lifeisoverpriced.com — My degree in economics has alllowed me to analyze government's knee jerk response to the financial crisis and the trend that is emerging has me worried. The housing bill and the pork filled bailout are just two of the many "rescue packages" that governments around the world have put together to "save" our economy.
Oct 24, 2008 View in Crawl 4
iphisOct 24, 2008
Wow. I don't have a degree in economics and I sure as hell am not obtaining one from the school this guy went toFirst of all, if he’s are referring to the Glass Stegal Act which Clinton repealed, it was veto proof. It passed with an overwhelming majority. Phil Gram, now McCain's chief economic adviser, wrote the bill. If on the other hand he’s are referring to the community reinvestment act which Clinton bolstered, here's a link with lots of graphs and numbers <a class="user" href="http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf">http://www.traigerlaw.com/publications/traiger_hin ...</a> which shows those loans are actually outperforming the loans issued by private banks with no regulation. If he doesn't like to read, here's a snippet, (1) CRA Banks were significantly less likely than other lenders to make a high cost loan;(2) The average APR on high cost loans originated by CRA Banks was appreciably lowerthan the average APR on high cost loans originated by other lenders;(3) CRA Banks were more than twice as likely as other lenders to retain originated loans intheir portfolio; and(4) Foreclosure rates were lower in MSAs with greater concentrations of bank branches.And here's an article by Business Week (if you can't trust them . . .) showing why this is false.<a class="user" href="http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html">http://www.businessweek.com/investing/insights/blo ...</a>Now on to Frannie and Freddie, THEY DON’T issue loans!!! The purchase mortgages so banks will have money to issue more mortgages. Their resilience depends on the banks honesty or wisdom or whatever you want to call it. To think of them as companies is a mistake. They should be government branches (which they used to be) or done away with but they are not companies because they are an essential part of how home buying in this country works. Here is why they were created <a class="user" href="http://hnn.us/articles/1849.html">http://hnn.us/articles/1849.html</a> . And if anyone thinks just tossing them on the street is a great idea, how would you like your mortgage interest rate to be that of your credit card?This problem is endemic with unregulated free markets, and tossing out some accusations depending on a degree to lend credibility is lazy and irresponsible. The ultimate end game with deregulation is corporate feudalism. Who the hell wants that?
arlok789Oct 24, 2008
I think you missed the point of the original article.As far as the CRA and oversights go, thats not stated in this article and that is not the point.Bill Clinton's exact words were "Every American Should Own a House"Interest rates were lowered. Fannie May and Freddie Mac don't give out loans, but they insure them. They were too big to fail, and the shadow of the government and the knowledge that they would get bailed out if they failed caused moral hazard.This has nothing to do with free markets. How do free markets create corporate feudalism. If you act unethically, people will boycott you. Consumers are free too. You will get put out of business. CEO's can't do whatever they want, they have to be held responsible to shareholders. Nothing is stopping you from buying corporate stock. Listen to Milton Friedman. Seriously.
wosatOct 24, 2008
No Freddie and Fannie don't originate loans, but they set the requirements for what constitutes a "conforming loan", and the lowering of standards contributed to the crisis in a big way. It doesn't take a degree in economics to see that.
wosatOct 24, 2008
Milton Friedman FTW!
oldhickOct 24, 2008
An economics degree eh? Well, time to go back to school. That is a massive oversimplification. More importantly, it's terribly short. Little supporting evidence is presented and the argument is far from persuasive. While partially right, there is much more to this story than this blogger can comprehend.