As Mata pointed out, the market tumbled four percent today in response to the horrible “fix” for the economy Obama and company announced. Martin Wolf at Financial Times muses….has Obama’s Presidency already failed due to the passing of TARP? They will now own the coming disaster, which could of been averted with some common sense and innovative fixes. Instead, after tomorrow, Obama and his cohorts will have become part of the problem by failing to acknowledge the true depth of the problem and how to really fix it:
Has Barack Obama’s presidency already failed? In normal times, this would be a ludicrous question. But these are not normal times. They are times of great danger. Today, the new US administration can disown responsibility for its inheritance; tomorrow, it will own it. Today, it can offer solutions; tomorrow it will have become the problem. Today, it is in control of events; tomorrow, events will take control of it. Doing too little is now far riskier than doing too much.
~~~…so far as I can judge from Tuesday’s sketchy announcement by Tim Geithner, Treasury secretary – also in the new plans for fixing the banking system. I commented on the former last week. I would merely add that it is extraordinary that a popular new president, confronting a once-in-80-years’ economic crisis, has let Congress shape the outcome.
The banking programme seems to be yet another child of the failed interventions of the past one and a half years: optimistic and indecisive. If this “progeny of the troubled asset relief programme” fails, Mr Obama’s credibility will be ruined. Now is the time for action that seems close to certain to resolve the problem; this, however, does not seem to be it.
All along two contrasting views have been held on what ails the financial system. The first is that this is essentially a panic. The second is that this is a problem of insolvency.
Under the first view, the prices of a defined set of “toxic assets” have been driven below their long-run value and in some cases have become impossible to sell. The solution, many suggest, is for governments to make a market, buy assets or insure banks against losses. This was the rationale for the original Tarp and the “super-SIV (special investment vehicle)” proposed by Henry (Hank) Paulson, the previous Treasury secretary, in 2007.
Under the second view, a sizeable proportion of financial institutions are insolvent: their assets are, under plausible assumptions, worth less than their liabilities. The International Monetary Fund argues that potential losses on US-originated credit assets alone are now $2,200bn (€1,700bn, £1,500bn), up from $1,400bn just last October. This is almost identical to the latest estimates from Goldman Sachs. In recent comments to the Financial Times, Nouriel Roubini of RGE Monitor and the Stern School of New York University estimates peak losses on US-generated assets at $3,600bn. Fortunately for the US, half of these losses will fall abroad. But, the rest of the world will strike back: as the world economy implodes, huge losses abroad – on sovereign, housing and corporate debt – will surely fall on US institutions, with dire effects.
Personally, I have little doubt that the second view is correct and, as the world economy deteriorates, will become ever more so. But this is not the heart of the matter. That is whether, in the presence of such uncertainty, it can be right to base policy on hoping for the best. The answer is clear: rational policymakers must assume the worst. If this proved pessimistic, they would end up with an over-capitalised financial system. If the optimistic choice turned out to be wrong, they would have zombie banks and a discredited government. This choice is surely a “no brainer”.
The new plan seems to make sense if and only if the principal problem is illiquidity. Offering guarantees and buying some portion of the toxic assets, while limiting new capital injections to less than the $350bn left in the Tarp, cannot deal with the insolvency problem identified by informed observers. Indeed, any toxic asset purchase or guarantee programme must be an ineffective, inefficient and inequitable way to rescue inadequately capitalised financial institutions: ineffective, because the government must buy vast amounts of doubtful assets at excessive prices or provide over-generous guarantees, to render insolvent banks solvent; inefficient, because big capital injections or conversion of debt into equity are better ways to recapitalise banks; and inequitable, because big subsidies would go to failed institutions and private buyers of bad assets.
~~~Assume that the problem is insolvency and the modest market value of US commercial banks (about $400bn) derives from government support (see charts). Assume, too, that it is impossible to raise large amounts of private capital today. Then there has to be recapitalisation in one of the two ways indicated above. Both have disadvantages: government recapitalisation is a bail-out of creditors and involves temporary state administration; debt-for-equity swaps would damage bond markets, insurance companies and pension funds. But the choice is inescapable.
~~~The correct advice remains the one the US gave the Japanese and others during the 1990s: admit reality, restructure banks and, above all, slay zombie institutions at once.
Let the market correct itself. Many of these banks, much of them insolvent, need to into bankruptcy….and trying to keep them upright with taxpayer funds is no way to right this ship.
After tomorrow, one of the biggest deficit spending sprees will take place and our children and their children will pay dearly for it.
See author page
sooo, when they burn through this next round of money will they be asking for more? they never should have gotten the first round, this is insane. when you give you kid money to get on his fett and pay his rent and house hold bills because of some minor or even magor set back, and they party and buy a new fish tank do you give him more money the next month? i wouldn’t. i know many parents who would and have, and they never learn their lessons. when is enough going to be enough? obama has failed, he will now own this financial disaster. he had the ability to turn crap around, to let what should fail,fail, but he thinks if he comes rushing in, handing out money that hasn’t even been printed yet he can be the hero. umm, nope, sorry. he is a loser who bought and promised his way to where he is and he is undeserving of the office he holds.
And yet, come 2012 (under the fairly likely assumption his approval ratings don’t warrant a primary challenge), Obama will be whining endlessly that it was all Bush’s fault and he had nothing to do with it. (Why not? He’s pretty much been doing that since he got sworn in. BTW, did Bush blame Clinton to the same degree when he took over eight years ago?)
The question isn’t whether or not Obama will own any economic mess that results from the pork bill. The question is whether or not a majority of voters will believe he’s at fault.
If life isn’t better in the average American household by spring 2010, Spidey… or appears it’s improving… no amount of blame by Dems and Obama should be able to change the traditional American response to politicians’ failures. And that is a change in the some (or all) of the balance of power in Congress.
The Dems have only so much time to make good on their promises with results that meet with the American public’s approval. And no media will be able to mask public disappointment in the Dem’s absolute power and their failures.
There is no one to blame anymore. The GOP can’t stop them. They won’t join them in their failure (save a few). And Dubya’s in Dallas, enjoying his lovely wife and life.
naw… say it ain’t so, Curt. Obama part of the problem? LOL
Actually, great article by FT’s Wolf. And a wonderful follow up to my market post. You know, I could generally care less about a day in the life of the US stock market. But today… following the much heralded Geithner speech, combined with the Senate passage of the “government cure”, I just couldn’t resist.
Indeed, by not rejecting what has already proven *not* to work, and forcing the less-than-perfect (ain’t that an understatement…) simulus, Obama has definitively taken “ownership” of his government economic “cure”.
Wear the onus well, President Obama. I wish you success in taking responsibility for your stubborn ineptness with the grace any POTUS should.
A terrific article on the Obama “bubble burst” for many issues appeared on American Thinker Feb 4th by Victor Davis Hanson.
Another article I read (can’t remember which one now) stated that what Obama chooses to do in his first hundred days shapes the rest of his term. Make the wrong first moves, and he makes every subsequent decision trying to get back to ground zero… or Inaugural Day… again to start over.
Hanson’s American Thinker article nicely sums up Obama’s first missteps in his first 30 days, let alone 100! Hallmarks of one too inexperienced for the job.
Well, it wouldn’ t be “extraordinary” if it was a MANIPULATED crisis. GEORGE SOROS (and radical left super rich friends) absolutely could pull it off. Anyone remember that SNL sketch with the “Sandlers that caused the big stir?” Or the secret “rich people only” party in San Fran (that’s where Obama coined his “cling to guns and religion” mantra.
The “crisis” of course first started with the banks. Are you aware that the GAZILLIONAIRES Sandlers cashed out their “ARM” business to Wachovia JUST before the meltdown, PERFECT TIMING? It was the Golden West Financial (the Sandlers’ ARM business) deal that crashed Wachovia. Let’s just say the Sandlers speak the George Soros patois, all part of the “radical left let’s change America” billionaire club.
I dug this article out of my files from IBD a little over a year ago.
http://www.ibdeditorials.com/IBDArticles.aspx?id=275181103776079
It would take a lot to convince me that this was NOT a manipulated “meltdown.” Don’t forget also that Soros is the granddaddy of Hedge Funds (the epicenter of the bubble). I doubt HF’s would even exist if it weren’t for Soros.
It also fits that if it WAS a manipulated meltdown, the last thing that Obama would be doing now is “fixing it.” After all, if my theory is correct, the goal is to MELT, to bring us to our knees, so desperate that even communism would look good. Consequently, it makes perfect sense to me that a “popular president would let (want), Pelosi and Reid to write the plan.”
Good heavens, pdill… stop with the same ol’ same ol’ conspiracy crap.
Hang, I’m not economist and I saw this housing meltdown coming as early as 2004. Just wasn’t sure when and how bad it would hit since who knew what would happen in the middle.
Yeah, Soros is a scum bag. Lots of scumbags in Washington and in the lobby ranks. But so sorry… Soros couldn’t mastermind the entire world’s near simultaneous meltdown but in his dreams. Or perhaps you haven’t been noticing the near parallels of the UK and sundry other countries over the past year and a half? Then again, not unusual for American’s not to look outside our own borders. We are such a narcissistic bunch.
What you purport sounds good for a sci fi novel and a Hollywood liberal flick, but this isn’t some Bond/Spectre plot to take over the world. You’re losing a grip on what is the old fashioned reality of corruption and downright political stupidity that goes back over a decade in it’s decline, and needed several events to come to this perfect storm result. And I’m here to tell you, Soros isn’t even a gnat on the elephant’s butt of influence.
And BTW, hedge funds are not the epicenter of the bubble. You are many steps past the originating problem that, in turn, affected the hedge funds.
Do the math:
2/3 of all subprime loans were made by entirely private sector financial institutions, with no Fannie/Freddie involvement. 2/3 of all subprime loans were for re-financings, investment homes (often intended to be “flipped”), and vacation homes. Less than 10% were for first homes for first time borrowers. Of these, less than 1% (by value) were for Barney-Frank-Democrat-style Community Reinvestment Act-type loans for poor people. Fannie/Freddie can be criticized only for following the herd mentality that there was big money to be made in the sub-prime market.
Why did the meltdown occur?
George W Bush gave a trillion dollar tax cut (i.e. government-financed “stimulus,” as all that money lost by virtue of the tax cuts had to be borrowed — see below) to the wealthiest Americans
Then Greenspan kept Fed rates artificially low, in a desperate attempt to stimulate the economy enough to allow for sufficient growth to minimize the growth of government debt caused by the tax cuts. The combination of the tax cuts and low interest rates created a capital glut, in which too much money was looking for too few investment opportunities (with the obvious bubble in the overvalued equities market). So this created the need for exotic vehicles, such as mortgage-backed securities and credit default swaps, to insure the mortgage-backed securities. This investment demand led to the predatory lending practices, such as “teaser” introductory interest rates. It wasn’t the government “forcing” banks to make bad loans to poor people which was the problem, it was just a bunch of greedy people, from mortgage brokers working on commission to banks like Wachovia to securities firms like Merrill Lynch, all trying to churn profits out of an economy with too much capital.
Reaganomics was a disaster for the country. If tax cuts really stimulated economic growth sufficient to overcome the debt generated by the tax cuts, then ratio of debt to GDP would fall. But many a beautiful theory is ruined by an ugly fact:
President(s): Debt as a percentage of GDP (beginning of term -> end of term):
http://zfacts.com/p/318.html
Truman 90% -> 72%
Eisenhower 72% -> 55%
Kennedy-Johnson 55% -> 38%
Nixon-Ford 38% -> 35%
Carter 35% -> 32%
Reagan-Bush 32% -> 67%
Clinton 67% -> 57%
Bush 57% -> 69%
This is what Obama means by “failed policies.” I’m against doing anything to further increase debt, but, between the Dem plan and the GOP plan of just more tax cuts, I’ll hold my nose and side with the congressional Dems.
Supply side economics should be relegated to the dustbin of history, where it so richly deserves to be.
With regard to the New Deal and the Depression, people are fond of saying that the New Deal didn’t get the country out of the Depression, World War II got the country out of the Depression. Well, WWII was just a big massive government spending program. The problem with the New Deal was simply that it wasn’t big enough to totally solve the problem, but it obviously helped keep it from being worse than it was. The current economic problem is not nearly as big as the Depression; so we don’t need a World War to solve it.
The GOP is basing its entire future viability on the stimulus package failing. Obama is basing his entire legacy (and re-election prospects) on the stimulus package working. If the stimulus really does work and the economy recovers and we make it through the next 8 years without being nuked, Obama will get his face on future US currency, and the GOP will be dead for a generation.
Item: real estate sales are now up 70%, compared to a year ago, in Orange County, California. California is the nation’s canary in the coal mine. Do you really want to bet against this guy?
– Larry Weisenthal/Huntington Beach
@openid.aol.com/runnswim:
You trotted out those “2/3 of subprime mortgage” figures on another thread.
I asked you for a source there but you’ve yet to provide it.
You also trotted out those debt to GDP figures on the same thread.
Those arguments were refuted as well.
The New Deal extended the Great Depression by seven years.
Talk to us Larry about the depression of 1920 and how the lack of gov’t intervention allowed it to run its’ course.
Some of us have learned the lessons of history. Some, not so much.
Real estate sales by volume in CA may very well be up 70%.
Talk to me about the property values attached to those sales.
Being able to buy a home today for $175K that was valued just a year ago at $300K may very well be creating an increase in sales, but that’s nothing to brag over.
Sorry, I haven’t been on this blog for several days. I’ll go back and see what you said, then reply.
– Larry Weisenthal/Huntington Beach, CA
Aye, what Larry does repeat each time the subprime subject comes up is that he blames the meltdown only on the private sector of lenders/loan originators issuing no doc, lo doc, interest only, ARMs etc to the less than stellar credit worthy.
But that he evidently believes it was okay for it to be done if the CRA banks were doing it.
This is blatant lending discrimination…. creating a loan only offered to a small segment of the population (minorities with bad credit), and even then *only* offering it thru particular banks in particular areas of the nation. These theories are as absurd as they are offensive.
The fact is our economic works on free market competition. Since the demand for these loans was high, more mortgage facilities – both banks and mortgage brokers – offered them. You cannot tell the private industry not to offer a loan package that Congress has mandated be made available thru others. That’s just plain unAmerican.
It is not, Larry, the fault that both CRA and private lending institutions offered bad product for the secondary mortgage market and securitization. It is the fact that this bad product was mandated by Congress to be issued to begin with.
Speaking of an offensive theory:
Let’s straighten out your thinking here, Larry. The reason Congress had to borrow is because they… like spoiled rich children…. overspend their allowance. The only way the government can “finance” anything is by taking it from me, the tax payer. It is not theirs, it is mine. When you bring in less income (for a time, as lower taxes historically have brought in more tax revenue for business expansion), you are supposed to cut back on expenses.
Congress… like those spoiled rich kids… doesn’t know how to “cut back” on anything. That’s because they have no conscience about spending other people’s money.
Genuine “stimulus” is never taking that money from our pockets… not “spending”, as Obama says. The only spending stimulus comes from the private sector, not government. Because what government spends, we no longer have it ourselves to spend. If Congress genuinely wants “instant stimulus”, they’d make sure the next paycheck Americans’ receive had more in it by cutting back the government take.
And if there ever was a bad manager of money, it’s government.
Economics is really simple at it’s foundation. Do not spend more than you earn, and do not overleverage when you invest.
What happened was multiple events that got us here…. the creation of exotic loans for “a special class of people” (the unqualified minority…); skyrocketing housing prices because of the new flood of unqualified buyers at the existing inventory; unnaturally high housing prices held hostage at that overinflation by Greenspan’s handling of interest rates; and Congress pushing the GSEs and allowing banking institutions to overleverage all this bad, inflated paper.
Fact plain and simple, if the defaulted assets were worth the price of the promissory note, we would not be in this pickle. One defaulting buyer were merely be replaced with another qualified buyer. People would still have equity in their homes if they didn’t refi/or purchase with 100% loans…. and thereby still be able to spend.
But I sure would appreciate if you didn’t advocate discrimination in lending practices, Larry. Or perhaps you think it’s okay to offer special loans to unqualified, but only if they are a minority.
@openid.aol.com/runnswim:
I missed this recycled gem in your post above Larry.
EVERY American who pays taxes got a tax cut under Bush, Larry.
Everyone.
Your “wealthiest Americans” assertion is patently false.
If you’re going to debate here, at least be intellectually honest in your efforts.
WAKE UP, PEOPLE! The left does not view any of this as a problem. The left views it as an OPPORTUNITY. And indeed, an opportunity of its own making. Pressure and intimidate banks/lending institutions into ridiculous, impossible loans to deadbeats, illegals and even the unemployed with the long term plan of government takeover of those institutions. That was the story years ago. And it has come to fruition. The left is buying up and shutting down the free market. This group of Marxist thugs is having a ball! There is no problem as far as they are concerned. We as conservatives have the only real problem. And that is our silly belief that anything but scamming, scimming and criminal activity are occuring.
Geez, OldPuppy… To say the multiple events it took to end up here were carefully planned orchestrated is giving the Dem/liberal/progressives more credit than they deserve. Frankly they aren’t that smart. Congress members (both parties) are, as they have ever been, just short sighted and underinformed.
A prime example of this is the switch from NTSC format to digital broadcast, originally mandated to be done by 2006. That’s because they were clueless to what it entailed for the industry, and how much it would cost.
Politicians are just a particular breed of human… manipulators and public mouthpieces that are really dumb in most arenas, and highly susceptible to corruption.
But this grand scheme you guys concoct? Way beyond their ability. And it would require the aid and abetting of way too many that are *not* trying to change the US over to marxism…. Come on, Greenspan? Bush 43? Corporate CEOs??? Get a grip.
Mata for starters I’m not a conspiracy theorist, nor do I waste my time reading sci fi books wearing my tin foil hat. George Soros and “friends” were the reason I left the Democratic Party. I could back everything I’ve written with documentation, but to be honest, on this board, it would be wasted.
For the record, I don’t jump into these debates to win, merely to state my case. I’m sorry if that doesn’t line up with your dogmatic talking points.
If you want to underestimate Soros, so be it. The reality is, Obama would not have won the presidency without him. You are more than naïve to under estimate the power elite in this country, OR, the deleterious effect of UNREGULATED hedge funds on the economy.
Anyone who can add up electoral votes can clearly understand that Obama could not have won without the Catholic vote. Thanks to “atheist” George funding bogus left wing Catholic “abortion rights” groups, Obama won the Catholic vote.
http://www.catholicleague.org/release.php?id=1496
A great trick/agenda of the MSM is to “appear Catholic” when the agenda is actually anti- Catholicism. It’s an easy thing to do being the faith is already weakened by a demoralized culture. I can assure you that many Catholics who voted for Obama had no idea that Catholics in Alliance for the Common Good and Catholics United were left wing radical front groups funded by George Soros.
This is just one example, albeit one that a 3rd grader could deduce.
All said, our problems are still rooted in pure evil. As long as we are a country that kills our babies and lives in moral relativism, we have no hope. Consequently, we get the leadership we deserve. If that’s too doom and gloom for you Mata, delete me. It’s reality.
Mata and Aye:
I’d be very interested in having a general discussion (particularly with the two of you) of the economics behind the financial meltdown, extending to what Obama may be doing right and what he’s doing wrong. I’ll take responsibility for the rather disjointed and random nature of our discussions on this. I tend to jump in and out, make random comments, then, a few days later, check to read the latest going on, make more random comments, and we never really take it to the point where it gets talked out and we all just agree to disagree.
I think that we can learn something by talking to each other, which is the main reason I do this stuff (plus, it’s fun).
Would it be possible for the two of you to agree on a single thread (maybe start a new one: “Conservatives and Liberals Debate the Economics Behind the Financial Meltdown and the Way Forward” or whatever?) That way, we wouldn’t lose track of the debate, because it’s spread over too many threads. This could be sort of an ongoing thing. If one of us got busy and went away for awhile, he/she could then just come back, look for designated thread, and continue from where he/she left off, after getting caught up on the interim comments.
???
– Larry Weisenthal/Huntington Beach, CA
Ya know, pdill, I don’t delete comments unless they are those already on Curt’s ban list, or other extremely rare occasions.
That said, I look at your comment to me, filled with personal condescending platitudes like “dogmatic talking points”; “more than naive” and “albeit one that a 3rd grader could deduce”…. and I have to scratch my head. Strikes me as you’ve leaped into a hypersensitive reaction to my quite casual comment to you about your (and OldPuppyMax’s) idea that all this is some deliberately planned and “manipulated” grand scheme.
At least OldPuppy didn’t make Soros the grandmaster of design for this orchestrated manipulation of the US (and evidently the world) markets in order to take over America in the name of Communism….
yeaaash… Hard to say who’s losing it faster under this Obama presidency. The extreme right wing or the Ron Paul Libertarians.
If you don’t consider Soros and friends mastermining the crash of the US – no, the world economy – all of which requires the help of very non Marxists types like Treasury Secretarys, corporate CEOS, Fed Reserve Chairmen and a GOP POTUS to boot, a conspiracy theory, I’d be darn interested in learning what you *do* consider a conspiracy theory.
I surely don’t need a lecture from you on Soros’ contribution to getting Obama elected. Consisder this “meltdown” started with a sequence of events commencing in the mid 90s, Obama was but a hopeful running for Jr. Senator of IL. This is all far fetched, considering the time frames, and amount of players that would have to be cooperative, and the global vision it would take.
Sorry… you say I underestimate Soros. I don’t. But neither do I overestimate him, as you do.
And if you think that securitization and hedge funds is at the heart of the economic crises… instead of first housing/lending/mortgages/interest rates… then it’s not me who is “more than naive”, as you say. I did *not* say that hedge funds *do not* play a part. They were a piece of the perfect storm events, but only after previous multiple events transpired.
To PDill:
You say:
You also claim:
Yet, long before Soros was involved in promoting the Obama candidacy, Catholics were already having the highest abortion rate of any recognizable demographic in the country. This goes back way before Soros:
http://www.beliefnet.com/Faiths/Christianity/Catholic/2001/01/The-Catholic-Abortion-Paradox.aspx
I don’t think that there is any justification whatsoever for claiming that Soros “delivered” the Catholic vote for Obama. It’s a mistake to claim that moral, observant Catholics could not have voted for Obama:
http://ncronline3.org/drupal/?q=node/2058
– Larry Weisenthal/Huntington Beach, CA
@MataHarley:
Heh.
The ear pinning, eyebrow singing post came before I could even post my prediction that it was coming.
So is Astrophysics, at it’s foundation (v=d/t). It gets more complicated. Also, unfortunately, as a science it’s closer to Astrology than Astronomy when it comes to predicting outcomes.
While waiting for the word from Mata/Aye if they’d be open to starting a single thread on which to debate the economics of the meltdown and the way out:
1. Reference for my claims that most of the subprimes had nothing to do with Freddie/Fannie and most were for re-financings, 2nd homes, investment properites, and that the CRA had nothing whatsoever to do with it:
http://bigpicture.typepad.com/comments/2008/10/private-sector.html
nb: I’ll post more primary source links when I have time.
2. Bush tax cuts went primarily to wealthiest Americans:
http://www.cbsnews.com/stories/2004/08/16/politics/main636398.shtml
http://www.nytimes.com/2006/04/05/business/05tax.html?pagewanted=1
400 richest Americans’ incomes doubled under Bush tax cuts; economy collapsed
http://www.cbpp.org/2-4-08tax.htm
3. One of Mata’s points:
Quoting me:
Mata responds:
Since we are all trying to be intellectually honest, let’s at least recognize that borrowing money to finance a tax cut is just as much of a government-driven “stimulus” as is borrowing money for the government to spend money.
Bush cut taxes WITHOUT cutting spending! If he’d cut spending, that would have been one thing. That makes sense. Cut spending. Then, since government needs less money, cut taxes. But cutting taxes without cutting spending, when the government is already running a deficit, is simply the government borrowing money to stimulate the economy. No tax cut (since Kennedy cut Eisenhower’s 90% marginal tax rate) ever came close to paying for itself by generating sufficiently increased economic activity.
The two presidents who most increased the debt and debt/GNP ratio were Reagan and Bush 43. That’s because Reaganomics is a fraud (Reaganomics defined as cutting taxes in the hopes of starving the beast, which NEVER happens — i.e. the beast refuses to be starved). I’ll discuss this some more later, after I’ve dug out Aye’s prior comments on this.
I couldn’t agree more. But I’d also add one more caveat: Don’t borrow more than you can repay in your own working lifetime.
– Larry Weisenthal/Huntington Beach, CA
Regarding the 70% increase in Orange County CA home sales, relative to one year ago:
Here’s a history of real estate valuations (from http://zillow.com):
Past: This
home 92649 HB Orange CA US
30 days -0.4% -2.1% -1.2% -1.7% -2.2% -1.5%
1 year -3.7% -13.4% -13.4% -20.1% -23.5% -10.5%
5 years 22.1% 7.6% 4.7% -2.7% -4.9% 14.5%
10 years 107.3% 119.6% 116.7% 99.2% 88.0% 78.4%
Where “This Home” = my home and 92649 = my zip code and HB = Huntington Beach and Orange = Orange County and CA = California and US = USA
Now, what can be seen is that Orange County home prices are down 20% during the past year, but that this 20% drop has finally triggered a very marked surge in purchases. From this, I deduce that it will take a further drop from 10.5% (for the rest of the USA) to 20% before there is a marked uptick nationally. This is what I mean about CA being the canary in the coal mine, as it virtually always is.
Yes, home prices are down, but it’s only a 20% drop — it’s not like 50% or more, which would make all those outstanding loans truly “toxic.” And the average time to sell bank foreclosures here in Orange County is only one month (compared to about 4 months for non-foreclosure sales, which is down from more than 8 months a year ago and which is about at historical records).
So I conclude that all those “toxic” loans may not end up being that “toxic” afterall. This is doubtless why Geithner feels that he can privatize the liquidation of those “toxic” loans, without putting the Federal Govt on the hook for an imprudent amount.
I’m going on record as predicting that Obama is in the process of pulling off one of the greatest political coups in American history. He has everyone (including European economists and Flopping Aces contributors) convinced that we are headed for an economic catastrophe. He has the GOP staking its political future on his “stimulus” package failing And then, not only is the economy going to rebound much faster than everyone is predicting, but he’ll have sneaked in many of his campaign pledges (tax cuts for middle and lower income America, green energy investment, education assistance, infrastructure spending, etc.) as a bit of a Trojan horse.
We can then proceed to argue whether borrowing money to spend a trillion dollars on Iraq was better or worse than borrowing money to spend a trillion on tax cuts for the middle class and the rest of Obama’s agenda.
– Larry Weisenthal/Huntington Beach, CA
Larry W #20
Today I, like you, am dashing in and out of the blog, so this is also somewhat disjointed.
Two flaws with your bigpicture link. Again, you do not take into consideration the illegality of Congress mandating lenders to provide loans to a special class of people (unqualified buyers allowed to get a loan because they are a minority…) and the private sector also not being able to provide those loans.
Again, the issue is not that only *some* lenders should be able to package volatile assets, but that *no* one should be packaging volatile assets.
Bigpicture’s quoted data are all from one year… 2006. These loans have been in existence, and increasing in popularity, since the late 90s. Any particular reason he wants to focus on just 2006 and prounounce that the “big picture”?? Guess he should rename his site “small snapshot”.
Also, he claims it was the banks pressuring the GSE’s to take a higher percentage of these loans. Incorrect. It was *also* Congress and those worried that the lucrative market was passing them by. Competitive banks were, in fact, asking Congress to rein the GSE’s in.. as you will see with some quotes below.
There’s actually a very good series on the NYTs (hard to believe…) called “The Reckoning”.
From the one titled Pressured to Take More Risk, Fannie Reached Tipping Point:
That was 2004.
Let’s go back earlier, shall we? Same article, but this time under the tutelage of Franklin Raines
Now the pieces for the increase risk are taking us back to their intents by the year 2000… six years earlier than your “big picture” wants to view.
The “Big picture” also blames the GSE’s increase in risk solely on the banks. Not so…
Let’s go back even further to their first forays into this subprime/minority/risky loan business… like say 1995? From the NHI Oct 1995 ShelterForce Online Issue #80 about Fannie/Freddie New Rules…
This issue came out, of course, almost simultaneous to Clinton’s Treasury Secy, Robert Rubin, being busy in the back room rewriting the CRA compliance rules for banks.
The die was cast, the path to increasing risky loans by those that set the standards (the GSEs) was laid… over a decade ago.
“Big Pictures” poo poohing of the 1999 article/announcement that Fannie/Freddie were entering the subprime purchasing business is just plain being blind. Within one year of the NHI’s issue announcing the GSE’s new policies, Fannie/Freddie obligated to buy over $2 trillion of mortgages by 2010 of these subprimes, and pressure to buy more of these was coming hot and heavy from Congress, as I’ve just demonstrated.
Shall we fast forward to the present? After two years of campaigning that this financial mess was “all Bush’s fault”, Obama has this to say:
This is shorthand for the process, of course. The banks AND the GSE’s were encouraged to take these “exorbitantly wild risks” by Congress. And since securitization and the secondary mortgage market have been around for a long time, it was inevitable that these “risks” were going to be passed on.
Again, the problem is not the system that allows assets to be bundled and sold. The problem is bundling and selling risky assets.
Have you completely lost it, Larry?? Most of us here, and especially me, have said this stimulus will do nothing but make life worse. Real estate activity has been picking up since just after Jan 1st… and yes, price values are going down as they should. This is, as I have always said, a needed market correction.
All of this improvement, BTW, would and is coming without the “stimulus”. It is, as FA has said, unnecessary spending.
Therefore the only “political coup” is Obama incurring the greatest debt in the shortest amount of time…. needlessly.
Some coup to have on your record.
BTW, it is Obama who is “convinced” we are headed for economic disaster/catastrophe if Congress doesn’t pass his spending.
Care to reconcile the facts now?
Mata, the ugly fact is that more than 2/3 of the all the subprime loans were made by lending institutions which had no connection at all to Fannie/Freddie/Federal Govt — period. And more than 2/3 of the loans were for re-financings, 2nd mortgages, investment properties. And a truly tiny amount (by dollar value) went into CRA-type loans. No one put a gun to their heads — they were motivated by hoped-for profits. There’s nothing unusual about 2006, by the way. I’ll provide more links, when I have the chance.
By the way, something else I read is this: of all the scores of banks which have failed during the financial meltdown, not a single bank executive has ever blamed any federal government mandates or policies for their problems.
– Larry Weisenthal/Huntington Beach, CA
A lending institution doesn’t have to have any “connection” to the GSEs, Larry. Most mortgages end up there anyway. You are probably unaware that when loan officers/lenders take applications, they run the borrowers thru either LPI or DU… each is the Fannie/Freddie automated underwriting guidelines. It is based on the GSE’s scoring and assessment that they base their loan packages… whether it’s an accept, A- or reject, for example. There’s a reason for this… and I repeat… because *most* mortgages end up in the GSEs.
Secondly, you still keep separating CRA. Your reality has become so narrow on how the free market and product demand that it’s impossible for you to get a grasp on this. You just want to say “we’d be fine if we just discriminated and only allowed for risky loans in a small amount thru special banks and only a few special people”. Wha????
And of course you won’t hear a bank executive blame any federal government mandate or policies. Talk about biting the hand the feeds you…. why would they do that when it’s from the very same they’ll get the bail out dollars??
duh wuh…
It’s not “discrimination” based on “people;” it’s based on neighborhoods.
The problem was red-lined neighborhoods and slum lords.
The government could have spent billions putting up housing projects or it could have encouraged pride of ownership. By virtually all measures, the CRA was a great success.
Now, I do understand the fundamental disagreement between people who think the government shouldn’t do anything at all, save provide national defense, and those who think that the government is capable of making at least some problems a bit better. We’ll never close that gap. But, in terms of the various things which government has tried to do to improve social problems, the CRA was one of the better (or less bad, depending on point of view) social programs.
Geo W Bush was himself an advocate (a strong advocate) of improving housing opportunities for disadvantaged communities.
– Larry Weisenthal/Huntington Beach CA
Larry, low and/or moderate income “redlined” neighborhoods were traditionally minorities. And it *is* “people” because lending is not done to “neighborhoods”… loans are given to individuals. It’s an industry that couldn’t be more “people” oriented. Thus, the lobbying done (such as ACORN) in the name of redlining was founded on discrimination against the neighborhood minorities who resided there. It became a racial argument in the court of law…. one you are chosing to ignore now to detract from their activities and lawsuits.
The risk comes into play because of those currently residing in the redlined ‘hoods couldn’t qualify for loans with standard criteria. If they could, they could afford to move out of those neighborhoods. And sometimes the home itself wouldn’t meet a lender’s criteria for value or condition.
My business *is* real estate, and I had many that used these “exotic” loans successfully, and have not defaulted. They were a great financial tool for many… those that wanted to buy, but still had credit clean up to do. Investors who wanted no paperwork for a flip and preferred an interest only loan, etc.
Financial tools are like any other tool… they can be used wisely. And they can be abused. But then, I’ve always been very picky about what lenders and appraisers surround me. Those I know in the lending business refused to do loans when they felt the borrower was in over his head based on their documentation. Ethics. It was people like that who ended up on the defending end of an ACORN lawsuit, BTW.
Now what makes you think 25 some odd CRA banks can service all the “redlined” neighborhoods in the nation? Impossible. The demands for these loans all around the nation – and in all areas, including rural – could not be serviced by only the CRA banks. Free market. Demand = opportunity.
But that opportunity would not exist if it wasn’t blessed by Congress, regulations, and the GSEs. Private banks, without the acceptance of resale on the secondary market by an accepting Fannie/Freddie, would not have done them.
And, it was an opportunity that should never have happened. Period. All the good intents in the world do not make up for bad business practices.
I have no problems with improving housing opportunities. FHA, rural housing loans, etal were great tools, along with the various nonprofit gift organizations such as Ameridream, HART, Libery Gold, etc. However even then, loans were wisely not made until Fannie/Freddie lowered criteria for repurchase of these loans.
Compound that with the abnormal and dangerous inflation of housing, and it was no surprise to me years ago that this was definitely a chicken that would come home to roost.
And speaking of slumlords, you mean like Obama’s prominent Chicago friends who were beneficiaries of Obama’s political achievement for slumlord subsidies? Ironic, eh?
As for the government’s involvement in our economic environment, Obama and the Dem Congress are using the media bully pulpit to scare the nation into thinking if they don’t pass this stimulus, the economic world will bottom out. Far from it. Homes and real estate never go out of vogue. Lending must return to reasonable (not easy, and not overly strict) standards as it used to be. And prices must again fall into affordable lines. All this is happening… sans the stimulus. I’ve always felt this spring would return to more stable times. Felt that way for two years now. I see nothing in the latest activity and trends to change that opinion.
However piling on the stimulus spending is going to have repercussions. Such spending is likely to cause inflation. Raise interest rates to control inflation, and home prices will be driven down further, potentially leading to a new block of foreclosures.
But Obama’s banking on time. If they pass the stimulus, and there’s even one good news about real estate and the credit world within 24 hours, they’ll proclaim it’s because of the stimulus.
Nothing could be further from the truth.
On the flip side, if this stimulus could be delayed, it would become obvious… just as it has to you with your upscale market area… that the stimulus is not necessary. Rather like the ultimate proof to the AGW types will be the future years of no rising oceans and global warming.
But it will take time for the damage they are about to cause with this stimulus to become apparent. They may try to claim success, as you are trying to do for them prematurely. But the fruits of their dangerous meddling will become apparent.
While I was initially convinced that the CRA and government-encouraged minority lending were the principal motive force behind this collapse, further reading has convinced me otherwise. These were bad policies and they did lead to hundreds of billions of dollars in losses; you can even make a case that it was this particular chunk of bad debt that set off the current avalanche. Certainly we would have been better off without these policies.
However, the worldwide extent of the deleveraging, and the magnitude of the total debt that is causing problems, both indicate that subprime US mortgages alone can’t be the main driver of what’s going on. The total size of the subprime mortgage pool is only $500 billion (source). If that alone were the source of our troubles, we could pay them all off and say we got off cheap (compared to what we’re proposing to spend these days).
Instead I’d say that increasing levels of debt and leverage simply made the world’s financial system unstable. The total level of US debt reached such levels that it gradually became clear that there was no way that all of these trillions of supposedly AAA-rated debt-backed securities (not just home mortgage, but also credit cards, commercial paper, commercial real estate mortgages) could possibly be worth their full face value. The subprime mess (which was basically a vehicle for fraud, at the end) just set off this bomb – but something else would have caused it to collapse, sooner or later, in any case. Between 1975 and 2007 the ratio of total debt (public and private) to GDP increased from 155 percent to 355 percent – because while production increased eightfold, our debts increased twentyfold.
I believe that a long period of low interest rates (not just the Fed, but also and maybe especially the Bank of Japan) made this problem much worse than it had to be.
One interesting event that I haven’t seen covered much: on Sept 18, 2008, following the initial unfolding of the subprime debacle, some entity or entities withdrew $550 *billion* dollars from US money market funds over the course of two hours (source). This is what panicked Paulson. I believe this was an unwinding of the yen carry trade (the yen appreciated 20% in the following month), but obviously I don’t know.
One other piece worth reading, as regards the current crisis: Steve Keen. The main takeaway from this is that controlling the money supply (M0, M1 or whatever) via a central bank does nothing to protect you from an actual expansion of debt, because debt is not constrained by the money supply in the way that orthodox economists propose. I think Keen underestimates or ignores the role that central banks can play in controlling debt expansion by setting interest rates, but his article is still good as a way of debunking some incorrect conventional ideas about money.
Mata, you are preaching to the choir. I’ve been saying all along that I wouldn’t have given a nickel to Wall Street and I wouldn’t spend a nickel on a stimulus. And I wouldn’t give a nickel in tax cuts and I’d let the Bush tax cuts sunset, so that we can get back to lowering the debt/GDP ratio, once again.
I’ve only tried to make these points in all of this:
1. Between having the government borrow money to spend on infrastructure, education, green energy, and assistance to local government on one hand and more across the board tax cuts (e.g. the McCain plan) on the other hand, I’ll hold my nose and go with the former.
2. It’s an exaggeration to refer to this as Obama’s trillion dollar spending plan. There’s only $350-$390 billion in spending and a similar amount in tax cuts. This should be compared/contrasted with GW Bush’s $trillion in Iraq War spending and $trillion in utterly unnecessary tax cuts, where the $trillion in tax cuts contributed to the capital glut which was the proximate cause of the financial meltdown.
3. Strictly as a political move, Obama is in the process of pulling off one of the great coups in history. He’s (1) convinced everyone that there’s a financial crisis of epic proportions; (2) he’s got the GOP on record as being squarely against him; (3) he’s got a stimulus package passed and shortly signed into law which fulfills most of his major campaign promises relating to economic matters. When the economy rebounds ahead of schedule, which it will, he’s going to look like a hero and the GOP is going to look like fools.
Now, you guys are forecasting Armageddon, financially-speaking, attributable to the stimulus. But this is wild exaggeration. Again, the scale of what Obama is going to be signing into law — red ink-wise — is much smaller than the Bush expenditures on Iraq and the huge/unnecessary/harmful tax cuts to the wealthy, to say nothing of the Bush/Paulson $700 billion Wall Street bailout.
I loved your reference to the global warming controversy. Near and dear to my heart. But I already “gave” on Mike’s previous threads.
– Larry Weisenthal/Huntington Beach, CA
Larry W:
Larry for starters, you quote an almost decade old article from Beliefnet, a secular newspaper that gets ‘anything Catholic’ right about as much as it snows in Hawaii. As for the other article, did you miss the past 6 months of debates of at least 100 US Bishops who spoke out? One Bishop in Scranton, to the shock of many, showed up at one of their rallies and denounced them!
That said, I’m not here to defend or deny the many Catholics who get abortions, but that’s the point. I would have to bore you with endless references to inform you of all the ways Soros has used his money to weaken the Catholic Faith in America. From the ACLU, ACORN, disguised “catholic” groups, the media, TV, and of course, the universities. Soros has been at it for well over two decades. Catholics, at least in name, IF they voted as Catholics, could get anyone into office. If you don’t think the left knows that, you haven’t been paying much attention.
Soros always tries to look good, and often uses other groups to carry out his agendas.
What I find most interesting is that we finally elect a black president, and he’s the poster boy of black genocide. Notice he didn’t waste a minute (100% NARAL rating) in “cranking up the abortions” as soon as he hit the Oval Office. Thirty seven percent of all abortions are on black women, which is astounding considering only 14% of the US population is black. And of course, most abortion centers are in black neighborhoods. Do you think that’s a coincidence? The other targeted group of course are the Latinos; combined, making up the majority of all US abortions.
How can you Larry, or anyone who looks at these stats, honestly believe that Obama is here for the little guy, or most of all, his own race? Far worse than a bogus stimulus will be the day America finally wakes up to the deception. And for the record, “moral, observant Catholics, did NOT vote for Obama.” The reality is, the number of them left, is simply too small to matter, at least in terms of a majority vote.
Larry W… I thought your Obama coup theory was actually worthy of a post. You can see my comments in response there.
bbart, it was never *just* risky loan lending criteria. This was truly a perfect storm of events that all had to happen to get to where we are today. And hand in hand with the risky lending was the housing prices inflation.
This housing price inflation – driven by the influx of new borrowers and risky loans world wide (yes, including England all on their own), combined with the interest rates staying low was also a large contribution.
Passing on the bad paper enmasse all played a part. All these overvalued assets – not only from America – make their way into the int’l pool, jeopardizing their leverage.
And don’t forget even revolving credit ties back to solvency… and for many, that also includes their housing asset. Real estate truly is one of the pinnacles for making the world’s economy go around.
In short, there is no ONE cause, even internationally. But easier money, leading to market flooding, and low interest rates is an *originating* cause for the economic avalance events the global economy experienced world wide.
@openid.aol.com/runnswim:
Well, well.
Where to begin?
(Forgive me if some of this is redundant in relation to what has already been posted. We’ve been kicking this mortgage horse for awhile. He’s got lots of bruises.)
FannieMae (FNMA) and FreddieMac (FHLMC) were founded for the express purpose of creating a secondary mortgage market. In other words, banks write mortgages, Fannie and Freddie then purchase those mortgages so that the bank has its’ money freed up to loan to the next person and so forth. The kicker, however, is that in order to have access to the secondary markets, the originators of the loans were forced to comply with the standards of Fannie and Freddie.
So, one cannot say that banks are “disconnected” from the GSE’s. That’s just not true.
Fannie and Freddie, at one point, owned up to 90% of all US mortgages, accounting for 46% of the national debt.
Congress exempted Fannie and Freddie from the FDIC Bank Holding Company Act capital/asset ratio reserve limit of 3%. This freed them up to leverage their assets.
In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers and specified that approval standards include the recipients of unemployment and welfare payments as sources of income.
HUD, under Clinton, established “quotas” for both GSE’s to insure 50% of all their loans be to minorities by 2001. Since the GSE’s are secondary markets, they applied pressure to originating banks to make more minority loans. In the past, the GSE’s prohibited “redlining” (the practice of refusing loans based on the neighborhood.) In the 1990’s under Franklin Raines, a Clinton Admin appointee, Fannie began to demand that lenders prove they were not redlining. Because of the pressure on the lenders from Fannie and Freddie approval standards were lowered in terms of incomes and down payments. In turn, the borrowers were charged higher interest rates.
The Zero Down Payment Act of 2004 requires the FHA to offer mortgages with 0% down-pmt. Down payment assistance market develops to exploit loophole. In 2005, FNMA revises its loan approval criteria to support post-hurricane rebuilding.
Having forced the lenders into lowering lending standards, Fannie and Freddie then had to accept lower standards in the mortgages they purchased.
The train was on the tracks and moving.
If a lender wrote a mortgage that was likely to default, no problem, just sell it off to Fannie and Freddie. The banks earned their fees for the origination etc.
Furthermore, Fannie and Freddie offered default insurance, even on mortgages that they didn’t buy outright. This soothed the nerves of the banks who were forced into accepting, and abiding by, lowered standards.
Fannie and Freddie had created a market for creative, risky, “exotic” mortgages which were then passed off from the originator putting the GSE’s on the hook.
These originators knew the risks to the borrowers from adjustable rates but it didn’t matter because ultimately they had nothing to lose.
These risky mortgages were bundled along with others that Fannie and Freddie held and were then sold off onto the market, thus spreading the disease.
Once Fannie and Freddie got into trouble and it became evident to the banks that the toxic assets would have to remain on their books reality set in on the banking sector. Their “out”, selling off the paper to the GSE’s, or cashing in on the insurance, had vaporized creating panic, and in some cases, outright collapse/takeover situations.
So, add the risky practices, the spreading of the disease, and the accounting irregularities together and you end up with a huge amount of culpability for Fannie and Freddie.
The disease (the forced lowering of qualification standards), the failure of Fannie and Freddie, and the presumed backing of the US gov’t for that toxic paper is the root of what happened to the mortgage market.
This is a prime example of what happens when you try to run your organization based on social welfare goals rather than financial reality.
This is an example of what happens when the gov’t gets involved and begins tinkering with the free markets where they have no business.
Anyone who tries to extract Fannie and Freddie from blame doesn’t understand how the mortgage markets work.
@openid.aol.com/runnswim:
One final post on this topic Larry and then I promise you can go wipe the blood off.
You contend that the “wealthiest Americans” received tax cuts. Well, you’re right. The wealthy did receive tax cuts, as they should have. However, so did every other American who pays taxes.
Everyone who pays taxes got a tax cut under the Bush plan.
Everyone.
The tax cuts offered to the lower brackets were actually more expensive in terms of not being offset by increased revenue. Aren’t those the ones that should have been eliminated since they didn’t pay for themselves?
Considering the rate of taxation that the upper percentages are burdened with, why shouldn’t they receive tax cuts?
Considering the opportunities, jobs, careers, and value that those people offer to American society as a whole why should the be discriminated against?
You go on to post a variety of links including cBS, the NY Times, some blog, and the Center on Budget and Policy Priorities (a liberal think tank and Soros money recipient).
Under the Bush tax plan the burden of tax responsibility actually shifted toward the rich:
Larry, in 2006:
In 2000 (pre-Bush):
The economy experienced a significant period of growth in the quarters following the tax cuts:
Yes, I believe that the rich had every right to get a larger percentage of the tax cuts. I’m a big fan of equality. You’ll have to forgive me for proudly espousing true American values.
Of course those, like yourself, who disagree with tax cuts were perfectly free to send in a check to the IRS to offset those horrible, unspeakably evil tax cuts you received, if indeed that’s how you really felt about the issue.
It’s easier though to cash the check, enjoy the windfall, and bitch about it all the while.
Sort of like all those globaloney warm-mongers who whine, gripe, complain, and look for ways to control the lives and tax the rest of us all while they drive their big cars and fly around in their fancy jets.
As I asked you on the other thread, is it hypocrisy or just lip service?
This thread sure turned into a fascinating experience, going to read everything again in the morning hoping everything Mata and Aye just gifted us with will stick in my memory. Either of you feel like adopting me?
Thanks for giving me credit; at least it was an original idea, as opposed to the usual cut and paste which is the mother’s milk of blogs like this.
– Larry Weisenthal/Huntington Beach, CA
Okay, Larry…. got to take serious exception to the quip “an original idea, as opposed to the usual cut and paste which is the mother’s milk of blogs like this”.
Being newer to the blog world, perhaps you’d like an intro to the way it recycles news for debate. Most of us are ordinary working joes/josephines like you. We don’t have the time to be investigative reporters for original stories.
What most blogs do is take a news story, excerpt the points we want to address, add our own op-ed thoughts to it, and open it to debate in the forum. Therefore, “cut and paste” forms the source of the debate… and it’s generally from a major media outlet.
On occasion any of us (or some readers in the Reader Posts) may do an entire op-ed with no “cut and paste” referenced from the article that gave them the inspiration. Nothing wrong with that, but since we are generally concerning ourselves with commentary on the news and the way the news is presented via the media, it doesn’t form the mainstay of the blog.
I assure you, if this were nothing but original op eds and no source references to back up the opinion, you’d be very bored indeed.
Oh, good grief; I just spent two hours (3AM to 5AM) responding to Aye’s posts # 32 and 33 and I lost everything when I jumped between Firefox and Safari to look something up and came back to find it had all disappeared. Totally my stupidity — should have been doing this in some offline text editor.
I’ll have to be very brief, for now, and without nice quotes and links.
(1) Mortgages: With regard to the origins of the financial meltdown, we are definitely going around and around. Aye is tossing of lots of true/true/unrelated stuff. True the government has encouraged lending to expand opportunities for first time homeowners. True that there has been a financial meltdown. But unrelated.
2/3 of subprimes were for re-financings, 2nd homes, investment properties. 2/3 were cases where both primary loans and secondary securitization markets were entirely outside the Fannie/Freddie sphere. Only 10% were for first time homeowner, owner-occupied homes (targets of federally-related programs related to mortgage lending). And only a truly minuscule amount (by value) were loans to residents of poor neighborhoods with bad credit ratings.
Not a single executive of a failed financial institution blamed the government for his/her institution’s failure or for his/her fiduciary failure! This speaks volumes.
(2) Tax revenues. Bush inherited a $5 trillion debt and left a $10 trillion debt. He borrowed $5 trillion. Of course tax revenues went up! If I borrowed $1,000,000 from my Bank of China platinum VISA account and spent it in local malls, the sales tax revenues of Orange County would also go up! duhh.
(3) Tax revenues correlate with GNP (Aye’s point on the other thread, which he cribbed from the Heritage Foundation website). Another duhh. As if anyone would expect otherwise? Point being? And with respect to Bush budget deficit being due mainly to excessive spending. Another duhh. He declared war and cut taxes (a first for a war time President) and borrowed money to pay for the war from China, rather than asking Americans to buy war bonds. And he expanded entitlements without expanding taxes to pay for them. And so on. He spent too much and taxed too little. Reagan did precisely the same thing. That’s why the Debt to GDP ratio skyrocketed under both, where it had fallen under all other post-WWII presidents.
As an aside, the Heritage foundation website comes right out and admits that tax cuts don’t pay for themselves with increased revenues. But they make an entirely disingenuous statement. They say that “just because tax cuts don’t pay for more then 90% of the lost revenue….” Well, reality check, they don’t even pay for 30% of lost revenue. Even conservative economists agree with this. Try and find a single reputable economist who claims that tax cuts come anywhere near paying for themselves.
With regard to Aye accusing me of being a hypocrite for not mailing in extra tax money, beyond that which I lawfully owe, under current tax laws, if I am a supporter of a return to Clinton-era tax rates (which I am), I’ll again repeat that I’m not into personal gestures. I’m willing to shoulder my share of the burden, while others are shouldering theirs; I agree entirely with Joe Biden that it’s patriotic to pay taxes to support, for example, the soldiers who are laying their lives on the line for me in Iraq. But I’m not into symbolic gestures. I think that most people can understand that this is not being hypocritical.
– Larry Weisenthal/Huntington Beach CA
I quoted an old article to make the point that there were plenty of Catholics in favor of allowing abortions to be a matter of personal conscience, long before Soros was contributing money to support these activities. You’ll say those weren’t “true” Catholics, but your writings on this have been about how Obama couldn’t have gotten elected without the Catholic vote, which you don’t otherwise qualify as being the “true Catholic” vote.
I am never impressed when someone argues with data by disparaging the source (“well, that was published in the New York Times: what do you expect?”). If the Beliefnet article got their data wrong, then refute the data.
– Larry W/HB
@openid.aol.com/runnswim:
Pardon me for asking, but did you just call me a thief?
I looked up the widely accepted definition of “cribbed” and, by golly, I do believe that you did.
Let me just caution you here. No one calls me a thief.
No. One.
Every source was cited.
Of course you knew that already since you knew that the information came from the Heritage Foundation site.
So, back up your accusation with some sort of proof.
Attack my arguments if you like, but never, never attack my honor or integrity.
Thin ice Larry.
Very thin ice.
***
As for the rest of your post, I’ll consider whether it’s worthy of a response as soon as this house keeping matter is resolved.
Aye. I certainly did not intend to call you a “thief.” “Cribbed” is a term which I’ve been using for decades, and mainly applying it to myself, as in, “I cribbed the following from David Brooks’ analysis in his NYT column,” and go on to discuss whatever it is that I want to discuss. I’m simply giving credit where credit is due, so that people don’t think that the source of this brilliant analysis is me.
So, I am very sorry for this apparently careless choice of words, which, again, I applied with the affection of familiarity and not out of disrespect, and I would be honored if you were to take the time to consider and respond to the rest of my post.
Just for fun, I entered the following search term in Google, and got 58 hits:
“larry weisenthal” cribbed
Now, I can search for myself using several other terms
Weisenthal/Huntington Weisenthal/HB LWeisenthal LWeisenthal/Huntington LWeisenthal/HB runnswim etc. and I could extend this from regular Google to Google Groups and I’m sure that, between them all, I’d pull up hundreds of occasions where I’ve used this term, never once accusing anyone of “theft” in the process.
– Larry Weisenthal/Huntington Beach, CA