To save the US economy - Republicans turn to a tribunus plebis??!

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That's exactly the point I was trying to make. Deregulation isn't the only thing that was broken - that's why I said that there is plenty of blame to go around. I do point some of the blame on deregulatoin because it is insufficient for government to be purely reflexive and reactive. Sometimes it is required to be proactive, and expert economists - heck even our local Harbourboy - have been calling this one for at least five years now.

 

And that is my point, too. It is about governing. And at governing the R's have been notoriously lousy. And it has a lot to do with their attitude that government is not the solution, but the problem

Sometimes government is the solution, but R's have had a hard time of seeing that clearly because they're way too ideological about it. In the military, or more recently in 'homeland security', they clearly see the need for the state, and for them, the more of it the better. But for everything else, geez ...... Now, in the Paulson bailout some appear to do see government action as a responsibility - but how late, and at what price!

Removing rules, and making government cheap and small to offer business opportunities for the private market is not governing. Every idiot can do that and cut budgets, gut agencies and fire federal and state employees because they are part of 'the problem that is government' and claim as a justification his fervent faith in the holy market. I argue that comparable qualities were one of the main reason why the economy of Communist Russia went down the drain: Ideology is no substitute for expertise. Where the commies had regulation for everything because the party in the infinite wisdom of the working class knew everything, the R party line relies on deregulation because the market is self regulating. Hahaha! Two sides of the same coin they are!

The belief to have to axe government because 'government is the problem' is irresponsible bordering on madness because it undermines the state's ability to act. In FEMA's response to Katrina one can clearly see the consequences of the dysfunctionality resulting from that approach. The challenge of making the state and the bureaucracy actually work well is a task of an entirely different magnitude. They don't even try face it. After all, outsourcing such functions to the private market is so much better - always and anywhere - it produces nothing but better service and lower cost to the taxpayer! Indeed! They want to have their cake, and eat it too. Now when has that ever worked?

 

Yeah, right. Somehow the Clinton admistration just happened to get it all this "deregulation" past a Republican Congress and Senate. :Really, your constant accusations against the Dems on this issue is just plain silly. The Republican mantra for decades has been smaller, and a more "do nothing at all" from the government (less oversite). Where have you been all this time, NOG?

http://www.motherjones.com/news/feature/2008/07/foreclosure-phil.html

 

Ok, I misunderstood Aldeth's earier post. To Ragusa and Chandos, I'm just trying to show you how the Dems are as much to blame as any other group involved in this in response to your fairly blatant Rep bashing. And Chandos, Clinton didn't deregulate, he mis-regulated. Again, attempts were made to fix this. If you want to know who killed them, you can look up the records.

Also, the official Republican position is that if it can be done on the local level, it shouldn't be done on the national level (i.e. the local approach is usually better), not that all government is bad. Of course the practical Republican approach for the last several decades has been more of a "Do what we want" tactic, much like the practical Democratic approach.

I hate politics.

 

Of course Clinton shares some of the blame. He was the president who signed into law the deregulation bills that were passed by the Republican Congress in 1998-99. Most Americans also believed that deregulation would be a good thing. Now, they will have to pay the price for believing that some of these large investment corporations didn't need any oversite. Like I commented on earlier, it sounded like good policy on the surface. The Chicago School of Economics, lead by Milton Freidman, spearheaded the deregulation mania of the 80s and 90s:

http://en.wikipedia.org/wiki/Milton_Friedman

I wonder what he would have thought of the meltdown....

 

Absolutely. And I go further, if the taxpayer bails someone out who is too important to fail, then he ought to get say and sway in the way the business they bail out is run, and some of the profit as well - after all, if a business investment bears fruits, so should a taxpayer investment in such a business.

What annoys me about the government-is-the-problem babble is that it is ideological phrases and little substance. It's a bloody slogan, and it has the utility of a slogan. How to do A? Privatise it! How to fix B? Privatise it! How to do C? Privatise it! Childish nonsense. I don't believe in magic formulas that solve everything. I'm too old for that.

 

I get the impression you assume all these defaulted mortgages are on run-down crack dens in poor neighborhoods?

Look at where most of the defaulted mortgages are: Las Vegas, Phoenix and other growing cities. The majority are new houses in the $300,000-$400,000 range. Crack dens?

To me, this illustrates the fundamental problem of the US economy: it's not poor black folks (though some -- Democrats? -- would like you to think so). It's middle class folks buying crap they don't need with money they don't have. Unfortunately, this accounts for a large chunk of the US's economic growth. Average American makes what? $30,000 a year and buys a $400,000 home, an SUV, iPhones and an X-Box 360 for the kids -- all on credit of course, and then is shocked when they can't pay it all off.

The banks and credit card companies have been all too willing to give these folks money. That's the problem.

The solution is probably worse than the disease, though. If everyone stopped using their credit cards and paid off their credit card debt and started living a more modest, pragmatic life it would gut the banks and credit card companies.

There's a strange irony when you watch these prime-time financial advice gurus like Suze Orman: they say priority number 1: pay off your credit cards and NEVER use them again... and buy stock in Visa and Master Card. Well Suze, God forbid everyone should take your advice. Then buying credit card stock wouldn't be such a good idea, eh?

 

Not all of them, but who knows who will move into an empty house illegally...

Aye, there's the rub. But the solution may not be as hard to live with as you suggest. Why do they need a $400k house? Wouldn't a cheaper house provide for the needs of the family? A $200k house coems with cheaper mortgage payments, and possibly a shorter term than the bigger house. This makes it possible to get the nicer TV and the X-Box 360. Also, Do you need the expensive car or would one cheaper do the job? Sure if you did a lot of heavy deliveries, you may need a bigger, more powerful truck, but for the weekend warrior type, a smaller, cheaper, maybe more fuel efficient vehicle. And Hybrids, don't get me started. How do people drive those things with their head that far up their ass? But seriously, You could save over $10k on a car of similar size that would not be noticibly harder on gas...

 

Interesting interview with Bush-McCain booster Jack Welch. If such a guy issues warnings six weeks before an election, the US economy is in real trouble, no matter who wins the election.

And what he doesn't say, is that keeping trade with derivatives regulated and restricted to the investment banks and hedge funds only could have prevented a lot of this mess, but he couldn't possibly bring himself to say that.

The problem with a free market is that it needs transparency to work. The answer is to shine an ever brighter light on the books and let the buyer discriminate. That's what has been lacking. Nobody knew how much those derivatives really were worth, and a lot of people used them who didn't really understand their speculative nature and how they were calculated. Had they known they were buying junk, they wouldn't have bought and invested elsewhere. Complex instruments are fine and probably necessary. Just leave them to the experts who can rationally assess the risk.

Who created this Monster?, that I'll quote, on popular demand in excerpts because it admittedly is a long article:

 

GAH! Ragusa, don't say that word! The pr*****ze one! A needed government function should never be handed over to private individuals and if it isn't a needed government function, it shouldn't be in the government's hands to hand over in the first place.

GAH! Ragusa, don't quote that much unbroken. Seriously, we can read links!

 

You're completely right on this point. There are a glut of houses built in the last five years on the market. Not just from people defaulting on their mortgage but also because home builders built like crazy during the housing boom, only to discover they couldn't sell the newly finished homes when the bubble burst.

Actually, I haven't heard either political party make that point. Certainly some of the people that are in debt up to their eyeballs were speculators who thought they could buy a home, live in it for a few years, and then sell it for a profit if necessary when the payments went up. On the other hand, I think some people were genuinely suckered. While I agree that it was the poor who were suckered more, I do not think that blacks represented the majority of these people (heck blacks account for less than 20% of the population).

I think the average household income last year was around $47K (inidividual income was lower, but for the purposes of affording a house, they take into account all income sources). Although even at the height of the housing boom, you wouldn't see a bank giving someone with an income of about $40K and loan for $400K unless they had a serious chunk of cash as a down payment. Prior to the housing boom, you could realistically expect to get a loan for about 3 times your annual income. During the housing boom, it was about 5 times your annual income. It never got so crazy that you were able to get loans for 10 times your annual income.

I also think that location has a lot to do with it. Sure, it's great to say that you could live in a $200K home instead of a $400K home (as Gnarff suggests), but depending on where you live that may not be practical. My current townhouse is worth $200K (which is down about 10% in the last few years), just outside of Baltimore, and is just 980 sq. ft. It's really tight with the three of us living there. But, if I want to move into a single family home within a reasonable drive to where I work, it's going to cost me $400K. That's not for a mansion on an estate, that's for a house of about 2000 sq. ft. on a 1/4 acre lot. And the Baltimore/Washington area is far from the worst. Try seeing what you get for $200K in the area of Boston or New York City.

 

I disagree. The problem is that credit was extended to individuals who were uncredit worthy. In other words, in order to achieve the sale of a home, bulders and mortgage companies looked the other way when selling to these buyers. There's a reason that these individuals have bad credit - it's because they don't pay their bills. Now they are defaulting on their loans and their homes are being foreclosed on. The average American that you are complaining about actually pays his/her bills in a timely manner. They are the ones who are going to be stuck paying for those deadbeats who refused to keep up their credit and the greedy companies who extended bad loans to these losers. Again, this will be welfare for the undeserving individuals who lack credit integrity, and welfare for the rich who invested in these loan schemes. Those in the middle class will be stuck bailing them all out.

 

Chandos, normally y9ou don't sound as judgemental toward the poor as that -- it must be my bad influence.

I totally agree, though. People who bite off more than they can chew shouldn't expect the rest of us to bail them out for their irresponsible behaviours.

 

I'm thinking it's actually both. The poor surely contributed a good bit, but are there really enough poor in the US to make that many loans? Methinks some middle-class people with poor credit made some bad decisions, too.

 

I worked in sales for years, and ran literally thousands of credit applications. I can tell you that most of those with bad credit were not the poor. Typically, the poor just don't have any credit. It was those in the lower-middle and upper-middle that I ran across who didn't have good credit. Most "poor" people that I dealt with typically bought inexpensive items and paid cash.

I finally learned after a while that those in the upper range, well-dressed, at least claiming a high income, and claimed to have loads of credit, were the ones to watch for. In sales you learn not to judge people by what they claim, how they are dressed, ethnic background or any other surface impressions. It all comes down to the numbers....

 

I admit, I'm not sure how I feel about the bailout. Fundamentally, I am opposed to bailouts, but I also don't think I want to risk a full fledged meltdown of the economy. Talk about a conservatives nightmare.

 

Here is a great quote

 

Bailout was voted down 228-205: http://www.npr.org/templates/story/story.php?storyId=95180529

Now, I did not read much about it before hand, but I would prefer not to have our economy die.

 

Does 'rightly' mean 'in a right wing fashion' or 'correctly'?

Given the points that have been made about how the bailout bill had some really stinky parts that seemed corrupt as all get out, perhaps some people were simply wanting a bailout package that actually would work?

Or are legislators like Hansarling just ideological zealots who cannot possibly consider the idea of government taking a hand like this in the economy?

To be honest, I'm not sure at this point, I'm really not.