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Tuesday, 30 September 2008
Which was stupider -- Pelosi's speech, or the Republican reaction to it?
Reading through various accounts of the breakdown in Washington yesterday, I kept running across the fact that some Republicans blamed a speech by Nancy Pelosi at the outset of the voting for so many Republicans voting against the bailout plan. And sure enough, it was pretty awful:
$700 billion. A staggering number. But only a part of the cost of the failed Bush economic policies to our country. Policies that were built on budget recklessness. When President Bush took office, he inherited President Clinton’s surpluses — four years in a row, budget surpluses, on a trajectory of $5.6 trillion in surplus. And with his reckless economic policies, within two years, he had turned that around.
And now eight years later, the foundation of that fiscal irresponsibility, combined with an anything goes economic policy, has taken us to where we are today. They claim to be free market advocates, when it’s really an anything goes mentality. No regulation, no supervision, no discipline. And if you fail, you will have a golden parachute, and the taxpayer will bail you out.
Those days are over. The party is over in that respect. Democrats believe in a free market. We know that it can create jobs, it can create wealth, it can create many good things in our economy. But in this case, in its unbridled form, as encouraged, supported, by the Republicans — some in the Republican Party, not all — it has created not jobs, not capital, it has created chaos.
One has to ask, what the hell was the woman thinking? After days of leaders of both parties struggling to come up with a deal that could pass the House, she talks like that as the voting starts? Was she trying to make it fail? Did she think the only problem at that point was that she needed to get the more angry, partisan Democrats to vote for it, and they needed to be whipped up? What?
Or was it just the usual -- that people who live by partisanship just don't even notice themselves when they say stuff like this; it just comes out?
I don't know, but I do know this -- that's a lousy excuse for Republicans to use to vote against it, because, as Barney Frank put it, their feelings were hurt. No, the Speaker should not have said those things. But if this was the plan that Republican negotiators had agreed was the thing to do, you don't just throw that out because somebody on the other side spouts a bunch of foolishness. The economic health of this nation is not a tool for you to express your displeasure with your opponents' rhetoric.
Just disgusting all around. Every time I look at this situation, I just get more and more disgusted. I realize that's not a particularly constructive reaction, but that's the one I have.
Posted by Brad Warthen at 10:40 AM in Business, Democrats, Economics, Parties, Republicans, The Nation
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Here's the New York Times article on the Clinton administration move that began this mess.
That's right, bud, Nancy, Harry, Barney, Goober, Gomer, Aunt Bea: CLINTON!
--------------------------------------------------------------------------------
September 30, 1999
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Posted by: p.m. | Sep 30, 2008 10:52:48 AM
Nancy didn't have a good day. She should have showed restraint. But her assessment of the situation was spot-on.
But the GOP. My gawd, what kind of excuse is it to say someone said mean things about them so they vote against the public interest. I don't really buy that. I think they were going to vote against the bill all along but Boehner just used Pelosi's speech as an excuse.
Let's try again. Maybe the third time will be the charm. The stock market seems to be pretty upbeat today so perhaps this isn't as alarming as the pundits and the Bush folks would have you believe. We'll see.
Posted by: bud | Sep 30, 2008 10:56:23 AM
The Republicans did not vote against this lousy bail out bill because of Nancy Pelosi's arrogant diatribe. They have heard lots of her nonsense.
They voted against it because Pelosi excluded most of Congress from the process, claimed the bill did one thing, when it really did the opposite, and was larded up with billions for unions, student loans, even an attempt to ban offshore drilling.
40% of Democrats voted against it.
65% of Republicans voted against it.
90% of constituents calling and writing opposed passage.
64% of Americans polled opposed it.
Posted by: Lee Muller | Sep 30, 2008 11:05:14 AM
This fantasy land that Democrats live in where they actually believe the ultimate cause of this financial crisis is Bush's fault and not the relaxed lending standards which they caused must be a wonderful place. Please tell papa smurf I said hi.
How can such a large group of people actually believe something that is not supported by one fact? I just don't get it.
A bigger question is when is McCain going to start going nuclear with the truth and will Americans listen? Judging by some of these posts, the answer to the latter is never. Unbelievable that the fundanemental position of a presidential candidate is based on a lie and so many buy it. Now that is a very very sad indictment of our country.
Posted by: Jimmy | Sep 30, 2008 11:11:12 AM
pm,
Subprime loans took on a life of their own as a securities packaging and guarantee in 1993.
In 1992, subprime mortgages comprised 2% of loans.
By 2000, subprime mortgages comprised 20% of loans.
- Source: Mortgage Insurance Association Report of July 2008.
Posted by: Lee Muller | Sep 30, 2008 11:11:16 AM
Bud, regarding the stock market today: Check out the jump in the LIBOR rate and give your local banker a call and ask to refinance your mortgage. The thunderous laugh you get and the staggering rate quote will tell you the fallout of yesterday's vote.
Posted by: Jimmy | Sep 30, 2008 11:13:24 AM
Jimmy says "Unbelievable that the fundanemental position of a presidential candidate is based on a lie and so many buy it. Now that is a very very sad indictment of our country."
You're talking about McCain's statement that the fundamentals of the economy are strong, right? There's a clip on Youtube now showing him saying the same line over and over starting in January and as recently as September 15. That was the biggest lie any candidate has perpetrated on the American public.
Posted by: Doug Ross | Sep 30, 2008 11:23:13 AM
You can't make this stuff up... the McCain campaign just released a statement for him that opens with this line:
"We are in the greatest financial crisis of our lifetimes."
This is the guy you want as President? A guy who treats every situation as if the sky is falling?
Posted by: Doug Ross | Sep 30, 2008 11:29:13 AM
In all fairness, it was President Bush who wanted this plan to pass. Why can't she state the beliefs of many before leading a vote that resulted in 60% of her party supporting the President?
Posted by: Matt Bohn | Sep 30, 2008 11:40:38 AM
There were ninety-four democrats that voted against the bailout, they did not need a single republican vote to pass this bill.Hmmmmmmmmm
Posted by: John | Sep 30, 2008 11:44:39 AM
Wow the GOP spinmeisters are out in force. The Bush economic team has had 8 years to address any alleged shortcomings with the Clinton policies, most of that with GOP control of congress. That's the bottom line here. Everyone could see the coming housing bubble was about to burst. That is something that did not occur overnight nor did it start with Bush, or Clinton for that matter. But Bush and company have been in charge, not the Democrats for the past 8 years. Before that the GOP had control of the congress for 6 years during the Clinton administration. And the regulatory climate was clearly a manifestation of the Reagan mantra. Contributing to the mess was the staggering deficit spending resulting from military adventurism and huge tax cuts for the wealthy.
Let's be clear on this. For about 8 years following the Clinton era changes to Freddy and Fannie housing prices grew at phenomenal rates, home ownership was at record levels and debt was soaring. And everyone was ok with all of this. Heck, Bush even took credit for helping create the highest rate of home ownership in history as a 2004 campaign issue.
No one talked about the problems. To suggest that the Republicans were in the least bit alarmed by all of this is simply not true. They pushed for deregulation after deregulation and stridently called for economic growth as a savior.
This problem is the result of greed by many. Greedy home buyers who got in over their heads by taking out mortgages that could only be paid for by unrealistic growth in home equity. Greedy lenders who hoped to profit from the same bubble. Politicians who campaigned on the promise that the economy would only grow at unrealistic rates if their tax cuts were enacted. Indeed this is a problem where much blame is warranted.
But in terms of the current election it's clear that John McCain's bizzare, frantic and misguided actions have shown the world that he is not even slightly capable of dealing with this crisis in an adult fashion. Barack Obama on the other hand has shown intelligence, restraint and common sense in his public comments. Clearly there is only one man who can lead us out of this mess and it ain't the phony maverick from Arizona. His time was yesterday. It's time for a new approach that only Barack Obama can deliver.
Posted by: bud | Sep 30, 2008 12:12:11 PM
I wish I could cut and paste my post from a few weeks ago about the economy but I will summarize. The "economy" is measured by a few indicators, namely the GDP and inflation but also unemployment, consumer confidence and a few others. When McCain made that statement GDP growth was still strong and inflationary pressures had decreased. Unemployment was up and consumer confidence was moving up and down.
McCains original point (though he tried to change it later) was that our Country can survive this "financial" crisis because the fundamental of our "economy" are strong. The fundamentals (GDP and inflation) were in fact strong.
Far from a lie. Financials were in the tank no doubt but if GDP were negative and inflation was through the roof, the financial problem would be multiplied. But either way, this is not a fundamental issue in McCain's platform. It was a statement that could be spun both ways and it was. That is politics.
What can't be spun are the myriad of facts that financial crisis in place because every financial institution has enormous amounts of bad assets known as mortgage backed securities. These exist because of the Community Reinvestment Act. Just look at the figures in the post above. These mortgages are defaulting and banks are having to write off huge sums of money and credit is locking up.
There is no disputing that. And by the way, you can't regulate what statute allows. And another thing, Bush and McCain, on separate occasions, foresaw the danger these bad mortgages posed and tried to fix it, but both were defeated by the Democrats.
Doug, no offense, but your position is untenable. But, that doesn't seem to matter this election cycle.
Posted by: Jimmy | Sep 30, 2008 12:26:25 PM
This about says it all. Even Brad can see the irony in this excerpt from an AP story:
McCain was on his campaign plane preparing to leave Ohio when the House vote became final. McCain's chief economic adviser, however, issued a statement that blamed Obama.
"This bill failed because Barack Obama and the Democrats put politics ahead of country," McCain senior policy adviser Doug Holtz-Eakin said.
When he reached Iowa, McCain told reporters: "Now is not the time to fix the blame, it's time to fix the problem."
Posted by: bud | Sep 30, 2008 12:29:38 PM
Bud,
If you don't understand how a party can control the house and still lose a vote on an item their party supports, please resort to reviewing the 10,000 headlines about yesterday's vote. Just because you control Congress does not by any stretch of the imagination mean you control the fate of every bill. Otherwise, the bailout would have easily passed yesterday. But I guess, on the flip side, you make a really good case why the Democrats are actually to blame for the bailout defeat. Democrats control the house and have the numbers. Why in the world did it no pass?
Posted by: Jimmy | Sep 30, 2008 12:31:24 PM
Bud,
We can agree that both campaigns put out dumb a)* comments now and then and that was certainly one of them. I do think McCain is running a terrible campaign so far.
Posted by: Jimmy | Sep 30, 2008 12:32:37 PM
The smartest thing Obama and his campaign are doing is allowing McCain to demonstrate his leadership capability by repeatedly shooting himself in the foot.
By laying low, he allows the American public to see what the next four years would look like. The polls show that McCain's stock is dropping across the country, particularly in swing states.
All Obama has to do is ride it out and it will be Clinton/Dole all over again.
Unfortunately, that will not bring me any sense of relief as I expect an Obama administration to be one where I will end up paying more taxes for more government that has repeatedly proven it can't do the job. I also expect Obama to throw an olive branch to McCain by ramming through a disastrous immigration amnesty bill that will only serve to damage our economy even more. It will also undoubtedly unleash the full forces of hell from the Limbaugh/Hannity/O'Reilly lemmings.
So maybe we should enjoy the moment, because it's only going to get worse.
Posted by: Doug Ross | Sep 30, 2008 12:43:35 PM
Pelosi's speech was uncalled for--everyone talks about needing bipartisan support, and then she says stuff like she did. Unbelievable. What's more unbelieveable is that even a single Republican changed his or her vote because of Pelosi's speech.
I believe the bill failed because constituents threatened their representatives' jobs if they voted for it. Democratic and Republican Representatives were voting in their personal best interest rather than in the interest of the country. Their political fortitude was tested and found to be lacking.
Many are calling this a change election. I prefer to think of it as a throw the bums out election.
Posted by: Norm Ivey | Sep 30, 2008 1:21:31 PM
Jimmy are these the post you were looking for. You actually had two.
The below was posted previosuly by Jimmy.
Unfortunately, the only thing fundamentally flawed is Bud's understanding of what is the "economy". Bear Stearns, Lehman . . . not so much.
Economy is suffering from fits and starts right now based almost entirely on the housing crisis. (Nugget: The credit crunch is also a SYMPTOM of the housing crisis, not a function of the "economy").
Bush and McCain tried fixing a primary causative factor of the housing crisis years ago but were blocked. (See discussion below)
What's really sad is the Obama campaign now sees a great opening for the dying presidentail run and McCain's camp is not cohesive (and maybe smart enough) to shut this pathetic little argument down.
Obama may win this presidency just yet. Not because he deserves it but because his better equipped opposition can't get his crap together.
Posted by: Jimmy | Sep 17, 2008 10:32:37 AM
Oh and Tim, the more the votes are actually educated, the more Obama's poll numbers will slide. You better hope this argument stays at the 10,000 foot level.
Query: Which political party actually favors home ownership for all? And how do you think you open home ownership to those that don't have a $100 to put down or a paycheck to cover a traditional loan?
Sub-prime goes hand in hand with no money down, 5% down and no proof of income mortgages. The villain in the dark are the bond rating agencies. Where were they when these securities were being traded as investment grade and cash equivalents?
Posted by: slugger | Sep 30, 2008 1:23:52 PM
Doug, Limbaugh/Hannity and O'Reilly would love an Obama presidency. What a perfect foil for their right-wing rants.
On the other hand, Jay Leno, David Letterman and SNL must be licking their chops at the possibility of a Sarah Palin Vice Presidency. She makes Dan Quayle look like Albert Einstein.
Posted by: bud | Sep 30, 2008 1:28:24 PM
Thanks Slugger. That was it.
Posted by: Jimmy | Sep 30, 2008 1:29:13 PM
Slugger, there are many problems with our economy besides the housing bubble and related credit crisis. Have you bought gasoline lately? It's difficult and expensive to find. Even with sharp drops in the price of oil a barrel of West Texas Intermediate is still more than twice what it was just 2 years ago. That cost is making a major contribution to the cost of everything including food. That leaves less money for other things. It also has put a damper on the auto industry.
Other factors include the crazy medical system we have to deal with. Any illness is likely to wipe a family out. Perhaps that is contributing to the housing bubble. Likewise the cost of college is way up, forcing people to borrow. The huge tax cuts that were suppossed to magically solve everything have resulted only in creating massive budget deficits. And then there's the various hurricanes and droughts hitting at inopertune times. Wages have been stagnant for years, a major factor no doubt in household debt as folks try to keep up their standard of living.
So while the housing bubble may be at the heart of our problems many other factors are in play. The wonder of it all is that the economy is doing as well as it has. About the only things keeping it propped up are the low value of the dollar thus making our goods cheaper abroad and helping with foreign tourism and plenty of government spending (perhaps one good effect of the war in Iraq).
Posted by: bud | Sep 30, 2008 1:41:03 PM
Bud, I think calling Palin stupid is a bit of a stretch. Is she out of her league right now, yes. Stupid, I don't think so.
Posted by: Jimmy | Sep 30, 2008 1:44:05 PM
There are many things wrong financially with our great nation all made by man (except weather problems). You do not need to put a label on who did what and when. What we need now is a large dose of extraction. If it is true that Barney Frank's boyfriend works for Fannie Mae, the the fox has known by being on the banking committee what has been going on and he is trying to save the henhouse?
I heard Obama making a speech a few minutes ago where basically he was promising the poor that when they elect him they will not be poor anymore.
I have a few dollars that I have invested and I resent the heck out of letting anyone involved in the current economic tragedy go without punishment. Heads need to roll over what has happened.
Posted by: slugger | Sep 30, 2008 2:08:32 PM
I thought this was an interesting analysis of the impact of re-election campaigns on the votes of both Dems and Repubs against the bailout:
http://www.fivethirtyeight.com/2008/09/swing-district-congressmen-doomed.html
The conclusion here is that the Dem/Repub vote was essentially split except for those up for election in tighter races. For those in closer races, the vote was heavily against the bailout. For those retiring, the vote was heavily for it.
Posted by: Susan | Sep 30, 2008 3:08:20 PM
"So while the housing bubble may be at the heart of our problems many other factors are in play. The wonder of it all is that the economy is doing as well as it has. About the only things keeping it propped up are the low value of the dollar thus making our goods cheaper abroad and helping with foreign tourism and plenty of government spending (perhaps one good effect of the war in Iraq)"
Be careful Bud. You are bordering on saying the fundamentals of the economy are strong despite the ongoing financial crisis.
Posted by: Jimmy | Sep 30, 2008 3:27:11 PM
