoil, demonstrating flexibility under difficult circumstances. “There is not any playbook,” Mr. Paulson said.

The president declined to be interviewed for this article. But in recent weeks Mr. Bush has shared his views of how the nation came to the brink of economic disaster. He cites corporate greed and market excesses fueled by a flood of foreign cash — “Wall Street got drunk,” he has said — and the policies of past administrations. He blames Congress for failing to reform Fannie and Freddie. Last week, Fox News asked Mr. Bush if he was worried about being the Herbert Hoover of the 21st century.

“No,” Mr. Bush replied. “I will be known as somebody who saw a problem and put the chips on the table to prevent the economy from collapsing.”

But in private moments, aides say, the president is looking inward. During a recent ride aboard Marine One, the presidential helicopter, Mr. Bush sounded a reflective note.

“We absolutely wanted to increase homeownership,” Tony Fratto, his deputy press secretary, recalled him saying. “But we never wanted lenders to make bad decisions.”

A Policy Gone Awry

Darrin West could not believe it. The president of the United States was standing in his living room.

It was June 17, 2002, a day Mr. West recalls as “the highlight of my life.” Mr. Bush, in Atlanta to unveil a plan to increase the number of minority homeowners by 5.5 million, was touring Park Place South, a development of starter homes in a neighborhood once marked by blight and crime.

Mr. West had patrolled there as a police officer, and now he was the proud owner of a $130,000 town house, bought with an adjustable-rate mortgage and a $20,000 government loan as his down payment — just the sort of creative public-private financing Mr. Bush was promoting.

“Part of economic security,” Mr. Bush declared that day, “is owning your own home.”

A lot has changed since then. Mr. West, beset by personal problems, left Atlanta. Unable to sell his home for what he owed, he said, he gave it back to the bank last year. Like other communities across America, Park Place South has been hit with a foreclosure crisis affecting at least 10 percent of its 232 homes, according to Masharn Wilson, a developer who led Mr. Bush’s tour.

“I just don’t think what he envisioned was actually carried out,” she said.

Park Place South is, in microcosm, the story of a well-intentioned policy gone awry. Advocating homeownership is hardly novel; the Clinton administration did it, too. For Mr. Bush, it was part of his vision of an “ownership society,” in which Americans would rely less on the government for health care, retirement and shelter. It was also good politics, a way to court black and Hispanic voters.

But for much of Mr. Bush’s tenure, government statistics show, incomes for most families remained relatively stagnant while housing prices skyrocketed. That put homeownership increasingly out of reach for first-time buyers like Mr. West.

So Mr. Bush had to, in his words, “use the mighty muscle of the federal government” to meet his goal. He proposed affordable housing tax incentives. He insisted that Fannie Mae and Freddie Mac meet ambitious new goals for low-income lending.

Concerned that down payments were a barrier, Mr. Bush persuaded Congress to spend up to $200 million a year to help first-time buyers with down payments and closing costs.

And he pushed to allow first-time buyers to qualify for federally insured mortgages with no money down. Republican Congressional leaders and some housing advocates balked, arguing that homeowners with no stake in their investments would be more prone to walk away, as Mr. West did. Many economic experts, including some in the White House, now share that view.

The president also leaned on mortgage brokers and lenders to devise their own innovations. “Corporate America,” he said, “has a responsibility to work to make America a compassionate place.”

And corporate America, eyeing a lucrative market, delivered in ways Mr. Bush might not have expected, with a proliferation of too-good-to-be-true teaser rates and interest-only loans that were sold to investors in a loosely regulated environment.

“This administration made decisions that allowed the free market to operate as a barroom brawl instead of a prize fight,” said L. William Seidman, who advised Republican presidents and led the savings and loan bailout in the 1990s. “To make the market work well, you have to have a lot of rules.”

But Mr. Bush populated the financial system’s alphabet soup of oversight agencies with people who, like him, wanted fewer rules, not more.

Like Minds on Laissez-Faire

The president’s first chairman of the Securities and Exchange Commission promised a “kinder, gentler” agency. The second was pushed out amid industry complaints that he was too aggressive. Under its current leader, the agency failed to police the catastrophic decisions that toppled the investment bank Bear Stearns and contributed to the current crisis, according to a recent inspector general’s report.

As for Mr. Bush’s banking regulators, they once brandished a chain saw over a 9,000-page pile of regulations as they promised to ease burdens on the industry. When states tried to use consumer protection laws to crack down on predatory lending, the comptroller of the currency blocked the effort, asserting that states had no authority over national banks.

The administration won that fight at the Supreme Court. But Roy Cooper, North Carolina’s attorney general, said, “They took 50 sheriffs off the beat at a time when lending was becoming the Wild West.”

The president did push rules aimed at forcing lenders to more clearly explain loan terms. But the White House shelved them in 2004, after industry-friendly members of Congress threatened to block confirmation of his new housing secretary.

In the 2004 election cycle, mortgage bankers and brokers poured nearly $847,000 into Mr. Bush’s re-election campaign, more than triple their contributions in 2000, according to the nonpartisan Center for Responsive Politics. The administration did not finalize the new rules until last month.

Among the Republican Party’s top 10 donors in 2004 was Roland Arnall. He founded Ameriquest, then the nation’s largest lender in the subprime market, which focuses on less creditworthy borrowers. In July 2005, the company agreed to set aside $325 million to settle allegations in 30 states that it had preyed on borrowers with hidden fees and ballooning payments. It was an early signal that deceptive lending practices, which would later set off a wave of foreclosures, were widespread.

Andrew H. Card Jr., Mr. Bush’s former chief of staff, said White House aides discussed Ameriquest’s troubles, though not what they might portend for the economy. Mr. Bush had just nominated Mr. Arnall as his ambassador to the Netherlands, and the White House was primarily concerned with making sure he would be confirmed.

“Maybe I was asleep at the switch,” Mr. Card said in an interview.

Brian Montgomery, the Federal Housing Administration commissioner, understood the significance. His agency insures home loans, traditionally for the same low-income minority borrowers Mr. Bush wanted to help. When he arrived in June 2005, he was shocked to find those customers had been lured away by the “fool’s gold” of subprime loans. The Ameriquest settlement, he said, reinforced his concern that the industry was exploiting borrowers.

In December 2005, Mr. Montgomery drafted a memo and brought it to the White House. “I don’t think this is what the president had in mind here,” he recalled telling Ryan Streeter, then the president’s chief housing policy analyst.

It was an opportunity to address the risky subprime lending practices head on. But that was never seriously discussed. More senior aides, like Karl Rove, Mr. Bush’s chief political strategist, were wary of overly regulating an industry that, Mr. Rove said in an interview, provided “a valuable service to people who could not otherwise get credit.” While he had some concerns about the industry’s practices, he said, “it did provide an opportunity for people, a lot of whom are still in their houses today.”

The White House pursued a narrower plan offered by Mr. Montgomery that would have allowed the F.H.A. to loosen standards so it could lure back subprime borrowers by insuring similar, but safer, loans. It passed the House but died in the Senate, where Republican senators feared that the agency would merely be mimicking the private sector’s risky practices — a view Mr. Rove said he shared.

Looking back at the episode, Mr. Montgomery broke down in tears. While he acknowledged that the bill did not get to the root of the problem, he said he would “go to my grave believing” that at least some homeowners might have been spared foreclosure.

Today, administration officials say it is fair to ask whether Mr. Bush’s ownership push backfired. Mr. Paulson said the administration, like others before it, “over-incented housing.” Mr. Hennessey put it this way: “I would not say too much emphasis on expanding homeownership. I would say not enough early focus on easy lending practices.”

‘We Told You So’

Armando Falcon Jr. was preparing to take on a couple of giants.

A soft-spoken Texan, Mr. Falcon ran the Office of Federal Housing Enterprise Oversight, a tiny government agency that oversaw Fannie Mae and Freddie Mac, two pillars of the American housing industry. In February 2003, he was finishing a blockbuster report that warned the pillars could crumble.

Created by Congress, Fannie and Freddie — called G.S.E.’s, for government-sponsored entities — bought trillions of dollars’ worth of mortgages to hold or sell to investors as guaranteed securities. The companies were also Washington powerhouses, stuffing lawmakers’ campaign coffers and hiring bare-knuckled lobbyists.

Mr. Falcon’s report outlined a worst-case situation in which Fannie and Freddie could default on debt, setting off “contagious illiquidity in the market” — in other words, a financial meltdown. He also raised red flags about the companies’ soaring use of derivatives, the complex financial instruments that economic experts now blame for spreading the housing collapse.

Today, the White House cites that report — and its subsequent effort to better regulate Fannie and Freddie — as evidence that it foresaw the crisis and tried to avert it. Bush officials recently wrote up a talking points memo headlined “G.S.E.’s — We Told You So.”

But the back story is more complicated. To begin with, on the day Mr. Falcon issued his report, the White House tried to fire him.

At the time, Fannie and Freddie were allies in the president’s quest to drive up homeownership rates; Franklin D. Raines, then Fannie’s chief executive, has fond memories of visiting Mr. Bush in the Oval Office and flying aboard Air Force One to a housing event. “They loved us,” he said.

So when Mr. Falcon refused to deep-six his report, Mr. Raines took his complaints to top Treasury officials and the White House. “I’m going to do what I need to do to defend my company and my position,” Mr. Raines told Mr. Falcon.

Days later, as Mr. Falcon was in New York preparing to deliver a speech about his findings, his cellphone rang. It was the White House personnel office, he said, telling him he was about to be unemployed.

His warnings were buried in the next day’s news coverage, trumped by the White House announcement that Mr. Bush would replace Mr. Falcon, a Democrat appointed by Bill Clinton, with Mark C. Brickell, a leader in the derivatives industry that Mr. Falcon’s report had flagged.

It was not until 2003, when Freddie became embroiled in an accounting scandal, that the White House took on the companies in earnest. Mr. Bush decided to quit the long-standing practice of rewarding supporters with high-paying appointments to the companies’ boards — “political plums,” in Mr. Rove’s words. He also withdrew Mr. Brickell’s nomination and threw his support behind Mr. Falcon, beginning an intense effort to give his little regulatory agency more power.

Mr. Falcon lacked explicit authority to limit the size of the companies’ mammoth investment portfolios, or tell them how much capital they needed to guard against losses. White House officials wanted that to change. They also wanted the power to put the companies into receivership, hoping that would end what Mr. Card, the former chief of staff, called “the myth of government backing,” which gave the companies a competitive edge because investors assumed the government would not let them fail.

By the spring of 2005 a deal with Congress seemed within reach, Mr. Snow, the former Treasury secretary, said in an interview.

Michael G. Oxley, an Ohio Republican and then-chairman of the House Financial Services Committee, had produced what Mr. Snow viewed as “a pretty darned good bill,” a watered-down version of what the president sought. But at the urging of Mr. Card and the White House economics team, the president decided to hold out for a tougher bill in the Senate.

Mr. Card said he feared that Mr. Snow was “more interested in the deal than the result.” When the bill passed the House, the president issued a statement opposing it, effectively killing any chance of compromise. Mr. Oxley was furious.

“The problem with those guys at the White House, they had all the answers and they didn’t think they had to listen to anyone, including the Treasury secretary,” Mr. Oxley said in a recent interview. “They were driving the ideological train. He was in the caboose, and they were in the engine room.”

Mr. Card and Mr. Hennessey said they had no regrets. They are convinced, Mr. Hennessey said, that the Oxley bill would have produced “the worst of all possible outcomes,” the illusion of reform without the substance.

Still, some former White House and Treasury officials continue to debate whether Mr. Bush’s all-or-nothing approach scuttled a measure that, while imperfect, might have given an aggressive regulator enough power to keep the companies from failing.

Mr. Snow, for one, calls Mr. Oxley “a hero,” adding, “He saw the need to move. It didn’t get done. And it’s too bad, because I think if it had, I think we could well have avoided a big contributor to the current crisis.”

Unheeded Warnings

Jason Thomas had a nagging feeling.

The New Century Financial Corporation, a huge subprime lender whose mortgages were bundled into securities sold around the world, was headed for bankruptcy in March 2007. Mr. Thomas, an economic analyst for President Bush, was responsible for determining whether it was a hint of things to come.

At 29, Mr. Thomas had followed a fast-track career path that took him from a Buffalo meatpacking plant, where he worked as a statistician, to the White House. He was seen as a whiz kid, “a brilliant guy,” his former boss, Mr. Hubbard, says.

As Mr. Thomas began digging into New Century’s failure that spring, he became fixated on a particular statistic, the rent-to-own ratio.

Typically, as home prices increase, rental costs rise proportionally. But Mr. Thomas sent charts to top White House and Treasury officials showing that the monthly cost of owning far outpaced the cost to rent. To Mr. Thomas, it was a sign that housing prices were wildly inflated and bound to plunge, a condition that could set off a foreclosure crisis as conventional and subprime borrowers with little equity found they owed more than their houses were worth.

It was not the Bush team’s first warning. The previous year, Mr. Lindsay, the former chief economics adviser, returned to the White House to tell his old colleagues that housing prices were headed for a crash. But housing values are hard to evaluate, and Mr. Lindsay had a reputation as a market pessimist, said Mr. Hubbard, adding, “I thought, ‘He’s always a bear.’ ”

In retrospect, Mr. Hubbard said, Mr. Lindsay was “absolutely right,” and Mr. Thomas’s charts “should have been a signal.”

Instead, the prevailing view at the White House was that the problems in the housing market were limited to subprime borrowers unable to make their payments as their adjustable mortgages reset to higher rates. That belief was shared by Mr. Bush’s new Treasury secretary, Mr. Paulson.

Mr. Paulson, a former chairman of the Wall Street firm Goldman Sachs, had been given unusual power; he had accepted the job only after the president guaranteed him that Treasury, not the White House, would have the dominant role in shaping economic policy. That shift merely continued an imbalance of power that stifled robust policy debate, several former Bush aides say.

Throughout the spring of 2007, Mr. Paulson declared that “the housing market is at or near the bottom,” with the problem “largely contained.” That position underscored nearly every action the Bush administration took in the ensuing months as it offered one limited response after another.

By that August, the problems had spread beyond New Century. Credit was tightening, amid questions about how heavily banks were invested in securities linked to mortgages. Still, Mr. Bush predicted that the turmoil would resolve itself with a “soft landing.”

The plan Mr. Bush announced on Aug. 31 reflected that belief. Called “F.H.A. Secure,” it aimed to help about 80,000 homeowners refinance their loans. Mr. Montgomery, the housing commissioner, said that he knew the modest program was not enough — the White House later expanded the agency’s rescue role — and that he would be “flying the plane and fixing it at the same time.”

That fall, Representative Rahm Emanuel, a leading Democrat, former investment banker and now the incoming chief of staff to President-elect Barack Obama, warned the White House it was not doing enough. He said he told Joshua B. Bolten, Mr. Bush’s chief of staff, and Mr. Paulson in a series of phone calls that the credit crisis would get “deep and serious” and that the only answer was big, internationally coordinated government intervention.

“You got to strangle this thing and suffocate it,” he recalled saying.

Instead, Mr. Bush developed Hope Now, a voluntary public-private partnership to help struggling homeowners refinance loans. And he worked with Congress to pass a stimulus package that sent taxpayers $150 billion in tax rebates.

In a speech to the Economic Club of New York in March 2008, he cautioned against Washington’s temptation “to say that anything short of a massive government intervention in the housing market amounts to inaction,” adding that government action could make it harder for the markets to recover.

Dominoes Start to Fall

Within days, Bear Sterns collapsed, prompting the Federal Reserve to engineer a hasty sale. Some economic experts, including Timothy F. Geithner, the president of the New York Federal Reserve Bank (and Mr. Obama’s choice for Treasury secretary) feared that Fannie Mae and Freddie Mac could be the next to fall.

Mr. Bush was still leaning on Congress to revamp the tiny agency that oversaw the two companies, and had acceded to Mr. Paulson’s request for the negotiating room that he had denied Mr. Snow. Still, there was no deal.

Over the previous two years, the White House had effectively set the agency adrift. Mr. Falcon left in 2005 and was replaced by a temporary director, who was in turn replaced by James B. Lockhart, a friend of Mr. Bush from their days at Andover, and a former deputy commissioner of the Social Security Administration who had once run a software company.

On Mr. Lockhart’s watch, both Freddie and Fannie had plunged into the riskiest part of the market, gobbling up more than $400 billion in subprime and other alternative mortgages. With the companies on precarious footing, Mr. Geithner had been advocating that the administration seize them or take other steps to reassure the market that the government would back their debt, according to two people with direct knowledge of his views.

In an Oval Office meeting on March 17, however, Mr. Paulson barely mentioned the idea, according to several people present. He wanted to use the troubled companies to unlock the frozen credit market by allowing Fannie and Freddie to buy more mortgage-backed securities from overburdened banks. To that end, Mr. Lockhart’s office planned to lift restraints on the companies’ huge portfolios — a decision derided by former White House and Treasury officials who had worked so hard to limit them.

But Mr. Paulson told Mr. Bush the companies would shore themselves up later by raising more capital.

“Can they?” Mr. Bush asked.

“We’re hoping so,” the Treasury secretary replied.

That turned out to be incorrect, and did not surprise Mr. Thomas, the Bush economic adviser. Throughout that spring and summer, he warned the White House and Treasury that, in the stark words of one e-mail message, “Freddie Mac is in trouble.” And Mr. Lockhart, he charged, was allowing the company to cover up its insolvency with dubious accounting maneuvers.

But Mr. Lockhart continued to offer reassurances. In a July appearance on CNBC, he declared that the companies were well managed and “worsts were not coming to worst.” An infuriated Mr. Thomas sent a fresh round of e-mail messages accusing Mr. Lockhart of “pimping for the stock prices of the undercapitalized firms he regulates.”

Mr. Lockhart defended himself, insisting in an interview that he was aware of the companies’ vulnerabilities, but did not want to rattle markets.

“A regulator,” he said, “does not air dirty laundry in public.”

Soon afterward, the companies’ stocks lost half their value in a single day, prompting Congress to quickly give Mr. Paulson the power to spend $200 billion to prop them up and to finally pass Mr. Bush’s long-sought reform bill, but it was too late. In September, the government seized control of Freddie Mac and Fannie Mae.

In an interview, Mr. Paulson said the administration had no justification to take over the companies any sooner. But Mr. Falcon disagreed: “They absolutely could have if they had thought there was a real danger.”

By Sept. 18, when Mr. Bush and his team had their fateful meeting in the Roosevelt Room after the failure of Lehman Brothers and the emergency rescue of A.I.G., Mr. Paulson was warning of an economic calamity greater than the Great Depression. Suddenly, historic government intervention seemed the only option. When Mr. Paulson spelled out what would become a $700 billion plan to rescue the nation’s banking system, the president did not hesitate.

“Is that enough?” Mr. Bush asked.

“It’s a lot,” the Treasury secretary recalled replying. “It will make a difference.” And in any event, he told Mr. Bush, “I don’t think we can get more.”

As the meeting wrapped up, a handful of aides retreated to the White House Situation Room to call Vice President Dick Cheney in Florida, where he was attending a fund-raiser. Mr. Cheney had long played a leading role in economic policy, though housing was not a primary interest, and like Mr. Bush he had a deep aversion to government intervention in the market. Nonetheless, he backed the bailout, convinced that too many Americans would suffer if Washington did nothing.

Mr. Bush typically darts out of such meetings quickly. But this time, he lingered, patting people on the back and trying to soothe his downcast staff. “During times of adversity, he bucks everybody up,” Mr. Paulson said.

It was not the end of the failures or government interventions; the administration has since stepped in to rescue Citigroup and, just last week, the Detroit automakers. With 31 days left in office, Mr. Bush says he will leave it to historians to analyze “what went right and what went wrong,” as he put it in a speech last week to the American Enterprise Institute.

Mr. Bush said he was too focused on the present to do much looking back.

“It turns out,” he said, “this isn’t one of the presidencies where you ride off into the sunset, you know, kind of waving goodbye.”

Kitty Bennett contributed reporting.

http://www.nytimes.com/2008/12/21/bu...1admin.html?hp

ASU2003 · 12-21-2008, 12:59 AM

I'm not sure I would put too much blame on Bush. It true that he wanted the 'ownership' society, and it is good if you can afford it. But there were a lot of other things that created a bubble instead of a smooth and sustainable increase in homeownership and homes being built. The free market failed for most people. It worked for the people who bought up homes and condos as soon as they were built and then resold them for thousands more without ever having lived there. But, taxing real estate investors and speculators hard wouldn't be in line with Bush's policies.

http://www.cbsnews.com/stories/2008/...n4666112.shtml

http://www.nowpublic.com/world/60-mi...meltdown-story

Quote:

The bank's own greed got the best of them; all they saw was the dollar signs in their eyes, as fees and points that filled their coffers.

The borrowers were really no less greedy- like I said, I did my best to explain, even tried to talk some borrowers out of using a POA to buy the property that they were interested in. But most times, it was to no avail. They either didn't care about the risks or worse yet, their Realtor "over talked" me and told them that I did not know what I was talking about, and that the POA was their best choice:

Real estate always goes up, remember? It's different here! No need to worry about that negative amortization loan if you stick with the only payment you can really afford, the one with the 1% teaser, your house will be worth double what you paid for it in a year or two!

But, unfortunately, the problem as the banks saw it wasn't that these loans were going to fail in droves, nope.

The problem the banks saw was that the people were using these loans as short-term real estate investment loans with a really low initial payment, giving the investors time to remodel the property in order to "flip" the house and then move on to the next investment without having to sink so much capital into principle and interest with a higher interest commercial loan payment.

Quote:

I'm not real estate expert, but I was working in a planning department of a 200,000+ city. between 2000 and 2004. I would process plats for developers. I remember getting plats for 1000-lot subdivisions for homes that would probably go for $150,000 or so. The town where I live in doesn't have nor will it have enough jobs to generate income needed to buy such homes. I wondered, "Where's the money coming from for these homes?" I guess my gut was right. It was all surfers riding the bubble. And now the wave is crashing like a tsunami.

ganon · 12-21-2008, 04:57 PM

i screwed up. it's my fault. i was greedy, i didn't hold people accountable that should have been, and i didn't do what i could to get everyone i could to play by the rules. it's my fault.

pai mei · 12-22-2008, 04:46 AM

I blame Peak Oil. And capitalism. How much crazy can we humans get ? Running around , destroying the planet, transforming it into money, working to pay debts - which are just money someone created for us. AND IF WE DON'T DO THESE THINGS WE HAVE THE PROBLEMS YOU SEE TODAY. Because we can go to the moon but can't find a "better way to live", to stupid for that.

Jack London - The Iron Heel :

Jack London: The Iron Heel (Table of Contents)

Quote:

And now we shift from this particular process to the sum total of all industrial processes in the United States, which includes the leather itself, raw material, transportation, selling, everything. We will say, for the sake of round figures, that the total production of wealth in the United States is one year is four billion dollars. Then labor has received in wages, during the same period, two billion dollars. Four billion dollars has been produced. How much of this can labor buy back? Two billions. There is no discussion of this, I am sure. For that matter, my percentages are mild. Because of a thousand capitalistic devices, labor cannot buy back even half of the total product.

Quote:

"I'll tell you," Ernest continued. "It means that the resources of Brazil are being developed. And now, the next point. When Brazil, under the capitalist system, has developed her resources, she will herself have an unconsumed surplus. Can she get rid of this surplus to the United States? No, because the United States has herself a surplus. Can the United States do what she previously did--get rid of her surplus to Brazil? No, for Brazil now has a surplus, too.

"What happens? The United States and Brazil must both seek out other countries with undeveloped resources, in order to unload the surpluses on them

11-25-2008, 10:06 PM	#1 (permalink)
ASU2003 immoral minority Location: Back in Ohio	Who do you blame the current financial mess on??? There are a few suspects, but I would be interested in some media company doing some real investigative journalism and finding out what or who is to blame. Or are there multiple guilty parties? Who do you think caused it: Flippers & speculators getting interest only loans and trying to make a quick buck off the people who want to move. Oil companies or countries manipulating the price of oil giving companies an excuse to raise prices. Hedge funds throwing their money around in order to increase the price of a stock to sell it later even if the news is good. American consumers buying too much, going into debt. Or buying things made in China/Taiwan/Saudi Arabia/OPEC instead of from America/Canada/UK/Australia/NZ/Brazil Poor Americans buying houses they couldn't afford, received ARM loans and when rates went up they couldn't afford it. Banks lending too much money AIG default credit swap scheme Mark to market accounting (Too much regulation) - http://www.forbes.com/home/2008/09/2...9gingrich.html Expose hedge fund and private investors practices (Not enough regulation) Globalization hasn't worked or won't work. Third world countries won't buy from the US/Canada/Europe/Australia/NZ Eight options not on the list: Government taxing us too much Federal Reserve manipulating interest rates to try and get the stock market to go up. Too many workers and not enough jobs. Too many people on welfare/retirement/pensions not enough tax/profits to cover them and still grow a business. Media over selling things and making them seem better than they are, and then making things seem worse than they are. Secret organization that is trying to control the population Free trade (That's not really fair) Home builders built too many homes too fast and no one wanted the old homes. Any others you can think of? I think it was like a bunch of dominoes falling over, one thing happened then the next thing happened until we get to where we are today. But, I think one of the first things was the banks creating interest only loans for people in California and New York to be able to afford to live there. Then they were offered at other banks. Soon, people started talking about buying homes they never intended on living in, just to watch them go up in price. The Federal Reserve tried to manipulate interest rates to get rid of the speculators in the housing market that was creating an artificial demand. But today, all of those items played a role in our current economic situation. Last edited by ASU2003; 11-25-2008 at 10:20 PM.. Reason: Answered my question.

11-26-2008, 11:33 AM	#2 (permalink)
Borla Junkie	Primarily on American consumers. The sense of entitlement that my generation and younger have about material things is mostly to blame. When I moved out, I expected to maintain and improve on my living standards, which got me into trouble with debt eventually. I didn't take into account the fact that both of my parents had successful careers and had worked hard to get a nice house, nice/new cars, be able to go out to nice restaurants, buy nice clothes, etc. I just think that nowadays young adults aren't willing to build their life from the ground up, so they borrow and live over their heads instead, usually never catching up. I think that mentality has been one of the biggest unspoken factors of the current crisis we see. Young families are getting foreclosed on because they were more worried about having things and having people see the things they have, instead of whether they can pay for it or it is a smart decision to get it. I guess it just irritates me because I started down that road, saw where it was going, and got myself out of it without bankruptcy, without getting sent to collection, without getting bailed out, but by simply STOPPING MY SPENDING on things I didn't need until I could start affording to pay cash for those things and by working my freaking tail off to improve my career and earn more. Selfish people feeling entitled to a standard of living above what they could afford or were willing to work for is primarily the issue, the secondary issue is lenders willing to give loans and credit to people who didn't deserve it. Now they are strapped, people are strapped to make their payments, so the money they are spending is going towards items they already possess, not new things. __________________ Coimhéad fearg fhear na foighde!!!!

11-26-2008, 11:44 AM	#3 (permalink)
Slims Eccentric insomniac Location: North Carolina	It's our own fault. Regardless of what we want we cannot afford to keep spending the way we are without serious negative consequences. I live a fairly simple lifestyle. I bought a renovated military barracks because though it was ugly, I could afford the payments. Why are we not blaming the people who purchase 200,000 dollar homes with a 30,000 dollar income? How can you be that stupid? Granted, the banks should have known better than to take the note, but the first people in line for blame are those that signed along the dotted line and promised they were able to make the payments. And now this bailout has become absolutely ridiculous. We need to cycle through a recession and credit crunch without artificial and unsustainable support from the government. It will force everyone to start living within their means, wether they want to or not. Of course, we also need to force the government to not overspend. Oh, and I am crying crocodile tears for people who are stuck because they are putting their money towards paying their contractual obligations, and I have even less sympathy for those who duck those obligations altogether simply because their house has declined in value. I can't express in words how much I resent MY tax dollars going to help bail people and companies out of this mess because they were irresponsible and we dont' have the spine to let them reap what they have sewn. I feel like those who have not been fiscally irresponsible are being penalized. __________________ "Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery." - Winston Churchill "All men dream: but not equally. Those who dream by night in the dusty recesses of their minds wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act out their dream with open eyes, to make it possible." Seven Pillars of Wisdom, T.E. Lawrence Last edited by Slims; 11-26-2008 at 11:47 AM..

11-26-2008, 11:57 AM	#4 (permalink)
Cynthetiq Tilted Cat Head Administrator Location: Manhattan, NY	People want to live particular lifestyles without the hard work and effort it takes to gain those lifestyles. This is not just limited to individuals but to encomapasses as far and wide as companies, whole industries, and governments. __________________ I don't care if you are black, white, purple, green, Chinese, Japanese, Korean, hippie, cop, bum, admin, user, English, Irish, French, Catholic, Protestant, Jewish, Buddhist, Muslim, indian, cowboy, tall, short, fat, skinny, emo, punk, mod, rocker, straight, gay, lesbian, jock, nerd, geek, Democrat, Republican, Libertarian, Independent, driver, pedestrian, or bicyclist, either you're an asshole or you're not. What's the best nation in the world? DO-NATION!

11-26-2008, 12:03 PM	#5 (permalink)
Vigilante Broken Arrow Location: US	We move money instead of goods. That's the problem IMO. I think we'd be alot better off acting less like a bank and more like a factory. __________________ We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle. -Winston Churchill

View Poll Results: Who's to blame?
Flippers & speculators	22	38.60%
Oil companies	8	14.04%
Hedge funds	14	24.56%
American consumers	34	59.65%
Poor Americans	4	7.02%
Banks lending too much money	31	54.39%
AIG default credit swap scheme	12	21.05%
Mark to market accounting (Too much regulation)	4	7.02%
Expose hedge funds (Not enough regulation)	11	19.30%
Globalization	12	21.05%
Multiple Choice Poll. Voters: 57. You may not vote on this poll

11-26-2008, 02:25 PM	#6 (permalink)
Amaras Junkie Location: At my daughter's beck and call.	I blame it on human greed, lack of realism, and shortsightedness. Clinton's admin. screwed up when they wanted everyone to have access to credit to purchase a house. Quite frankly, not everyone should or can have a house. Take me, for instance. There is no way I could pay off a $200, 000 with the way I live now. I'll probably die in an apartment. __________________ Propaganda is to a democracy what the bludgeon is to a totalitarian state. -Noam Chomsky Love is a verb, not a noun. -My Mom The function of genius is to furnish cretins with ideas twenty years later. -Louis Aragon, "La Porte-plume," Traite du style, 1928

11-26-2008, 08:08 PM	#7 (permalink)
Tully Mars Living in a Warmer Insanity Super Moderator Location: Yucatan, Mexico	I was going to take the poll but notice there was no "all of the above and them some" option. __________________ I used to drink to drown my sorrows, but the damned things have learned how to swim- Frida Kahlo Vice President Starkizzer Fan Club

11-27-2008, 04:05 AM	#8 (permalink)
jewels Eponymous Location: Central Central Florida	I agree with the posts above about consumerism, but there's something that brought us all to this point. We have to take responsibility for the choices we've made, but what is it that turned us from "free love" and communes to gotta-have-a-Porsche and Dolce & Gabbana? The banks aren't at fault because they simply responded to demand. I blame the media, including television marketing, popular TV shows -- the images we've been surrounded by that have slowly evolved from that anti-materialism mindset in the 60s/70s to total materialism twenty years later. If there's planned obsolescence, there's definitely planned materialism. It's a conspiracy, I tell ya __________________ We are always more anxious to be distinguished for a talent which we do not possess, than to be praised for the fifteen which we do possess. Mark Twain

11-27-2008, 06:23 AM	#10 (permalink)
dc_dux Location: Washington DC	IMO, banking deregulation is the prime suspect which opened the floodgates that led to the greed and irresponsible behavior in housing finance lending, investment practices and spending habits at both the corporate and personal levels. Yes, I am suggesting that sometimes we benefit from having the government protect us from ourselves. __________________ "The perfect is the enemy of the good." ~ Voltaire

11-27-2008, 07:31 AM	#14 (permalink)
roachboy Super Moderator Location: essex ma	it seems to me that the enabling condition behind most of this is neoliberalism, the assumption that markets magically regulate themselves and that the state introduces irrationality, that growth is a steady state, that people suddenly become rational actors when money's involved and that in the aggregate the actions of rational actors armed with cash money and credit extensions (think hair weave) function to serve the greater good. this is the ideology that surfaced across the thatcher-reagan period and which has formed the logical center of globalizing capitalism. it has been the rationale behind deregulation in all its various forms, from taking the breaks off the banking and traffic in debt derivatives to the imf/world bank various experiments in "structural adjustment" to the doctrine of "free trade" that has been used to justify it. if you assume that people are not stupid, particularly not people who find themselves in positions of power (which is to some extent arbitrary, as assumptions go) but they do things that make no sense, what that generally indicates is that the framework they use to make sense of the world and to think through actions/agency in the world are fucked up. that's why neoliberalism is important to think about in this context. without it, i don't think the elements that we can list as being involved with the present massive trainwreck would be in place, and if they were, they'd not have the same impact. from there, you can fit together any number of trajectories that explain one or another aspect of the present trainwreck. in the most local sense, folk seem to find in the decision to let lehmann brothers tank a turning point, more than the decision to bail out a.i.g.--but the moment that framed the a.i.g. action seems to me the first to indicate that this was actually a crisis of the global financial order and not only the american. you also have to factor in the political weakness of the bush administration in all this. but that's another story. __________________ a gramophone its corrugated trumpet silver handle spinning dog. such faithfulness it hear it make you sick. -kamau brathwaite

11-27-2008, 08:03 AM	#15 (permalink)
Amaras Junkie Location: At my daughter's beck and call.	Lest we forget, there is also a cycle in economic theory that predicts eventual downturns. Growth seems to occur until rampant spending and credit exceeds true wealth, and factors like the Bush admin.'s wild spending and Clinton's credit free for all make it worse. In Canada, we did not change our banking laws in accordance with yours (for once, thank god). Also, during the late 90's early 00's we paid down some of the national debt with the surpluses of the time. Our negative effects are primarily due to the fact that your economy is so vastly important to our survival that as the old saying goes "When the US sneezes, Canada catches a cold." __________________ Propaganda is to a democracy what the bludgeon is to a totalitarian state. -Noam Chomsky Love is a verb, not a noun. -My Mom The function of genius is to furnish cretins with ideas twenty years later. -Louis Aragon, "La Porte-plume," Traite du style, 1928

12-04-2008, 07:50 AM	#19 (permalink)
tisonlyi Nothing	The entire economic model. Houses are not investments. Money as debt, rather than value. Fantasyland faith in efficient markets. The systematic dismantling and shipping overseas of the value-creating elements of an economy. (Hint: Industry/Manufacturing) Finance as end to itself. Tainted economic figures. (Inflation figures that measure nothing of tangible worth, for example) Corrupt politics, based on a fantasy. Redistribution of wealth in the wrong direction. Destruction of value on the altar of consumption. Exponential growth rates being acceptable, necessary and encouraged. All of the above and more. -----Added 4/12/2008 at 10 : 59 : 39----- As RB says, this Chicago-esque wet dream exploded in the Reagan/Thatcher era (but it started with Chile, a decade earlier and then New Zealand took to the doctrine with gusto), but in fairness, other than wholesale surrender of power by financial and industrial powers and the re-basing/revolutionising of all the industrialised nations, what the hell else but incredible indebtedness could possibly have driven their capitalist world out of the 70's slump/stagnation? I think that was pretty much the one option left/available and it was taken to with the relish and zeal of fanatics - which both Reagan and Thatcher most certainly were. As of now, I don't think there are any options left. At least not in the west. (but hey! Just as Marx said; You must exhaust Capitalism before Communism can take hold.) __________________ "I do not agree that the dog in a manger has the final right to the manger even though he may have lain there for a very long time. I do not admit that right. I do not admit for instance, that a great wrong has been done to the Red Indians of America or the black people of Australia. I do not admit that a wrong has been done to these people by the fact that a stronger race, a higher-grade race, a more worldly wise race to put it that way, has come in and taken their place." - Winston Churchill, 1937 --{ORLY?}-- Last edited by tisonlyi; 12-04-2008 at 07:59 AM.. Reason: Automerged Doublepost

12-04-2008, 08:04 AM	#20 (permalink)
Lasereth Knight of the Old Republic Location: Winston-Salem, NC	A big one that sticks out to me is the banks lending too much. When I bought my house this past March I went in and they told me I was approved for a $300,000 house. In reality, I can afford a $150k house at max. I told the lender I wanted to keep the loan under $150k and she argued with me that I could afford $280k easily. It's absolutely ridiculous that we have bankers arguing with consumers that they can afford more than they really can. All the banks do is take your fixed monthly bills and subtract it from your monthly income and then say the rest can be spent on big gigantic house. They don't take into account FOOD, miscellaneous bills, entertainment, stuff you need around the house, gas, car maintenance, varying bills, etc. I checked that and oil companies.

12-04-2008, 07:57 PM	#21 (permalink)
raeanna74 I'm not a blonde! I'm knot! I'm knot! I'm knot! Location: Upper Michigan	I primarily view the predatory lenders as the instigators of the economy crises. But there are a host of other contributors. Not the least of which is the media who were screaming "Housing Crises" last year. There was NO Housing crises in Middle America until the media started scaring away home buyers. The only "housing crises" was in California, Florida, and the East Coast. The biggest reason being, over-pricing, going on by Appraisers who worked for lending companies. Appraisals were being made to more than double the actual bulding cost of the homes just so people would 'qualify' for a large enough loan (again predatory lending)... I could name dozens more, right down to all Americans forgetting the lessons of the depression. Not building safety nets, not living within their means, and not planning for the future. Stocks did not start dropping until the Media 'Prophesied' a Recession. If the media had SHUT the HELL UP, we probably would have pulled through the 'housing crises' without shut and all out shutdown of our economy. I expect in another 3 generations we'll have another recession. I just hope it's nothing worse. __________________ "Always learn the rules so that you can break them properly." Dalai Lama My Karma just ran over your Dogma.

12-10-2008, 04:56 PM	#25 (permalink)
NoSoup Non-Rookie Location: Green Bay, WI	As in insider, here's my opinion on the appraisals - there is a common misconception they often inflated them. However, keep in mind that their job is to determine "market value" - basically, the price that someone would buy it for. Remember when houses were increasing hundreds of percent a year? It wasn't because appraisers were typing in some artificial number on an arbitrary report that noone ever sees, it's because consumers were actually paying those prices, causing the true market value to be increased exponentially.... Just food for thought. __________________ I have an aura of reliability and good judgement. Just in case you were wondering...

12-11-2008, 09:50 AM	#27 (permalink)
aceventura3 Junkie Location: Ventura County	I selected "Mark to Market Accounting" primarily because our current crisis is mostly physiological or self-induced. Under normal circumstances if there is a loan on an asset, and the asset declines in value it is a non-event unless there is a need for a forced sale. If the market gets flooded with forced sales, prices fall further in a frenzy of panic selling. So, given leveraged financial institutions with assets on the books that declined in value and then the need to "mark to market" affecting reserve or capital levels, prompting forced sales and then more forced sales and more forced sales, you end up with a "crisis". If some of these financial institution had an opportunity to operate normally during the normal market correction the situation would have been much more orderly. __________________ "Democracy is two wolves and a sheep voting on lunch." "It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion." "If you live among wolves you have to act like one." "A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

12-18-2008, 07:34 PM	#29 (permalink)
mixedsubstance Crazy Location: Where the wild things are.	I honestly feel it's a combination of American consumers spending frivolously, Banks lending way too much, and the Bush Admin putting too much into the war. Can't just blame one group or source. __________________ Well, isn't that just kick-you-in-the-crotch, spit-on-your-neck fantastic?!? Without energy, there would be nothing.

12-21-2008, 04:57 PM	#32 (permalink)
ganon Insane Location: in my head	i screwed up. it's my fault. i was greedy, i didn't hold people accountable that should have been, and i didn't do what i could to get everyone i could to play by the rules. it's my fault. __________________ "My give up, my give up." - Jar Jar Binks