The Failure of the Free Market Experiment

What's wrong in America

The last thirty plus years have been an experiment in lowering taxes, cutting regulations, and weakening both unions and the social welfare system.   The result is graphically clear above – a massive shift of relative wealth and income from the poor and middle class to the very wealthiest of society.

The experiment proves that the illusion that markets are magic and, if left to their own devices, will give the best possible result is wrong.   This deregulation and market fetish has led to the biggest economic catastrophe since the Great Depression (which was also proceeded by a belief in markets and inactive government) and a country that risks become a shadow of its former self — weaker, more divided, and in risk of long term economic decline.

It’s time to be forceful and clear about the lessons of the last thirty years, and reject the free market fetish that many on the right engage in.  They get seduced by ideology, a overly simplified economic theory that makes it sound as if all would be great if only the government was less active, taxes were minimal, and social welfare programs were cut.

Numerous fallacies support such ideological delusions.   One is the notion that the poor are simply leaches.  It’s a self serving and incorrect belief, but one that can be used to justify a lack of concern for the many people struggling in our economy.  If, instead of seeing them as humans trying to make it in rough times they can be dismissed as lazy parasites who simply live of taxpayer money, then there is no need to be concerned about them.   That kind of dehumanization of others has been the tool of many ideologies — the Communists about the kulacks, the Nazis about the Jews, the Hutus about the Tutsis, etc.  This case may be more benign — a “let them eat cake” response rather than a desire to eliminate them — but it’s still a false, dangerous propagandistic trend.

The problem is power.  The free market myth has a hidden assumption.   There is a belief that everyone is an equal player in the game, everyone is a free agent, able to make choices and act.   If that were true, then the result of these interactions would be due to the choices made.   Moreover, there is an assumption that people have good information upon which to act.   However, if information is false, imperfect or manipulated, and if there are power differentials, then the market easily gets warped to serve the needs and desires of those with power (wealth) and more information.

Thanks to inside info and power, the benefits of increasing productivity went to investors, not workers, as this chart shows. Their investments went to fuel bubbles not create jobs.

A classic class is the housing bubble and resulting derivatives market that led to the crisis in 2008.   Some on the right wrongly claim the crisis came from trying to get poor people into homes (it didn’t — that is a clearly and obviously false argument), but it’s clear to anyone who looks at the evidence that the crisis was caused by big banks turning mortgage debt into bonds that they sold (and then repackaged and resold) on the market.    Dervivatives begot dervivatives and soon the market was awash in what the banks knew were dangerous junk bonds – albeit with a AAA rating.

After deregulation the growth in derivatives trade skyrocketed, and led to the housing bubble and economic breakdown in 2008

Here’s a classic example of market fail.   The banks knew what was in the bonds.  But their money and clout got the ratings agencies to rate these AAA.   Then the banks sold bonds and credit default swaps to investors even though they knew the investments were dangerous — e-mails and phone logs prove that.  Hence wealth gets increasingly transferred to the already wealthy — a redistribution of wealth which has no ethical rationale.

Even before that, back in early 2000 I was part of an e-mail correspondance group that included a very wealthy connected individual.  In January he wrote that we should all dump our stock, especially tech and dot com stocks.  The insiders are all abandoning the market, he said — something’s about to go south.  The insiders know.

This shouldn’t be controversial.   The evidence is overwhelming that markets left to their own devices simply create a very powerful, wealthy class that dominates and rigs the game.   That’s why the graph looks like it did — less regulation, less taxation and more emphasis on the market alone warped the US economy.   Moreover, it made it easy for high debt to grow (private debt grew faster than governmental) and banks to avoid controls that used to limit such behavior.

From a comparative perspective, the evidence is equally strong.  The states faring best in this crisis are those who kept more regulation on the market and maintained social protections.   The best performing economies are from Scandinavia and Germany.   They seemed to growing more slowly during the bubble years (leading some Americans to claim that their regulatory approach harmed growth), but it was more that they avoided the worst aspects of the bubble and emerged more in tact.   Yes, due to globalization they aren’t immune to the crisis, and deregulation and bad policies in Ireland, Greece and Italy impact all of Europe, but Germany and Scandinavia prove that regulation, a strong social welfare system, strong unions and more equality does not weaken capitalism or hurt the economy — quite the contrary!

Before taxes and transfers the distribution of income as measured by the GINI index (used by the CIA as the best method of measuring relative equality) shows the US about average - .00 would be perfect equality, 1.0 would be one person with all the money.

Yet in this country class war from the right continues.   Paul Ryan’s budget shifting even more money to the wealthy while cutting assistance to the poor is a stark and to me comically absurd example of not learning from history.  It doubles down on the mistakes of the last thirty years, closing eyes to reality in order to smoke the drug of ideology.

After taxes and transfers the US has improved equality very little (there isn't much redistribution), but almost every other state has -- consider Germany which was worse than the US before taxes and transfers, but much more equal afterwards.

The evidence is powerful.  2012 needs to be a year where President Obama, and responsible Republicans and Democrats halt this flight of ideological fancy and take a pragmatic approach that recognizes that the country is strongest when government policy is used to try to combat the impact of power and information on the market.   The goal isn’t to equalize outcomes, but to create true opportunity for everyone, and counter the advantages power, wealth and inside information provide to a small elite.

Occupy Wall Street was a start.  It changed the conversation and got a lot of this information out there, even to people who don’t like protest movements.  The impact of OWS could be profound, especially if they reignite their efforts this summer to get the word out about how warped our economy is, and how this is a result of a false belief in market magic.   Deregulation, tax cuts, and cuts in social welfare programs have led us to where we are today – on the brink of collapse.

I think this message is starting to get out, and it has to be a theme of the 2012 campaign.  The country seems ready to turn around and reject the grand thirty year experiment in deregulation, tax cuts and free market ideological fantasy.  It’s time to change course.

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  1. #1 by Black Flag® on March 29, 2012 - 14:35

    hahahahha!

    Geez, that opening title is the best joke of the da!

    No, Scott.

    It is the failure of the Socialist/Fascist Economic Experiment – and, yep, it will collapse.

    The end of the Nation State as a means to human prosperity has been shown to be the path of disaster.

    Not only has it bankrupted the People, but its very existence has created the means by which the human race can utterly extinguish itself.

  2. #2 by Scott Erb on March 29, 2012 - 15:32

    Another interesting article from the Bangor Daily News – 93% of income growth went to the top 1%:

    http://bangordailynews.com/2012/03/29/politics/93-percent-of-income-growth-went-to-top-1-percent-study-says/

    • #3 by Black Flag® on March 29, 2012 - 15:43

      Yep, no doubt – when Congresscritters average a 30% return on their investment portfolios, while the nation suffers catastrophic economic turmoil caused by these same critters, it is not surprising that the 1% – your rulers and kings – take the loot and the People pay it.

  3. #4 by lbwoodgate on March 29, 2012 - 18:21

    “Paul Ryan’s budget shifting even more money to the wealthy while cutting assistance to the poor is a stark and to me comically absurd example of not learning from history. It doubles down on the mistakes of the last thirty years, closing eyes to reality in order to smoke the drug of ideology.”

    I honestly think they know what they’re doing and are just trying to do as much damage as they can before most voters catch on and send them packing again. The goal is to try and get as much done for as long as you can then come back and hit ‘em again when voter memories fade about how they fucked us before.

  4. #5 by pino on March 29, 2012 - 19:33

    The result is graphically clear above – a massive shift of relative wealth and income from the poor and middle class to the very wealthiest of society.

    Your chart doesn’t tell the whole picture. It assumes too many things, one of which is the makeup of society. Check this:

    http://tarheelred.com/2012/02/16/wages-middle-class-and-stagnation/

    From the Fed:

    The claim that the standard of living of middle Americans has stagnated over the past generation is common. An accompanying assertion is that virtually all income growth over the past three decades bypassed middle America and accrued almost entirely to the rich.

    The findings reported here—and summarized in Chart 8—refute those claims. Careful analysis shows that the incomes of most types of middle American households have increased substantially over the past three decades.

    Families are changing. There are more single parents greatly reducing the income of each family This is true only if you consider a mother and father create a family that makes more than if each were single. It further explains that married individuals go on to generate more wealth individually.

    This deregulation and market fetish has led to the biggest economic catastrophe

    It wasn’t worse than the 80′s.

    The problem is power. The free market myth has a hidden assumption. There is a belief that everyone is an equal player in the game, everyone is a free agent, able to make choices and act.

    Very few, very very few, people have access to the power you’re talking about. Not even the richest 1% have access to that power. I’ve seen reports that suggest it’s more like the richest 1/10%. Frankly, if a very small subset of people get stupid rich, and I and my family are living the life that would be the envy of every king and potentate but 50 years ago….I’m good with that.

    For example, I would consider myself to be fairly well off. I don’t even KNOW a politician on a first name basis. I have no access to power or information or influence.

    Some on the right wrongly claim the crisis came from trying to get poor people into homes (it didn’t — that is a clearly and obviously false argument)

    Of course it was government regulation that caused the housing bubble. Banks were forced to make loans to a certain set of people. In an effort to hep them, the government set up agencies that would then buy those loans.

    Occupy Wall Street was a start. It changed the conversation and got a lot of this information out there, even to people who don’t like protest movements. The impact of OWS could be profound, especially if they reignite their efforts this summer to get the word out about how warped our economy is, and how this is a result of a false belief in market magic.

    OWS will never be a serious movement. They have long ago spent whatever influence they had as a result of their message.

    • #6 by lbwoodgate on March 29, 2012 - 20:31

      “Of course it was government regulation that caused the housing bubble. Banks were forced to make loans to a certain set of people. In an effort to hep them, the government set up agencies that would then buy those loans.”

      I think you’re out of your domain on this one pino. If, on the other hand you can provide some verifiable data that backs your assumption, there’s a guy named Barry Ritholtz that will pay you $100,000 to show him.

      That “the worst financial crisis in generations was set off by a massive government effort … makes for a fascinating narrative that plays into a number of different ideological beliefs. It exonerates the radical free market deregulators, it ignores what the private sector did, and it somehow ignores the fact that Congress was controlled by a very conservative GOP from 1994 to 2006 — the prime period of time covered leading up to and including the beginning of the crisis.

      Over the past 2 years, I have repeatedly asked the people who push this narrative to provide some evidence for their positions. I have offered a $100,000 if they could prove their case.

      Specifically, I have requested some data or evidence that DISPROVED the following facts:

      -The origination of subprime loans came primarily from non bank lenders not covered by the CRA;

      -The majority of the underwriting, at least for the first few years of the boom, were by these same non-bank lenders

      -When the big banks began chasing subprime, it was due to the profit motive, not any mandate from the President (a Republican) or the the Congress (Republican controlled) or the GSEs they oversaw.

      -Prior to 2005, nearly all of these sub-prime loans were bought by Wall Street — NOT Fannie & Freddie

      -In fact, prior to 2005, the GSEs were not permitted to purchase non-conforming mortgages.

      -After 2005, Fannie & Freddie changed their own rules to start buying these non-conforming mortgages — in order to maintain market share and compete with Wall Street for profits.

      -The change in FNM/FRE conforming mortgage purchases in 2005 was not due to any legislation or marching orders from the President (a Republican) or the the Congress (Republican controlled). It was the profit motive that led them to this action. SOURCE

      Ready to get rich quick pino. Give Mr. Ritholtz a call

  5. #7 by Scott Erb on March 29, 2012 - 20:01

    No, banks were not forced to make bad mortgages. That simply is not true, Pino! The bad mortgages were pure private sector inventions, designed to fund derivatives trade. Read “All the Demons Are Here” by McLean and Nocera for the whole story (including government involvement in the housing market). This was deregulation and private sector inside jobs, not government. The evidence is overwhelming and undeniable.

    Incomes have increased, but the balk of the increase has gone to the wealthiest. Relative wealth has shifted to the top. Families aren’t that different, and I’ve not seen anything to suggest comparative statistics would be warped that much by different demographics. We’ve gotten to the point where almost half the population is too poor to pay federal taxes — even though most of them work.

    Finally, people getting filthy rich does not help the economy. Look to Germany and Scandinavia where you see a stronger middle class, a stronger economy, less debt, and high standards of living across the board (and excellent health care, education, and infrastructure). We’re looking more like a third world country in comparison to northern Europe.

    • #8 by pino on April 1, 2012 - 03:47

      No, banks were not forced to make bad mortgages. That simply is not true, Pino!

      Scott, normally you are better on the facts than you are on this.

      Of COURSE the banks were forced to make bad loans. People do not lend money to people who won’t pay that money back.

      Families aren’t that different, and I’ve not seen anything to suggest comparative statistics would be warped that much by different demographics.

      I see no indications that you have even looked into this.

  6. #9 by Alan Scott on March 29, 2012 - 23:11

    Scott,

    If banks were not forced to make loans to people who were not able to repay them, then why are Fannie and Freddie insolvent ? You keep making the argument that government policy is not to blame. The GSEs were instruments of government policy. Splain to us in the peanut gallery, just what their roles were. Why are we still bailing out these government bastard step children ?

    • #10 by lbwoodgate on March 29, 2012 - 23:52

      Perhaps this will splain what you want to know Alan

      “a look at the actual data shows that Fannie and Freddie—while certainly plagued with problems—are not the root causes of the subprime mortgage meltdown nor the financial collapse. First, context: Fannie and Freddie’s roles, in part, consisted of buying up lots of mortgages in the secondary mortgage markets, i.e., taking them off the books of mortgage originators, and allowing those originators to extend more credit to potential homeowners.”,/i.

      What this essentially addresses is why freddie and fannie carried more toxic debt than their private counterparts to make them as you claim, “insolvent” which they bought up from the private mortgage originators, giving them the appearance that they were more a factor in this mess than they really were.

      Here are a couple of good sources that will give you even further details on the GSEs role and that of the private sector’s that started this whole mess.

      Dear GOP: Fannie, Freddie Did Not Cause the Financial Crisis

      and

      Private sector loans, not Fannie or Freddie, triggered crisis

      You may also want to read another expert’s take on this issue

      Get Me ReWrite by Barry Ritholtz

      Barry’s willing to pay anyone who can prove him wrong about Fannie and Freddie’s role in the economic crisis $100,000. Give it your best shot if you can. All I ask is a small finder’s fee for pointing you in his direction, say 10%?

    • #11 by Scott Erb on March 29, 2012 - 23:55

      First, Allan, see lbwoodgate’s post above. Second, your question is a non-sequitar. I’ve explained how derivatives trade and the like caused the bubble, and how it was driven by private speculation. If you want to claim Freddie and Fannie caused it, you have to make an argument, not just ask a vague question with no support. You can’t say “explain the GSEs to us” if you don’t actually do the work to make an argument and state your case. You can’t because you have no case — as lbwoodgate notes above, if you could you’d earn $100,000! You’ve bought a lie from talk radio types who want to pretend that somehow the government was responsible for something de-regulation caused. You can’t make a case because there is none there. I’ve also given you cites of books that explain this, I’ve given you facts, an argument and sources. Put up or admit you really don’t understand how this happened and are simply blaming government because it’s ideologically convenient for you.

  7. #12 by Tim Stevens on March 29, 2012 - 23:25

    A mutual friend from Usenet days pointed me to your blog. Excellent analysis, Scott, and keep up the good work!

  8. #13 by Alan Scott on March 31, 2012 - 00:43

    lbwoodgate and Scott,

    I consider ” Crony Capitalists ” to be agents of the Central Government.. When you guys blame the private sector, how about naming the individual villains? And I don’t mean George Bush. Give me the companies. I will, when I blame your beloved public sector. First off citing Mother Jones does not impress me.

    Now, have you ever heard of Country Wide. It was the Crony Capitalist that conspired with Fannie Mae to do the bidding of big brother . I sincerely hope you include Country Wide in your list of the evil private sector .I could go on, but now I will just cite a source I trust that lays out my case better and in fewer words than I am capable .

    http://nrinstitute.org/lmotw/2011/11/10/fannie-and-freddie-created-the-mortgage-crisis/

    Your argument for blaming deregulation doesn’t fly when government rigs the game to make sure that their friends in the private sector win against their competitors. The whole Country Wide-Fannie Mae monopoly was a central factor . There were smaller actors who took advantage of what the GSEs created. I say that if the GSEs were not buying the mortgages before Wall St. got in, the bubble would never have been inflated. Now prove me wrong .

    • #14 by lbwoodgate on March 31, 2012 - 17:32

      “how about naming the individual villains? And I don’t mean George Bush. Give me the companies”

      Sorry, Geoege W. has to be implicated with this economic nightmare, but he is only one of 25 that TIME listed as part of the “good intentions, bad managers and greed behind the meltdown”, with your boy Angelo Mozilo from Countrywide at the top of the list

      ” I say that if the GSEs were not buying the mortgages before Wall St. got in, the bubble would never have been inflated. Now prove me wrong .”

      I already did. Did you not bother to read the link I gave you to Barry Ritholtz? Besides, you haven’t even proven your self to be right about most of this. What gives you the right to ask anyone here to “prove you wrong”

      “I consider ” Crony Capitalists ” to be agents of the Central Government”</i.

      I'm pretty sure it's the other way around. It's all part of the D.C./K Street revolving door

    • #15 by Scott Erb on March 31, 2012 - 17:43

      You need to make a case before you say “prove me wrong.” I have in the post showed the increase of derivatives trade, I’ve pointed you to books that describe the unfolding of the crisis, especially Nocera and McLean’s “All the Devils are Here” (which explains how mortgage lenders AVOIDED the GSEs because they were too strict on approving mortgages). Alan, you still haven’t dealt with the fact it was derivatives trade that caused the crisis and inflated the bubble. You haven’t countered the fact that lending standards declined and predatory lending rose via the private sector, driven by the big banks. If we had regulated derivative trade and had more control over the banking sector we could have prevented this.

      Look, I understand – some on the right want to avoid the implication that lack of regulation caused this and they created a narrative that tries to somehow blame the government. You bought it, it fits your ideological predisposition. It just happens to be a very weak case. Yes, there are problems with Fannie and Freddie, and various aspects of government policy — especially de-regulation — can be criticized. But to blame the government for this is to ignore the power and well documented activity of the big banks whose influence on government was primarily to get it to leave them alone. That was the big error — sometimes you need an active, interventionist government.

      • #16 by pino on April 1, 2012 - 03:51

        I have in the post showed the increase of derivatives trade

        No you haven’t. You show a graph with no other data.

        And then point us to books.

        You have no “case.”

  9. #17 by Alan Scott on April 1, 2012 - 00:49

    lbwoodgate,

    ” with your boy Angelo Mozilo from Countrywide at the top of the list ”

    Uhhhhh,,, big news flash. Angelo Mozilla is one of your boyz. I’m surprised you even know his name.

    Scott,

    ” But to blame the government for this is to ignore the power and well documented activity of the big banks whose influence on government was primarily to get it to leave them alone ”

    Earth to Scott,,,,,, that is what I am talking about . The cronies were taking care of people on your side to stop the Office of Federal Housing Enterprise Oversight (OFHEO) from shutting down the gravy train . OFHEO did try to rein in the GSEs before the meltdown. Some poor shlub from OFHEO was called everything short of a Republican by Democratic Congress persons in Committee hearings when he dared to regulate .

    Republicans DID try to intervene and regulate . It was your guys and girls who acted like Libertarians on crack when Republicans and OFHEO dared to question Franklin Raines about the risks he was allowing .

    • #18 by Scott Erb on April 1, 2012 - 01:45

      There were problems with the GSEs, but they did not cause the bubble or the crisis. They were eclipsed by private banks, especially Goldman, Lehman, Bear Stearns and others that took advantage of relaxed regulations and securitized mortgages into derivative bonds that they sold and then repackaged. Mortgage lenders bypassed Fannie and Freddie because they were too strict, the private banks had no standards, they’d buy anything. They thought they were getting rid of risks by selling it through bonds, but they really simply created systemic risk. You keep ignoring the real problem by fixating on the GSEs.

      I laugh when you try to get partisan and say “Republicans did try…” Bull. The GOP was just as into the GSEs as the Democrats, but that wasn’t what caused the bubble or the crisis. You’re talking about a relatively minor problem and ignoring the big one. But if you think you can prove it, go collect your $100,000! You can’t, that’s why you aren’t making a case that the GSEs caused the problem. You tried to assert that, but you’ve offered zero evidence. I’ve explained what caused the problem, provided a graph showing derivatives trade above, pointed you to books that explain it and went through what happened. You’re putting your fingers in your ears and going ‘lalalalalala’ since you don’t want to hear anything that doesn’t fit your ideological perspective.

  10. #19 by Scott Erb on April 1, 2012 - 06:36

    Pino, the banks made bad loans because they were able to put these bonds and sell on the derivatives market. They thought they were getting rid of risk, but they were making it systemic. Seriously, Pino, your comment shows that you do not know what happened. To say they were forced to make bad loans shows complete ignorance of what went down. You must read “All the Devils Were Here” by McLean and Nocera, or “The Big Short” by Lewis, or I can give you more. Your claim they were forced to make loans is just dead wrong. Completely, objectively and absolutely wrong.

  11. #20 by Alan Scott on April 1, 2012 - 12:22

    Scott,

    You can deny the GSEs role all you want. I do not deny Wall Street’s or even the Banks role in the disaster . I just deny your assertion that deregulation was the primary cause . There is no way even the greediest Capitalists caused this mess. Not when Fannie Mae and Freddie Mac controlled so much of the mortgage business. And when they lost some of that control to Wall Street then they should have been clear of liabilities . But as we know they and us taxpayers are on the hook for hundreds of billions in losses. And guess what ? What ! We have and will get most of the bailout money back from the evil banks . We have no prospects of ever getting our money back from your party’s bastard step children . Your guys populated them with their buddies. Crony capitalism at it’s best.

    Until you acknowledge this, your arguments have no standing. Ask yourself, what is different between this mess and the Savings and Loan meltdown of the late 80s ? They were both housing bubbles. In both cases mortgages were allowed to be bundled and sold. It just shows that we learn nothing. 10 or 15 years from now we will have another one.

    The lessons learned from the S&L crisis contributed to the rise of the GSEs. I wonder what lessons from now will contribute to the next disaster.

  12. #21 by Scott Erb on April 1, 2012 - 13:46

    What role do you claim GSEs played? Can you give evidence? They did not control the mortgage business. You are talking about a completely different issue – I’m talking the housing bubble and the 2008 economic crisis. You seem to know you’re wrong on that, so you’re dancing around, making vague claims about the GSEs, putting in the Savings and Loan problems of the 80s, doing everything you can to avoid admitting that your claim that government was responsible for the housing bubble and 2008 crisis is simply wrong. Just admit it. Sure, there are other problems, there are problems with the GSEs. But those are tangential to the housing bubble and crisis that hit in 2008.

    That bubble was primarily caused by de-reguation and a market failure. Markets ultimately correct themselves, but at great social cost. That’s why you need government oversight and regulation. Markets are not magic, and they can be very destructive left to their own devices.

  13. #22 by Alan Scott on April 1, 2012 - 20:16

    Scott,

    You are a challenge. No matter what I say you refuse to allow even a sliver, a microscopic amount of blame to fall on your precious government, other than that they deregulated the banks . This unleashed evil unregulated free marketeers that caused the whole mess, right ???? You are 100 % locked into Government regulation good, capitalism and free markets bad .

    Now you will allow that if people would have just paid their damn mortgages, you and I would not be having this conversation, right ? So what happened? It occurred to me to try to find the origins of why lending standards were even lowered in the first place. There have always been sub prime mortgage, sub prime loans, and sub prime borrowers . In a truly free market these folks pay a much higher interest rate than lower risk borrowers. Again, what the heck happened ? Having searched high and low, this following article is the best I’ve found to make my case.

    http://www.sjsu.edu/faculty/watkins/subprime.htm

    The article shows what happened in 1999. It also ties in what what I said about the previous S&L crisis.

    This quote from the end of the article pretty much says it all .

    ” There are plenty of parties to blame for the subprime mortgage crisis, but a large share of that blame rests with Franklin Raines, Timothy Howard and the other members of the inner circle of Fannie Mae. The lenders would not have written the flawed mortgages with their bobby-trapped conditions if they could not have counted on selling them to Fannie Mae or getting default insurance from such sources. “

    • #23 by Scott Erb on April 1, 2012 - 21:17

      Subprime lending before 2003 was not really at a level that it threatened the market. If you want to go back to 1999, yes, problems in the 80s and 90s were more due to Fannie and Freddie. Derivatives trade was light. But that was before the biggest housing bubble in history and before derivatives trade took off. Moreover, I’ve been very critical of the government for not regulating derivatives trade, not regulating the ratings agencies, and following a free market ideology embraced whole heartedly by the Clinton and Bush administrations. It’s just that this housing bubble was driven by the big banks and their derivatives trade. That doesn’t mean there aren’t problems with the GSEs (again, the book I recommended goes back to the 80s and goes through the GSEs thoroughly, though showing they had bipartisan support most of the time), only that this big bubble/crisis was primarily due to Wall Street.

  14. #24 by Alan Scott on April 2, 2012 - 15:24

    Scott ,

    What Wall Street did was blow up the bubble sooner. Fannie and Freddie were dedicated to keeping the volume of mortgages high so their bosses and partners could keep getting rich . The whole bubble was based on rising prices for homes .They kept bringing in new barely solvent borrowers . Without Wall Street it would have just happened a little later . This also cost the good borrowers more for homes . Besides the scoundrels it was good for sellers .

    • #25 by Scott Erb on April 2, 2012 - 15:36

      No, Freddie and Fannie didn’t make the bubble. The bubble came from derivatives trade, as they big banks demanded more and more mortgages to turn into bonds. That’s why mortgage lenders bypassed Freddie and Fannie — their lending standards were too strict, Wall Street would take anything, assuming all risk, no questions asked. That’s what drove the value of homes up, that’s what created the bubble. It was not from Freddie and Fannie. Again, this has been documented, and lbwoodgate points to the $100,000 offer if anyone can show that the effort to get poor into homes caused this. There were problems as far back as the 80s with Freddie and Fannie, but if not for the big banks, deregulation, and derivatives trade, we’d have not had the massive housing bubble.

  15. #26 by Alan Scott on April 3, 2012 - 22:00

    Scott ,

    I doubt that they would award me the money even though I believe the evidence I have presented shows that the sub prime borrowers were the reason . They were by definition too poor for the houses they were buying. You don’t have to accept it .

    But what was your point in this whole argument ? By any measure you wish to use, President Obama’s policies have produced atrocious results . So what was your point ? You wish to add to the picture that since capitalism is 100 % guilty for the financial meltdown, Socialism should be given more leeway and time to correct .it . It furthers the argument that the reason President Obama has failed to meet his own benchmarks is because his starting point is further back on the racetrack . ‘ Things were worse than even we knew ‘ .

    Now I accept your argument no further than you accept my objections to it . It doesn’t matter. The voters in the middle, who put Obama in office, are less and less inclined to go for it . They want results, not blame shifting and double speak . You provide the blame shifting . Our President provides the double speak .

    • #27 by Scott Erb on April 6, 2012 - 16:59

      The atrocious results are from the policies followed that lead to the crisis of September 2008. Obama stepped into an economy in collapse bleeding jobs, and slowed the loss of jobs his first month in office. Since then the economy has slowly turned around, but the crisis was so severe and the damage done from 1981 to 2008 so extensive that he can’t perform magic. We avoided a major depression, are adding jobs slowly and people are starting to feel more confident. Right now Obama is winning big with independents in swing states and Romney’s unfavorables are near 60%. Obama still might lose, but right now his campaign team has to be feeling pretty good!

  16. #28 by Alan Scott on April 7, 2012 - 04:19

    Scott,

    ” but the crisis was so severe and the damage done from 1981 to 2008 so extensive that he can’t perform magic. ”

    Excellent . With your logic, any President can excuse pretty much everything . Why not go all the way back to George Washington ?

    I dispute your figures of Obama and Romney . But polls are premature anyway . As I see it, if Obama does not get gasoline prices down, the recovery will slow from it’s anemic pace to nothing . Obama is saying he can do nothing . Bush was blamed for $4 per gallon, now Obama will not avoid it . You can inflate your tires all you want and winterize your home. All of Obama’s stupid remarks will hurt him . I know hardcore liberals who have finally seen the light on just this one issue . The keystone pipeline call was a political disaster .

    Anyway do not worry about Romney . Once he secures the nomination we will hold our noses and rally behind him . I have not been happy about how dirty Romney has gotten with Santorum . I’ve heard the robo calls . But when he battles Obama the smellier the mud the better . Democrat Super packs will be mixing manure in the mudballs they will throw at Mitt.

    The upcoming race will be wonderfully vicious . I look at it this way. Obama is in big trouble. Only an outside miracle can save him . Mitt will have to be incredibly stupid to lose. It’s possible. Barring that, the polls will break for Romney late. Right now opinions are being formed. If the economy does not recover faster by June it will be too late . It’s what happed to Bush SR. A recovery in August-September will not help .

  17. #29 by sheokhanda on May 18, 2012 - 02:18

    loved the first pic… I think it is a well know fact now that free market is a way of rich to get more rich in which they can maximize their resource usage without government restrictions.

    In India too you can see that, the top lot is earning millions building homes like Antial (a multi-million dollar home) by Mr Mukesh Ambani of Reliance Industries 4th richest person in the world. Whereas India is seen as poverty sick country where 30% of population is below poverty line and many of the middle class are just surviving. (It is a pity that many common people donot try to understand what is going on in the west, especially in US in terms of economy).

    Of the free market economies I think of Estonia for one which has really made remarkable change, though issue may remain there too.

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