" This column pretty much boils it down to what happened. Our great "free market" wasn't so free after all. Now we all pay for the greed of Wall Street. "

" And for those who still cling to the urban legend that the Community Reinvestment Act lies at the root of the mortgage problem - here is something from the Federal Reserve about that:

http://www.frontpagemag.com/blog/Read.aspx?guid=289665cc-e976-4e5f-b761-4b92876505a1 "

" Phil wrote on Dec 7, 2008 11:11 AM:

" And for those who still cling to the urban legend that the Community Reinvestment Act lies at the root of the mortgage problem..." I'll keep clinging until I see why else a lending institution would purposely loan money to unqualified persons. "

" xdfred - well, cling to what you want. Institutions do lend to unqualified folks all the time, though usually not intentionally. And that wasn't the purpose of the CRA, but that's another discussion. But that's not the point of the statement put out by the Federal Reserve.

Perhaps reading the statement by the Fed would clarify - and maybe even eliminate - the need for you to cling to such beliefs about a program that worked well for 30+ years, and actually still works well. "

" An open response to Thomas;

Hmmm, seems to be quite a little liberal viewpoint your parable illustrates. You mentioned that your 'avg. dude' had a 401k. i assume then that he was gainfully employed at one time. You also mentioned that your 'avg dude' blames his realtor for his decision to take out a risky loan. You also like to blame your 'avg dudes' problems on big, bad, investors in this country.

Instead, I would like to put the blame squarely on the shoulders who seem to put this guy in such a position; himself!

Investors dont seek out to ruin lives. They seek out to create wealth. this 'avg dude' should never had made such an aggregious decision to put himself in such risk. He was aided in this decision by liberals from Carter, to Clinton to Dodd, Paulson, and barney 'has an avg gay escort dude in his basement' frank. They dangled the carrot in front of the jackarses nose and your 'avg dude' couldnt help but want to eat.

Hold on to your grudge as long as you wish. b hussein will only work to trickle welfare up to the middle-class. your 'avg dude' may never work again due to abortionist(left) policies.

A note on Smith. long has the left smeared smith with the legacy that he coined laisse faire.

From wiki;
Similarly, Vivienne Brown stated in The Economic Journal that in the 20th century United States, Reaganomics supporters, The Wall Street Journal, and other similar sources have spread among the general public a partial and misleading vision of Adam Smith, portraying him as an "extreme dogmatic defender of laissez-faire capitalism and supply-side economics".[91] Noam Chomsky has argued[c] that several aspects of Smith's thought have been misrepresented and falsified by contemporary ideology, including Smith’s reasons for supporting markets and Smith’s views on corporations. Chomsky argues that Smith supported markets in the belief that they would lead to equality.[92] Economic historians such as Jacob Viner regard Smith as a strong advocate of free markets and limited government (what Smith called "natural liberty") but not as a dogmatic supporter of laissez-faire.[93] "

" Phil wrote on Dec 8, 2008 12:23 PM:

" xdfred - well, cling to what you want...." Gee, thanks.
"....Institutions do lend to unqualified folks all the time, though usually not intentionally...." You forgot the why..."
"...And that wasn't the purpose of the CRA...." Oh yes it was. To force lenders.

"....Perhaps reading the statement by the Fed would clarify - and maybe even eliminate - the need for you to cling to such beliefs about a program that worked well for 30+ years, and actually still works well....." Who's clinging to bogus beliefs now? "

" Sorry xdfred, but you are completely wrong.

Here is a link to the Federal Reserve Board descripton of the act - very short and simple to read.

http://www.federalreserve.gov/dcca/cra/

Here are a couple of key sentences:

"The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations."

"Nor does the law require institutions to make high-risk loans that jeopardize their safety."

So its your choice - believe the right wing urban legends - or believe the truth from the Federal Reserve Board who enforces the act.

Its not hard the evidence is everywhere. "

" As the article below - written this summer before the huge market crash -clearly points out, one person played a huge part in establishing the environment that allowed the current financial crisis to occur. Guess Adam Smith didn't count on the bloated greed of people like this and his associates.

"Who's to blame for the biggest financial catastrophe of our time? There are plenty of culprits, but one candidate for lead perp is former Sen. Phil Gramm. Eight years ago, as part of a decades-long anti-regulatory crusade, Gramm pulled a sly legislative maneuver that greased the way to the multibillion-dollar subprime meltdown. Yet has Gramm been banished from the corridors of power? Reviled as the villain who bankrupted Middle America? Hardly. Now a well-paid executive at a Swiss bank, Gramm cochairs Sen. John McCain's presidential campaign and advises the Republican candidate on economic matters. He's been mentioned as a possible Treasury secretary should McCain win. That's right: A guy who helped screw up the global financial system could end up in charge of US economic policy. Talk about a market failure.

Gramm's long been a handmaiden to Big Finance. In the 1990s, as chairman of the Senate banking committee, he routinely turned down Securities and Exchange Commission chairman Arthur Levitt's requests for more money to police Wall Street; during this period, the sec's workload shot up 80 percent, but its staff grew only 20 percent. Gramm also opposed an sec rule that would have prohibited accounting firms from getting too close to the companies they audited—at one point, according to Levitt's memoir, he warned the sec chairman that if the commission adopted the rule, its funding would be cut. And in 1999, Gramm pushed through a historic banking deregulation bill that decimated Depression-era firewalls between commercial banks, investment banks, insurance companies, and securities firms—setting off a wave of merger mania.

But Gramm's most cunning coup on behalf of his friends in the financial services industry—friends who gave him millions over his 24-year congressional career—came on December 15, 2000. It was an especially tense time in Washington. Only two days earlier, the Supreme Court had issued its decision on Bush v. Gore. President Bill Clinton and the Republican-controlled Congress were locked in a budget showdown. It was the perfect moment for a wily senator to game the system. As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act. Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (R-Ind.), the chairman of the agriculture committee, the measure had been considered dead—even by Gramm. Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. "Nobody in either chamber had any knowledge of what was going on or what was in it," says a congressional aide familiar with the bill's history.

It's not exactly like Gramm hid his handiwork—far from it. The balding and bespectacled Texan strode onto the Senate floor to hail the act's inclusion into the must-pass budget package. But only an expert, or a lobbyist, could have followed what Gramm was saying. The act, he declared, would ensure that neither the sec nor the Commodity Futures Trading Commission (cftc) got into the business of regulating newfangled financial products called swaps—and would thus "protect financial institutions from overregulation" and "position our financial services industries to be world leaders into the new century."

No one loses—as long as no one tries to cash in on the insurance.
It didn't quite work out that way. For starters, the legislation contained a provision—lobbied for by Enron, a generous contributor to Gramm—that exempted energy trading from regulatory oversight, allowing Enron to run rampant, wreck the California electricity market, and cost consumers billions before it collapsed. (For Gramm, Enron was a family affair. Eight years earlier, his wife, Wendy Gramm, as cftc chairwoman, had pushed through a rule excluding Enron's energy futures contracts from government oversight. Wendy later joined the Houston-based company's board, and in the following years her Enron salary and stock income brought between $915,000 and $1.8 million into the Gramm household.)

But the Enron loophole was small potatoes compared to the devastation that unregulated swaps would unleash. Credit default swaps are essentially insurance policies covering the losses on securities in the event of a default. Financial institutions buy them to protect themselves if an investment they hold goes south. It's like bookies trading bets, with banks and hedge funds gambling on whether an investment (say, a pile of subprime mortgages bundled into a security) will succeed or fail. Because of the swap-related provisions of Gramm's bill—which were supported by Fed chairman Alan Greenspan and Treasury secretary Larry Summers—a $62 trillion market (nearly four times the size of the entire US stock market) remained utterly unregulated, meaning no one made sure the banks and hedge funds had the assets to cover the losses they guaranteed.

In essence, Wall Street's biggest players (which, thanks to Gramm's earlier banking deregulation efforts, now incorporated everything from your checking account to your pension fund) ran a secret casino. "Tens of trillions of dollars of transactions were done in the dark," says University of San Diego law professor Frank Partnoy, an expert on financial markets and derivatives. "No one had a picture of where the risks were flowing." Betting on the risk of any given transaction became more important—and more lucrative—than the transactions themselves, Partnoy notes: "So there was more betting on the riskiest subprime mortgages than there were actual mortgages." Banks and hedge funds, notes Michael Greenberger, who directed the cftc's division of trading and markets in the late 1990s, "were betting the subprimes would pay off and they would not need the capital to support their bets."

These unregulated swaps have been at "the heart of the subprime meltdown," says Greenberger. "I happen to think Gramm did not know what he was doing. I don't think a member in Congress had read the 262-page bill or had thought of the cataclysm it would cause." In 1998, Greenberger's division at the cftc proposed applying regulations to the burgeoning derivatives market. But, he says, "all hell broke loose. The lobbyists for major commercial banks and investment banks and hedge funds went wild. They all wanted to be trading without the government looking over their shoulder."

Now, belatedly, the feds are swooping in—but not to regulate the industry, only to bail it out, as they did in engineering the March takeover of investment banking giant Bear Stearns by JPMorgan Chase, fearing the firm's collapse could trigger a dominoes-like crash of the entire credit derivatives market.

No one in Washington apologizes for anything, so it's no surprise that Gramm has failed to issue any mea culpa. Post-Enron, says Greenberger, the senator even called him to say, "You're going around saying this was my fault—and it's not my fault. I didn't intend this."

Whether or not Gramm had bothered to ponder the potential downsides of his commodities legislation, having helped set off an industry free-for-all, he reaped the rewards. In 2003, he left the Senate to take a highly lucrative job at ubs, Switzerland's largest bank, which had been able to acquire investment house PaineWebber due to his banking deregulation bill. He would soon be lobbying Congress, the Fed, and the Treasury Department for ubs on banking and mortgage matters. There was a moment of poetic justice when ubs became one of the subprime crisis' top losers, writing down $37 billion as of this spring—an amount equal to its previous four years of profits combined. In a report explaining how it had managed to mess up so grandly, ubs noted that two-thirds of its losses were the fault of collateralized debt obligations—securities backed largely by subprime instruments—and that credit default swaps had been "key to the growth" of its out-of-control cdo business. (Gramm declined to comment for this article.)

Gramm's record as a reckless deregulator has not affected his rating as a Republican economic expert. Sen. John McCain has relied on him for policy advice, especially, according to the campaign, on housing matters. The two have been buddies ever since they served together in the House in the 1980s; in 1996, McCain chaired Gramm's flop of a presidential campaign. (Gramm spent $21 million and earned only 10 delegates during the gop primaries.) In 2005, McCain told a Wall Street Journal columnist that Gramm was his economic guru. Two years later, Gramm wrote a piece for the Journal extolling McCain as a modern-day Abraham Lincoln, and he's hailed McCain's love of tax cuts and free trade. Media accounts have identified Gramm as a contender for the top slot at the Treasury Department if McCain reaches the White House. "If McCain gets in," frets Lynn Turner, a former chief sec accountant, "we'll have more of the same deregulatory mess. I like John McCain, but given what I know about Phil Gramm, I wouldn't vote for McCain."

As a thriving bank exec and presidential adviser, Gramm has defied a prime economic principle: Bad products are driven out of the market. In John McCain, he has gained an important customer, so his stock has gone up in value. And there's no telling when the Gramm bubble will burst." "

" Phil wrote on Dec 8, 2008 7:04 PM:

" Sorry xdfred, but you are completely wrong...." Completely? Who's homes are being foreclosed on? Why?

"The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations." Double talk at it's best. How do you encourage more lending in low and moderate income areas without encouraging higher risk loans? The lower income areas already had loans going, just not as many high risk ones. Double talk, with a capital D. "

" frodo throws gramm under the bus! what a hoot. how about the fannie execs, like johnson, rahms, and others who caused this failure? they are now in b husseins camp and they also bailed themsleves out with huge parachutes.

how about barney ' gay in basement' frank? he refused more regulation and then went on record saying he would never bail them out. Dodd? another conspirator! b hussein? he made millions from this liberal slush fund.

instead frodo blames the only conservative he can find.

shame frodo the hobbit. shame "

" xdfred - the majority (notice I didn't say ALL) of homes being foreclosed on are ones made that were NOT part of the RCA.

And many, many of these were NOT to low income or minority borrowers. "

" Phil wrote on Dec 9, 2008 11:26 AM:

" xdfred - the majority (notice I didn't say ALL) of homes being foreclosed on are ones made that were NOT part of the RCA.

And many, many of these were NOT to low income or minority borrowers. "

prove this statement, frodo, if you dare! "

" xdfred - this link, which I posted several weeks ago, indicates that 80% of subprime loans were made outside of the CRA program - proof that lower income CRA program mortgage holders were not even close to being the majority of those loans that failed.

http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html

In addition, an article showing that there were programs in place to help insure the success of the CRA - such as this one where only 3.3% of CRA subprime loans were delinquent as opposed to over 14% of all subprime loans.

http://www.iht.com/articles/2007/11/25/business/morgen26.php?page=1

And finally, a study by a law firm showing how CRA subprime loans in the 15 largest metro area out performed non-CRA subprime loans.

http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf

Like I said before, its not hard, the evidence is everywhere. "

" anyone who would sign their name to a sub-prime loan, and could afford a cheaper loan is an absolute idiot and i have no sorrow for them.

frodo, your argument is useless. the blame falls on the consumer and liberals who offered the programs. stick that in your pipe and smoke it. "

" And now we know the Republican solution to the economic crisis - break the unions and make American workers make even less money.

Don't worry about the Wall Street types who make 2, 3, 5, 10 times what an auto worker makes - and I'm not talking about the managers on Wall Street either - but by golly those unions have to take pay cuts!

What pompous jerks! And what is worse, is the people of those states are dumb enough to keep voting for these anti-US worker, pro-foreign (state supported) car company schills. "