Why not enforce exist regulations and laws first instead of looking the other way ( usually a the request of various lobbyists) . I can see it now - new regs and new departments - and under the present administration maybe even outsourcing to Haliburton like corp <g>.
We are nowhere near a hyperinflationary depression. Your fearmongering is dually though. Manufacturing is alive and well and even thriving under the current situation.
Wistfully looking back at the 19th century when this country was still developing and saying it should continue is stupid.
We are a developed country, deal with it.
We had almost a fully deregulated environment even after the Fed was established and the GD still happened. Sure, they kept rates lower to help the Pound Sterling backed by Gold become "successful", but we essentially had nothing else. The Fed had almost no power and there weren't many securities laws. We even had the gold system then and it still failed.
As I mentioned earlier, much of the framework of New Deal banking supervision has been slowly and relentlessly rescinded, leaving the Fed in an impossible position. Not that the Fed, under Greenspan's leadership, had any qualms about promoting "growth" at any price, regardless of the foreseeable and near inevitable consequences of their actions.
I's a complex situation, one that doesn't lend itself easily to soundbite demagogery or simplistic non-analysis. The one thing I'm sure of, however, is that the current regime is attempting to restore confidence w/o any real changes to the structure of the system or the rules governing it. The economists, politicians, wheeler-dealers and capitalists behind this initiative are the same ones who fought long and hard to make things the way they are, to deregulate. They're just putting lipstick on a pig, turning out the same whore in a different dress.
Interesting in-depth article here-
http://www.prospect.org/cs/art...cle=the_bubble_economy
And it wasn't the Community Reinvestment Act itself that led to the current situation, Butterbean, but changes to it allowing for securitization of subprime mortgages certainly didn't help.
I's a complex situation, one that doesn't lend itself easily to soundbite demagogery or simplistic non-analysis. The one thing I'm sure of, however, is that the current regime is attempting to restore confidence w/o any real changes to the structure of the system or the rules governing it. The economists, politicians, wheeler-dealers and capitalists behind this initiative are the same ones who fought long and hard to make things the way they are, to deregulate. They're just putting lipstick on a pig, turning out the same whore in a different dress.
Interesting in-depth article here-
http://www.prospect.org/cs/art...cle=the_bubble_economy
And it wasn't the Community Reinvestment Act itself that led to the current situation, Butterbean, but changes to it allowing for securitization of subprime mortgages certainly didn't help.
The changes for subprime securitization existed for 40 years. Subprime mortgages themselves existed for far longer. The combination of the two aren't the problem, nor is the slant put on securitization, which has proved over 40 years that it can and has worked quite well.
The idea that you could get rich quick, combined with low long-term rates due to capital floods, FAS 140, the proliferation of exotic mortgages down credit, as well as favorable tax treatment, gave people the incentive to push the envelope.
vhx
Golden Member
- Jul 19, 2006
- 1,151
- 0
- 0
Here is some more information:
Bush proposes financial regulation overhaul
Plan would expand powers of Federal Reserve
http://www.msnbc.msn.com/id/23853415/
Sweet. More power to the company that caused most of the financial mess we are in now.
Bush proposes financial regulation overhaul
Plan would expand powers of Federal Reserve
http://www.msnbc.msn.com/id/23853415/
Sweet. More power to the company that caused most of the financial mess we are in now.
Originally posted by: vhx
Here is some more information:
Bush proposes financial regulation overhaul
Plan would expand powers of Federal Reserve
http://www.msnbc.msn.com/id/23853415/
Sweet. More power to the company that caused most of the financial mess we are in now.
How did the Fed cause the problem?
lol, the industry was begging for it long before. Lobbyists lined up. Not to mention, even with past laws, this would likely not have been prevented.
Originally posted by: LegendKiller
Originally posted by: vhx
Here is some more information:
Bush proposes financial regulation overhaul
Plan would expand powers of Federal Reserve
http://www.msnbc.msn.com/id/23853415/
Sweet. More power to the company that caused most of the financial mess we are in now.
How did the Fed cause the problem?
I agree there should be more regulations, but it shouldn't be the FED. I don't think the Fed caused the problem, in fact I think Fed did great the last few weeks to protect the economy. But I think Fed should remain the vehicle to regulate money supply and watch over inflation. The shouldn't be involved in regulating/auditing of the financial institution, because they are part of the process. Having them regulating/auditing the process they are part of would have huge conflict of interest issue.
If anything, they should expand agency like SEC to regulate banking/fund industry. They already have "auditor's mentality", and they have the experience going after/filing charges those violating security laws.
I think Henry Paulson is too pro Wall Street, I agree with him that something should be done about this process, but someone from a real regulation agency and not part of the banking system should audit/regulate the system.
Originally posted by: LegendKiller
Originally posted by: vhx
Here is some more information:
Bush proposes financial regulation overhaul
Plan would expand powers of Federal Reserve
http://www.msnbc.msn.com/id/23853415/
Sweet. More power to the company that caused most of the financial mess we are in now.
How did the Fed cause the problem?
Another important consequence of the dot-com crash and the subsequent 2001?2002 recession was that the Federal Reserve cut short-term interest rates to historically low levels, from about 6.5% to just 1%. Former Federal Reserve Board Chairman Alan Greenspan admitted that the housing bubble was "fundamentally engendered by the decline in real long-term interest rates."[116] In United States, mortgage rates are typically set in relation to 10-year treasury bond yields, which, in turn, are affected by Federal Funds rates. The Federal Reserve acknowledges the connection between lower interest rates, higher home values, and the increased liquidity the higher home values bring to the overall economy.[117] A Federal Reserve report reads,
Like other asset prices, house prices are influenced by interest rates, and in some countries, the housing market is a key channel of monetary policy transmission.[118]
For this reason some have criticized then Fed Chairman Alan Greenspan for "engineering" the housing bubble,[119][120][121][122][123][124] saying, e.g., "It was the Federal Reserve-engineered decline in rates that inflated the housing bubble."[12] Between 2000 and 2003, the interest rate on 30-year fixed-rate mortgages fell 2.5 percentage points (from 8% to all-time historical low of about 5.5%). The interest rate on one-year adjustable rate mortgages (1/1 ARMs) fell 3 percentage points (from about 7% to about 4%). Richard Fisher, president of the Dallas Fed, said in 2006 that the Fed's low interest-rate policies unintentionally prompted speculation in the housing market, and that the subsequent "substantial correction [is] inflicting real costs to millions of homeowners."[111][112]
A drop in mortgage interest rates reduces the cost of borrowing and should logically result in an increase in prices in a market where most people borrow money to purchase a home (for instance, in the United States), so that average payments remain constant. If one assumes that the housing market is efficient, the expected change in housing prices (relative to interest rates) can be computed mathematically. The calculation in the sidebox shows that a 1 percentage point change in interest rates would theoretically affect home prices by about 10% (given 2005 rates on fixed-rate mortgages). This represents a 10-to-1 multiplier between percentage point changes in interest rates and percentage change in home prices. For interest-only mortgages (at 2005 rates), this yields about a 16% change in principal for a 1% change in interest rates at current rates. Therefore, the 2% drop in long-term interest rates can account for about a 10 × 2% = 20% rise in home prices if every buyer is using a fixed-rate mortgage (FRM), or about 16 × 3% ? 50% if every buyer is using an adjustable rate mortgage (ARM) whose interest rates dropped 3%. Robert Shiller shows that the inflation adjusted U.S. home price increase has been about 45% during this period,[9] an increase in valuations that is approximately consistent with most buyers financing their purchases using ARMs. In areas of the United States believed to have a housing bubble, price increases have far exceeded the 50% that might be explained by the cost of borrowing using ARMs. For example, in San Diego area, average mortgage payments grew 50% between 2001 and 2004. When interest rates rise, a reasonable question is how much house prices will fall, and what effect this will have on those holding negative equity, as well as on the U.S. economy in general. The salient question is whether interest rates are a determining factor in specific markets where there is high sensitivity to housing affordability.
Courtesy of wikipedia, citations present.
http://en.wikipedia.org/wiki/U..._States_housing_bubble
Now whether the Fed intentionally or unintentionally caused it is besides the point. The important thing is that they caused it. They didn't let the market correct itself after the tech bubble collapsed under the same failed logic that they're using now to bail out Bear Stearns: that it would be worse for the economy to let the market correct. But instead of biting a smaller bullet back then, we have to bite a much bigger bullet now. This is essentially all the Fed does and can do when it comes to the market. They really don't have a way of "fixing" anything, just shifting or dispersing the problem onto others (Inflation to bail out BS), re-inflating bubbles to delay politically inconvenient recessions, and incentivizing/exaggerating already existing malinvestments in the free market by perpetuating and promoting illusory growth that they know is artificial.
But even after all the fudged CPI numbers and propaganda during this mess, you still believe that the people who took part in this shady lending are the only place in which blame can be placed? I think you're missing the whole boat on this, Legend. Shady lending always existed, yes, but the Fed's existence and policies magnify it. That's all anyone has been trying to argue. And if you believe for one minute that we're nearing a bottom, or that there won't be more foolish stimulus packages out of congress in the coming years, you're living on Mars. Hyperinflation is a real possibility with the naivety in Washington and Helicopter Ben at the helm. The average politician knows as much about economics as you do, which is to say, nothing.
no new laws are/were necessary to keep this from happening. our society
just had to follow the laws we already had.
just had to follow the laws we already had.
I didn't say that quite right, LK. CRA based subprime loans couldn't be securitized prior to 1995-
http://en.wikipedia.org/wiki/Community_Reinvestment_Act
And subprime loans per se didn't exist prior to 1980, nor subprime ARM's prior to 1982-
http://w2jig.blogspot.com/2007...-mortgage-history.html
And it's not fixed rate long term subprime loans causing problems, it's the short term 2 and 3 year ARM's based on cheap short term lending that have become such a problem. That's because they're based on unrealistic market expectations- that prices could rise forever, and that borrowers could somehow afford the increased rates inevitable at the end of the initial period. The reasons that borrowers are rated subprime vary, but recently it's because the LTV was increasingly poor, along with less favorable payment to income ratios, simply because of exploding prices. Increasingly, people simply couldn't qualify for conventional loans, but they could for ARM's... whose market share exploded across all types of mortgages.
This should have set off warning bells somewhere, but apparently didn't. I mean, if a huge % borrowers can't qualify for a conventional loan at record low interest rates, what makes anybody think they'll qualify at the end of the initial period of an ARM, other than increased valuation and cheap money forever?
ARM's really should have been priced above conventional mortgages in a realistic risk assessment scenario, yet weren't. Why not? Good question.
http://en.wikipedia.org/wiki/Community_Reinvestment_Act
And subprime loans per se didn't exist prior to 1980, nor subprime ARM's prior to 1982-
http://w2jig.blogspot.com/2007...-mortgage-history.html
And it's not fixed rate long term subprime loans causing problems, it's the short term 2 and 3 year ARM's based on cheap short term lending that have become such a problem. That's because they're based on unrealistic market expectations- that prices could rise forever, and that borrowers could somehow afford the increased rates inevitable at the end of the initial period. The reasons that borrowers are rated subprime vary, but recently it's because the LTV was increasingly poor, along with less favorable payment to income ratios, simply because of exploding prices. Increasingly, people simply couldn't qualify for conventional loans, but they could for ARM's... whose market share exploded across all types of mortgages.
This should have set off warning bells somewhere, but apparently didn't. I mean, if a huge % borrowers can't qualify for a conventional loan at record low interest rates, what makes anybody think they'll qualify at the end of the initial period of an ARM, other than increased valuation and cheap money forever?
ARM's really should have been priced above conventional mortgages in a realistic risk assessment scenario, yet weren't. Why not? Good question.
I didn't realize it wasn't until 95 that you could securitize subprime. It goes along with the other two factors, more favorable taxation in 98 and flood of capital in 01, to form a perfect storm.
That being said, I still fight the notion that subprime RMBS itself is bad, it lowered rates and allowed many who should get houses (and keep them) to get the houses. However, I do firmly agree that things got out of hand, whether it was from lax regulation to irresponsible borrowers/lenders/bankers/investors.
The so-called Free Market is a figment of imagination.
Did you see how the guy from Shell Oil was on the TV last week discussing our lack of a real OIL/Energy policy? He went on to mention that the USA is one of the few countries where the Oil was not managed by the State. It sounded like he was for the USA to manage the oil market. Kind of strange for a Capitalist???
He went on to say that the USA is importing refined gasoline, because we dont have enough refineries to refine our own gasoline. It is not that there is no source of crude in the USA, it is just that we refuse to drill for it or process it because of our red tape and environmental policies. We want to complain about the cost of gasoline, but we dont want to have refineries in our own country.
Then what also drives prices up is the market itself. When demand is up, then speculators move in artificially raise up the price for crude oil through market speculation, to beyond what the demand and supply curve require. This creates an OIL Market Bubble, similar to the housing market bubble. The stock market itself can be a force for evil.
Did you see how the guy from Shell Oil was on the TV last week discussing our lack of a real OIL/Energy policy? He went on to mention that the USA is one of the few countries where the Oil was not managed by the State. It sounded like he was for the USA to manage the oil market. Kind of strange for a Capitalist???
He went on to say that the USA is importing refined gasoline, because we dont have enough refineries to refine our own gasoline. It is not that there is no source of crude in the USA, it is just that we refuse to drill for it or process it because of our red tape and environmental policies. We want to complain about the cost of gasoline, but we dont want to have refineries in our own country.
Then what also drives prices up is the market itself. When demand is up, then speculators move in artificially raise up the price for crude oil through market speculation, to beyond what the demand and supply curve require. This creates an OIL Market Bubble, similar to the housing market bubble. The stock market itself can be a force for evil.
OutHouse
Lifer
- Jun 5, 2000
- 36,413
- 616
- 126
exactly
on a side note, did you know that Burlington Northern & Santa Fe RailRoad (BNSF) has its own POLICE force? i don't mean security guards packing heat but a POLICE force with full rights to arrest you and charge you. BNSF is a private company so if they can get a police force why cant the Federal Reserve?
A "private" corporation that sets it's greater policies from Congressional mandate, regulates through laws passed by Congress or regulations passed by the appropriate boards, is overseen by Congress, and has it's governors chosen by our government.
Please drop the "private bank" stuff. It's a quasi-government entity, regulated and overseen in most cases by the Government but kept at arms length to attempt to give it isolation from political hackery.
Exactly. The Fed is owned by entites such as JP Morgan and Goldman Sachs, the very ones that need to be regulated heh.
Moreover the US government has also given the Fed access to US taxpayer money do underwrite it's policies without any accountability to the US taxpayers in return.
And it's also owned by every other bank in this country that is part of the NA, which is already regulated by the Fed. All this is doing is taking Thrifts from the OCC and also taking some power from the SEC, to regulate financial entities under one body.
This changes absolutely nothing, since almost all major regulations are set by Congress, enforcable by the agency and many other regulations are set by industry boards (such as FASB), still enforced by accountants (private companies) and other regulatory bodies.
The Fed does have accountability through Congress, so nice try.
If I was mean I'd say Congress is a toothless old cur that licks the hand that feeds it (various big money interests). If I was polite I'd say Congress isn't exactly known for being very efficient in enforcing accountability.
Which is a function of the American people and no different than any other regulatory situation we are currently in.
This is just a move towards making inside hackery easier imo. Inside hackery with direct access to taxpayers funds, if need be, with a toothless Congress for nominal oversight. What could be sweeter.
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