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A novel idea: An economist talks about the economy
By FRED ABRAHAM
Many years ago when I was still in college, I somehow managed to amass a few dollars and decided to invest in the stock market for the first time. I bought shares of General Motors and over the years continued to buy more with dividends. I never sold a share and hold it to this day, although more for sentimental value than financial value since the stock is virtually worthless.
For decades, the company has been poorly run with countless bad decisions stemming from an attitude of superiority and arrogance. I stood by helpless to do anything other than write letters to management which were ignored or answered with a form letter. Admittedly, they made money for the stockholders, not because of any great business acumen, but rather due to a growing economy and a historical control of the U.S. automobile market. For years, GM and the other U.S. automakers decided what they wanted to build and then spent a fortune in advertising convincing car buyers they wanted to buy Detroit's production. The companies made money in good times not because of brilliant decisions but because they had no competition. Further, the unions demanded compensation far in excess of any productivity as they, too, got into car buyers' pockets. It was a nice gravy train for the companies and workers, all at the expense of those of us who had little choice in the market.
This gradually began to change as the inefficient practices and excess profits attracted foreign cars into the U.S. market. The market share of U.S. manufacturers steadily declined as European and Pacific rim carmakers responded to the desires of Americans to have reliable, fuel-efficient cars. And how did the U.S. carmakers respond? In 1993, they went to Congress and asked for a tariff on foreign cars to reduce competition.
As long as 15 years ago, U.S. manufacturers were asking the government to help them out. They didn't get the tariff but they did get a great economy in the '90's that pumped up demand. They continued with business as usual and made money in spite of poor business practices. A low unemployment rate coupled with a growing economy and rising incomes can mask a wealth of problems.
The cavalier attitude of the U.S. carmakers during this period is breathtaking. In the face of a falling market share and profit margins below their foreign competition, they continued to grant excessive compensation increases to employees and ignore consumers' desires. Now, all of those chickens have come home and we are treated to the spectacle of GM, Ford and Chrysler once again asking for the government's help.
Note, these are the same companies that have resisted higher fuel standards, emission controls and even airbags as unnecessary government intrusions. I guess consistency isn't taught in carmaking class. Maybe they should have paid more attention in another class: economics.
What we're seeing is economics in action. The study of markets teaches that a firm can't continue to be mismanaged in the long run without getting into trouble. The market rewards efficiency and punishes inefficiency, and Detroit is getting punished for decades of inefficiency.
So, should we give them $30 billion? For what? To continue to throw it away paying for foolish, past decisions? Nope. My company, GM, is so far gone it can't be saved in its present form. A chapter 11 bankruptcy which allows the company to continue to exist but come up with a new plan is its only hope. GM could force a new, reasonable agreement on its workers, a different set of pension obligations and completely altered arrangements with dealers. All of these groups would be hurt but here's where government should legitimately help. A program to help retrain or relocate workers and give them expanded health care would be necessary. Pensions are already partially protected by the government but Congress would have to spend more. My stock has become worthless and nothing will save that. A lot of people would be hurt by the bankruptcy, and we need government to help them. But government can't eliminate all hurt, just reduce it.
A market is callous, and carmakers long ignored its ruthlessness with disastrous consequences. It would be a mistake to give them any taxpayer money.
For decades, the company has been poorly run with countless bad decisions stemming from an attitude of superiority and arrogance. I stood by helpless to do anything other than write letters to management which were ignored or answered with a form letter. Admittedly, they made money for the stockholders, not because of any great business acumen, but rather due to a growing economy and a historical control of the U.S. automobile market. For years, GM and the other U.S. automakers decided what they wanted to build and then spent a fortune in advertising convincing car buyers they wanted to buy Detroit's production. The companies made money in good times not because of brilliant decisions but because they had no competition. Further, the unions demanded compensation far in excess of any productivity as they, too, got into car buyers' pockets. It was a nice gravy train for the companies and workers, all at the expense of those of us who had little choice in the market.
This gradually began to change as the inefficient practices and excess profits attracted foreign cars into the U.S. market. The market share of U.S. manufacturers steadily declined as European and Pacific rim carmakers responded to the desires of Americans to have reliable, fuel-efficient cars. And how did the U.S. carmakers respond? In 1993, they went to Congress and asked for a tariff on foreign cars to reduce competition.
As long as 15 years ago, U.S. manufacturers were asking the government to help them out. They didn't get the tariff but they did get a great economy in the '90's that pumped up demand. They continued with business as usual and made money in spite of poor business practices. A low unemployment rate coupled with a growing economy and rising incomes can mask a wealth of problems.
The cavalier attitude of the U.S. carmakers during this period is breathtaking. In the face of a falling market share and profit margins below their foreign competition, they continued to grant excessive compensation increases to employees and ignore consumers' desires. Now, all of those chickens have come home and we are treated to the spectacle of GM, Ford and Chrysler once again asking for the government's help.
Note, these are the same companies that have resisted higher fuel standards, emission controls and even airbags as unnecessary government intrusions. I guess consistency isn't taught in carmaking class. Maybe they should have paid more attention in another class: economics.
What we're seeing is economics in action. The study of markets teaches that a firm can't continue to be mismanaged in the long run without getting into trouble. The market rewards efficiency and punishes inefficiency, and Detroit is getting punished for decades of inefficiency.
So, should we give them $30 billion? For what? To continue to throw it away paying for foolish, past decisions? Nope. My company, GM, is so far gone it can't be saved in its present form. A chapter 11 bankruptcy which allows the company to continue to exist but come up with a new plan is its only hope. GM could force a new, reasonable agreement on its workers, a different set of pension obligations and completely altered arrangements with dealers. All of these groups would be hurt but here's where government should legitimately help. A program to help retrain or relocate workers and give them expanded health care would be necessary. Pensions are already partially protected by the government but Congress would have to spend more. My stock has become worthless and nothing will save that. A lot of people would be hurt by the bankruptcy, and we need government to help them. But government can't eliminate all hurt, just reduce it.
A market is callous, and carmakers long ignored its ruthlessness with disastrous consequences. It would be a mistake to give them any taxpayer money.
More Stories from Columnists » Guest Column
Spenser wrote on Dec 14, 2008 12:46 PM:
" The union workers received an artificially high,non-market wage;let them pay for their own retraining and healthcare.That would be the most efficient way.
The cavalier attitude of auto management and union workers pales in comparison to that of the people they solicited in the plea for help. Which is where the underlying inefficiency of the entire economy lies.That and the market for healthcare. "
The cavalier attitude of auto management and union workers pales in comparison to that of the people they solicited in the plea for help. Which is where the underlying inefficiency of the entire economy lies.That and the market for healthcare. "
chester11 wrote on Dec 14, 2008 1:41 PM:
" I'm forced to swallow the hard truth that wages and benefits for assembly line workers have gone beyond their value. Given GM and Ford's inferior product compared with Japanese automakers. Nobody can argue that there hasn't been some spoiling.
For someone like myself though, who has always supported unions, it's difficult to criticize them when I know how far the pendulum can swing the other way.
The spotlight is on the U.S. auto industry now though. If Bush does throw them some dollars, they will be put on notice to quell the bloating. "
For someone like myself though, who has always supported unions, it's difficult to criticize them when I know how far the pendulum can swing the other way.
The spotlight is on the U.S. auto industry now though. If Bush does throw them some dollars, they will be put on notice to quell the bloating. "
ionf wrote on Dec 14, 2008 3:27 PM:
" My opinion of Fred just went up a notch. This is not your typical knee-jerk progressive view of the world. He actually suggests that the union might be partly to blame.
I'd think the best thing for everyone is Chapter 11. It gives the companies a final chance to actually figure it out. If they do then great, if not why delay the inevitable. "
I'd think the best thing for everyone is Chapter 11. It gives the companies a final chance to actually figure it out. If they do then great, if not why delay the inevitable. "
momwhocares wrote on Dec 15, 2008 5:54 AM:
" Very good column...I feel our tax payers $ should not be given to the auto industry. My idea is let the oil companies help them out. If the auto workers do not agree to a compromise, lay them off for a short time. Close the doors for a short time. You can not saturate the market and continue to build cars if they are not being sold. Look what happened to Winnebago, they continued to build and build and then so many employees lost their jobs, granted they were not a union plant. People are not spending money because they do not know what will happen tomorrow or next week. And they sure are not going to go out and buy a new SUV. The auto industry made a lot of money in the last 15-20 yrs...where did that all go? To CEO's and high paying bonuses, how many of you hard working individuals receive bonuses? "
MAC wrote on Dec 15, 2008 8:18 AM:
" Albert Einstein once remarked that insanity was repeating the same activity over and over, thinking that it would result in a different outcome.
I think that Prof. Abraham has just given us a pretty good example. "
I think that Prof. Abraham has just given us a pretty good example. "
xdfred wrote on Dec 15, 2008 8:29 AM:
" An outstanding column. A very succinct analysis of the current automotive company issue. BRavo. "
Roper1946 wrote on Dec 15, 2008 10:32 AM:
" I've longed for the day that Fred would write as well as he bowls ... congratulations Fred, well done my friend. "
Phil wrote on Dec 15, 2008 10:44 AM:
" I am not going to defend the auto industry and all the parties involved.
I do want to point out a few things that perhaps folks have not realized.
First, as far back as 1952 Japan offered its auto manufacturers low interest loans so that they could grow and compete internationally.
In addition, the Japanese government, at the request of the Japanese auto manufacturers kept foreign (especially US) auto makers out of their market until 1965 because they knew they couldn't compete and would lose their own local market shares. Even then, it took until 1978 before Japan eliminated all tariffs on imported autos so that our industry could compete on an even playing field there.
Do you also know that the UAW has negotiated contracts that will put them in line with the non-union foreign car makers starting in the 2010-2011 time frame?
Did you know that approximated 1 in 10 of all jobs in the USA are tied to the automobile industry? That a failure at this time of these companies would bring even more devastation on an already reeling US economy.
What shocks me is how much people have complained about $15-30 Billion for people who actually make things - and do NOT collect six and seven figure bonuses annually (except a few top managers), but how little is said when $700 Billion is given to people who COMPLETELY created their own problems, and now due to their created crisis the rest of the nation, including the car makers, are now suffering. If there were people who don't deserve one dime of our money, it is the Wall Street brokers and bankers with their six and seven figure salaries and bonus programs.
And if you think the Wall Street created housing mortgage crisis is nearly over, I encourage all of you to go the 60 minutes web site and view the segment broadcast last night on that topic. Here is the link.
http://www.cbsnews.com/sections/60minutes/main3415.shtml
Then think about putting thousands of blue collar workers and parts suppliers, local auto dealers, etc., out of work while these rip off artists sink our economy.
Think long - think hard. "
I do want to point out a few things that perhaps folks have not realized.
First, as far back as 1952 Japan offered its auto manufacturers low interest loans so that they could grow and compete internationally.
In addition, the Japanese government, at the request of the Japanese auto manufacturers kept foreign (especially US) auto makers out of their market until 1965 because they knew they couldn't compete and would lose their own local market shares. Even then, it took until 1978 before Japan eliminated all tariffs on imported autos so that our industry could compete on an even playing field there.
Do you also know that the UAW has negotiated contracts that will put them in line with the non-union foreign car makers starting in the 2010-2011 time frame?
Did you know that approximated 1 in 10 of all jobs in the USA are tied to the automobile industry? That a failure at this time of these companies would bring even more devastation on an already reeling US economy.
What shocks me is how much people have complained about $15-30 Billion for people who actually make things - and do NOT collect six and seven figure bonuses annually (except a few top managers), but how little is said when $700 Billion is given to people who COMPLETELY created their own problems, and now due to their created crisis the rest of the nation, including the car makers, are now suffering. If there were people who don't deserve one dime of our money, it is the Wall Street brokers and bankers with their six and seven figure salaries and bonus programs.
And if you think the Wall Street created housing mortgage crisis is nearly over, I encourage all of you to go the 60 minutes web site and view the segment broadcast last night on that topic. Here is the link.
http://www.cbsnews.com/sections/60minutes/main3415.shtml
Then think about putting thousands of blue collar workers and parts suppliers, local auto dealers, etc., out of work while these rip off artists sink our economy.
Think long - think hard. "
(return of) joe wrote on Dec 15, 2008 12:00 PM:
" Spenser...Had you been able to read, you would have gathered that Abraham was not talking about the unions, but rather, the administrators who made these bad decisions. When he spoke of compensation, it wasn't with the working classes in mind. WOWIE!!!!!!!!!!!!!!! "
Spenser wrote on Dec 15, 2008 1:09 PM:
" (return of) joe wrote on Dec 15, 2008 12:00 PM:
" Spenser...(if you had read clearly), you would have gathered that Abraham was not talking about the unions, but rather, the administrators who made these bad decisions. When he spoke of compensation, it wasn't with the working classes in mind. WOWIE!!!!!!!!!!!!!!! "
He was referencing the benefits of an oligopoly for both management and union workers. "
" Spenser...(if you had read clearly), you would have gathered that Abraham was not talking about the unions, but rather, the administrators who made these bad decisions. When he spoke of compensation, it wasn't with the working classes in mind. WOWIE!!!!!!!!!!!!!!! "
He was referencing the benefits of an oligopoly for both management and union workers. "
Spenser wrote on Dec 15, 2008 1:35 PM:
" Phil,
Wall Street had people hedging in an attempt to mitigate losses after being forced by government,from the previous administration,to underwrite bad loans.
Whether it's union labor wanting a nominal wage far in excess of what they produce or government intervening in the market for housing...the one common denominator is a wistful liberal hope for equality.
What exactly is your point about Japanese automakers?They certainly operate more efficiently than ours do.Their profit/cost functions are much more in tune with how real markets function. "
Wall Street had people hedging in an attempt to mitigate losses after being forced by government,from the previous administration,to underwrite bad loans.
Whether it's union labor wanting a nominal wage far in excess of what they produce or government intervening in the market for housing...the one common denominator is a wistful liberal hope for equality.
What exactly is your point about Japanese automakers?They certainly operate more efficiently than ours do.Their profit/cost functions are much more in tune with how real markets function. "
bob weave wrote on Dec 15, 2008 2:12 PM:
" What would have been nice for the auto workers and companies is; that when they were making obscene profits in the past, that they would have made a real commitment to their wage employees. Wages could have been held in check and cheaper benefits could have been devised; they wouldn't now have to steal back the pension commitments that unions negotiated for their members. The above bloggers must of had higher salaries where providing long term retirement solutions was personally affordable and irrevocable. "
avee wrote on Dec 15, 2008 2:44 PM:
" When it comes to who’s responsible for the financial condition of a corporation it’s always the management and the board that’s responsible. They deserve the credit when things go well and they deserve the blame when things go bad. The company allowing the unions to dictate labor costs that the market could not support is managements fault.
Our government should not be rewarding failure. "
Our government should not be rewarding failure. "
Spenser wrote on Dec 15, 2008 2:45 PM:
" (return of) joe
I'm pretty sure the article addresses both management and union labor using an inefficient oligopoly to their advantage in a competitive market. "
I'm pretty sure the article addresses both management and union labor using an inefficient oligopoly to their advantage in a competitive market. "
Phil wrote on Dec 15, 2008 2:52 PM:
" Spenser,
The point is the Japanese government felt it was important during a tough economic time (post WWII recovery) to have a strong manufacturing base that included auto manufacturing. They didn't hesitate to be involved to help make it happen. In fact, they still are, by keeping the value of the yen low (as China does with their currency) to make their exports more affordable in the USA.
In addition, no Japanese manufacturer has to fund their employees health care. Nor does the management of Japanese companies pay themselves the outrageous salaries and bonuses that US companies do. It sure becomes a lot easier to be efficient when an entire layer of cost structure is removed from your model.
So their government has played an integral part in their success - even though there were leaders in Japan post-WWII that said Japan didn't need to have an auto manufacturing industry. Sound familiar?
Regarding your comment about Wall Street and being forced to underwrite bad loans - well if you would have seen posts I made last week (and links) you would know that it complete hogwash. Over 80% of subprime loans written were NOT part of the CRA or ANY government program. CRA loans averaged a failure rate of 3% compared to over 14% for non-CRA loans. And the loans talked about on 60 Minutes last night - that Wall Street packaged up and will start failing in droves in 2010 and 2011 - are completely outside the CRA program. So lose that line of thinking, cause it has no basis in reality. Wall Street hung themselves.
Finally your comment about a "nominal wage far in excess of what they produce" also shows a lack of understanding - let alone compassion. Tell me exactly what a Wall Street trader "produces" that justifies their six figure wage? I will be waiting a long time for that one. "
The point is the Japanese government felt it was important during a tough economic time (post WWII recovery) to have a strong manufacturing base that included auto manufacturing. They didn't hesitate to be involved to help make it happen. In fact, they still are, by keeping the value of the yen low (as China does with their currency) to make their exports more affordable in the USA.
In addition, no Japanese manufacturer has to fund their employees health care. Nor does the management of Japanese companies pay themselves the outrageous salaries and bonuses that US companies do. It sure becomes a lot easier to be efficient when an entire layer of cost structure is removed from your model.
So their government has played an integral part in their success - even though there were leaders in Japan post-WWII that said Japan didn't need to have an auto manufacturing industry. Sound familiar?
Regarding your comment about Wall Street and being forced to underwrite bad loans - well if you would have seen posts I made last week (and links) you would know that it complete hogwash. Over 80% of subprime loans written were NOT part of the CRA or ANY government program. CRA loans averaged a failure rate of 3% compared to over 14% for non-CRA loans. And the loans talked about on 60 Minutes last night - that Wall Street packaged up and will start failing in droves in 2010 and 2011 - are completely outside the CRA program. So lose that line of thinking, cause it has no basis in reality. Wall Street hung themselves.
Finally your comment about a "nominal wage far in excess of what they produce" also shows a lack of understanding - let alone compassion. Tell me exactly what a Wall Street trader "produces" that justifies their six figure wage? I will be waiting a long time for that one. "
Oboy wrote on Dec 15, 2008 5:08 PM:
" Is the Auto Industry to the Nation, as John Deere is to Waterloo? IF, John Deere was asking for help (Money) would most of you writers be as quick to say NO WAY? If, foreign Tractor Factories in the Non-union south, were about to close your back bone industry (John Deere)would your opinions be some what reversed? Those of us that can remember the 80's can remember "the last one out shut out the lights." What if John Deere had not come back? Should this nation not only depend on Foreign oil, but on Foreign Auto. "
jb wrote on Dec 15, 2008 11:03 PM:
" Spenser-
I wouldn't worry about Joe; he's never let facts get in the way of his ideology. "
I wouldn't worry about Joe; he's never let facts get in the way of his ideology. "
a362966 wrote on Dec 16, 2008 12:23 AM:
" From the Moscow Times (substitute "Putin with "Bush" and it will sound like it is from the NY Times)
Free markets need a little socialist medicine once in a while...
"Prime Minister Vladimir Putin said Monday that 1,500 companies could receive financial support as part of government efforts to stabilize the economy.
Putin called for a list of companies eligible for assistance at the federal and regional levels to be confirmed by Dec. 17. The state may buy equity stakes in key companies, restructure tax debts and provide loans and guarantees, Putin said at a government meeting in comments broadcast by state television.
Russia is deploying a bailout package worth about $200 billion after investors pulled $211 billion out of the country since August, according to BNP Paribas." "
Free markets need a little socialist medicine once in a while...
"Prime Minister Vladimir Putin said Monday that 1,500 companies could receive financial support as part of government efforts to stabilize the economy.
Putin called for a list of companies eligible for assistance at the federal and regional levels to be confirmed by Dec. 17. The state may buy equity stakes in key companies, restructure tax debts and provide loans and guarantees, Putin said at a government meeting in comments broadcast by state television.
Russia is deploying a bailout package worth about $200 billion after investors pulled $211 billion out of the country since August, according to BNP Paribas." "
Phil wrote on Dec 16, 2008 7:47 AM:
" a362966 - while I hadn't heard that, it would not be surprising.
In addition, people living in former Soviet block countries of eastern Europe are beginning to turn on capitalism. While there are several reasons, one of the main ones is the large discrepancies between rich and poor that occur in a capitalist system.
I guess those former socialists have a greater understanding of fairness and compassion than many capitalists do. "
In addition, people living in former Soviet block countries of eastern Europe are beginning to turn on capitalism. While there are several reasons, one of the main ones is the large discrepancies between rich and poor that occur in a capitalist system.
I guess those former socialists have a greater understanding of fairness and compassion than many capitalists do. "
Phil wrote on Dec 16, 2008 8:33 AM:
" While the Bush administration is seeking to assist the auto manufacturers, I am very skeptical that the motive is anything other than making sure further economic damage does not occur under his watch which would only further tarnish his dismal legacy.
Meanwhile, on the Wall Street bailout front, the Bush administration added a loophole to the bill that they are now exploiting that will allow Wall Street executives to receive their six and seven figure salaries and bonuses this year - even though their firms lost billions of dollars.
Here is a quote from the article by none other than our own Sen. Grassley:
"The flimsy executive-compensation restrictions in the original bill are now all but gone," said Sen. Charles E. Grassley (Iowa), ranking Republican on of the Senate Finance Committee.
Read the entire article here:
http://www.washingtonpost.com/wp-dyn/content/article/2008/12/14/AR2008121402670.html?hpid=topnews
So the car executives are going to work for $1 a year and the union members are supposed to take pay and benefit cuts while Wall Street executives still pull down six and seven figure salaries AND bonuses.
Tell me again exactly what Wall Street manufactures that provides jobs for 1 out of every 10 Americans?
I can't wait to see all the posts that show up justifying this scenario. "
Meanwhile, on the Wall Street bailout front, the Bush administration added a loophole to the bill that they are now exploiting that will allow Wall Street executives to receive their six and seven figure salaries and bonuses this year - even though their firms lost billions of dollars.
Here is a quote from the article by none other than our own Sen. Grassley:
"The flimsy executive-compensation restrictions in the original bill are now all but gone," said Sen. Charles E. Grassley (Iowa), ranking Republican on of the Senate Finance Committee.
Read the entire article here:
http://www.washingtonpost.com/wp-dyn/content/article/2008/12/14/AR2008121402670.html?hpid=topnews
So the car executives are going to work for $1 a year and the union members are supposed to take pay and benefit cuts while Wall Street executives still pull down six and seven figure salaries AND bonuses.
Tell me again exactly what Wall Street manufactures that provides jobs for 1 out of every 10 Americans?
I can't wait to see all the posts that show up justifying this scenario. "
avee wrote on Dec 16, 2008 9:23 AM:
" Phil--- Because our government (Bush & Dem controlled congress) has done a bunch of really stupid things, that does not justify continuing to do more. "
(return of) joe wrote on Dec 16, 2008 9:39 AM:
" jb...So, tell us why no one is willing to answer why U.S. car companies have told us for years that American labor is too expensive, while Toyota continues to build plants here in the U.S., while also paying the same wage that the big 3 apparently "can't afford?" How about them, there facts, Rush? "
a362966 wrote on Dec 16, 2008 10:25 AM:
" Cost of bailout so far=$8 trillion.
$2 trillion = assuming 200 million adults in this country, $450,000 for every adult, to pay off mortgage, cars, credit cards, education loans. No one would have ANY debt, social security could be re-funded, what a boom to the economy !
No, we gave 4 times that amount to a bunch of thieves that caused the problem in the first place.
Who voted for this? Grassley, Harkin, Braley. Let's not forget. "
$2 trillion = assuming 200 million adults in this country, $450,000 for every adult, to pay off mortgage, cars, credit cards, education loans. No one would have ANY debt, social security could be re-funded, what a boom to the economy !
No, we gave 4 times that amount to a bunch of thieves that caused the problem in the first place.
Who voted for this? Grassley, Harkin, Braley. Let's not forget. "
think wrote on Dec 16, 2008 11:04 AM:
" I see the UAW getting this. GM will file for bankruptcy and get rid of the health care and pension obligations for those retired. For those that retired at 48 with 30 years of service a few years back, you’re in trouble. Deere will follow suit. Come on, you really can’t expect to retire at 48 and think Deere or GM is going to cover you until you’re 65. Not going to happen. "
Spenser wrote on Dec 16, 2008 11:50 AM:
" Phil,
The previous administration paved the way for underwriting standards to be reduced for a multitude of people;this wasnt just confined to poor people and CRA loans.
I dont recall attempting to justify a six figure wage for anybody.In virtually any profession if the wage is not commensurate with productivity this will ensure that the supply of people needing jobs will exceed demand--this is what unproductive unions do and inefficiently run auto companies.Unlike the japanese. "
The previous administration paved the way for underwriting standards to be reduced for a multitude of people;this wasnt just confined to poor people and CRA loans.
I dont recall attempting to justify a six figure wage for anybody.In virtually any profession if the wage is not commensurate with productivity this will ensure that the supply of people needing jobs will exceed demand--this is what unproductive unions do and inefficiently run auto companies.Unlike the japanese. "
Phil wrote on Dec 16, 2008 3:18 PM:
" Spenser,
Regarding the "underwriting standards" - please do your history on this subject. The Federal Reserve has publications out that specifically state that CRA loans were NOT to burden lenders with undue or additional risks. You are buying into myths and urban legends.
Second, there was only one underwriting standard in place for these loans the past 5 years - GREED. The companies offering them didn't believe the housing bubble would burst and prices would fall - they were wrong. Still, we would not be paying the price we are now had Wall Street not been so greedy as to repackage these loans in ways that allowed the bad ones to poison the good ones. Again, GREED. No other excuse.
As for your last paragraph, I'm sorry, I don't grasp the point you are attempting to make. "
Regarding the "underwriting standards" - please do your history on this subject. The Federal Reserve has publications out that specifically state that CRA loans were NOT to burden lenders with undue or additional risks. You are buying into myths and urban legends.
Second, there was only one underwriting standard in place for these loans the past 5 years - GREED. The companies offering them didn't believe the housing bubble would burst and prices would fall - they were wrong. Still, we would not be paying the price we are now had Wall Street not been so greedy as to repackage these loans in ways that allowed the bad ones to poison the good ones. Again, GREED. No other excuse.
As for your last paragraph, I'm sorry, I don't grasp the point you are attempting to make. "
Phil wrote on Dec 16, 2008 3:23 PM:
" avee - you have a point about "stupid things" and in other times that would probably take precedence - but the possible economic disaster auto failures would cause right now out weighs the cost.
We taxpayers will pay for this anyway, whether it is via unemployment benefits, food stamps, Medicare, etc. - or a loan. Plus the number of associated businesses that would fail would be overwhelming.
A loan is the best of two bad options. Then hopefully there can be a restructuring, merger, or something else that cleans this up correctly. "
We taxpayers will pay for this anyway, whether it is via unemployment benefits, food stamps, Medicare, etc. - or a loan. Plus the number of associated businesses that would fail would be overwhelming.
A loan is the best of two bad options. Then hopefully there can be a restructuring, merger, or something else that cleans this up correctly. "
Spenser wrote on Dec 16, 2008 5:10 PM:
" Phil,
The CRA standards,promulgated by government,spread to the rest of the market.Once again,liberal government intervened where it shouldn't have.
You said,"I am very skeptical that the motive is anything other than making sure further economic damage does not occur under his watch which would only further tarnish his dismal legacy".I might be mistaken,but this seems to contradict your previous posts--you might want to omit "anything other than" "
The CRA standards,promulgated by government,spread to the rest of the market.Once again,liberal government intervened where it shouldn't have.
You said,"I am very skeptical that the motive is anything other than making sure further economic damage does not occur under his watch which would only further tarnish his dismal legacy".I might be mistaken,but this seems to contradict your previous posts--you might want to omit "anything other than" "
chester11 wrote on Dec 16, 2008 5:44 PM:
" Spenser wrote on Dec 16, 2008 5:10 PM:
" Phil,
The CRA standards,promulgated by government,spread to the rest of the market.Once again,liberal government intervened where it shouldn't have.
Lenders were forced to do nothing. Prove to us how CRA standards forced Aurora, Novastar, Wells Fargo or any other private investor to back shaky loans. Companies traded and sold these mortgage backed securities at will, with little oversight by the government. Each counted on the bubble lasting for another decade, while lining their pockets with another closed loan.
Please prove that the Community Reinvestment Act forced any bank to close any loan and then pool and resell it. Please.
Cause I don't think you know what you're talking about. "
" Phil,
The CRA standards,promulgated by government,spread to the rest of the market.Once again,liberal government intervened where it shouldn't have.
Lenders were forced to do nothing. Prove to us how CRA standards forced Aurora, Novastar, Wells Fargo or any other private investor to back shaky loans. Companies traded and sold these mortgage backed securities at will, with little oversight by the government. Each counted on the bubble lasting for another decade, while lining their pockets with another closed loan.
Please prove that the Community Reinvestment Act forced any bank to close any loan and then pool and resell it. Please.
Cause I don't think you know what you're talking about. "
Phil wrote on Dec 16, 2008 7:35 PM:
" Spenser,
I know the world is round. I know this because science, NASA, and numerous other reliable sources tell me this. I have not seen it for myself.
I am sure there are people who believe otherwise.
I know the CRA did not CAUSE nor FORCE any other lenders to change their lending standards. I know this because the Federal Reserve, economists, and other reputable sources have reviewed the law, statistics and other sources tell us this is the case. I have not done all this work or asked the banks myself - these people have.
Other people choose to ignore all these reliable sources and believe otherwise.
So believe what you want, but the truth has been determined in this area - and it is not the one you have posted here - twice now.
Finally, your posts show you don't really know anything about what really happened with the subprime loans.
First, most of these loans were made by lending institutions NOT regulated by the CRA. Second, many of these unregulated loans weren't to low income people. Third, the loans themselves weren't part of the problem, it was the resale and packaging of the loans into new investment opportunities called Credit Default Swaps. These were a Wall Street creation and had nothing to do with CRA.
So greed - by the lenders - and then more greed - by Wall Street drove this problem.
Liberal government had nothing to do with it.
Conservatives, like Phil Gramm, on the other hand, allowed the creation and avoided any regulation of Credit Default Swaps.
Now I am sure you will still deny this set of facts, but that doesn't make it any less real. "
I know the world is round. I know this because science, NASA, and numerous other reliable sources tell me this. I have not seen it for myself.
I am sure there are people who believe otherwise.
I know the CRA did not CAUSE nor FORCE any other lenders to change their lending standards. I know this because the Federal Reserve, economists, and other reputable sources have reviewed the law, statistics and other sources tell us this is the case. I have not done all this work or asked the banks myself - these people have.
Other people choose to ignore all these reliable sources and believe otherwise.
So believe what you want, but the truth has been determined in this area - and it is not the one you have posted here - twice now.
Finally, your posts show you don't really know anything about what really happened with the subprime loans.
First, most of these loans were made by lending institutions NOT regulated by the CRA. Second, many of these unregulated loans weren't to low income people. Third, the loans themselves weren't part of the problem, it was the resale and packaging of the loans into new investment opportunities called Credit Default Swaps. These were a Wall Street creation and had nothing to do with CRA.
So greed - by the lenders - and then more greed - by Wall Street drove this problem.
Liberal government had nothing to do with it.
Conservatives, like Phil Gramm, on the other hand, allowed the creation and avoided any regulation of Credit Default Swaps.
Now I am sure you will still deny this set of facts, but that doesn't make it any less real. "
Phil wrote on Dec 17, 2008 8:08 AM:
" Sometimes we forget the reason we enjoy the working conditions and benefits we enjoy not just in this country, but in most of the developed countries around the world, are due to the power of unions and the right of workers to organize.
This from a news report out today:
"China's government has long feared the rise of labor movements, banning unauthorized unions and arresting those who speak out for workers' rights. The strikes, driven in part by China's economic downturn, have caught officials off guard."
But as the article points out later, that is changing:
"Urban workers say they are worried about being unable to pay for their children's college education, missing payments on car loans, and not having enough money left each month to dine out with friends or go on vacation.
In the past 30 years of economic liberalization, younger Chinese have come to see these things not as a luxury of modern life but as a right."
As nations modernize, their workers awaken to the realization that they have a right to share in the profits and wealth made possible by their efforts. It make take another 50 or 100 years, but eventually Americans will realize that unions were, and are, the vehicle that allowed this to happen and that will prevent it from going back to what it was.
That is, all Amercians except Republican Senators now serving in the US Senate. "
This from a news report out today:
"China's government has long feared the rise of labor movements, banning unauthorized unions and arresting those who speak out for workers' rights. The strikes, driven in part by China's economic downturn, have caught officials off guard."
But as the article points out later, that is changing:
"Urban workers say they are worried about being unable to pay for their children's college education, missing payments on car loans, and not having enough money left each month to dine out with friends or go on vacation.
In the past 30 years of economic liberalization, younger Chinese have come to see these things not as a luxury of modern life but as a right."
As nations modernize, their workers awaken to the realization that they have a right to share in the profits and wealth made possible by their efforts. It make take another 50 or 100 years, but eventually Americans will realize that unions were, and are, the vehicle that allowed this to happen and that will prevent it from going back to what it was.
That is, all Amercians except Republican Senators now serving in the US Senate. "
think wrote on Dec 17, 2008 10:19 AM:
" Sorry Phil,
America as we know it will not be round in 50 years. We are trillions in debt, have Social Security that is upside down and are on the verge of the next revolution. With the foreclosure rate, the frustration is evident. People are trashing the homes before they leave.People are angry! Do the math on Social Security. Right now, the people pay about 7.5% for FICA with business matching. All the graphs show we would have to be at 16% today just to meet the baby boom retirement. Business cannot afford another 7.5% and today’s youth are not going to pay it. People are not getting how close we are to total economic melt down. They said the USSR would never fall either. We made it just over 200 years and that is a drop in time when you look at Japan or Rome. "
America as we know it will not be round in 50 years. We are trillions in debt, have Social Security that is upside down and are on the verge of the next revolution. With the foreclosure rate, the frustration is evident. People are trashing the homes before they leave.People are angry! Do the math on Social Security. Right now, the people pay about 7.5% for FICA with business matching. All the graphs show we would have to be at 16% today just to meet the baby boom retirement. Business cannot afford another 7.5% and today’s youth are not going to pay it. People are not getting how close we are to total economic melt down. They said the USSR would never fall either. We made it just over 200 years and that is a drop in time when you look at Japan or Rome. "
xdfred wrote on Dec 17, 2008 10:24 AM:
" chester11 wrote on Dec 16, 2008 5:44 PM:
"Please prove that the Community Reinvestment Act forced any bank to close any loan and then pool and resell it." How about explaining to us dumb conservatives what the CRA actually did, then? "
"Please prove that the Community Reinvestment Act forced any bank to close any loan and then pool and resell it." How about explaining to us dumb conservatives what the CRA actually did, then? "
xdfred wrote on Dec 17, 2008 10:27 AM:
" "As nations modernize, their workers awaken to the realization that they have a right to share in the profits and wealth made possible by their efforts." Dumbest thing I've read in a while. Workers have a right to what they sell their labor for. That's it. A problem with socialsim/communism is that the state sets what those worths are. Free market allows you to sell your talents to the highest bidder. "
xdfred wrote on Dec 17, 2008 10:33 AM:
" Phil wrote on Dec 17, 2008 8:08 AM:
" Sometimes we forget the reason we enjoy the working conditions and benefits we enjoy not just in this country, but in most of the developed countries around the world, are due to the power of unions and the right of workers to organize..."
Then why are unionized industries and non right to work states taking it in the shorts now? We enjoy what we enjoy because the free market in this country USED to allow a person to develop a business or career and enjoy the fruits of his/her labors. Not anymore. Unions force higher unemployment and strangle running a commercial enterprise efficiently. Forcing someone to pay more than what something is worth adds more incentive to do without that item, be it labor or a commodity.
I can guarantee that if the car companies paid the uaw for the labor, and the union paid the workers, things would be radically different. "
" Sometimes we forget the reason we enjoy the working conditions and benefits we enjoy not just in this country, but in most of the developed countries around the world, are due to the power of unions and the right of workers to organize..."
Then why are unionized industries and non right to work states taking it in the shorts now? We enjoy what we enjoy because the free market in this country USED to allow a person to develop a business or career and enjoy the fruits of his/her labors. Not anymore. Unions force higher unemployment and strangle running a commercial enterprise efficiently. Forcing someone to pay more than what something is worth adds more incentive to do without that item, be it labor or a commodity.
I can guarantee that if the car companies paid the uaw for the labor, and the union paid the workers, things would be radically different. "
xdfred wrote on Dec 17, 2008 10:36 AM:
" Phil wrote on Dec 16, 2008 7:47 AM:
" a362966 - while I hadn't heard that, it would not be surprising.
In addition, people living in former Soviet block countries of eastern Europe are beginning to turn on capitalism. While there are several reasons, one of the main ones is the large discrepancies between rich and poor that occur in a capitalist system.
I guess those former socialists have a greater understanding of fairness and compassion than many capitalists do. "
You mean they prefer a system where almost everyone was broke? That's fair, isn't it? "
" a362966 - while I hadn't heard that, it would not be surprising.
In addition, people living in former Soviet block countries of eastern Europe are beginning to turn on capitalism. While there are several reasons, one of the main ones is the large discrepancies between rich and poor that occur in a capitalist system.
I guess those former socialists have a greater understanding of fairness and compassion than many capitalists do. "
You mean they prefer a system where almost everyone was broke? That's fair, isn't it? "
Phil wrote on Dec 17, 2008 10:38 AM:
" I realize I continue to beat this drum about unions, but since my last post I also came across another very fascinating article. Some excerpts follow - as well as a link to the entire article:
#1
"In 1949, a pamphlet was published that argued that the American auto industry should pursue a different direction. Titled "A Small Car Named Desire," the pamphlet suggested that Detroit not put all its bets on bigness, that a substantial share of American consumers would welcome smaller cars that cost less and burned fuel more efficiently.
The pamphlet's author was the research department of the United Auto Workers."
#2
"...by the early 1950s, the UAW had secured a number of contractual innovations -- annual cost-of-living adjustments, for instance -- that set a pattern for the rest of American industry and created the broadly shared prosperity enjoyed by the nation in the 30 years after World War II."
#3
"The UAW not only built the American middle class but helped engender every movement at the center of American liberalism today -- which is one reason that conservatives have always held the union in particular disdain.
Over the past several weeks, it has become clear that the Republican right hates the UAW so much that it would prefer to plunge the nation into a depression rather than craft a bridge loan that doesn't single out the auto industry's unionized workers for punishment. (As manufacturing consultant Michael Wessel pointed out, no Republican demanded that Big Three executives have their pay permanently reduced to the relatively spartan levels of Japanese auto executives' pay.)"
#4
"Republicans complain that labor costs at the Big Three are out of line with those at the non-union transplant factories in the South, factories that Southern governors have subsidized with billions of taxpayer dollars. But the UAW has already agreed to concessions bringing its members' wages to near-Southern levels, and labor costs already comprise less than 10 percent of the cost of a new car. (On Wall Street, employee compensation at the seven largest financial firms in 2007 constituted 60 percent of the firms' expenses, yet reducing overall employee compensation wasn't an issue in the financial bailout.)"
Read the entire article here - its a good history lesson we should all learn well:
http://www.washingtonpost.com/wp-dyn/content/article/2008/12/16/AR2008121602482.html "
#1
"In 1949, a pamphlet was published that argued that the American auto industry should pursue a different direction. Titled "A Small Car Named Desire," the pamphlet suggested that Detroit not put all its bets on bigness, that a substantial share of American consumers would welcome smaller cars that cost less and burned fuel more efficiently.
The pamphlet's author was the research department of the United Auto Workers."
#2
"...by the early 1950s, the UAW had secured a number of contractual innovations -- annual cost-of-living adjustments, for instance -- that set a pattern for the rest of American industry and created the broadly shared prosperity enjoyed by the nation in the 30 years after World War II."
#3
"The UAW not only built the American middle class but helped engender every movement at the center of American liberalism today -- which is one reason that conservatives have always held the union in particular disdain.
Over the past several weeks, it has become clear that the Republican right hates the UAW so much that it would prefer to plunge the nation into a depression rather than craft a bridge loan that doesn't single out the auto industry's unionized workers for punishment. (As manufacturing consultant Michael Wessel pointed out, no Republican demanded that Big Three executives have their pay permanently reduced to the relatively spartan levels of Japanese auto executives' pay.)"
#4
"Republicans complain that labor costs at the Big Three are out of line with those at the non-union transplant factories in the South, factories that Southern governors have subsidized with billions of taxpayer dollars. But the UAW has already agreed to concessions bringing its members' wages to near-Southern levels, and labor costs already comprise less than 10 percent of the cost of a new car. (On Wall Street, employee compensation at the seven largest financial firms in 2007 constituted 60 percent of the firms' expenses, yet reducing overall employee compensation wasn't an issue in the financial bailout.)"
Read the entire article here - its a good history lesson we should all learn well:
http://www.washingtonpost.com/wp-dyn/content/article/2008/12/16/AR2008121602482.html "
Phil wrote on Dec 17, 2008 12:56 PM:
" xdfred wrote on Dec 17, 2008 10:33 AM:
"Then why are unionized industries and non right to work states taking it in the shorts now?"
Short answer - free trade laws and anti-labor laws that allow companies that manufacture in other countries to basically practice a form of indentured servitude. See my post about China where unions and the right to organize are basically illegal.
When workers across the planet are allowed to organize, and/or when shipping costs become too high for products to be made abroad, then labor will have a stronger bargaining position.
There are American companies who support these countries suppression of their citizens rights to organize and strike so they don't have to pay higher wages or give benefits.
I guess that must be what you mean when you talk about being forced to pay more than what something is worth. "
"Then why are unionized industries and non right to work states taking it in the shorts now?"
Short answer - free trade laws and anti-labor laws that allow companies that manufacture in other countries to basically practice a form of indentured servitude. See my post about China where unions and the right to organize are basically illegal.
When workers across the planet are allowed to organize, and/or when shipping costs become too high for products to be made abroad, then labor will have a stronger bargaining position.
There are American companies who support these countries suppression of their citizens rights to organize and strike so they don't have to pay higher wages or give benefits.
I guess that must be what you mean when you talk about being forced to pay more than what something is worth. "
avee wrote on Dec 17, 2008 1:05 PM:
" Why doesn’t the UAW just buy GM. They could get 51% of the stock for a song today. Then they could fire all the management and the board, put their own people in and run the company the way they want? Take the 8 or 10 billion loan it to the union and ask for repayment in 10 years. It appears to me that this would be the best of both worlds for the union. Of course they would then have to assume the risk of going bankrupt if they can't do any better than the present management. "
Spenser wrote on Dec 17, 2008 1:56 PM:
" Phil wrote on Dec 17, 2008 10:38 AM:
" I realize I continue to beat this drum about unions, but since my last post I also came across another very fascinating article. Some excerpts follow - as well as a link to the entire article:
You can get all the leftist literature you want;Competition,unique production function,and technological advancement were responsible for the growth of the middle class and society in general.Not organized labor and Alice in Wonderland economics.
It's the mindset of the UAW and liberals in general that will be responsible for the demise of the middle class and our economy.
The radical left and organized labor are taking an already mature,moribund economy and making it that much less competitive in a global market.Any edges that we had in the form of production function and competitive advantages are already eroded away.
Incidentally,I don't need NASA's help or photographs in proving that the world is round. "
" I realize I continue to beat this drum about unions, but since my last post I also came across another very fascinating article. Some excerpts follow - as well as a link to the entire article:
You can get all the leftist literature you want;Competition,unique production function,and technological advancement were responsible for the growth of the middle class and society in general.Not organized labor and Alice in Wonderland economics.
It's the mindset of the UAW and liberals in general that will be responsible for the demise of the middle class and our economy.
The radical left and organized labor are taking an already mature,moribund economy and making it that much less competitive in a global market.Any edges that we had in the form of production function and competitive advantages are already eroded away.
Incidentally,I don't need NASA's help or photographs in proving that the world is round. "
reader08 wrote on Dec 17, 2008 2:01 PM:
" Has anyone heard from hetfield?
Has this mysterious conservative disapeared? Has the truth of his beliefs been diminished by the truth of B.hussein? hmmmm IDK. maybe he is a doctor now. "
Has this mysterious conservative disapeared? Has the truth of his beliefs been diminished by the truth of B.hussein? hmmmm IDK. maybe he is a doctor now. "
Spenser wrote on Dec 17, 2008 2:26 PM:
" reader08 wrote on Dec 17, 2008 2:01 PM:
Has the truth of his beliefs been diminished by the truth of B.hussein?
Nice contribution to the discussion.
The only truth about B.Hussein is that this country is moving left-of-center.Most likely,because these people can't find a niche for themselves so they have to have someone else do it for them. "
Has the truth of his beliefs been diminished by the truth of B.hussein?
Nice contribution to the discussion.
The only truth about B.Hussein is that this country is moving left-of-center.Most likely,because these people can't find a niche for themselves so they have to have someone else do it for them. "
Spenser wrote on Dec 17, 2008 2:58 PM:
" Phil wrote on Dec 16, 2008 7:35 PM:
I know the world is round. I know this because science, NASA, and numerous other reliable sources tell me this.
If you think your inane argument is grounded in scientific fact why don't we go to a forum where we can discuss the objective,irrefutable realities in life(i.e.physics,mathematics...),since you like it so much.
However,I believe you're right at home where you can perpetuate your subjective opinion. "
I know the world is round. I know this because science, NASA, and numerous other reliable sources tell me this.
If you think your inane argument is grounded in scientific fact why don't we go to a forum where we can discuss the objective,irrefutable realities in life(i.e.physics,mathematics...),since you like it so much.
However,I believe you're right at home where you can perpetuate your subjective opinion. "
xdfred wrote on Dec 17, 2008 4:04 PM:
" Spenser wrote on Dec 17, 2008 2:26 PM:
" reader08 wrote on Dec 17, 2008 2:01 PM:
Has the truth of his beliefs been diminished by the truth of B.hussein?"
A lot of left wingers are going to wake up on the 21st of January and be extremely dissappointed that their situation has not changed one bit. Lot's. "
" reader08 wrote on Dec 17, 2008 2:01 PM:
Has the truth of his beliefs been diminished by the truth of B.hussein?"
A lot of left wingers are going to wake up on the 21st of January and be extremely dissappointed that their situation has not changed one bit. Lot's. "
xdfred wrote on Dec 17, 2008 4:22 PM:
" From one economist to another:
http://townhall.com/columnists/ThomasSowell/2008/12/17/postponing_reality
This article puts the economic situation in perspective, like prof Fred Abraham's, but with a little more history. "
http://townhall.com/columnists/ThomasSowell/2008/12/17/postponing_reality
This article puts the economic situation in perspective, like prof Fred Abraham's, but with a little more history. "
Roper1946 wrote on Dec 17, 2008 5:04 PM:
" " Phil--- Because our government (Bush & Dem controlled congress) has done a bunch of really stupid things, that does not justify continuing to do more. "
I'm trying to recall Phil...how many of the last 8 years have we had "Bush & Dem controlled congress?" "
I'm trying to recall Phil...how many of the last 8 years have we had "Bush & Dem controlled congress?" "
Phil wrote on Dec 18, 2008 7:43 AM:
" xdfred - I read the Thomas Sowell article you linked to (just wondering - do you ever read the links I post here?) and there are some things I agree with. I even agree that one, two or all three of the US auto manufacturers might or will eventually go out of business. I disagree that the unions were a big part of the cause of this problem. Are they innocent - no, but there are bigger forces at play here than the union contracts that could have prevented the auto companies from getting into this mess.
The point is the timing of allowing these companies to fail based upon our current national economic condition. Perhaps the loans are delaying the inevitable - but perhaps they aren't. Regardless, the money will be spent regardless, it is simply a matter of which fund(s) the government takes it out of. Does it come from the loan fund or the combination of unemployment, food stamps, Medicaid, etc. social funds that will be needed when all these companies go broke and people are out of work?
Since I don't read Mr. Sowell on a regular basis, I assume he wrote just as serious an article on what should happen to the Wall Street fat cats when that bailout was passed. Seems to me they don't have unions there, but they sure spend an inordinate percentage of their expenses on very expensive labor. Perhaps you can provide a link to that column. "
The point is the timing of allowing these companies to fail based upon our current national economic condition. Perhaps the loans are delaying the inevitable - but perhaps they aren't. Regardless, the money will be spent regardless, it is simply a matter of which fund(s) the government takes it out of. Does it come from the loan fund or the combination of unemployment, food stamps, Medicaid, etc. social funds that will be needed when all these companies go broke and people are out of work?
Since I don't read Mr. Sowell on a regular basis, I assume he wrote just as serious an article on what should happen to the Wall Street fat cats when that bailout was passed. Seems to me they don't have unions there, but they sure spend an inordinate percentage of their expenses on very expensive labor. Perhaps you can provide a link to that column. "
Phil wrote on Dec 18, 2008 7:55 AM:
" Spenser,
You should read the post that xdfred linked to - especially the first several paragraphs where Mr. Sowell talks about reality.
See that is where you are at. You know the world is round because scientists, NASA, etc. have proved it. Thus it was put into textbooks and taught to you in school. Since it doesn't affect any core belief you have, there is no need to question it.
On the other hand the CRA has been around over 30 years. Certainly if it was as flawed as your right wing masters would have you believe we would have been experiencing economic problems and fallout well before now. But no, that didn't happen. And economists and others who practice the science of studying such economic issues have researched and documented the impact of the CRA. The "science" was done - the results are in. It was not the cause of the subprime crisis.
However, these results challenge your belief system. If what these right wingers have told me is false about the CRA, what else have they been wrong about? So do what Mr. Sowell talks about in his article - denounce the results of these studies (its in his third paragraph). Deny their accuracy.
Now that doesn't make what you believe true - far from it - but you sure feel better, plus you can still blame the liberals! "
You should read the post that xdfred linked to - especially the first several paragraphs where Mr. Sowell talks about reality.
See that is where you are at. You know the world is round because scientists, NASA, etc. have proved it. Thus it was put into textbooks and taught to you in school. Since it doesn't affect any core belief you have, there is no need to question it.
On the other hand the CRA has been around over 30 years. Certainly if it was as flawed as your right wing masters would have you believe we would have been experiencing economic problems and fallout well before now. But no, that didn't happen. And economists and others who practice the science of studying such economic issues have researched and documented the impact of the CRA. The "science" was done - the results are in. It was not the cause of the subprime crisis.
However, these results challenge your belief system. If what these right wingers have told me is false about the CRA, what else have they been wrong about? So do what Mr. Sowell talks about in his article - denounce the results of these studies (its in his third paragraph). Deny their accuracy.
Now that doesn't make what you believe true - far from it - but you sure feel better, plus you can still blame the liberals! "
jeroze wrote on Dec 18, 2008 8:09 AM:
" Roper 1946 The Republican Administration still has the power to veto anything the "liberal" Democratic Congress passes. There is not enough votes to overide that veto. However the Administration is now in opposition to the conservative party in some issues. Wouldn't it be nice if we could just know who to blame for the mess we are in? "
xdfred wrote on Dec 18, 2008 10:02 AM:
" Phil wrote on Dec 18, 2008 7:43 AM:
" xdfred - I read the Thomas Sowell article you linked to (just wondering - do you ever read the links I post here?)" Yes, but just some, not all. Time permitting.
"Since I don't read Mr. Sowell on a regular basis, I assume he wrote just as serious an article on what should happen to the Wall Street fat cats when that bailout was passed. Seems to me they don't have unions there, but they sure spend an inordinate percentage of their expenses on very expensive labor. Perhaps you can provide a link to that column. " I don't have the link handy, but he wrote a similar piece against that bailout as well. I'm against it. "
" xdfred - I read the Thomas Sowell article you linked to (just wondering - do you ever read the links I post here?)" Yes, but just some, not all. Time permitting.
"Since I don't read Mr. Sowell on a regular basis, I assume he wrote just as serious an article on what should happen to the Wall Street fat cats when that bailout was passed. Seems to me they don't have unions there, but they sure spend an inordinate percentage of their expenses on very expensive labor. Perhaps you can provide a link to that column. " I don't have the link handy, but he wrote a similar piece against that bailout as well. I'm against it. "
thatguy wrote on Dec 18, 2008 12:09 PM:
" One point no one has made about the collapse of the auto industry is demand for new cars will still be the same in our global economy regardless if GM, Chrysler or Ford are still in the picture (obviously economical circumstance may affect demand, but this is more an issue of supply). What does this mean? Opportunity.
The idea once these companies are gone that all associated industries will collapse completely false. Demand will still need to be fulfilled. I’ll be the first to agree things will be tough and some will not survive, but it’s not all doom and gloom. I read a story (sorry I can’t provide a link or direct quotes or exact numbers) talking about some GM plant closing. Approximately 1500 - 1800 people were going to lose their jobs. The story highlighted the tragic circumstance many of these employees had to face, a real tear jerker article. However, at the end of the article it mentions Toyota had opened a plant some 80 mile away and was looking for 1500 - 1800 to work at this new facility. This story makes my point. Demand will be fulfilled and someone or thing will fulfill it.
You cannot look at this situation with your heart in your hand and definitely define capitalism as a failure. I would argue that this is a perfect example of capitalism overcoming socialistic policies (government policy, union policies, etc.). This industry has been artificially afloat for years. Let people fail, it will only make them work harder to succeed in the future. This is what made the American economy so powerful. For many years America allowed people to fall on their faces, dust themselves off, and try again. It’s becoming increasingly difficult for Americans to do this without some government agency softening the fall. Failure creates innovation.
Some comments on this post have pointed to communist countries with fairly free economic sectors (Russia and China) questioning the effectiveness of capitalism. People are actually using this as justification on why capitalism is bad. Are you serious? The sole fact these countries, whose core beliefs have been deeply rooted in communist ideologies since forever, have adopted free markets philosophy within an economic setting should be proof that capitalism works. Common sense people.
One last quick point. Lending institutions WERE heavily influenced by government policies and actions to participate more heavily in subprime lending. All you have to do is look at government’s backing of Freddie Mac and how they allowed them to securitize paper that wasn’t worth anything (you do the research, I’ve been on my soap box way to long). Remember congressional members (regardless of party) will do anything to get votes, and what better way than making the American dream (owning a home) accessible to all. "
The idea once these companies are gone that all associated industries will collapse completely false. Demand will still need to be fulfilled. I’ll be the first to agree things will be tough and some will not survive, but it’s not all doom and gloom. I read a story (sorry I can’t provide a link or direct quotes or exact numbers) talking about some GM plant closing. Approximately 1500 - 1800 people were going to lose their jobs. The story highlighted the tragic circumstance many of these employees had to face, a real tear jerker article. However, at the end of the article it mentions Toyota had opened a plant some 80 mile away and was looking for 1500 - 1800 to work at this new facility. This story makes my point. Demand will be fulfilled and someone or thing will fulfill it.
You cannot look at this situation with your heart in your hand and definitely define capitalism as a failure. I would argue that this is a perfect example of capitalism overcoming socialistic policies (government policy, union policies, etc.). This industry has been artificially afloat for years. Let people fail, it will only make them work harder to succeed in the future. This is what made the American economy so powerful. For many years America allowed people to fall on their faces, dust themselves off, and try again. It’s becoming increasingly difficult for Americans to do this without some government agency softening the fall. Failure creates innovation.
Some comments on this post have pointed to communist countries with fairly free economic sectors (Russia and China) questioning the effectiveness of capitalism. People are actually using this as justification on why capitalism is bad. Are you serious? The sole fact these countries, whose core beliefs have been deeply rooted in communist ideologies since forever, have adopted free markets philosophy within an economic setting should be proof that capitalism works. Common sense people.
One last quick point. Lending institutions WERE heavily influenced by government policies and actions to participate more heavily in subprime lending. All you have to do is look at government’s backing of Freddie Mac and how they allowed them to securitize paper that wasn’t worth anything (you do the research, I’ve been on my soap box way to long). Remember congressional members (regardless of party) will do anything to get votes, and what better way than making the American dream (owning a home) accessible to all. "
Phil wrote on Dec 18, 2008 5:33 PM:
" thatguy wrote on Dec 18, 2008 12:09 PM
"I would argue that this is a perfect example of capitalism overcoming socialistic policies (government policy, union policies, etc.)."
Sorry to be the bearer of bad news, but the Japanese auto makers come from a much more socialist society than the USA car companies do. They HAVE a national health insurance plan that the companies DON'T have to pay for. They gave loans to their car makers when they were in tough times. They have a social structure where the management does NOT make huge salaries and bonuses on an annual basis - or ever. You talk about a culture and government that believes in the success of all - and fairness to all - i.e. socialism - over that of the individual and its Japan.
The government's original backing of Freddie and Fannie was only meant to extend to the CRA loans they were underwriting. They were still a stand alone business. They got in trouble by being greedy - what else. They wanted a bigger piece of the market so they went out and bought up (i.e. underwrote) millions of dollars worth non-CRA loans which went bad. To avoid a meltdown the government stepped in and took over all these loans as well, basically taking over Freddie and Fannie.
Now why were these non-CRA subprime loans on the market? Not because the government asked or pressured the companies to lend the money at these terms - it was due to GREED. They wanted to expand their market share - regardless of the risk. Pressure to expand market share and make more money drove this subprime bus off the cliff - not the government.
Folks, you can't yell about the greatness of capitalism in one breath without being willing to see the pitfalls it can create in the next. Unregulated capitalism is not perfect - the subprime collapse is an example of greed run amok. "
"I would argue that this is a perfect example of capitalism overcoming socialistic policies (government policy, union policies, etc.)."
Sorry to be the bearer of bad news, but the Japanese auto makers come from a much more socialist society than the USA car companies do. They HAVE a national health insurance plan that the companies DON'T have to pay for. They gave loans to their car makers when they were in tough times. They have a social structure where the management does NOT make huge salaries and bonuses on an annual basis - or ever. You talk about a culture and government that believes in the success of all - and fairness to all - i.e. socialism - over that of the individual and its Japan.
The government's original backing of Freddie and Fannie was only meant to extend to the CRA loans they were underwriting. They were still a stand alone business. They got in trouble by being greedy - what else. They wanted a bigger piece of the market so they went out and bought up (i.e. underwrote) millions of dollars worth non-CRA loans which went bad. To avoid a meltdown the government stepped in and took over all these loans as well, basically taking over Freddie and Fannie.
Now why were these non-CRA subprime loans on the market? Not because the government asked or pressured the companies to lend the money at these terms - it was due to GREED. They wanted to expand their market share - regardless of the risk. Pressure to expand market share and make more money drove this subprime bus off the cliff - not the government.
Folks, you can't yell about the greatness of capitalism in one breath without being willing to see the pitfalls it can create in the next. Unregulated capitalism is not perfect - the subprime collapse is an example of greed run amok. "
xdfred wrote on Dec 19, 2008 10:49 AM:
" Phil wrote on Dec 18, 2008 5:33 PM:
"Now why were these non-CRA subprime loans on the market? Not because the government asked or pressured the companies to lend the money at these terms - it was due to GREED. They wanted to expand their market share - regardless of the risk. Pressure to expand market share and make more money drove this subprime bus off the cliff - not the government.
Folks, you can't yell about the greatness of capitalism in one breath without being willing to see the pitfalls it can create in the next. Unregulated capitalism is not perfect - the subprime collapse is an example of greed run amok. " Keep repeating the fib that banks purposely decided to make high risk loans without any government agency/official pushing them to do it. Sure fire way to make even more money. Makes perfect sense to me. "
"Now why were these non-CRA subprime loans on the market? Not because the government asked or pressured the companies to lend the money at these terms - it was due to GREED. They wanted to expand their market share - regardless of the risk. Pressure to expand market share and make more money drove this subprime bus off the cliff - not the government.
Folks, you can't yell about the greatness of capitalism in one breath without being willing to see the pitfalls it can create in the next. Unregulated capitalism is not perfect - the subprime collapse is an example of greed run amok. " Keep repeating the fib that banks purposely decided to make high risk loans without any government agency/official pushing them to do it. Sure fire way to make even more money. Makes perfect sense to me. "
xdfred wrote on Dec 19, 2008 10:54 AM:
" Phil wrote on Dec 18, 2008 5:33 PM:
" thatguy wrote on Dec 18, 2008 12:09 PM
"I would argue that this is a perfect example of capitalism overcoming socialistic policies (government policy, union policies, etc.)."
Sorry to be the bearer of bad news, but the Japanese auto makers come from a much more socialist society than the USA car companies do. They HAVE a national health insurance plan that the companies DON'T have to pay for. They gave loans to their car makers when they were in tough times. They have a social structure where the management does NOT make huge salaries and bonuses on an annual basis - or ever. You talk about a culture and government that believes in the success of all - and fairness to all - i.e. socialism - over that of the individual and its Japan." You've obviously never been to Japan. Japan has poverty, and crime, and a very high suicide rate. And you have it backwards. The government does not control the companies. The companies control the government. Also, you wash out in school, you sweep floors for a liveng. Failing in school is a disgrace to you and your family. Not so here. Women marry successfull men, and men marry successful women and have stable families. Here, people get married for the heck of it and/or have children for the heck of it and don't raise them properly. Socialism is the father of the children of unwed mothers. "
" thatguy wrote on Dec 18, 2008 12:09 PM
"I would argue that this is a perfect example of capitalism overcoming socialistic policies (government policy, union policies, etc.)."
Sorry to be the bearer of bad news, but the Japanese auto makers come from a much more socialist society than the USA car companies do. They HAVE a national health insurance plan that the companies DON'T have to pay for. They gave loans to their car makers when they were in tough times. They have a social structure where the management does NOT make huge salaries and bonuses on an annual basis - or ever. You talk about a culture and government that believes in the success of all - and fairness to all - i.e. socialism - over that of the individual and its Japan." You've obviously never been to Japan. Japan has poverty, and crime, and a very high suicide rate. And you have it backwards. The government does not control the companies. The companies control the government. Also, you wash out in school, you sweep floors for a liveng. Failing in school is a disgrace to you and your family. Not so here. Women marry successfull men, and men marry successful women and have stable families. Here, people get married for the heck of it and/or have children for the heck of it and don't raise them properly. Socialism is the father of the children of unwed mothers. "
Phil wrote on Dec 19, 2008 4:52 PM:
" xdfred - that "fib" is reality - MOST of the subprime loans that went bad were from lending institutions that were not subject to the CRA.
So tell me how government regulations forced them to lend money they weren't forced to lend?
The only fib is that the government can make a business not required to do something to do it. "
So tell me how government regulations forced them to lend money they weren't forced to lend?
The only fib is that the government can make a business not required to do something to do it. "
Spenser wrote on Dec 19, 2008 7:07 PM:
" Phil wrote on Dec 19, 2008 4:52 PM:
Now why were these non-CRA subprime loans on the market?
It was virtually impossible for the people in charge of enforcing relaxed government CRA standards not grant the loans following the same standards to more qualified borrowers.Especially,given the costs that the act imposed on banks.The only logical way to look at this is to say,people in prime markets fairly took advantage of the situation perpetrated by government regulatory policies which started the bubble.What kind of a good liberal wouldn't want everyone to have the same opportunity?
Also,inefficient UAW workers receive healthcare benefits that make Japanese workers look like paupers. "
Now why were these non-CRA subprime loans on the market?
It was virtually impossible for the people in charge of enforcing relaxed government CRA standards not grant the loans following the same standards to more qualified borrowers.Especially,given the costs that the act imposed on banks.The only logical way to look at this is to say,people in prime markets fairly took advantage of the situation perpetrated by government regulatory policies which started the bubble.What kind of a good liberal wouldn't want everyone to have the same opportunity?
Also,inefficient UAW workers receive healthcare benefits that make Japanese workers look like paupers. "
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avee wrote on Dec 14, 2008 8:21 AM: