Big Government's Big Role in the Credit Crisis

congress

The government is run by immature self centered people. They are concerned with one thing and one thing only :Re Election. It is clear they are squandering tax dollars for their own agenda not the agenda of citizens.

chrsi of NV @ Sep 27, 2008 17:10:53 PM

Distortion

Problem with this type of reasoning is it lumps different people and different laws/regulations together as 'government'. It's like talking about 'the media' like it is a single entity. There were many irresponsible actors that led to this mess, not one. At every level from unqualified borrowers taking doomed to fail loans pushed by deceptive brokers all the way up to the investors who ignored the problems inherent in speculating of complicated credit derivatives. But while we're on the topic of government let's not forget things like the

Gramm-Leach-Bliley Act

and

Commodity Futures Modernization Act

that allowed banks to get so big and for everyone and anyone to enter the credit default swap markets with totally irresponsible leverage.

Yep, it's easy to blame 'the government' or 'the media'. It's much harder to set down the blame finger for a moment and understand all the elements of the current crisis.

b hallmark of AZ @ Sep 22, 2008 17:45:42 PM

CRA had NOTHING to do with the Current Economic Crisis

What an incredible fairy tale the GOP is telling - where Phil Graham is the hero rather than the villain and Carter (not Bush deregulation) is to blame for the collapse of the market!!! Only a Disney movie could spin a finer fairy tale. I think I woke up in Bizarro World.

The CRA only accounts for a small number of loans in the subprime market. And of those, only a small number (statistically speaking) defaulted. The vast majority of the defaulted loans came from institutions not governed by the CRA. And the REAL root of the problem is deregulation which made credit-debt swaps and CDOs being sold as "low-risk" totally invisible.

Contrary to the GOP's fantasy, the entire financial collapse was orchestrated by the "hero" in the GOP's tale: Phil "Americans-are-a-Bunch-of-Whiners" Graham. The villain in his story? Yep, you guessed it: bleeding heart libruls and their "pet" minorities.

To the readers out there: you are being slowly manipulated by the "blast-faxing" efforts of Rove & Co. Having spent time in the conservative inner circles, let me tell you how the GOP dupes you: when a story looks like it's going to hurt the Republicans, the GOP calls all their loyal "soldiers" by blast-faxing them (or email). Everyone gets on the same "talking points" and it is repeated over and over until the American public believes it. That is what is happening here.

People like Jonah Goldberg are well-known soldiers for the right. So was I. But enough is enough. The GOP policies have destroyed this nation and must be they exposed for what they are. Lies.

I am not saying McCain is the answer, but he's a good man and learns much more quickly than the current President.

I believe he has learned from the crash and will do the right thing.

Rory Talbot of TX @ Sep 21, 2008 13:24:27 PM

Clueless Congress

It is amazing to think that while this economic crisis was brewing congress was focused on drug use in professional baseball.

Consider also that after 35 years we still do not have an energy strategy.

This list could go on, but the ability for rational thought seems to be - at best - grid locked.

The countries ability to pick competent leaders is at an all time low. Congress is especially disgraceful.

John Hogan of SC @ Sep 21, 2008 12:27:00 PM

Greed

As I can see where Mr. Petholukis is placing most of the responsibility for our economic MESS (government, please italic), perhaps if the private sector tried to keep raises closer to or matching the rate of inflation; if people worried less about buying $1,000 purses and jeans and more about making our school system among the best in the world; if we fight the wars that make the most sense for truly protecting our nation instead of wasting billions each month and putting our brave soldiers in harms way for a war that has not kept us more safe; we would not all be here trying to pass the buck on who is to blame. It's greed that's to blame; our natural urge for power and money (i.e., greed).

PS - It's narrow minded to think one president alone caused this. It was Bush who blew the government surplus, and let big business do pretty much what it wants and pay trivial taxes.

A. of CO @ Sep 20, 2008 23:31:12 PM

Govt is DIRECTLY Responsible

In 1995, as a result of interest from President Clinton's administration, the implementing regulations for the Community Reinvestment Act were strengthened by focusing the financial regulators' attention on institutions' performance in helping to meet community credit needs. The 1995 revisions were credited with helping to substantially increase the amount of loans to small businesses and to low- and moderate-income borrowers for home loans.

The revisions allowed the securitization of CRA loans containing subprime mortgages. The first public securitization of CRA loans started in 1997. 16 - 1/2 years ago.

As Stan Liebowitz, a University of Texas economist has pointed out, a Fannie Mae Foundation report enthusiastically singled out one mortgage lender that followed "the most flexible underwriting criteria permitted." That lender's loans to low-income people had grown to $600 billion by 2003. Its name? Countrywide, the largest U.S. mortgage lender and one of the lenders in the most trouble for its lax lending practices.

Mainstream banks were forced to loan money to borrowers they never would have, had government regulation not forced them to. Additionally, government regulation encouraged Wall Street to package the loans that never should have been made into negotiable securities and sold, and resold. This made these high risk securities backed by the loans, which never should have been made in the first place, popular with the hedge funds and investment banks worldwide - since they had a high yield. This created tremendous demand back down the pipe for more of these securities, which accelerated even further the building of homes that never should have been built, and sold to buyers who could not afford, nor had the ability to borrow, which overbuilt the entire housing market and deflated the value of all houses.

The genesis of the entire mess is GOVERNMENT wrongly demanding a solution to so-called “affordable housing”, adopting the attitude that Banks were racist for "wink & nod" redlining, then ordering banks to loan money to people NOT based upon credit standards that protected the bank and the public that insures them..

President Clinton ran on a platform of re-inventing affordable housing in 1991. He culminated his signature effort by signing the "Community Development Banking Financial Institutions Act, Sept. 23, 1994", which contained within it a reformation of the "Community Reinvestment Act".

The investment banks, pension groups, sovereign wealth funds, Hedge funds, GSEs (including Fannie Mae & Freddie Mac) all purchased MBSs then used them as cash downs to purchace 20 times the amount in derivatives and other high-risk securities. When the cash down (MBSs) lost market value, all the other securities they anchored were called. - OUCH!

This is what collapsed the world, as we know it.

Edward Holman of TX @ Sep 18, 2008 19:17:16 PM

Congress clean up

I think we should get rid of each and every one of them ASAP

jO of MA @ Sep 18, 2008 18:03:00 PM