Recipe for disaster: Take the top banker add “W” and you get a big Wanker!

Scott: you made me laugh.

Hey, Greenspan had to be made a god by the folks who worshipped him which included Democrats as well as Republicans. If people didn’t like what he said, they could have complained. I don’t remember all that much complaining during good times.

While Powell single-handedly might have stopped the Iraq war had he made a public fuss over the cooked intelligence and because he went along, he’s as guilty as Bush and Cheney, his endorsement on MTP was spectacular, one of the most heartfelt and eloquent statements about Obama yet. Made me cry, even though I have very mixed feelings about him.

If this election doesn’t happen soon I’m going to go nuts. The daily polling is giving me heart palpitations. My wife is going to kill me before it’s all over.

Colin Powell in a sense redeemed himself by getting back to what he’s always been about, but forgot in the selling of the war: integrity and the truth. He also supported Barack Obama with the Powell Doctrine … he made his statement with overwhelming force.

McClellan has joined Powell in support of Obama — the two men who were repeatedly sent out to lie on Bush’s behalf are now trying to regain their public integrity.

Scientist Garret Hardin’s 1968 article entitled “Tragedy of the Commons” highlighted the ecological concept of individuals using a public resource for individual gain in spite of detriment to the common good. It seems to me that this concept applies very well to the actions of sub prime mortgage lenders and the repackaging of those mortgages for sale to investors. Individual agents, banks, and financial institutions achieved gain for themselves and dumped the risk into the economy as a whole.

In response to Ms. Easton regarding homeowners borrowing beyond their means at the encouragement of Fannie and Freddie:

Who gave them the money in the end? It was the banks. If our banks had not been participating in lending irresponsibly, we would not be having this conversation!

She’s right there’s plenty of blame to go around, but policy encouragement did not cause this bubble — an unregulated market let it get out of control.

I wish you would ask Nina Easton if she and the conservative side accept any responsibility. I thought that was their game…accept responsibility. How long were the conservative republicans in charge of both the legislature and executive branches. And, maybe this is a reflection of the GOP’s contract on (oops I mean, with) America. Or have we forgotten about this?

I always enjoy the free wheeling Friday show…and glad Jack from Hanover is there…keeping things balanced.

Nina Easton is a dinosaur. Blaming Fannie and Freddie is not the reason for this mess and this is all the Republicans do is blame it on these two institutions.

Greenspan is one of the main players here, as is Phil Gramm and Bush.

Her talking points are typical right wing BS here is one independent voter who is seeing through it.

P.S. Some implications of my previous comment are that we need to recognize the national and global economy as a type of ecosystem — recognize that it is possible for individual participants in the economy to cause damage to the economy as a whole — and recognize a valid role for government to police (not totally control) the economy in order to limit actions that put the economy as a whole at risk.

I agree that there is plenty of blame to go around but I continue to be surprised at how little blame is directed at the ratings agencies. Had they done their job in properly rating these subprime mortgage based products then they would not have sold around the globe nearly as well and there would have been more visibility to their toxicity. I believe there are legal issues here.

I am quite disappointed in the level of banal partisan punditry that I have heard on the show of late. I would like to believe the producers could do a little better and be a little more creative. Nina Easton is particularly shrill, but not the only recent example. I have come to believe that this particular forum sought to and succeeded in rising above and ADDING VALUE in the quotidian background noise, but alas, On Point has been falling short on this in recent times.

Maybe there is blame to go around. Where is the responsibility?

Nina should go stick her head in the sand… and oh, bankers are not economists. Listen to economists! Dean Baker warned about the bubble in 2002, you might want to look at his analysis.

I’m happy to see the smallest inkling this week (from Hillary Clinton actually) that attention is finally being paid to the real root of the financial crisis — the under-employment of Americans. If you look one step before the mortgage crisis, you’ll see a jobs crisis, with the consistent devastation of the American working class employment opportunities. This must be addressed by the next President urgently.

Greenspan had a big revelation about human nature… DUHHH!

Some big revelation that greedy _holes are going to squeeze all they can out of a corrupt system down to the Nth dollar that exists on the planet if they can (all the way to tens of trillions of dollars, for instance).

CAPITALISM IS A PROVEN FAILURE, as it has now been proven many times over that people will use up any resource to the point of crisis before common sense kicks in, all in the name of following the profit motive.

The world has to face the fact that there is not enough resource wealth on the planet for everyone to have everything they want when they want it. Under capitalism, humans have managed to use up an estimated 70% of the worlds easily recoverable resources in less than three hundred years, destroying much of the Earth’s life sustaining ecosystem along the way.

Is that it???!!!! Do we only plan on being around as an advanced civilization for another couple of generations? Or do we expect to survive as a species for at least another few thousand years, if not millions or billions?

All of this is happening to put the great majority of wealth in the hands of relatively few people in just a few generations of humanity. It is time to realize that Capitalism is simply another failed system.

What is the better alternative then? Well, equilibrium is what needs to be worked on, and living more simply is eventually going to have to be mandated by governments the world over, whether we like it or not. Start praying that we begin trying to figure out how to live within the Earth’s means, or start practicing our speech to our children and grandchildren about how we’re sorry, but we just didn’t think we needed to leave them a world they could live in.

Why invite an obnoxious trumpeter of a worn out tune like Ms. Easton to defend the indefensible?… Is it the journalistic need to remain balanced? She’s doing the sales pitch for the upper crust ideology, count on it. Can’t you find competent people who are less biased - Fortune, Fox News, and Wall Street Journal, what do you expect?

Regarding Jack’s question, “Why can’t people afford their mortgages?” Low wages, he says, but no one is mentioning the folly of the variable rate loan. People got loans at a low initial rate, but then at some point the rate of their mortgage loan went way up - this is the killer; suddenly the mortgage payments became a budget buster for the household.

We’re in the midst of an international financial crisis that will likely get worse within the next six months. Was Biden wrong?

Frank, Schumer, Dodd and Obama all got huge campaign contributions from Fannie and Freddie; all called for opening home ownership to more Americans. By more, they meant the less creditworthy. As a result, Fannie and Freddie told banks that they were interested in dramatically increasing their sub-prime loan exposure. Thanks Obama.

You forgot to blame Biden? You must be open-minded!

The rest of Biden’s quote about Obama’s leadership has been omitted. Senator Biden said Senator Obama has steel in his spine. I don’t understand why the media omitted the punchline. Biden was trying to say that Obama would be tested and had the fortitude. In the meantime, this ecoonomic crisis seems to show that Obama knows how to react and reassure the public.

The public seems very reassured; that’s why there’s panic in the streets. We’re so excited about the future, we’ve decided not to shop anymore, not to go on vacation, and to abandon our homes.

“I agree that there is plenty of blame to go around but I continue to be surprised at how little blame is directed at the ratings agencies.”

Totally agree Dale. I tried to make this point on Talk of the Nation and got totally dismissed. I’m glad that there are other people out there that see this.

Frank, Schumer, Dodd and Obama all got huge campaign contributions from Fannie and Freddie; all called for opening home ownership to more Americans. By more, they meant the less creditworthy. As a result, Fannie and Freddie told banks that they were interested in dramatically increasing their sub-prime loan exposure. Thanks Obama.

So did McCain. This is an absurd issue.
Either we let our politicians take contributions or we do not. This is an issue. I’m for this kind of thing being
illegal.

However it is not the main reason for the failures in the markets. It’s part of it but more of it was tied to the derivative market and bad speculation.

Judging by how the head of the ratings agencies were treated when they went in front of Waxman’s Committee, I don’t think they’re getting a pass. However, ratings are never fool-proof and no excuse of doing your own homework. If the only due dilience you did was to look at the rating, then your laziness is partly to blame for your mistake.

Part of the problem was people were straight-lining recent experience with default rates and home prices. This led to expectations that were overly optimistic, to put it lightly.

I’d like to know why my comment regarding Obama’s grandma was deleted. It was on topic, brief and civil; but apparently not to the liking of the powers that be here.

My contention is that this is a schred political move, similar to uncharacteristic, and supposedly spontaneous, outburts of emotion by Clinton.

The whole idea of a Republic is elitist. Why shouldn’t I be in charge?

See, the Joe Sixpacks and Joe Plumbers out there should be running the show.

I’m sick of being told what to do by a bunch of “experts”. I’m sick and tired of our foreign policy being conducted by “statesmen.”

And I’m sick of the liberal establishment and its newspapers sending “reporters” out there to find “facts.”

It’s time to get America back on track. That means fighting them there before they come here. That means being on the side of Joe Sixpack and not the elitist establishment.

First, you give college liberals tenure. Next thing you know, the blacks are becoming generals and running for president.

I’m beginning to suspect your loyalty. Watch yourself.

Just something more form my blog

SEERS10 05/07/2004

My condolences really, to the secretary of state, GEN Collin Powell. How long can you sell your dignity, and still retain any kind of self-respect.

I bet right now he is lying awake in his bed, wondering if he could have made more money by exposing his boss for what he is, had he done it before the invasion. How does a person go around the globe, facing people that know you to be a spinless liar. How much money in speaking fees, and how many seats on boards of directors equal ones honor.

How long do you wish to continue the charade Mr. Secretary. Where is the honor of a four star general. Your boss let you down, your fellow cabinet memebers have proven out to be a bunch of liars. And the king is naked, do you have enough honor to admit you were a dope. Do you continue to go around the globe, promoting lies. Do you feel no shame that if you are not lying out there yourself, you are the bottom of the food chain, not even trusted by your boss, your president, your commander-in-cheif.

I will stop here now and wait to see if you can soon find your spine (M.N.R)

tombstone001

I’m all for hearing from sensible conservatives, but do we really want Fox News people?

They operate in bad faith at nearly every turn. I don’t believe they should be considered a legitimate news organization.

Ms Easton is an ideologue and a political hack, not a journalist.

Why do conservatives always blame minorities for the failures of capitalism?

Protofascistic propaganda. I say can Easton from now on.

“Wall Street Chef’s of Possibility”

God bless Jack Beatty! Give em hell, Jack. No quarter.

Please follow up with Nina Easton to demand she produce the supposed Democratic banker who said 40% of his bad sub-prime loans were required by the CRA. This has to be a lie - the vast majority of subprime lenders were not subject to the CRA.

David Goldstein and Kevin Hall of McClatchy (which was also about the only paper to report on the Bush Administration lies that got us into Iraq) conducted an analysis showing that only one of the top 25 subprime lenders was even subject to that law because it applies only to depository institutions—banks and thrifts. A study released earlier this year by a law firm specializing in Community Reinvestment Act compliance estimated that in the 15 most populous metropolitan areas, 84.3 percent of subprime loans in 2006 were made by financial institutions not governed by the CRA.

Furthermore, Congressional testimony last year indicated that a huge chunk of the subprime mess was refinancings in suburbia, not originations in minority neighborhoods, as the CRA myth would hold.

To the extent mortgages were a problem, David Abromowitz in the LA Times a few weeks back laid out the details of how the Bush Administration, through the Office of the Comptroller of the Currency crippled efforts to address all the predatory lending.

But what clearly caused the broader crisis was Republican-driven deregulation. The most amazing story to me is of the Commodity Futures Modernization Act. Phil Gramm slipped it into a huge omnibus appropriations bill, via a House-Senate Conference Committee, in the middle of the night back in 2000, just after the Supreme Court handed the White House to Bush. The bill had never even made it to the floor of either chamber before being grafted on in conference. The bill expanded the range of derivatives that could be created, expanded the range of institutions that could buy them, and obliterated effective oversight of what would subsequently grow from a $900 million derivatives market into a $62 trillion (with a “t”) derivatives market.

The CFMA enabled the credit default swaps that killed Bear Stearns, killed Lehman, and may still kill AIG — as well as the whole global financial system. There are now a lot of asset bubbles besides mortgage-backed securities fueling the broader crisis, and it all ties back to the insane leverage enabled by these swaps.

That you let Easton get away with such distortions is nothing less than a disgrace — and there should be an obligation to set the record straight.

Greenspan finds that his ideology of self-interest is flawed. Indeed, it is. But that does not mean that an ideology of collective-interest must be the answer. Believing in either one to the exclusion of the other is a basic flaw of social systems.

Although in our minds self-interest and collective-interest may be thought of as separate, opposite and in conflict with one another they are in fact always intertwined, they form a dynamic. It is plain for all to see that it is in everyone’s self-interest to be part of various collectives of one sort or another be it a family, school, club, business, gang, community, etc. Forming and being part of collectives is in the self-interest of everyone because that is how everyone’s self-interest can best be realized. One participates, then, in the maintenance of collective organizations as a means of fulfilling one’s self-interest while it is in the interest of the collective to allow individuals to pursue their own self-interest, which includes maintaining the collective-interest.

Nina blamed the Democrats and Clinton economists
and Barney Frank for the lack of regulations! It was Sen. Phil Gramm in 1999 who sponsored the bill to roll
back regulations. Clinton signed it. The GOP has the presidency for almost eight years now and had the majority in the Congress for six of those years. They have taken no leadership to reinstate regulations. Of course they would not. It is their philosophy. Remember Sen. Gramm sponsored that 1999 bill. And now he’s closely associated with the McCain campaign.

Morphing the phrase “spreading the wealth” into
socialism is a stretch. Sen. Obama wants to raise the tax rate on a certain segment of the population to what it was in the 90s. Did we have socialism in the 90s?
I heard the bail out described as a huge piece of
socialist legislation. It was asked for by a Republican president and a Republican Sec. of the Treas. And some want us to worry about Sen. Obama being a socialist as they overlook what has just taken place.

I’m not at all impressed with the analysis that I heard put forth on this broadcast. It was just partisan
rhetoric.

I hope Nina Easton will never be invited back as a guest commentator for On Point. Her views are so one-sided and jaded in favor of failed suuply side Reaganomics. Her views are incredulous and completely divorced from reality.

Tom I really love your show…I always respect how you try to maintain your fairness on air…i could tell today that you were getting a little pissed off with the BS that Fortune magazine writer was pushing on your show…but Tom!!! you gotta get off your ass in a bigger way when you hear that kinda BUllshit being spuid on YOUR SHOW…she is the one who is lucky to be there!!On point is better than Fortune magazine!!…having said this Tom i love your show especially your feelings for ASia….oh yeah..Jack I love you man…thanks bruce, Tokyo

Tom, Nina and Jack — thanks for a thought-provoking program on the financial meltdown and Greenspan. A lot of the points, even the seemingly contradictory ones, were insightful. However, I’d like to provide some additional perspectives — and request some follow-up angles. And, while I think there is plenty of blame to go around, my angle is not about finger-pointing, because that is as useless as asking “which player caused us to lose the World Series?” (even if it’s Bill Buckner!).”

The first angle is a hidden culprit: the bond ratings agencies.

The second is less hidden: aversion of debt.

On ratings agencies: despite all kinds of bad behavior — greed, self-interest, etc. — if the ratings agencies had more accurately priced the risk of mortgage-backed securities, Fannie and Freddie would have not happened so easily. Their role in this mess is that they bought “junk mortgage securities” — like junk bonds — that were worth a lot less than they paid.

Essentially, these junk mortgages were packaged with “insurance” — called credit default swaps (CDSs)that were made up of complex, sophisticated financial instruments that include derivatives and hedges. So, what ever happened to that insurance? Didn’t it work?

Well, no, and it was never priced as insurance. If it’s insurance, where are the reserves that back up that insurance? Well, lobbying of Congress not to label CDSs as insurance (let’s leave aside who did that) resulted in the super-high leverage situation that is now crashing around us.

But, if the ratings agencies had priced CDSs as unreserved insurance (VERY RISKY), what kinds of prices would they have traded at? And wouldn’t it be a lot clearer to everyone (including the Europeans and Chinese who bought a lot of these securities), that they were junk? And wouldn’t that have caused the market to increase prices for that junk to the point they were undesirable?

That’s the scenario free marketers would have expected to kick in. But it didn’t, because we were not operating within the bounds of free market rules anymore. The pricing mechanism had failed.

Now the second point is about our attitude towards debt. In short, bubbles are caused by speculation. But there’s a natural level of speculation that will always occur, because there’s always going to be greed in our world.

But, when people and companies and governments all forget that debt is to be avoided when possible, then that speculation balloons. Individuals decide not to save the 10-20% downpayment for a house, and they get into a debt obligation that could crush them. Investors borrow money so they can invest/speculate more. Our government doesn’t tax the people to pay for programs (from FHA to Iraq), but rather borrows the money for future generations to pay.

I mention debt aversion because it could have cooled this whole thing off, no matter how imperfect the market mechanisms (like pricing) were.

I lost my entire life savings because of one decision: I chose to acquire my company shares on margin, and I didn’t pay off that debt as my first priority. Then shares fell, and margin calls gobbled everything (and left me with a massive tax hangover afterwards). I think a lot of our financial problems can be traced to debt.

I currently have expenditures that I really want to make. I want to re-side my house, and Home Depot offers a pay-nothing-for-one-year financing program. My wife and I looked at our battered siding and decided — let’s wait and save the money and pay cash for it. Who knows what will happen in one year.

Nina Easton is afraid of being the next Christopher Buckley and she needs her income to replace the money she is losing in the stock market. Schadenfreude! She does a disservice to Fortune Magazine and THEY should let her go! She should be forced to read the McClatchy account of the subprime debacle 10 times before bed each night until she gets it right.

See:

http://www.mcclatchydc.com/homepage/story/53802.html

Boy-o-boy, what an exciting “Week in the News” episode! One of the best I’ve heard. You folks were really duking it out.

I was rooting for Tom in his differences with Nina, but going beyond the points at issue for a moment — I found it a bit disturbing that Nina’s whole method of evaluating an argument was not What Was Said, but rather Who Said It. If a Democrat says intemperate poor people caused the crisis, well, that’s solid supporting evidence, never mind whether the “Democrat” was right- or left-wing, or whether he or she knew anything about economics or finance, or whether he or she was an idiot. A Democrat said it and it goes against the liberal consensus so it’s profoundly revealing and probably true. And Nina’s snort of contempt at the very idea that Jack might cite a “liberal” think tank in support of anything — again, before he even managed to say what they had said!

2 points, then: 1) When Greenspan was talking about “ideology”, I don’t thnk he meant (or should have meant) a party platform. He was talking something deeper, something most folks would describe with a word that Nina used: zeitgeist. It may be something identiified with Reagan, but it began even earlier — with Carter, or maybe with the New York City bailout — and it sank into the souls of Democrats as much as Republicans, and even into the most liberal of the liberals. The deification of the market as the transmuter of selfish actions into social benefits. If it does this at all, it does it under very specific, tightly contained and regulated conditions.

And 2) This almost makes me come around to Obama’s notion that the solutions America needs will have to overcome petty partisanship. I don’t know if the country’s quite ready to overcome them to the extent necessary, but clearly, if Nina is any example, few of even the brightest people in the country can see through their party-based blinkers.

Very interesting show….almost heated?

The one point that seems to be missing is why these mortgages failed. No one wants to draw the conclusion that for a few years people could afford these mortgages, or at least things were not dire.

So what changed in the last few years? Gas prices have increased causing food prices to rise and just as home heating and electricity costs have increased, while living wages have not.

Could it have something to do with the way we have built America? Sprawl, dependence on the automobile and continued emphasis on a growth economy? Fairly universal, certainly non-partisan. I think this whole economic crisis is a non-partisan issue in the terms that the show focused on. I think it is fully American. Keep the credit coming.

Bill H,

I agree with all your points on the bond rating agencies, CDS, CMOs, etc. There is one thing I’d like to add: the oversight and the required capital requirements on firms that wrote the credit default swaps was woefully inadequate. Had this not been true, there would’ve been less availability and higher prices on this bond insurance, leading to fewer customers for this debt, and reducing the size of the bubble.

Jack,

Thank you for standing up to Nina. There is nothing greedy about wanting to own a home in a safe neighborhood. The problem is that wages are low and citizens are being priced out of the American dream. I will say the people who bought multiple homes in speculation were being greedy and deserve whats coming to them. Too bad they don’t have the golden parachute like the CEO of the banks that loaned them the money.

I thought Nina did a great job, please have her back. She strikes a logical balance to Jack’s nonsense. If you want to do some fact checking, start with Jack’s proclamations.

Nice try David on CDS. Clinton signed the bill and a Democratic congress did nothing the past two years. In any case, CDS didn’t cause mortgage defaults to explode, CRA did. Another do-gooder program doing bad. This is what Easton got and you didn’t.

I would really like the Presidential candidates to tell me what is a fair rate of income tax. The top 5% of income earners page 60% of all income tax collected, the bottom 1/3 pay nothing. Is that fair?

Gee Jack it’s the 2005 and later vintages of mortgages that are the worst, just when Fanny and Freddie ramped up their sub-prime lending. Pressure from shareholders, you’ve got to be kidding. Jack ignores the calls of Frank and Schumer for significantly broadened lending by these entities to less-than-creditworthy homeowners. I trust it is not ignorance that gets him there.

Jack whines about low wage jobs and then condemns high wage Wall Streeters. I think Obama has promised that he will find a way to get us all high paid jobs on Wall Street.