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First, thank you for responding courteously and seriously.
I do have a simple question.
If things are the way you claim, i.e. that Democratic senators BLOCKED regulatory reform in 2005 (the title of this thread), then how, precisely, did they “block” it? With 122 House Democrats voting in favor, indicating that there was no way of threatening a serious filibuster, then how did they “block” it?
Even more to the point, Republicans are looking down the muzzle of an election debacle of the type that they haven’t seen since 1964. Republicans are looking at the potential of a filibuster proof Democratic majority in the Senate. Why in the world are no Senate Republicans making the charge that the Democrats BLOCKED their “reform” efforts? Why? I think that the only credible explanation is that they themselves succumbed to the pressure of Wall Street lobbyists. What is your explanation?
The idea that this was caused by a demand for credit by purchasers, as opposed to a demand for purchasers by lenders is refuted by the very existence of the 2/28 mortgages which lured so many unqualified buyers into the housing market. If there was such a demand by would-be purchasers, then why in the world would lenders invent such a predatory lending instrument?
The concept that the Community Reinvestment Act (which was the Jimmy Carter/Bill Clinton program to expand home ownership) had anything at all to do with the financial meltdown cannot be supported by any objective data.
In post number 95, I provided links to data which refute the charges relating to the Community Reinvestment Act and also to Ben Bernanke’s explanation of the root causes of the subprime crisis.
P.S. Hi, Mata. I’m flattered you spent so much time addressing elements of my post on your other thread. I’d be very pleased to debate you, here, if you’d like, but I’ve got an actual day job and I can’t keep track of postings on multiple threads. It’s one of the good reasons why thread etiquette discourages the initiation of spin-off threads which pertain directly to the subject matter of existing threads. Having a running debate on multiple threads at the same time is just more than I can handle right now. But you are certainly very knowledgeable, and I would be honored to engage you on this particular thread, should you have an interest in so doing.
Larry: Are you confusing the House and Senate? The House vote had nothing to do with the failure of the Senate to take up the bill, which passed out of Committee on a straight party line vote with ALL Democrats voting against it. The tracks after that are less clear but the bill never came to a vote. There’s an unfortunate habit in the Senate for a handful of members to threaten a filibuster without actually going on the record and effectively killing legislation. How convenient for Democrats.
But Dems record on obstruction on Fannie/Freddie reforms is CLEAR even if you don’t want to see it.
As for a Senator reminding people who it was that blocked reforms, I recommend you tune in to Tuesday’s McCain-Obama debate.
I tried to append the following paragraph to post number 101, but I got a message which said “this comment has been marked for moderation and can’t be edited.”
Why was I “marked for moderation?” Did I say anything offensive? If so, it was entirely inadvertent, as I was trying to write in a respectful manner.
P.S. Hi, Mata. I’m flattered you spent so much time addressing elements of my post on your other thread. I’d be very pleased to debate you, here, if you’d like, but I’ve got an actual day job and I can’t keep track of postings on multiple threads. It’s one of the good reasons why thread etiquette discourages the initiation of spin-off threads which pertain directly to the subject matter of existing threads. Having a running debate on multiple threads at the same time is just more than I can handle right now. But you are certainly very knowledgeable, and I would be honored to engage you on this particular thread, should you have an interest in so doing.
Mike, my comment is that the threat of a Democratic filibuster wouldn’t have been credible with 122 House Democrats having voted in favor. It takes 41 votes to sustain a filibuster, which would require a near unanimous vote. The House vote indicates that there was no possibility of achieving that level of unanimity. There are many fiscally conservative Democratic Senators, just as there are many fiscally conservative Democratic House members.
I will watch Tuesday’s debate. I’ll be very anxious to hear precisely how the Democrats “blocked” GOP attempts at reform.
By the way, this is a really great blog. There are a lot of smart people who contribute and good arguments are presented in the spirit of discussing honest differences of opinion, which is unfortunately rare these days.
>>This drove up prices… massive demand v limited supply. An error here is how values of comparables should be handled in the future. A bidding war over normal neighborhood prices should not change a loan value. But they did, and the appraisers had to work with the new inflated prices as a norm.<<
If what you are saying has any truth at all to it, then the price of sub-prime loan homes should have risen out of proportion to conventional loan homes. Here in California, sub-prime loan homes made up a comparatively small fraction of the total. Yet the price of all homes went through the roof, with the pace of increase of the most expensive considerably outstripping those at the low end. I’m quite confident that these general principles applied, as well, on a national basis.
Mike, you make the following comment:
>>You can use whatever words you want to describe what Dems did, but the reality is that they succeeded in BLOCKING REFORMS. None were passed were they?<<
But the Republicans controlled the Presidency and both Houses of Congress from January, 2001 to mid-January, 2007. How did the Democrats BLOCK reforms? And why are no Republican Senators telling us how Democrats BLOCKED reforms? It really does remind me of Saddam’s Weapons of Mass destruction. There are still those who, to this very day, insist that Saddam sent them to Syria for “safe keeping,” providing all manner of arguments, including the “testimony” of an Iraqi general (who was generously compensated while making the talk show rounds). I was always willing to consider such a scenario, but only if President Bush himself made the charge, which he never did.
I want to hear a single Republican Senator explain precisely how it was that Democrats BLOCKED reforms. I find the charge to be not just implausible but wildly implausible (122 House Democrats voted in favor of reforms). I’ll seriously consider it when the first Republican Senator who was seated in the Senate in 2005 stands up and makes the charge and tells me how precisely the Democrats were able to BLOCK the bill that McCain signed on to months after it was first proposed by Senate colleagues.
Larry: It’s getting late here on the East Coast, so maybe I am misreading your comment. But again, there is no correlation between a House vote and action in the Senate.
There is also no denying a history of Democrats blocking reforms of Fannie and Freddie just as there is a history of Dems at Fannie and Freddie profiting from that looser regulatory environment.
I haven’t even brought up the fact that a long time “companion” of Barney Frank was an exec. at Fannie and profited directly from Frank’s refusal to admit there was a problem that needed addressing.
And again, do I need to bring up the fact that Obama took more money from Fannie Mae and Freddie Mac bundlers in less than four years than every member of Congress except Senator Dodd who took his “contributions” over a span of 20 years?
Don’t mean to keep you up late, Mike. I have an unfair advantage over you, with it being easier for me to have the last word of the night, being on the West Coast. So I promise this will be my last post of the night and I’ll resume tomorrow night.
>>But again, there is no correlation between a House vote and action in the Senate.<<
No, but, once again, to sustain a filibuster in the Senate would have required a near unanimous vote of Democrats. In 2005, there were 204 total Democrats in the House and 122 voted for the reform bill — a solid majority, in fact. Now it is simply not credible that a solid majority of Democratic House members would vote one way and that there would be a near unanimous (41 out of 43) vote of Senate Democrats in the exact opposite direction. Can you even begin to think of a precedent for this? In either party? Where the majority of the party members in the House voted one way and where there was a near unanimous vote in the Senate the other way?
The title of this thread is about Democrats BLOCKING reforms in 2005. We are both “guilty” of expanding the scope of this complicated mess to a lot of other things. How about we agree to stay on task and simply debate, on this thread, whether or not Democrats BLOCKED reforms in 2005?
After we resolve this issue, then perhaps I’ll have the energy and you’ll have the willingness to pursue the broader issues.
Larry, it’s late morning here and your comment still doesn’t make sense. Action in the House has no impact on what the Senate might or might not do. So 122 votes in the House would not necessarily effect plans to derail the legislation in the Senate.
And as for the title, my conclusion is borne out not only by the research I have done but also by an array of media figures who have commented on this same issue.
It doesn’t serve any point, other than to provide cover for guilty DemocratsVic: Toadbat lives in the Chicago area and it would appear he’s fallen under the same hate America spell that Obama has. I’d ask if he was a member of Rev. Wright’s church but I know he hates Christianity, as well as every other tradtion that has made this country great., to belaboring the matter here of whether and how Dems blocked reforms. You might disagree with my conclusions but thus far you haven’t presented any solid factual material to contradict it.
That seems to be the problem throughout the various comment streams on this topic. Myself and fellow contributors have posted quite a volume of material and naysayers who arrive just say it aint so with only the barest of material to back up their claim.
Well, perhaps we can get Mata to drop in and offer her perspective. She’s much fairer and nicer than I am anyway. You might be able to get her to agree just for the heck of it.
Hi, beginning of my work day and I don’t have time for detailed comments. You are asking me to prove a negative — that Democrats didn’t block reforms. This is impossible to do. It was you who made the statement that Democrats blocked reforms. To my knowledge, all you’ve provided is examples of situations where certain individual Democrats resisted reforms. You haven’t begun to provide any support at all for your assertions that Democrats blocked reforms in 2005.
Maybe it would help if you would, in a single paragraph, if possible, summarize the evidence which supports the conclusion that Democrats blocked reforms in 2005.
Although it is impossible to prove a negative (that I don’t beat my wife, for example or that the Democrats didn’t block reforms, for another example), to me the single piece of best evidence favoring my point of view is the complete absence of Senate Republicans who were actually there in 2005 and who have every motivation to speak out an lay the blame where it belongs, but who are being conspicuously silent on this issue, as the blogosphere is filled with pundits who appear to claim to have inside information (by virtue of the certitude of their assertions), without ever stating specifically what is the evidence that Democrats did, indeed, block regulations which would have prevented the current financial meltdown.
I, too, hope that Mata will agree to continue the discussion on the current thread.
See you guys after tonight’s debate, where I will be closely listening for evidence from John Sidney McCain to substantiate the current charges that Democrats were responsible for blocking regulatory reform at a time when the Republicans enjoyed solid control of the Presidency and both branches of Congress.
The idea that this was caused by a demand for credit by purchasers, as opposed to a demand for purchasers by lenders is refuted by the very existence of the 2/28 mortgages which lured so many unqualified buyers into the housing market. If there was such a demand by would-be purchasers, then why in the world would lenders invent such a predatory lending instrument?
There’s two issues you bring up here.
First, the 2/28 ARM package. For those of you know don’t know, a 2/28 mortgage is an ARM loan with 2 years fixed, and the ensuing 28 years resetting to the adjustable based on prime. That’s a very basic ARM. There were other more exotic ARMs… 3/1, 5/1, 7/1 ARMs for example. Many of these started with a very low rate that increased 1% over each year (3 to 7 years) until it hit the reset/adjustable year.
Most lenders offered ARM loans, including FHA. Fact is, there is nothing wrong with an ARM loan. It was a tool that could be used.. and like any tool, can also be abused.
Candidates for an ARM loan are those who know they will be selling/moving before the reset period. Another candidate for an ARM is those with iffy credit, doing a clean up of their debts. They improve their credit scores, then refinance into a fixed when they have better scores.
You speak of people who were “lured”. Now I don’t know how these ARMs were presented, but with TIL and RESPA laws, plus the other sundry disclosures loan officers must provide, at some point these “victim” buyers had to figure that they weren’t going to have a 3% rate for the rest of their loan. Not one loan officer in the world can tell you what your payments will be on an adjustable rate three years downline because it’s based on the prime… an unknown figure. So there is only so much one can disclose.
If the buyers were under the assumption, after all the disclosures required by law, that they were going to have a 3% loan the rest of their lives, I don’t know what to say. Before they sign on the dotted line, they should inquire with someone they trust. There is always a responsibility of the one who obligates to a contract. And perhaps they can create more educational material in the future for those who just can’t get a grip on the lending/payment process.
But I will not let buyers off scott-free as victims, lured. They may have had bad advice on the specifics of an ARM. But in the long run, if they qualified for $300K, they did not have to buy a $300K house. They could have also bought a $150K house. The US consumer has been living beyond their means and racking up credit for quite some time now.
The second issue … the Community Reinvestment Act
The concept that the Community Reinvestment Act (which was the Jimmy Carter/Bill Clinton program to expand home ownership) had anything at all to do with the financial meltdown cannot be supported by any objective data.
You are entirely incorrect here, Larry. When Carter passed the bill original, lending was different. Most banks could not lend outside their state, or even local areas. They could not bundle and sell interbank either. So their lending risk was not only limited, but remained local.
This, however, didn’t allow for the money to flow for the growing population. Bundling and interbank selling freed up assets for more loans. The securitization era began. Not bad on it’s own unless, as I said before, you’re selling bad product.
Comes Bill Clinton and Rubin, his Secy of the Treasury. They rewrite the CRA compliance rules that mandate banks show x $ amount of performance for minority loans, or sufffer penalities and restrictions. Problem is, with the current lending criteria, most of the minorities do not qualify for a loan.
So they have to lower the lending standards… the only way they can do this without running it thru the automated underwriting programs – where it will get kicked out as a reject – is to create loans that didn’t require certain items. Thus the creation of low doc or no doc loans, and stated income packages. This enabled those who didn’t qualify to get the loan anyway.
Don’t confuse subprime with these loans. Fact is, any of us could get a low doc/no doc or stated income loan. The subprime came into play if your credit scores weren’t up to snuff, or you weren’t employed for enough time in your current job, OR if your income to debt ratio was too high. Subprime means you didn’t get the prime lending rates… you were being penalized because you were more a risk.
If you went to the post I said you “inspired”, or if you read my original “perfect storm” post on Sept 22nd, you’d see that there is direct evidence that home ownership, and home prices went up in the wake of Rubin’s rewrite of the compliance regs, effective 1995.
The home prices were driven up because of the flood of newly “un”qualified buyers purchasing. Hefty demand, limited supply. Add the rates going below the inflation level after 911, and the flood gates were really opened. You say there is no objective evidence, yet you ignore the home ownership numbers and the housing prices skyrocketing after over two decades of reasonable stability and nominal appreciation.
Last, INRE your other comment:
If what you are saying has any truth at all to it, then the price of sub-prime loan homes should have risen out of proportion to conventional loan homes. Here in California, sub-prime loan homes made up a comparatively small fraction of the total. Yet the price of all homes went through the roof, with the pace of increase of the most expensive considerably outstripping those at the low end.
Again, this is not true, Larry. As I explained, the only difference between a subprime and A+ loan is the loan rate. Which is why many of the uncredit worthy dove at the ARMs. The price of houses has to do with supply v demand. With the exotic loan packages available to everyone, and the very low loan rates, EVERYONE took advantage of these financing tools. And not everyone is defaulting.
The reason *all* homes went up in price was because of cheap, easy money for everyone… those with good credit and those with bad. A buyer who had good credit a few years before, and qualified for $300K now could easily get $400K. Since this happened to everyone in all qualification categories, the buying frenzy began in earnest. Bidding wars were the norm. Houses didn’t stay on the market but hours and had multiple offers. This drove up the comparable prices for appraisers, and the house values went up.
With the house values up, home owners who didn’t sell refinanced into low mortgage rates, and pulled out equity. Unfortunately too many of them spent their appreciation on anything BUT the house… another sign of an undisciplined consumer. When the housing prices went down, the unimproved homes weren’t worth the mortgages they had.
So no… I disagree this was unfettered, unregulated capitalism. This was consumers diving at a good thing that started with CRA compliance regulations in 1995, and unwise use of investments and financial tools by consumers.
Larry: I’m sorry I haven’t proved my point to your satisfaction. Perhaps I will just have to content myself with the notion that a good number of political analsyts agree wtih me.
I don’t know how you misconstrue the fact that Dems voted totally along party lines in attempting keep the bill McCain co-sponsored from reaching the floor And I don’t know how you overlook Dems efforts in the House to say there is no problem:
>>The reason *all* homes went up in price was because of cheap, easy money for everyone… those with good credit and those with bad. A buyer who had good credit a few years before, and qualified for $300K now could easily get $400K. Since this happened to everyone in all qualification categories, the buying frenzy began in earnest. Bidding wars were the norm. Houses didn’t stay on the market but hours and had multiple offers. This drove up the comparable prices for appraisers, and the house values went up.<<
But this is precisely my point. The problem wasn’t the CRA. If it were, then non-CRA institutions should have made better loans than CRA institutions. But they didn’t. Quite the contrary, as shown in the studies I sourced earlier.
The problem was too much capital chasing too few investment opportunities. Why was there too much capital? Well, the GOP-controlled government granted the most massive tax cuts in history to the wealthiest Americans in war time, producing large deficits, which put pressure on the Fed to keep interest rates at rock bottom levels, to grow the economy enough to close the deficit and lessen the need to borrow. The combination of the low interest rates and low taxes produced a whole lot of free capital, as intended, but too little flowed into investments into new businesses and expansion of existing businesses or into infrastructure projects. By this time, the corporate equities aftermarkets were massively overvalued. This left real estate. So what drove the financial markets to make bad loans and purchase bad securities was simply the driving force of excess capital, and not the driving force of Democrat-initiated social engineering programs, which, at the time of their inception and even later modification, could never have anticipated the crazy lending situation which had developed by 2005, owing entirely to the presence of too much capital chasing too few investment opportunities.
Mike, I readily concede that certain House Democrats said some really stupid things on CSPAN, but the majority of House Democrats did vote in favor of regulatory reform, and, again, I find no proof whatsoever that Senate Democrats “blocked” regulation reform in 2005 (again, the topic of this thread) and I find the lack of a single Senate Republican making this specific charge to be strong reason to doubt this assertion.
Talk is just that. Talk. Talk is cheap. Here’s an analysis from a non-partisan, academic political science blog:
But this is precisely my point. The problem wasn’t the CRA. If it were, then non-CRA institutions should have made better loans than CRA institutions. But they didn’t. Quite the contrary, as shown in the studies I sourced earlier.
Larry, you aren’t getting this yet, are you.
CRA was the reason for the creation of exotic loans… available to everyone – both subprime and prime borrowers. This became in demand by all borrowers.
These loans were offered by both CRA and non CRA banks because demand was high, and lending is competitive. So I don’t know what you mean by “better loans”… If you are suggesting that the CRA was allowed to offer exotic loans in demand, and non-CRA were not, then you are limiting competition, which also allowed a borrower to get one of those exotic loans at a better price from another institution.
The point is, CRA=exotic loans with low qualification criteria=lots of new buyers=demand for housing raising prices above normal appreciation… a bubble doomed to crash. Period.
The problem was too much capital chasing too few investment opportunities. Why was there too much capital? Well, the GOP-controlled government granted the most massive tax cuts in history to the wealthiest Americans in war time, producing large deficits, which put pressure on the Fed to keep interest rates at rock bottom levels, to grow the economy enough to close the deficit and lessen the need to borrow.
First, you should rewrite your first sentence and stop there. ala
“the problem was too much capital chasing too few over leveraged investment opportunities”
But noooo… you ramble off into tax cuts for the wealthy. Let me remind you that the reason for the low interest rates was not the Bush tax cut. It was plane loads of terrorists slamming into the heart of the US financial district, the Pentagon, and attempts at the White House. That shut down Wall St for a week, and the repercussions of that event economically was exactly what Bin Laden designed.
The rates went low… below inflation… to recoup. It had nothing to do with tax cuts for the wealthy.
You disappoint me. You can’t just throw some blanket BS beef with Bush or the GOP in here that’s unrelated, and expect the guppies to swallow that. You’re hanging on the wrong forum to pull that off.
We both agree that the problem was too much capital chasing over leveraged investment opportunities (nb: I agree that your way of stating it was better). It wasn’t a problem of social engineering; it was an economically driven decision to make those loans in the mid-00s; it wasn’t a socially driven decision.
With regard to the capital excess, it was a combination of tax cuts and low interest. Both contributed. I think that it is a mistake to increase spending and cut taxes in the hope that the tax cuts will generate sufficient economic acceleration to pay for the tax cuts — which is something which has never yet occurred in the last 28 years of Reaganomics. But whether it was a mistake or not, it was the combination of tax cuts and low interest which contributed to the capital excess, and it was the capital excess which was the proximate cause of the present crisis, according to Bernanke and according to other scholarly economic analyses, e.g. http://knowledge.wharton.upenn.edu/article.cfm?articleid=1812
With regard to CRA banks making “better loans,” here, again, is my source:
>>The point is, CRA=exotic loans with low qualification criteria=lots of new buyers=demand for housing raising prices above normal appreciation… a bubble doomed to crash. Period.<<
But the CRA had nothing whatsoever to do with the run up in housing costs here in Orange County, CA, where there have been only a microscopic number of CRA loans, relative to the dollar value of the total housing market. And we are no different than anywhere else. The increased pool of low income buyer can’t seriously be blamed for the housing bubble which affected all financial strata. It’s simply not a credible claim.
It wasn’t a problem of social engineering; it was an economically driven decision to make those loans in the mid-00s; it wasn’t a socially driven decision.
Almost, Larry. You still are missing the connect. Again let me rephrase this above.
A socially driven decision to prevent redlining resulted in an economically drive decision to make risky loans.
But the CRA had nothing whatsoever to do with the run up in housing costs here in Orange County, CA, where there have been only a microscopic number of CRA loans, relative to the dollar value of the total housing market.
Let’s try this again, Larry. I know you can get this if you try.
It did *not* take just CRA loans to drive up costs. The CRA creation of the exotic loan was extended not just to subprime borrowers, but to A+ prime borrowers as well. The product was created because of the CRA, and was offered to all borrowers. Conversely, not all of these risky loans are in failure.
These easy loans, with very low interest rates, created a flood of buyers for existing inventory, which drove up prices for ALL homes – including the high dollar homes in the Orange County beach communities.
This is an A (CRA compliance reg changes)
to B (creating of exotic loans for all borrowers, inc risky borrowers)
to C (low rates after 911)
to D (flood of buyers)
to E (housing price increase) type of event…
… a perfect storm, as I said in my original post about this stuff. You keep repeating A doesn’t lead to E, and forget the steps in the middle . Doesn’t work that way.
I think that it is a mistake to increase spending and cut taxes in the hope that the tax cuts will generate sufficient economic acceleration to pay for the tax cuts —
But of course I agree in this principle. Our problem is Congress, no matter which party is in charge, continues to spend spend spend our cash. They don’t wait for the tax cuts to take effect and spend the money *after* it comes in. They anticipate it, and spend it ahead of time. That’s a Congress problem… not a free market problem.
And BTW, I disagree with you that tax cuts is not the economic solution. It’s proven to work here, and increased taxes has proven *not* to work in Europe. THe more money the private sector is allowed to make, keep and reinvest, the more revenue can be garnished.
Trouble is, Congress is like a spoiled child – always spending other people’s money and asking for more.
BTW, I’ve already been to your Traiger Law site… a legal firm that specializes in representing CRA banks. As their business site, I hardly expect to see articles in their “in the news” section that speak ill of CRA. How smart would that be?
However what you should take notice is that, in this very news busy economic times, their most current news article in that section was back in February of this year. Could that be because the CRA was already starting to come under fire, and the pro-CRA articles were getting harder to find to post?
Curious…. because I’m quite sure there’s been plenty of news since Feb 08
I’m sure, if you read my other bail out posts (just click on my name above and all my posts will open), you’ll find ample links to all kinds of different publications and views. You should start back with my perfect storm post on the 22nd(?) or 25th? of Sept, and move forward from there as the story progresses. Because I’ll tell ya, guy… if you’re going to depend upon Bernanke and Traiger Law, you’re really going to stay in the dark on all this.
>>Here’s what actually happened. In October 2005 the House, by a vote of 331-90, passed a bill to establish a new federal regulator created for Fannie, Freddie and the Federal Home Loan Banks. The new regulator was authorized to set capital standards and, if it deemed necessary, require reductions in mortgage portfolios. The White House opposed the proposed legislation and instead supported the pending Senate bill. But the Senate bill never came up for a vote, and the legislation died.
>>In other words, the Republicans failed to negotiate a deal when they were in charge, and now place the blame on others. And once again, Fox News treats their distortions of history as reportable fact.
>>One Republican has a different take on events. Rep. Michael Oxley claims his bill was opposed by White House “ideologues” who wanted to privatize Fannie and Freddie and who opposed a bigger government role.<<
So what you’ve got is the White House opposed the Fannie Mae regulation bill passed by the House, with strong bipartisan support. The Senate came up with a different bill, which was opposed by Dems in committee but which the GOP leadership didn’t bring for a vote. The GOP senate leadership and the White House chose the route of no regulation, when they couldn’t get their wish to fully privatize Fannie Mae and because they didn’t want a bigger government role in regulating Fannie Mae.
Now technically, the WH can pay lip service to opposing a bill. But the WH can’t do whit until a bill lands on a POTUS’s desk to either sign into law, or veto. So in reality, you can’t say the WH stopped this when it never got there.
The Senate version, S 190, FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005 is the very same bill we all keep trying to tell the Obama faithful that McCain stood up against this in advance… and made his May 2006 floor speech (which is the link) stressing the importance of passage of the bill. This bill was sponsored by GOP Charles Hagel, and co-sponsored by only three Senators… all GOP… Elizabeth Dole, John Sununu, and… ta daaaa… John McCain.
You will notice no DNC crossing the aisle… least of all Obama, who was raking in the contributions annually from Fannie/Freddie, that surpassed all others’ annual contributions.
If the Senate Committee on Banking, Housing, and Urban Affairs didn’t allow it to come to a vote, it was most likely because there were not enough votes for it to pass. And absolutely there are GOPers who also bear responsibility for sitting on their thumbs instead of taking action. With the make up of the Senate being so close, if 100% DNC oppose, and they have a few GOP renegades, it’s a dead deal.
On the flip side, if a good portion of the DNC stood up to do what is right, it would have passed. So what we have is a few GOPers who are a problem, and all of the DNC as a problem. Which is worse?
However the GOP candidate, John McCain is *not* one of those. And President Bush cannot officially oppose or veto a bill that never arrived.
So when you are dealing with GOP leadership, today you have to assess the man who stood up for doing the right thing. It is he who is on the ticket. Then you have to assess the man who says he crosses the aisle… but never finds the bread crumbs to do so.
BTW… Bernanke, Traiger and Huffpo???? We must work on expanding your horizons… LOL
>>Amends the Federal Home Loan Bank Act to establish the Federal Home Loan Bank Finance Corporation. Transfers the functions of the Office of Finance of the Federal Home Loan Banks to such Corporation.
>>Excludes the Federal Home Loan Banks from certain securities reporting requirements.
>>Abolishes the Federal Housing Finance Board.<<
The Senate Bill, unlike the House bill, wasn’t a bill about regulation, it was a bill about a broad restructuring and privatization.
House Democrats and Republicans supported improved regulation (loan standards, etc.) in a strong, bipartisan manner. There is no reason to suspect that Senate Democrats would not have supported similar improved regulatory legislation.
It would appear that the Senate Republicans inserted a poison pill provision for drastic restructuring, as opposed to improved regulation.
The GOP was in charge. They could have done a deal, but chose not to.
I’m more impressed by data and facts than I am by criticisms of sources. You don’t like Bernanke; so you just dismiss him. Traiger presents objective data; you don’t challenge the data; you simply dismiss Traiger. I quote a Huffington Blogger. You don’t dispute what he says, you just dismiss it because it appears on Huffington. You ignore the charges of the GOP congressman who worked on the House version of the regulatory bill that “his bill was opposed by White House “ideologues” who wanted to privatize Fannie and Freddie and who opposed a bigger government role.” No, the President isn’t in the Senate, but he’s the President and he’s a Republican and the Senate was run by Republicans and presumably his West Wing staff told the Republican Senate leadership what the President wanted in the way of a bill.
And you choose to ignore the U of Pennsylvania’s Wharton Business School.
Larry, what are you talking about?? S190 is the related bill to the House bill you referenced. And it was all about oversight/regulation.
/26/2005–Introduced.
Federal Housing Enterprise Regulatory Reform Act of 2005 – Amends the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to establish: (1) in lieu of the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development (HUD), an independent Federal Housing Enterprise Regulatory Agency which shall have authority **over** the Federal Home Loan Bank Finance Corporation, the Federal Home Loan Banks, the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac); and (2) the Federal Housing Enterprise Board.
Sets forth operating, administrative, and regulatory provisions of the Agency, including provisions respecting:
(1) assessment authority;
(2) authority to limit nonmission-related assets;
(3) minimum and critical capital levels;
(4) risk-based capital test;
(5) capital classifications and undercapitalized enterprises;
(6) enforcement actions and penalties;
(7) golden parachutes; and
(8) reporting.
Amends the Federal Home Loan Bank Act to establish the Federal Home Loan Bank Finance Corporation. Transfers the functions of the Office of Finance of the Federal Home Loan Banks to such Corporation.
Excludes the Federal Home Loan Banks from certain securities reporting requirements.
Abolishes the Federal Housing Finance Board.
Now… wanna try again? And this time, provide links to what bill you think you’re discussing, and we might be able to sort out communication differences. You’ll find GovTrack a terrific site.
I dismiss Bernanke because he was in the politically delicate position of not being able to call a spade a spade when discussing the cause. If he needs Congressional approval for his and Paulson’s proposed government take over, he’s not likely to get it if he points fingers at them and says “it’s *your* fault”, is he? One has to lend more credibility to those who are removed from the cause and the fix.
Secondly, Traiger’s data is dated. There’s been a lot of events since Feb 2008. Also, again, you need to get removed from involvement. When their entire business revolves around CRA banking clientele, what they display on their website will be edited to fit that clientele. So I use economic publications like Agora, Financial Times, Investors Business Daily, etal. These are neutral third parties.
As far as HuffPo goes… it’s hard to lend anything of substance to a link that’s titled “Fox News: Barney Frank Escaped Blame for Fannie Mae’s Problems Because He Is Gay”… which of course is not the title of the Fox piece. Nor did they provide a link to the Fox piece they were slamming.
Frankly, I give the National Enquirer more credibility than HuffPo. It’s a toilet cyber tabloid with fake headlines. Not to mention quite a group of “ugly Americans” that comment there.
Now, if you provide the original link to the article they are revamping in their own blog trash, I can live with that.
That said… as you can see, I go to your links. I do, however, find your news sources extremely bizarre choices. But, as you can see, I still respond to them… and provide direct sources (such as bill history, text). And you’ll also note that in my posts, I link to neutral specialty sources… not cyber tabloids.
As far as refuting Barney Frank in the HuffPo piece, where he says he wasn’t in the position to do anything until 2007…. uh, would that be the same Barney Frank who said:
House Financial Services Committee hearing, Sept. 10, 2003:
Rep. Barney Frank (D., Mass.): I worry, frankly, that there’s a tension here. The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios. . . .
~~~
House Financial Services Committee hearing, Sept. 25, 2003:
Rep. Frank: I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing. . . .
~~~
House Financial Services Committee hearing, Sept. 25, 2003:
snip the other DNC bozos making fools of themselves here and going for Frank…
Rep. Frank: Let me ask [George] Gould and [Franklin] Raines on behalf of Freddie Mac and Fannie Mae, do you feel that over the past years you have been substantially under-regulated?
Mr. Raines?
Mr. Raines: No, sir.
Mr. Frank: Mr. Gould?
Mr. Gould: No, sir. . . .
Mr. Frank: OK. Then I am not entirely sure why we are here. . . .
Rep. Frank: I believe there has been more alarm raised about potential unsafety and unsoundness than, in fact, exists.
Or perhaps, if you don’t want to believe the printed quotes from the WSJ, you might like to hear it from the horse’s mouth how the DNC was arguing with FHEO and regulators how Fannie/Freddie weren’t in trouble, when notable members of the GOP were saying the opposite.
Now I can’t defend the GOP who sided with the DNC. But with 100% of the DNC on the Fannie/Freddie side, plus renegade GOP, the GOP majority couldn’t evoke the reform.
Below… for your viewing pleasure …. the horses’ mouths in action.
Craig
14 years ago
Mata,
Very smart answer and very well sustained. You have patience with manipulators like Larry. He doesn’t fool me though with his apparent respect… it’s a cover-up. I prefer idiots like Dave, Doug, and Fit Fit and alike… they are less hypocrites. The snake-type like Larry is the worst, much more dangerous, because nobody sees him coming with his misinformation. Keep the good work Mata, don’t let Larry get away with his BS.
You don’t need to go with the personal insults, Mark. It doesn’t help clarify anything.
I’ll continue discussing/debating with Mata, as long as she approaches this at the honest difference of opinion level. Perhaps she’ll ultimately establish that I’m misinformed or in error. Perhaps not. But life is too short to get involved in pissing contests.
You obviously don’t agree with me, but I’m no “snake.” I stand up for that which I believe by signing my own name. I’m not some annonymous DNC operative or anything like that. Simply a private citizen, entitled to have his own point of view and seeking to discuss this with others. I’m an open book. You can Google me. Good grief…”snake”? The only people welcome on your blog are those you share your point of view? Why didn’t you post a warning to that effect and spare both you and I the aggravation?
>>In “Paulson’s Fannie Test” (Review & Outlook, July 15), you editorialize, “Had Treasury and Congress acted two years ago, or even three or six months, the current panic could have been avoided.” In fact, the House did act. After a successful committee vote, we passed strong, freestanding GSE reform legislation, H.R. 1461, in the House on Oct. 26, 2005, with a bipartisan vote of 331-90. The bill encountered opposition in the Senate, in the administration, and on the Journal’s editorial page. It died in the Senate.
>>I am proud that the Financial Services Committee acted while the housing economy remained robust. In a noncrisis atmosphere, we produced legislation that would have created a stronger regulator with new powers to increase capital, to limit portfolios, and to deal with the possibility of receivership. Had our legislation become law in 2005, a world-class regulator would have been in place, providing better oversight prior to and during the market downturn.
>>Michael G. Oxley
Washington
>>Michael G. Oxley was chairman of the House Financial Services Committee from 2001 through 2006.<<
Note that the House bill was actively opposed not by the Democrats, but by the Senate Republican leadership, the Bush administration, and also by the Wall Street Journal editorial page. This is a smoking gun for “smoking aces.” It proves that a bill to regulate Fannie Mae in 2005 was indeed “killed” in the Senate. But by REPUBLICANS, not by Democrats.
By the way, I listened carefully in the debate for McCain to make the charge that Democrats “killed” legislation to regulate Fannie Mae. He never came close to making such a charge.
I’ll address the arguments most recently made by Mata later on.
What do you guys think of McCain’s proposal to buy out bad mortgages and re-sell them to the original purchasers at current (reduced) market value, with the government picking up the tab for the difference?
Larry: You might also be aware that many Republicans opposed some of Oxley’s provisions which would have given a financial windfall to groups like ACORN. That was the source of opposition, NOT a desire to see Fannie and Freddie unregulated.
It’s become abundantly clear that you simply refuse to accept ANY responsibility on the part of Democrats for blocking the reforms that McCain and others proposed which would have saved us from this catastrophe.
As I said, it was Democrats, on a strict party line vote, who voted against S190 in committee.
At the time, McCain’s was warning of what could happen if no action was taken:
“If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.”
– John McCain, May 25, 2006
Your willingness to provide cover for Democrats is truly remarkable. But it is also unfortunate, as it means there will likely never be the kind of accountability in this situation that is necessary if we are to move forward. Worse yet, your deliberate obfuscation is an enabler for Democrats to continue doing more of the same.
The record here is clear: Republicans put up multiple legislative proposals, all of which were shot down mostly by Democrats.
One letter from Mike Oxley doesn’t alter that fact.
Mike, Here’s the reality. There was a bipartisan bill which passed the House in 2005, which would have regulated Fannie Mae and improved its lending standards. This wasn’t a Democratic bill, it was a bipartisan bill.
Now, there were elements of this bill which the White House and Senate Republican leadership didn’t like. So the Republicans killed the House Fannie Mae regulation bill in the Senate. The floated a different bill, instead, and the Republican sponsor of the House-passed Fannie Mae regulatory bill (Rep. Michael Oxley) claimed his bill was opposed by White House “ideologues” (his word) who wanted to privatize Fannie and Freddie and who opposed a bigger government role.
Now, you claim that Democrats “killed” this latter bill. You’ve yet to provide the slightest bit of evidence to support this charge. Not a single Republican Senator, including John McCain has made this charge. Given the very high level of GOP support in the House for the Oxley bill, it is entirely plausible that there were insufficient GOP Senate votes to support the bill. What typically happens when there is a disagreement between House and Senate bills, there are meetings and compromises to hammer out a deal. Obviously, the majority of Democrats didn’t oppose substantive regulation of Fannie Mae, despite the exisistence of old CSPAN clips of a few House members saying stupid things from time to time. The obvious truth is that no one — President, McCain, Senate leadership — cared enough circa 2005 – 2006 to do a deal with the House to reform Fannie Mae regulation.
So both Democrats and Republicans favored Fannie Mae regulation. Talk is cheap. Getting the votes is what counts. Fannie Mae regulation was favored in the House by a Democratic majority and a strong Republican minority. A final bipartisan regulatory bill passed by a huge margin. But this bill was killed — truly killed — by the Republican controlled Senate, who obviously did not make a priority of putting together a regulatory bill which would be acceptable to the majority of both Houses of Congress and which the President would sign. The Senate Republicans could have passed a strong regulatory bill along the lines of the House bill. They chose not to do so.
My own position is bipartisan. I don’t blame Republicans. I don’t blame Democrats. Everything is 100% clear in retrospect. Had Senate Republicans and the President realized in 2005 what was going to happen in 2008, I’m sure they’d have done a deal with the House to pass regulatory reform. I’m sure that Bush would have actually made an effort to achieve regulatory reform in 2003, rather than simply phoning in a press release and dropping the subject. I’m sure that Clinton would have twisted a lot more arms. I’m sure that all the banks who bought mortgage backed securities because they thought they were going to make a lot of money wouldn’t have done so. And that brings us to the proximate cause of this global debacle: the Wall Street Masters of the Universe were the proximate cause.
I’m on the fly most of today, but will check in a few times to carry on the three way conversation Mike’sA, Larry and I are having.
There’s just a couple of things that I wanted to address in brief. Larry, INRE your comments from #125:
The floated a different bill, instead, and the Republican sponsor of the House-passed Fannie Mae regulatory bill (Rep. Michael Oxley) claimed his bill was opposed by White House “ideologues” (his word) who wanted to privatize Fannie and Freddie and who opposed a bigger government role.
Technically, Fannie and Freddie are already privatized in their operations, but are a GSE… meaning optionally government backed. But it was never a guarantee… But today, we realize they did guarantee it.
S190 created a new regulatory agency, wresting away it’s current oversight under HUD… and gave that new regulatory agency authority to address some, today, familiar issues like golden parachutes, risk assessment criteria, capital levels, etc. This does not sound like a WH who wanted to further privatize Fannie/Freddie…. but rather like a WH and Senate who wanted more govt oversight of the GSEs.
A final bipartisan regulatory bill passed by a huge margin. But this bill was killed — truly killed — by the Republican controlled Senate, who obviously did not make a priority of putting together a regulatory bill which would be acceptable to the majority of both Houses of Congress and which the President would sign.
You originally said the WH preferred the Senate bill, Larry. In which case the GOP was likely to have constructed it within the framework they felt the WH would not veto. If that passed, the House and Senate could have worked together to reconcile the differences for Presidential signature/veto.
While I agree there is ample blame for both parties in this whole mess over the 13 years of it’s growth to the financial tumor it is today, I can’t see this Senate bill being a GOP failure entoto. With likely 100% of the DNC opposed, it only took a few GOP to oppose it for it’s demise.
And yes… I will agree witih your last paragraph that had any of these elected bozos had a crystal ball to see today’s times, they might have acted differently. But the point is, they carry significant power to affect our nation. And frankly, I think all of them took that responsibility far too lightly, assuming they could not cause this collapse.
I will, however, remain to agree to disagree with you on Wall Street masters of the universe being the prime culprit here. I believe Congress created an environment of easy money/credit, promoted risky loans for minority home ownership, and the market took over from there. And I also blame a very undisciplined, gimme “stuff” oriented society who thought they could live forever outside of their financial means.
So just as the DNC and GOP must share blame, so must the consumer.
Last, in your comment #123, Larry:
Note that the House bill was actively opposed not by the Democrats, but by the Senate Republican leadership, the Bush administration, and also by the Wall Street Journal editorial page.
I did not see where Oxley expressly stated “Senate Republican leadership”. He said:
The bill encountered opposition in the Senate, in the administration, and on the Journal’s editorial page.
That opposition was certainly by the DNC, and quite likely some GOP since they did not get the majority verbals to forward it to the floor for a vote. But that may not have been “leadership”.
But fact remains, DNC opposed fixes and not enough GOP overrided them when they had a majority. But also, if enough DNC would have supported reform, this could have been accomplished. So we are still blaming a small segment of GOP, and the bulk, if not all of the DNC.
The point is that the GOP controlled Congress from January 1995 to January 2007 and the only Fannie Mae regulatory bill to pass either chamber of the congress was the October 2005 bill, which was authored by a Republican (Oxley) and which passed with the votes of 122 out of 204 Democratic member of the House (a majority) and with the votes of a large minority of Republicans.
This bill was actively opposed by the White House, as expressly stated by Oxley. I’m personally certain that the main opposition to the House-passed bill was from the Senate Republicans, as the majority of the House Democrats supported the bill, but only a (substantial) minority of House Republicans. My understanding is that the Senate Republicans wrote their own, alternative bill, for which they were unable to find sufficient support.
It isn’t likely that only a minority of House Republicans would have supported the House bill with a majority of Democrats supporting and then the situation would not just be the reverse in the Senate, but that Senate Democrats would be in such opposition to a bill passed in the House with a majority of Democratic votes that they could actually “block” the bill with a filibuster threat.
I mean, don’t you agree with me on this? What happened, precisely, in the Senate remains opaque, but, on the basis of available information presented on this thread, it’s neither credible nor fair to claim that Democrats “blocked” Fannie Mae regulatory reforms in 2005. I again repeat that no Senate Republican, including McCain, has ever made this charge, despite the fact that they obviously have every motivation to do so, were it, indeed, true, which it certainly is not.
In contrast to the House action in 2005, in which Fannie Mae regulatory reform was passed with strong Democratic majority support, all we have from anyone else during that entire period of GOP congress control between Jan 1995 and Jan 2007 are speeches and press releases. The fact that some individual House Democrats were caught on CSPAN saying dumb things is much less important than the fact that the House Democrats supported improved Fannie Mae regulation in 2005 (authored by a Republican) by a strong majority vote.
– Larry Weisenthal
Craig
14 years ago
“I again repeat that no Senate Republican, including McCain, has ever made this charge, despite the fact that they obviously have every motivation to do so, were it, indeed, true, which it certainly is not.” (Larry)
You’ve got to be kidding, right? McCain has been saying it everywhere he can. Are you deaf or what? Didn’t you see all the videos? Didn’t you watch the debate last Tuesday? Come’on, get real! Even Bill Clinton said it and blamed the Dems.
Larry: I’m not going to waste my time by repeating everything I have said before and the essential elements of this post which DO document the efforts Republicans made for reform of Fannie Mae and the efforts Dems made to block it.
I realize you simply prefer NOT to allow any blame to be cast on the Dems and you are an enabler of the tricks they pull.
So be it.
I’ve presented my side in detail and you haven’t given me anything that casts doubt (other than your own) on my conclusions.
Well, I guess you’re done with our conversation INRE the causes of the bail out too, Larry… yes?
Well, don’t be a stranger. I, for one, found your comments to be thought provoking. And opposing opinions alway demands rechecking your base information for their merits… and inspiring more research. Being a research junkie, I’m always appreciative of being challenged with one that presents cogent dissenting arguments.
BTW… hope you and the group come up with some serious inroads into curing the big “C”. It’s an admirable quest.
Basically, it was Bill Frist who ultimately “blocked” the Senate bill. There were 25 Republican Senators who signed Senator Hagel’s letter and 29 Republicans who did not sign it, including not only the then-GOP majority leader (Frist), but also the current GOP minority leader (Mitch McConnell).
We now have the complete story of the 2005 attempts to regulate Fannie Mae. A regulatory bill passed in the House, with a majority of Democrats joining with a majority of Republicans to approve the bill, despite speeches against the bill by Barney Franks and Maxine Waters. Some Democrats said dumb things, but a majority of Democrats voted in favor. According to the Bill’s sponsor, Republican Michael Oxley, the bill was opposed by the Bush White House and by the Senate.
We now know the details of the Senate opposition. (story above).
My conclusion remains that the title of this thread is incorrect. The Democrats did NOT “block” financial reforms in 2005. Which is precisely why neither John McCain nor any Senate Republican running for re-election (including Mitch McConnell) is making that charge. McCain said that he signed a letter supporting reform. We now know what the letter was. And we now know why it didn’t go anywhere.
– Larry Weisenthal/Huntington Beach CA
Scott Malensek
14 years ago
Larry, great job looking this up. I’d like to look at it more later (busy this afternoon). This is EXACTLY the kind of feedback and discussion that makes Flopping Aces strong. Sincerely, my thanks to you!
It’s late and I need to go to bed.
First, thank you for responding courteously and seriously.
I do have a simple question.
If things are the way you claim, i.e. that Democratic senators BLOCKED regulatory reform in 2005 (the title of this thread), then how, precisely, did they “block” it? With 122 House Democrats voting in favor, indicating that there was no way of threatening a serious filibuster, then how did they “block” it?
Even more to the point, Republicans are looking down the muzzle of an election debacle of the type that they haven’t seen since 1964. Republicans are looking at the potential of a filibuster proof Democratic majority in the Senate. Why in the world are no Senate Republicans making the charge that the Democrats BLOCKED their “reform” efforts? Why? I think that the only credible explanation is that they themselves succumbed to the pressure of Wall Street lobbyists. What is your explanation?
The idea that this was caused by a demand for credit by purchasers, as opposed to a demand for purchasers by lenders is refuted by the very existence of the 2/28 mortgages which lured so many unqualified buyers into the housing market. If there was such a demand by would-be purchasers, then why in the world would lenders invent such a predatory lending instrument?
The concept that the Community Reinvestment Act (which was the Jimmy Carter/Bill Clinton program to expand home ownership) had anything at all to do with the financial meltdown cannot be supported by any objective data.
In post number 95, I provided links to data which refute the charges relating to the Community Reinvestment Act and also to Ben Bernanke’s explanation of the root causes of the subprime crisis.
P.S. Hi, Mata. I’m flattered you spent so much time addressing elements of my post on your other thread. I’d be very pleased to debate you, here, if you’d like, but I’ve got an actual day job and I can’t keep track of postings on multiple threads. It’s one of the good reasons why thread etiquette discourages the initiation of spin-off threads which pertain directly to the subject matter of existing threads. Having a running debate on multiple threads at the same time is just more than I can handle right now. But you are certainly very knowledgeable, and I would be honored to engage you on this particular thread, should you have an interest in so doing.
– Larry Weisenthal/Huntington Beach, CA
Larry: Are you confusing the House and Senate? The House vote had nothing to do with the failure of the Senate to take up the bill, which passed out of Committee on a straight party line vote with ALL Democrats voting against it. The tracks after that are less clear but the bill never came to a vote. There’s an unfortunate habit in the Senate for a handful of members to threaten a filibuster without actually going on the record and effectively killing legislation. How convenient for Democrats.
But Dems record on obstruction on Fannie/Freddie reforms is CLEAR even if you don’t want to see it.
As for a Senator reminding people who it was that blocked reforms, I recommend you tune in to Tuesday’s McCain-Obama debate.
I tried to append the following paragraph to post number 101, but I got a message which said “this comment has been marked for moderation and can’t be edited.”
Why was I “marked for moderation?” Did I say anything offensive? If so, it was entirely inadvertent, as I was trying to write in a respectful manner.
P.S. Hi, Mata. I’m flattered you spent so much time addressing elements of my post on your other thread. I’d be very pleased to debate you, here, if you’d like, but I’ve got an actual day job and I can’t keep track of postings on multiple threads. It’s one of the good reasons why thread etiquette discourages the initiation of spin-off threads which pertain directly to the subject matter of existing threads. Having a running debate on multiple threads at the same time is just more than I can handle right now. But you are certainly very knowledgeable, and I would be honored to engage you on this particular thread, should you have an interest in so doing.
Larry Weisenthal/Huntington Beach, CA
Mike, my comment is that the threat of a Democratic filibuster wouldn’t have been credible with 122 House Democrats having voted in favor. It takes 41 votes to sustain a filibuster, which would require a near unanimous vote. The House vote indicates that there was no possibility of achieving that level of unanimity. There are many fiscally conservative Democratic Senators, just as there are many fiscally conservative Democratic House members.
I will watch Tuesday’s debate. I’ll be very anxious to hear precisely how the Democrats “blocked” GOP attempts at reform.
By the way, this is a really great blog. There are a lot of smart people who contribute and good arguments are presented in the spirit of discussing honest differences of opinion, which is unfortunately rare these days.
Larry Weisenthal/Huntington Beach, CA
Mata, the following doesn’t make any sense to me:
>>This drove up prices… massive demand v limited supply. An error here is how values of comparables should be handled in the future. A bidding war over normal neighborhood prices should not change a loan value. But they did, and the appraisers had to work with the new inflated prices as a norm.<<
If what you are saying has any truth at all to it, then the price of sub-prime loan homes should have risen out of proportion to conventional loan homes. Here in California, sub-prime loan homes made up a comparatively small fraction of the total. Yet the price of all homes went through the roof, with the pace of increase of the most expensive considerably outstripping those at the low end. I’m quite confident that these general principles applied, as well, on a national basis.
Mike, you make the following comment:
>>You can use whatever words you want to describe what Dems did, but the reality is that they succeeded in BLOCKING REFORMS. None were passed were they?<<
But the Republicans controlled the Presidency and both Houses of Congress from January, 2001 to mid-January, 2007. How did the Democrats BLOCK reforms? And why are no Republican Senators telling us how Democrats BLOCKED reforms? It really does remind me of Saddam’s Weapons of Mass destruction. There are still those who, to this very day, insist that Saddam sent them to Syria for “safe keeping,” providing all manner of arguments, including the “testimony” of an Iraqi general (who was generously compensated while making the talk show rounds). I was always willing to consider such a scenario, but only if President Bush himself made the charge, which he never did.
I want to hear a single Republican Senator explain precisely how it was that Democrats BLOCKED reforms. I find the charge to be not just implausible but wildly implausible (122 House Democrats voted in favor of reforms). I’ll seriously consider it when the first Republican Senator who was seated in the Senate in 2005 stands up and makes the charge and tells me how precisely the Democrats were able to BLOCK the bill that McCain signed on to months after it was first proposed by Senate colleagues.
– Larry Weisenthal
Larry: It’s getting late here on the East Coast, so maybe I am misreading your comment. But again, there is no correlation between a House vote and action in the Senate.
There is also no denying a history of Democrats blocking reforms of Fannie and Freddie just as there is a history of Dems at Fannie and Freddie profiting from that looser regulatory environment.
I haven’t even brought up the fact that a long time “companion” of Barney Frank was an exec. at Fannie and profited directly from Frank’s refusal to admit there was a problem that needed addressing.
And again, do I need to bring up the fact that Obama took more money from Fannie Mae and Freddie Mac bundlers in less than four years than every member of Congress except Senator Dodd who took his “contributions” over a span of 20 years?
Don’t mean to keep you up late, Mike. I have an unfair advantage over you, with it being easier for me to have the last word of the night, being on the West Coast. So I promise this will be my last post of the night and I’ll resume tomorrow night.
>>But again, there is no correlation between a House vote and action in the Senate.<<
No, but, once again, to sustain a filibuster in the Senate would have required a near unanimous vote of Democrats. In 2005, there were 204 total Democrats in the House and 122 voted for the reform bill — a solid majority, in fact. Now it is simply not credible that a solid majority of Democratic House members would vote one way and that there would be a near unanimous (41 out of 43) vote of Senate Democrats in the exact opposite direction. Can you even begin to think of a precedent for this? In either party? Where the majority of the party members in the House voted one way and where there was a near unanimous vote in the Senate the other way?
The title of this thread is about Democrats BLOCKING reforms in 2005. We are both “guilty” of expanding the scope of this complicated mess to a lot of other things. How about we agree to stay on task and simply debate, on this thread, whether or not Democrats BLOCKED reforms in 2005?
After we resolve this issue, then perhaps I’ll have the energy and you’ll have the willingness to pursue the broader issues.
– Larry Weisenthal
Larry, it’s late morning here and your comment still doesn’t make sense. Action in the House has no impact on what the Senate might or might not do. So 122 votes in the House would not necessarily effect plans to derail the legislation in the Senate.
And as for the title, my conclusion is borne out not only by the research I have done but also by an array of media figures who have commented on this same issue.
It doesn’t serve any point, other than to provide cover for guilty DemocratsVic: Toadbat lives in the Chicago area and it would appear he’s fallen under the same hate America spell that Obama has. I’d ask if he was a member of Rev. Wright’s church but I know he hates Christianity, as well as every other tradtion that has made this country great., to belaboring the matter here of whether and how Dems blocked reforms. You might disagree with my conclusions but thus far you haven’t presented any solid factual material to contradict it.
That seems to be the problem throughout the various comment streams on this topic. Myself and fellow contributors have posted quite a volume of material and naysayers who arrive just say it aint so with only the barest of material to back up their claim.
Well, perhaps we can get Mata to drop in and offer her perspective. She’s much fairer and nicer than I am anyway. You might be able to get her to agree just for the heck of it.
Hi, beginning of my work day and I don’t have time for detailed comments. You are asking me to prove a negative — that Democrats didn’t block reforms. This is impossible to do. It was you who made the statement that Democrats blocked reforms. To my knowledge, all you’ve provided is examples of situations where certain individual Democrats resisted reforms. You haven’t begun to provide any support at all for your assertions that Democrats blocked reforms in 2005.
Maybe it would help if you would, in a single paragraph, if possible, summarize the evidence which supports the conclusion that Democrats blocked reforms in 2005.
Although it is impossible to prove a negative (that I don’t beat my wife, for example or that the Democrats didn’t block reforms, for another example), to me the single piece of best evidence favoring my point of view is the complete absence of Senate Republicans who were actually there in 2005 and who have every motivation to speak out an lay the blame where it belongs, but who are being conspicuously silent on this issue, as the blogosphere is filled with pundits who appear to claim to have inside information (by virtue of the certitude of their assertions), without ever stating specifically what is the evidence that Democrats did, indeed, block regulations which would have prevented the current financial meltdown.
I, too, hope that Mata will agree to continue the discussion on the current thread.
See you guys after tonight’s debate, where I will be closely listening for evidence from John Sidney McCain to substantiate the current charges that Democrats were responsible for blocking regulatory reform at a time when the Republicans enjoyed solid control of the Presidency and both branches of Congress.
– Larry Weisenthal/Huntington Beach, CA
Larry, in response to a couple of your counters:
There’s two issues you bring up here.
First, the 2/28 ARM package. For those of you know don’t know, a 2/28 mortgage is an ARM loan with 2 years fixed, and the ensuing 28 years resetting to the adjustable based on prime. That’s a very basic ARM. There were other more exotic ARMs… 3/1, 5/1, 7/1 ARMs for example. Many of these started with a very low rate that increased 1% over each year (3 to 7 years) until it hit the reset/adjustable year.
Most lenders offered ARM loans, including FHA. Fact is, there is nothing wrong with an ARM loan. It was a tool that could be used.. and like any tool, can also be abused.
Candidates for an ARM loan are those who know they will be selling/moving before the reset period. Another candidate for an ARM is those with iffy credit, doing a clean up of their debts. They improve their credit scores, then refinance into a fixed when they have better scores.
You speak of people who were “lured”. Now I don’t know how these ARMs were presented, but with TIL and RESPA laws, plus the other sundry disclosures loan officers must provide, at some point these “victim” buyers had to figure that they weren’t going to have a 3% rate for the rest of their loan. Not one loan officer in the world can tell you what your payments will be on an adjustable rate three years downline because it’s based on the prime… an unknown figure. So there is only so much one can disclose.
If the buyers were under the assumption, after all the disclosures required by law, that they were going to have a 3% loan the rest of their lives, I don’t know what to say. Before they sign on the dotted line, they should inquire with someone they trust. There is always a responsibility of the one who obligates to a contract. And perhaps they can create more educational material in the future for those who just can’t get a grip on the lending/payment process.
But I will not let buyers off scott-free as victims, lured. They may have had bad advice on the specifics of an ARM. But in the long run, if they qualified for $300K, they did not have to buy a $300K house. They could have also bought a $150K house. The US consumer has been living beyond their means and racking up credit for quite some time now.
The second issue … the Community Reinvestment Act
You are entirely incorrect here, Larry. When Carter passed the bill original, lending was different. Most banks could not lend outside their state, or even local areas. They could not bundle and sell interbank either. So their lending risk was not only limited, but remained local.
This, however, didn’t allow for the money to flow for the growing population. Bundling and interbank selling freed up assets for more loans. The securitization era began. Not bad on it’s own unless, as I said before, you’re selling bad product.
Comes Bill Clinton and Rubin, his Secy of the Treasury. They rewrite the CRA compliance rules that mandate banks show x $ amount of performance for minority loans, or sufffer penalities and restrictions. Problem is, with the current lending criteria, most of the minorities do not qualify for a loan.
So they have to lower the lending standards… the only way they can do this without running it thru the automated underwriting programs – where it will get kicked out as a reject – is to create loans that didn’t require certain items. Thus the creation of low doc or no doc loans, and stated income packages. This enabled those who didn’t qualify to get the loan anyway.
Don’t confuse subprime with these loans. Fact is, any of us could get a low doc/no doc or stated income loan. The subprime came into play if your credit scores weren’t up to snuff, or you weren’t employed for enough time in your current job, OR if your income to debt ratio was too high. Subprime means you didn’t get the prime lending rates… you were being penalized because you were more a risk.
If you went to the post I said you “inspired”, or if you read my original “perfect storm” post on Sept 22nd, you’d see that there is direct evidence that home ownership, and home prices went up in the wake of Rubin’s rewrite of the compliance regs, effective 1995.
The home prices were driven up because of the flood of newly “un”qualified buyers purchasing. Hefty demand, limited supply. Add the rates going below the inflation level after 911, and the flood gates were really opened. You say there is no objective evidence, yet you ignore the home ownership numbers and the housing prices skyrocketing after over two decades of reasonable stability and nominal appreciation.
Last, INRE your other comment:
Again, this is not true, Larry. As I explained, the only difference between a subprime and A+ loan is the loan rate. Which is why many of the uncredit worthy dove at the ARMs. The price of houses has to do with supply v demand. With the exotic loan packages available to everyone, and the very low loan rates, EVERYONE took advantage of these financing tools. And not everyone is defaulting.
The reason *all* homes went up in price was because of cheap, easy money for everyone… those with good credit and those with bad. A buyer who had good credit a few years before, and qualified for $300K now could easily get $400K. Since this happened to everyone in all qualification categories, the buying frenzy began in earnest. Bidding wars were the norm. Houses didn’t stay on the market but hours and had multiple offers. This drove up the comparable prices for appraisers, and the house values went up.
With the house values up, home owners who didn’t sell refinanced into low mortgage rates, and pulled out equity. Unfortunately too many of them spent their appreciation on anything BUT the house… another sign of an undisciplined consumer. When the housing prices went down, the unimproved homes weren’t worth the mortgages they had.
So no… I disagree this was unfettered, unregulated capitalism. This was consumers diving at a good thing that started with CRA compliance regulations in 1995, and unwise use of investments and financial tools by consumers.
Larry: I’m sorry I haven’t proved my point to your satisfaction. Perhaps I will just have to content myself with the notion that a good number of political analsyts agree wtih me.
I don’t know how you misconstrue the fact that Dems voted totally along party lines in attempting keep the bill McCain co-sponsored from reaching the floor And I don’t know how you overlook Dems efforts in the House to say there is no problem:
Mata says:
>>The reason *all* homes went up in price was because of cheap, easy money for everyone… those with good credit and those with bad. A buyer who had good credit a few years before, and qualified for $300K now could easily get $400K. Since this happened to everyone in all qualification categories, the buying frenzy began in earnest. Bidding wars were the norm. Houses didn’t stay on the market but hours and had multiple offers. This drove up the comparable prices for appraisers, and the house values went up.<<
But this is precisely my point. The problem wasn’t the CRA. If it were, then non-CRA institutions should have made better loans than CRA institutions. But they didn’t. Quite the contrary, as shown in the studies I sourced earlier.
The problem was too much capital chasing too few investment opportunities. Why was there too much capital? Well, the GOP-controlled government granted the most massive tax cuts in history to the wealthiest Americans in war time, producing large deficits, which put pressure on the Fed to keep interest rates at rock bottom levels, to grow the economy enough to close the deficit and lessen the need to borrow. The combination of the low interest rates and low taxes produced a whole lot of free capital, as intended, but too little flowed into investments into new businesses and expansion of existing businesses or into infrastructure projects. By this time, the corporate equities aftermarkets were massively overvalued. This left real estate. So what drove the financial markets to make bad loans and purchase bad securities was simply the driving force of excess capital, and not the driving force of Democrat-initiated social engineering programs, which, at the time of their inception and even later modification, could never have anticipated the crazy lending situation which had developed by 2005, owing entirely to the presence of too much capital chasing too few investment opportunities.
– larry weisenthal/huntington beach
Mike, I readily concede that certain House Democrats said some really stupid things on CSPAN, but the majority of House Democrats did vote in favor of regulatory reform, and, again, I find no proof whatsoever that Senate Democrats “blocked” regulation reform in 2005 (again, the topic of this thread) and I find the lack of a single Senate Republican making this specific charge to be strong reason to doubt this assertion.
Talk is just that. Talk. Talk is cheap. Here’s an analysis from a non-partisan, academic political science blog:
http://uspolitics.about.com/b/2008/09/18/republican-congress-talked-about-financial-reform-but-did-nothing.htm
– Larry Weisenthal/Huntington Beach, CA
Larry, you aren’t getting this yet, are you.
CRA was the reason for the creation of exotic loans… available to everyone – both subprime and prime borrowers. This became in demand by all borrowers.
These loans were offered by both CRA and non CRA banks because demand was high, and lending is competitive. So I don’t know what you mean by “better loans”… If you are suggesting that the CRA was allowed to offer exotic loans in demand, and non-CRA were not, then you are limiting competition, which also allowed a borrower to get one of those exotic loans at a better price from another institution.
The point is, CRA=exotic loans with low qualification criteria=lots of new buyers=demand for housing raising prices above normal appreciation… a bubble doomed to crash. Period.
First, you should rewrite your first sentence and stop there. ala
“the problem was too much capital chasing
too fewover leveraged investment opportunities”But noooo… you ramble off into tax cuts for the wealthy. Let me remind you that the reason for the low interest rates was not the Bush tax cut. It was plane loads of terrorists slamming into the heart of the US financial district, the Pentagon, and attempts at the White House. That shut down Wall St for a week, and the repercussions of that event economically was exactly what Bin Laden designed.
The rates went low… below inflation… to recoup. It had nothing to do with tax cuts for the wealthy.
You disappoint me. You can’t just throw some blanket BS beef with Bush or the GOP in here that’s unrelated, and expect the guppies to swallow that. You’re hanging on the wrong forum to pull that off.
We both agree that the problem was too much capital chasing over leveraged investment opportunities (nb: I agree that your way of stating it was better). It wasn’t a problem of social engineering; it was an economically driven decision to make those loans in the mid-00s; it wasn’t a socially driven decision.
With regard to the capital excess, it was a combination of tax cuts and low interest. Both contributed. I think that it is a mistake to increase spending and cut taxes in the hope that the tax cuts will generate sufficient economic acceleration to pay for the tax cuts — which is something which has never yet occurred in the last 28 years of Reaganomics. But whether it was a mistake or not, it was the combination of tax cuts and low interest which contributed to the capital excess, and it was the capital excess which was the proximate cause of the present crisis, according to Bernanke and according to other scholarly economic analyses, e.g. http://knowledge.wharton.upenn.edu/article.cfm?articleid=1812
With regard to CRA banks making “better loans,” here, again, is my source:
http://traigerlaw.com/index.php (click on “Community Reinvestment Act” sections)
More later.
[continuing]
>>The point is, CRA=exotic loans with low qualification criteria=lots of new buyers=demand for housing raising prices above normal appreciation… a bubble doomed to crash. Period.<<
But the CRA had nothing whatsoever to do with the run up in housing costs here in Orange County, CA, where there have been only a microscopic number of CRA loans, relative to the dollar value of the total housing market. And we are no different than anywhere else. The increased pool of low income buyer can’t seriously be blamed for the housing bubble which affected all financial strata. It’s simply not a credible claim.
– Larry Weisenthal/Huntington Beach, CA
Almost, Larry. You still are missing the connect. Again let me rephrase this above.
A socially driven decision to prevent redlining resulted in an economically drive decision to make risky loans.
Let’s try this again, Larry. I know you can get this if you try.
It did *not* take just CRA loans to drive up costs. The CRA creation of the exotic loan was extended not just to subprime borrowers, but to A+ prime borrowers as well. The product was created because of the CRA, and was offered to all borrowers. Conversely, not all of these risky loans are in failure.
These easy loans, with very low interest rates, created a flood of buyers for existing inventory, which drove up prices for ALL homes – including the high dollar homes in the Orange County beach communities.
This is an A (CRA compliance reg changes)
to B (creating of exotic loans for all borrowers, inc risky borrowers)
to C (low rates after 911)
to D (flood of buyers)
to E (housing price increase) type of event…
… a perfect storm, as I said in my original post about this stuff. You keep repeating A doesn’t lead to E, and forget the steps in the middle . Doesn’t work that way.
But of course I agree in this principle. Our problem is Congress, no matter which party is in charge, continues to spend spend spend our cash. They don’t wait for the tax cuts to take effect and spend the money *after* it comes in. They anticipate it, and spend it ahead of time. That’s a Congress problem… not a free market problem.
And BTW, I disagree with you that tax cuts is not the economic solution. It’s proven to work here, and increased taxes has proven *not* to work in Europe. THe more money the private sector is allowed to make, keep and reinvest, the more revenue can be garnished.
Trouble is, Congress is like a spoiled child – always spending other people’s money and asking for more.
BTW, I’ve already been to your Traiger Law site… a legal firm that specializes in representing CRA banks. As their business site, I hardly expect to see articles in their “in the news” section that speak ill of CRA. How smart would that be?
However what you should take notice is that, in this very news busy economic times, their most current news article in that section was back in February of this year. Could that be because the CRA was already starting to come under fire, and the pro-CRA articles were getting harder to find to post?
Curious…. because I’m quite sure there’s been plenty of news since Feb 08
I’m sure, if you read my other bail out posts (just click on my name above and all my posts will open), you’ll find ample links to all kinds of different publications and views. You should start back with my perfect storm post on the 22nd(?) or 25th? of Sept, and move forward from there as the story progresses. Because I’ll tell ya, guy… if you’re going to depend upon Bernanke and Traiger Law, you’re really going to stay in the dark on all this.
Maya, I’ll get back later. Thanks for investing the time in discussing this with me. We do have a ways to go yet.
Mike, here’s another take on what happened in 2005:
http://www.huffingtonpost.com/david-fiderer/fox-news-barney-frank-esc_b_132347.html
>>Here’s what actually happened. In October 2005 the House, by a vote of 331-90, passed a bill to establish a new federal regulator created for Fannie, Freddie and the Federal Home Loan Banks. The new regulator was authorized to set capital standards and, if it deemed necessary, require reductions in mortgage portfolios. The White House opposed the proposed legislation and instead supported the pending Senate bill. But the Senate bill never came up for a vote, and the legislation died.
>>In other words, the Republicans failed to negotiate a deal when they were in charge, and now place the blame on others. And once again, Fox News treats their distortions of history as reportable fact.
>>One Republican has a different take on events. Rep. Michael Oxley claims his bill was opposed by White House “ideologues” who wanted to privatize Fannie and Freddie and who opposed a bigger government role.<<
So what you’ve got is the White House opposed the Fannie Mae regulation bill passed by the House, with strong bipartisan support. The Senate came up with a different bill, which was opposed by Dems in committee but which the GOP leadership didn’t bring for a vote. The GOP senate leadership and the White House chose the route of no regulation, when they couldn’t get their wish to fully privatize Fannie Mae and because they didn’t want a bigger government role in regulating Fannie Mae.
– Larry Weisenthal/Huntington Beach
Larry, you are speaking of HR 1461, Federal Housing Finance Reform Act of 2005 which did pass the House 331-90, with 12 not voting.
Now technically, the WH can pay lip service to opposing a bill. But the WH can’t do whit until a bill lands on a POTUS’s desk to either sign into law, or veto. So in reality, you can’t say the WH stopped this when it never got there.
The Senate version, S 190, FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005 is the very same bill we all keep trying to tell the Obama faithful that McCain stood up against this in advance… and made his May 2006 floor speech (which is the link) stressing the importance of passage of the bill. This bill was sponsored by GOP Charles Hagel, and co-sponsored by only three Senators… all GOP… Elizabeth Dole, John Sununu, and… ta daaaa… John McCain.
You will notice no DNC crossing the aisle… least of all Obama, who was raking in the contributions annually from Fannie/Freddie, that surpassed all others’ annual contributions.
If the Senate Committee on Banking, Housing, and Urban Affairs didn’t allow it to come to a vote, it was most likely because there were not enough votes for it to pass. And absolutely there are GOPers who also bear responsibility for sitting on their thumbs instead of taking action. With the make up of the Senate being so close, if 100% DNC oppose, and they have a few GOP renegades, it’s a dead deal.
On the flip side, if a good portion of the DNC stood up to do what is right, it would have passed. So what we have is a few GOPers who are a problem, and all of the DNC as a problem. Which is worse?
However the GOP candidate, John McCain is *not* one of those. And President Bush cannot officially oppose or veto a bill that never arrived.
So when you are dealing with GOP leadership, today you have to assess the man who stood up for doing the right thing. It is he who is on the ticket. Then you have to assess the man who says he crosses the aisle… but never finds the bread crumbs to do so.
BTW… Bernanke, Traiger and Huffpo???? We must work on expanding your horizons… LOL
Senate Bill:
>>Amends the Federal Home Loan Bank Act to establish the Federal Home Loan Bank Finance Corporation. Transfers the functions of the Office of Finance of the Federal Home Loan Banks to such Corporation.
>>Excludes the Federal Home Loan Banks from certain securities reporting requirements.
>>Abolishes the Federal Housing Finance Board.<<
The Senate Bill, unlike the House bill, wasn’t a bill about regulation, it was a bill about a broad restructuring and privatization.
House Democrats and Republicans supported improved regulation (loan standards, etc.) in a strong, bipartisan manner. There is no reason to suspect that Senate Democrats would not have supported similar improved regulatory legislation.
It would appear that the Senate Republicans inserted a poison pill provision for drastic restructuring, as opposed to improved regulation.
The GOP was in charge. They could have done a deal, but chose not to.
I’m more impressed by data and facts than I am by criticisms of sources. You don’t like Bernanke; so you just dismiss him. Traiger presents objective data; you don’t challenge the data; you simply dismiss Traiger. I quote a Huffington Blogger. You don’t dispute what he says, you just dismiss it because it appears on Huffington. You ignore the charges of the GOP congressman who worked on the House version of the regulatory bill that “his bill was opposed by White House “ideologues” who wanted to privatize Fannie and Freddie and who opposed a bigger government role.” No, the President isn’t in the Senate, but he’s the President and he’s a Republican and the Senate was run by Republicans and presumably his West Wing staff told the Republican Senate leadership what the President wanted in the way of a bill.
And you choose to ignore the U of Pennsylvania’s Wharton Business School.
http://knowledge.wharton.upenn.edu/article.cfm?articleid=1812
Will get back to Maya later on. Have to get out another report in my day job.
– Larry Weisenthal/Huntington Beach
Larry, what are you talking about?? S190 is the related bill to the House bill you referenced. And it was all about oversight/regulation.
Now… wanna try again? And this time, provide links to what bill you think you’re discussing, and we might be able to sort out communication differences. You’ll find GovTrack a terrific site.
I dismiss Bernanke because he was in the politically delicate position of not being able to call a spade a spade when discussing the cause. If he needs Congressional approval for his and Paulson’s proposed government take over, he’s not likely to get it if he points fingers at them and says “it’s *your* fault”, is he? One has to lend more credibility to those who are removed from the cause and the fix.
Secondly, Traiger’s data is dated. There’s been a lot of events since Feb 2008. Also, again, you need to get removed from involvement. When their entire business revolves around CRA banking clientele, what they display on their website will be edited to fit that clientele. So I use economic publications like Agora, Financial Times, Investors Business Daily, etal. These are neutral third parties.
As far as HuffPo goes… it’s hard to lend anything of substance to a link that’s titled “Fox News: Barney Frank Escaped Blame for Fannie Mae’s Problems Because He Is Gay”… which of course is not the title of the Fox piece. Nor did they provide a link to the Fox piece they were slamming.
Frankly, I give the National Enquirer more credibility than HuffPo. It’s a toilet cyber tabloid with fake headlines. Not to mention quite a group of “ugly Americans” that comment there.
Now, if you provide the original link to the article they are revamping in their own blog trash, I can live with that.
That said… as you can see, I go to your links. I do, however, find your news sources extremely bizarre choices. But, as you can see, I still respond to them… and provide direct sources (such as bill history, text). And you’ll also note that in my posts, I link to neutral specialty sources… not cyber tabloids.
As far as refuting Barney Frank in the HuffPo piece, where he says he wasn’t in the position to do anything until 2007…. uh, would that be the same Barney Frank who said:
Or perhaps, if you don’t want to believe the printed quotes from the WSJ, you might like to hear it from the horse’s mouth how the DNC was arguing with FHEO and regulators how Fannie/Freddie weren’t in trouble, when notable members of the GOP were saying the opposite.
Now I can’t defend the GOP who sided with the DNC. But with 100% of the DNC on the Fannie/Freddie side, plus renegade GOP, the GOP majority couldn’t evoke the reform.
Below… for your viewing pleasure …. the horses’ mouths in action.
Mata,
Very smart answer and very well sustained. You have patience with manipulators like Larry. He doesn’t fool me though with his apparent respect… it’s a cover-up. I prefer idiots like Dave, Doug, and Fit Fit and alike… they are less hypocrites. The snake-type like Larry is the worst, much more dangerous, because nobody sees him coming with his misinformation. Keep the good work Mata, don’t let Larry get away with his BS.
Mata and Mark,
Back later. Post debate.
You don’t need to go with the personal insults, Mark. It doesn’t help clarify anything.
I’ll continue discussing/debating with Mata, as long as she approaches this at the honest difference of opinion level. Perhaps she’ll ultimately establish that I’m misinformed or in error. Perhaps not. But life is too short to get involved in pissing contests.
You obviously don’t agree with me, but I’m no “snake.” I stand up for that which I believe by signing my own name. I’m not some annonymous DNC operative or anything like that. Simply a private citizen, entitled to have his own point of view and seeking to discuss this with others. I’m an open book. You can Google me. Good grief…”snake”? The only people welcome on your blog are those you share your point of view? Why didn’t you post a warning to that effect and spare both you and I the aggravation?
– Larry Weisenthal/Huntington Beach, CA
The following is an excerpt from letter to the editor of the Wall Street Journal, commenting on a WSJ editorial:
http://wsj.net/article/SB121746628592499215.html?mod=todays_us_opinion
>>In “Paulson’s Fannie Test” (Review & Outlook, July 15), you editorialize, “Had Treasury and Congress acted two years ago, or even three or six months, the current panic could have been avoided.” In fact, the House did act. After a successful committee vote, we passed strong, freestanding GSE reform legislation, H.R. 1461, in the House on Oct. 26, 2005, with a bipartisan vote of 331-90. The bill encountered opposition in the Senate, in the administration, and on the Journal’s editorial page. It died in the Senate.
>>I am proud that the Financial Services Committee acted while the housing economy remained robust. In a noncrisis atmosphere, we produced legislation that would have created a stronger regulator with new powers to increase capital, to limit portfolios, and to deal with the possibility of receivership. Had our legislation become law in 2005, a world-class regulator would have been in place, providing better oversight prior to and during the market downturn.
>>Michael G. Oxley
Washington
>>Michael G. Oxley was chairman of the House Financial Services Committee from 2001 through 2006.<<
Note that the House bill was actively opposed not by the Democrats, but by the Senate Republican leadership, the Bush administration, and also by the Wall Street Journal editorial page. This is a smoking gun for “smoking aces.” It proves that a bill to regulate Fannie Mae in 2005 was indeed “killed” in the Senate. But by REPUBLICANS, not by Democrats.
By the way, I listened carefully in the debate for McCain to make the charge that Democrats “killed” legislation to regulate Fannie Mae. He never came close to making such a charge.
I’ll address the arguments most recently made by Mata later on.
What do you guys think of McCain’s proposal to buy out bad mortgages and re-sell them to the original purchasers at current (reduced) market value, with the government picking up the tab for the difference?
– Larry Weisenthal
Larry: You might also be aware that many Republicans opposed some of Oxley’s provisions which would have given a financial windfall to groups like ACORN. That was the source of opposition, NOT a desire to see Fannie and Freddie unregulated.
It’s become abundantly clear that you simply refuse to accept ANY responsibility on the part of Democrats for blocking the reforms that McCain and others proposed which would have saved us from this catastrophe.
As I said, it was Democrats, on a strict party line vote, who voted against S190 in committee.
At the time, McCain’s was warning of what could happen if no action was taken:
“If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.”
– John McCain, May 25, 2006
Your willingness to provide cover for Democrats is truly remarkable. But it is also unfortunate, as it means there will likely never be the kind of accountability in this situation that is necessary if we are to move forward. Worse yet, your deliberate obfuscation is an enabler for Democrats to continue doing more of the same.
The record here is clear: Republicans put up multiple legislative proposals, all of which were shot down mostly by Democrats.
One letter from Mike Oxley doesn’t alter that fact.
Mike, Here’s the reality. There was a bipartisan bill which passed the House in 2005, which would have regulated Fannie Mae and improved its lending standards. This wasn’t a Democratic bill, it was a bipartisan bill.
Now, there were elements of this bill which the White House and Senate Republican leadership didn’t like. So the Republicans killed the House Fannie Mae regulation bill in the Senate. The floated a different bill, instead, and the Republican sponsor of the House-passed Fannie Mae regulatory bill (Rep. Michael Oxley) claimed his bill was opposed by White House “ideologues” (his word) who wanted to privatize Fannie and Freddie and who opposed a bigger government role.
Now, you claim that Democrats “killed” this latter bill. You’ve yet to provide the slightest bit of evidence to support this charge. Not a single Republican Senator, including John McCain has made this charge. Given the very high level of GOP support in the House for the Oxley bill, it is entirely plausible that there were insufficient GOP Senate votes to support the bill. What typically happens when there is a disagreement between House and Senate bills, there are meetings and compromises to hammer out a deal. Obviously, the majority of Democrats didn’t oppose substantive regulation of Fannie Mae, despite the exisistence of old CSPAN clips of a few House members saying stupid things from time to time. The obvious truth is that no one — President, McCain, Senate leadership — cared enough circa 2005 – 2006 to do a deal with the House to reform Fannie Mae regulation.
So both Democrats and Republicans favored Fannie Mae regulation. Talk is cheap. Getting the votes is what counts. Fannie Mae regulation was favored in the House by a Democratic majority and a strong Republican minority. A final bipartisan regulatory bill passed by a huge margin. But this bill was killed — truly killed — by the Republican controlled Senate, who obviously did not make a priority of putting together a regulatory bill which would be acceptable to the majority of both Houses of Congress and which the President would sign. The Senate Republicans could have passed a strong regulatory bill along the lines of the House bill. They chose not to do so.
My own position is bipartisan. I don’t blame Republicans. I don’t blame Democrats. Everything is 100% clear in retrospect. Had Senate Republicans and the President realized in 2005 what was going to happen in 2008, I’m sure they’d have done a deal with the House to pass regulatory reform. I’m sure that Bush would have actually made an effort to achieve regulatory reform in 2003, rather than simply phoning in a press release and dropping the subject. I’m sure that Clinton would have twisted a lot more arms. I’m sure that all the banks who bought mortgage backed securities because they thought they were going to make a lot of money wouldn’t have done so. And that brings us to the proximate cause of this global debacle: the Wall Street Masters of the Universe were the proximate cause.
– Larry Weisenthal/Huntington Beach, CA
I’m on the fly most of today, but will check in a few times to carry on the three way conversation Mike’sA, Larry and I are having.
There’s just a couple of things that I wanted to address in brief. Larry, INRE your comments from #125:
Technically, Fannie and Freddie are already privatized in their operations, but are a GSE… meaning optionally government backed. But it was never a guarantee… But today, we realize they did guarantee it.
S190 created a new regulatory agency, wresting away it’s current oversight under HUD… and gave that new regulatory agency authority to address some, today, familiar issues like golden parachutes, risk assessment criteria, capital levels, etc. This does not sound like a WH who wanted to further privatize Fannie/Freddie…. but rather like a WH and Senate who wanted more govt oversight of the GSEs.
You originally said the WH preferred the Senate bill, Larry. In which case the GOP was likely to have constructed it within the framework they felt the WH would not veto. If that passed, the House and Senate could have worked together to reconcile the differences for Presidential signature/veto.
While I agree there is ample blame for both parties in this whole mess over the 13 years of it’s growth to the financial tumor it is today, I can’t see this Senate bill being a GOP failure entoto. With likely 100% of the DNC opposed, it only took a few GOP to oppose it for it’s demise.
And yes… I will agree witih your last paragraph that had any of these elected bozos had a crystal ball to see today’s times, they might have acted differently. But the point is, they carry significant power to affect our nation. And frankly, I think all of them took that responsibility far too lightly, assuming they could not cause this collapse.
I will, however, remain to agree to disagree with you on Wall Street masters of the universe being the prime culprit here. I believe Congress created an environment of easy money/credit, promoted risky loans for minority home ownership, and the market took over from there. And I also blame a very undisciplined, gimme “stuff” oriented society who thought they could live forever outside of their financial means.
So just as the DNC and GOP must share blame, so must the consumer.
Last, in your comment #123, Larry:
I did not see where Oxley expressly stated “Senate Republican leadership”. He said:
That opposition was certainly by the DNC, and quite likely some GOP since they did not get the majority verbals to forward it to the floor for a vote. But that may not have been “leadership”.
But fact remains, DNC opposed fixes and not enough GOP overrided them when they had a majority. But also, if enough DNC would have supported reform, this could have been accomplished. So we are still blaming a small segment of GOP, and the bulk, if not all of the DNC.
The point is that the GOP controlled Congress from January 1995 to January 2007 and the only Fannie Mae regulatory bill to pass either chamber of the congress was the October 2005 bill, which was authored by a Republican (Oxley) and which passed with the votes of 122 out of 204 Democratic member of the House (a majority) and with the votes of a large minority of Republicans.
This bill was actively opposed by the White House, as expressly stated by Oxley. I’m personally certain that the main opposition to the House-passed bill was from the Senate Republicans, as the majority of the House Democrats supported the bill, but only a (substantial) minority of House Republicans. My understanding is that the Senate Republicans wrote their own, alternative bill, for which they were unable to find sufficient support.
It isn’t likely that only a minority of House Republicans would have supported the House bill with a majority of Democrats supporting and then the situation would not just be the reverse in the Senate, but that Senate Democrats would be in such opposition to a bill passed in the House with a majority of Democratic votes that they could actually “block” the bill with a filibuster threat.
I mean, don’t you agree with me on this? What happened, precisely, in the Senate remains opaque, but, on the basis of available information presented on this thread, it’s neither credible nor fair to claim that Democrats “blocked” Fannie Mae regulatory reforms in 2005. I again repeat that no Senate Republican, including McCain, has ever made this charge, despite the fact that they obviously have every motivation to do so, were it, indeed, true, which it certainly is not.
In contrast to the House action in 2005, in which Fannie Mae regulatory reform was passed with strong Democratic majority support, all we have from anyone else during that entire period of GOP congress control between Jan 1995 and Jan 2007 are speeches and press releases. The fact that some individual House Democrats were caught on CSPAN saying dumb things is much less important than the fact that the House Democrats supported improved Fannie Mae regulation in 2005 (authored by a Republican) by a strong majority vote.
– Larry Weisenthal
“I again repeat that no Senate Republican, including McCain, has ever made this charge, despite the fact that they obviously have every motivation to do so, were it, indeed, true, which it certainly is not.” (Larry)
You’ve got to be kidding, right? McCain has been saying it everywhere he can. Are you deaf or what? Didn’t you see all the videos? Didn’t you watch the debate last Tuesday? Come’on, get real! Even Bill Clinton said it and blamed the Dems.
Larry: I’m not going to waste my time by repeating everything I have said before and the essential elements of this post which DO document the efforts Republicans made for reform of Fannie Mae and the efforts Dems made to block it.
I realize you simply prefer NOT to allow any blame to be cast on the Dems and you are an enabler of the tricks they pull.
So be it.
I’ve presented my side in detail and you haven’t given me anything that casts doubt (other than your own) on my conclusions.
We’ve each had our say. It’s your blog, and you deserve the last word. Thank you for allowing me to state my opinions as your guest.
– Larry Weisenthal/Huntington Beach, CA
Well, I guess you’re done with our conversation INRE the causes of the bail out too, Larry… yes?
Well, don’t be a stranger. I, for one, found your comments to be thought provoking. And opposing opinions alway demands rechecking your base information for their merits… and inspiring more research. Being a research junkie, I’m always appreciative of being challenged with one that presents cogent dissenting arguments.
BTW… hope you and the group come up with some serious inroads into curing the big “C”. It’s an admirable quest.
Hi, Guys.
Little follow up:
http://ap.google.com/article/ALeqM5jRzoY3Qvz0l_IFNXguiYMSK9ur5AD93TNP1O0
Basically, it was Bill Frist who ultimately “blocked” the Senate bill. There were 25 Republican Senators who signed Senator Hagel’s letter and 29 Republicans who did not sign it, including not only the then-GOP majority leader (Frist), but also the current GOP minority leader (Mitch McConnell).
We now have the complete story of the 2005 attempts to regulate Fannie Mae. A regulatory bill passed in the House, with a majority of Democrats joining with a majority of Republicans to approve the bill, despite speeches against the bill by Barney Franks and Maxine Waters. Some Democrats said dumb things, but a majority of Democrats voted in favor. According to the Bill’s sponsor, Republican Michael Oxley, the bill was opposed by the Bush White House and by the Senate.
We now know the details of the Senate opposition. (story above).
My conclusion remains that the title of this thread is incorrect. The Democrats did NOT “block” financial reforms in 2005. Which is precisely why neither John McCain nor any Senate Republican running for re-election (including Mitch McConnell) is making that charge. McCain said that he signed a letter supporting reform. We now know what the letter was. And we now know why it didn’t go anywhere.
– Larry Weisenthal/Huntington Beach CA
Larry, great job looking this up. I’d like to look at it more later (busy this afternoon). This is EXACTLY the kind of feedback and discussion that makes Flopping Aces strong. Sincerely, my thanks to you!
-Scott
Larry: ONE example proving your point does not make the title, nor the conclusions of this post incorrect.
To say “We now know the details of the Senate opposition” is absurd despite Scott’s tepid endorsement.