Put The Blame Where Blame Is Due

[Mark F. Barnes]

Why is everyone pointing to the current administration as the blame for the sudden surge in home foreclosures? Is it not the fault of the people who took on heightened financial leverage by buying a new home and taking advantage of the past several years of robust price appreciation, record-low interest rates and more lenient lending practices? I don't get it. Instead of just refinancing the home they were already in and get it at a better rate that they were already able to manage, they get in something with double the payment, because the interest rate was so alluring, and then they get in over their heads and lose it all. Credit Card companies issuing cards with huge credit lines and lower interest rates, and the people run out and dig the deeper hole they were already in. Who's fault is that? Transferring balances don't fix the problem, just delays the pain. Especially when they let you transfer it to a new line of credit, with another five or ten thousand dollar credit availability after the transfer is done. Who's fault is that? Take a good look in the mirror.

Put the blame where blame is due.

[RedScare]

Actually, Mark, most of the blame is being placed (and should be placed) on the lending industry for the crisis. They did not properly qualify borrowers, they offerred loans to people they knew could not qualify, and they lied to unsophisticated borrowers about ARM resets. They made loans that could never be repaid, banking on rising home values to allow borrowers to refi, knowing this would get them another origination fee. The banks get blame as well, lying about the loans bundled into bonds.

Individual borrowers get blame on an individual basis, as well. While everyone knows that there are many unsophisticated borrowers out there, the borrower must take some blame for his own unsophistication.

The Administration gets blame, rightfully, on several fronts. One, they refused to regulate the market, allowing lenders to mislead borrowers. They not only allowed the crisis to build, they encouraged it. They saw the bubble, but also saw that rising home prices pumped money into the economy through refis and home equity loans. One of Bush's biggest brags was his thriving economy, and record homeownership. He completely ignored the faulty foundation, because he wanted to brag about what a great economist he was.

What we see now is the product of unchecked greed and the leader who encouraged it. Bush gets some blame, but not nearly all of it. Frankly, I rarely hear his role in the debacle mentioned. It sounds more like you are understating Bush's role in the crisis, as opposed to the media overstating it. If this housing crisis ends up being the worst since the Depression, as some say it will eventually be, Administration policies that allowed it must certainly be taken into account.

[lockmat]

The Administration gets blame, rightfully, on several fronts. One, they refused to regulate the market, allowing lenders to mislead borrowers. They not only allowed the crisis to build, they encouraged it. They saw the bubble, but also saw that rising home prices pumped money into the economy through refis and home equity loans. One of Bush's biggest brags was his thriving economy, and record homeownership. He completely ignored the faulty foundation, because he wanted to brag about what a great economist he was.

What we see now is the product of unchecked greed and the leader who encouraged it. Bush gets some blame, but not nearly all of it. Frankly, I rarely hear his role in the debacle mentioned. It sounds more like you are understating Bush's role in the crisis, as opposed to the media overstating it. If this housing crisis ends up being the worst since the Depression, as some say it will eventually be, Administration policies that allowed it must certainly be taken into account.

The President and the "Administration" always get too much blame or credit, just like the quarterback. While I'm not excusing the decisions of any president, it's naive for us to believe that every good and bad thing is his or his administration's fault.

I'm not calling you naive, Red, just criticism in general.

[RedScare]

The President and the "Administration" always get too much blame or credit, just like the quarterback. While I'm not excusing the decisions of any president, it's naive for us to believe that every good and bad thing is his or his administration's fault.

I'm not calling you naive, Red, just criticism in general.

I'm not saying you did not read my post, lockmat, but you did not read my post.

I said that the prez is not getting an undue amount of blame, just an amount of blame commensurate with the amount of credit he claimed for the "surging economy". The president has little effect on the economy, but they insist on taking credit for it. This causes them to get the blame when it tanks, even though they had little effect on that either.

I think it is fair for those who claim undue credit to take undue blame. Do you?

[lockmat]

I'm not saying you did not read my post, lockmat, but you did not read my post.

I said that the prez is not getting an undue amount of blame, just an amount of blame commensurate with the amount of credit he claimed for the "surging economy". The president has little effect on the economy, but they insist on taking credit for it. This causes them to get the blame when it tanks, even though they had little effect on that either.

I think it is fair for those who claim undue credit to take undue blame. Do you?

haha, I agree. Maybe the point I was trying to make birthed itself and was crying to get out?

[RedScare]

haha, I agree. Maybe the point I was trying to make birthed itself and was crying to get out?

Yes. I consider myself sort of a midwife for internet forum thought.

[lockmat]

The Administration gets blame, rightfully, on several fronts. One, they refused to regulate the market, allowing lenders to mislead borrowers. They not only allowed the crisis to build, they encouraged it. They saw the bubble, but also saw that rising home prices pumped money into the economy through refis and home equity loans.

Or maybe I was responding to this portion?

Maybe I don't fully understand the roles of government players, but I'm thinking the Administration isn't the only one who knows and can try and make change to regulate the market. I don't know, did congress or whoever else deals w/ that just sit on their hands when they too saw this? I need a govt. refresher course.

Respectfully,

lockmat

[Mark F. Barnes]

I just guess I have been watching too much Primary BS and it seems to ring clear, But in the so called debate, which was really a full out shouting match between Clinton and Obama, with Edwards watching the fireworks, like the idiot he is. But time and time again, when it's brought up about the shortcomings of the current administration, housing foreclosure surge ends up as a big key to Bush's failed economy. I say Pooh Pooh to that. It may be a result of financial instability, but not his fault entirely. I agree Red that perhaps they should have stepped in and said enough is enough. But Greenspan set the lower rates and the leeches followed suit. That's what they do, bleed down their victim until there nothing left, send what's left of the carcass to the auction block and move on. People have let greed cripple them for thousands of years, it's one of the Achilles Heals of mankind. One of the seven deadlies so to speak. Sure there is a certain amount of blame to go around to all, but the majority is in the mirror IMHO. It's not the first time a lot of these same people have been there done that, yet they continue to go back to the trough. Like cattle waiting to be slaughtered. Just boggles my mind. I have a brother who is the worst of this, and I have bailed him out too many times. I cut him off a year and a half ago and have spoke to him since. It's hurts in a way, but enough is enough. three hundred thousand in the red with me is enough, too much and it's my fault for letting it get that far along. Perhaps that's the role where Bush gets the blame for not forcing the creditors to cut off certain people. However in a country of free enterprise, where are we crossing the line. It's not that they are breaking any laws, or selling them swampland in Arizona, they are just taking advantage of the gluttony of mankind, and profiting from it. I don't think it's the responsibility of the administration to babysit idiots that can't manage their money. Protect the Children and mentally defenseless, but just and idiot that can't manage his own budget, I say tough cookies.

[RedScare]

This is a worldwide crisis. Look at the news of some of the monstrous losses some European banks are announcing. The blame for this extends to millions of people, some powerful, some homeowners. The portion of the blame ascribed to the current administration is generally in the area of refusal to regulate banks and lending practices, a Republican staple for 30 years, and Alan Greenspan's reluctance to call attention to the gathering storm, even though he saw the problem growing.

It would take me hours to type out the specifics or link to the articles that describe the details. I realize that this may make me sound like some of those Chronicle posters who throw out accusations without backing it up, but I don't have time. However, the MAIN point that I was trying to make is that EVERYONE shares some blame in this, not just borrowers, and not just lenders. In no way am I trying to put all or even a lot of the blame on the president. I am merely pointing out that an unregulated system, such as the president espouses, is prone to be abused. It is human nature.

The blame I WILL put on the president is trying to bail out those who abused an unregulated system. If he REALLY believes in deregulation, he must allow the deregulated system to cure itself as well. That means allowing the millions of foreclosures, the failure of banks, and the losses of millions of dollars in rich people's investments. This will roil the economy, of course, but this is what HE wanted. He must take the good with the bad.

BTW, this is one of my complaints about a completely deregulated system. But, I am not president, so don't blame me.

Interesting Mark, that we posted at the same time, and said basically the same thing.

And, if you are watching the debates, I understand where you thought too much blame is going to the prez. No one gets elected blaming overseas hedge funds.

[lockmat]

That means allowing the millions of foreclosures, the failure of banks, and the losses of millions of dollars in rich people's investments. This will roil the economy, of course, but this is what HE wanted. He must take the good with the bad.

I don't know the specifics on hedge funds or even foreclosures. But I remember Bush talking about not letting

[Mark F. Barnes]

I will buy that Red, the blame is spread around, but I never hear any of the so called political leaders want to run for higher office pointing blame anywhere other than the White House. Even McCain's sorry a$$ does it. I am kinda scared of Romney, one because I just can't get an even read on him, and don't get any warm fuzzy feeling, however I haven't heard him point fingers at Pennsylvania Ave. McCain I cannot stand, he is too much Me Me Me, and claims to be a team player. Bull Hockey. Clinton is just not qualified and is a lying conniving twat in IMHO, Obama will more than likely get my vote. If he wants to make the broad VP, I may can live with that, anything above that is a no go. Rudy needs to step aside and take a lower seat with Romney if he wants to actually help the Republican cause. We won't have to worry about McCain doing that, he's always said he's above the Vice Presidency. Screw Him!

[houstonmacbro]

I'm not saying you did not read my post, lockmat, but you did not read my post.

I said that the prez is not getting an undue amount of blame, just an amount of blame commensurate with the amount of credit he claimed for the "surging economy". The president has little effect on the economy, but they insist on taking credit for it. This causes them to get the blame when it tanks, even though they had little effect on that either.

I think it is fair for those who claim undue credit to take undue blame. Do you?

So true, so true. All presidents take credit for roaring economies but rarely take the blame when things tank.

[RedScare]

I will buy that Red, the blame is spread around, but I never hear any of the so called political leaders want to run for higher office pointing blame anywhere other than the White House. Even McCain's sorry a$$ does it. I am kinda scared of Romney, one because I just can't get an even read on him, and don't get any warm fuzzy feeling, however I haven't heard him point fingers at Pennsylvania Ave. McCain I cannot stand, he is too much Me Me Me, and claims to be a team player. Bull Hockey. Clinton is just not qualified and is a lying conniving twat in IMHO, Obama will more than likely get my vote. If he wants to make the broad VP, I may can live with that, anything above that is a no go. Rudy needs to step aside and take a lower seat with Romney if he wants to actually help the Republican cause. We won't have to worry about McCain doing that, he's always said he's above the Vice Presidency. Screw Him!

Funny. Though we generally come at this from different angles, I agree with you. I will likely vote for Obama, too. All of these candidates say that in "these difficult times" we cannot trust a neophyte like Obama. Screw them! It was the professionals that got us into "these difficult times". They'll only make it worse! I'd just as soon a new guy come in and try his hand at it.

On the subject of the debates, I rarely watch them. You cannot take anything that is said seriously. They are merely trying to win the debate, and hence the election. Just to give an example, in 2000, Bush claimed to be uninterested in "nation building". That would have been fine with me, if he would have stayed uninterested. Instead, he is meddling all over the world, and bankrupting us while doing it. Regardless of one's views on Iraq and Iran, it cannot be disputed that what we are doing is the exact opposite of what he said. And, to make it more clear, Bush said this in response to Gore's position that we should be the world's policeman. NOW, Gore is on the other side!

I am not one to jump on politicians for "flip-flopping" per se. Situations change. More information comes in. But, at the same time, debates rarely seem to flesh out what a candidate stands for. It is merely a platform in which to engage in 'Gotcha!' politics.

[memebag]

The blame I WILL put on the president is trying to bail out those who abused an unregulated system. If he REALLY believes in deregulation, he must allow the deregulated system to cure itself as well. That means allowing the millions of foreclosures, the failure of banks, and the losses of millions of dollars in rich people's investments. This will roil the economy, of course, but this is what HE wanted. He must take the good with the bad.

They bail out market failures with tax dollars. They privatize military operations with no-bid contracts. They're constructing a new economic system that uses the propaganda of capitalism to force citizens to pay top dollar for incompetence.

[RedScare]

They bail out market failures with tax dollars. They privatize military operations with no-bid contracts. They're constructing a new economic system that uses the propaganda of capitalism to force citizens to pay top dollar for incompetence.

Absolutely agree. The Club for Growth claims to be for "free market" policies. Yet, what they are really for is government contracts to wealthy contributors. The federal budget always increases more with Republicans in office. That money is going to wealthy donors' companies, but not necessarily getting the taxpayer anything more for his money. The other side of the coin is that these same donors that receive these lucrative government dollars refuse to pay taxes on the profits. The result is that the National Debt has increased $3.6 Trillion under Bush, $3.1 Trillion under Reagan/Bush, and $2.5 Trillion under every other president COMBINED.

Now, THAT's conservative propaganda!

[crunchtastic]

They bail out market failures with tax dollars. They privatize military operations with no-bid contracts. They're constructing a new economic system that uses the propaganda of capitalism to force citizens to pay top dollar for incompetence.

Privatizing with public money: I'm amazed at how so many people somehow miss this fact that the 'free' market is utterly manipulated, globally.

The world bank/IMF (Not a satellite US federal agency, no, certainly no!!) do the same thing, except they go that special, extra step by engineering complete economic and political revolution. Most of South America, for example. Who, funnily enough, are back to their leftist inclinations after the failure of the free market experiments, and hate us even more than they used to.

[MidtownCoog]

What a bunch of partisan hacks.

I don't know about y'all, but this "Recession" ain't so bad here in Houston.

Stay positive and don't watch too much TV!

[Mark F. Barnes]

Funny. Though we generally come at this from different angles, I agree with you. I will likely vote for Obama, too. All of these candidates say that in "these difficult times" we cannot trust a neophyte like Obama. Screw them! It was the professionals that got us into "these difficult times". They'll only make it worse! I'd just as soon a new guy come in and try his hand at it.

Definitely. Obama's been in the Senate now for a term, he's no idiot. He's been to the puppet show and he's seen the strings. I am sure he knows what he's up against if he gets elected. He will be a war with both sides to try and do the right thing, because in the past couple hundred years they haven't wanted to "do the right thing" yet. Not long after they threw the tea in Boston Harbor, did the integrity of the leaders start downhill, and it never gotten any better. Voting is not much more than damage control on our part, and hopefully most people will do the best they can, stay away from straight party tickets, and vote for the right person in line with your own individual needs, and hope for the best.

[CDeb]

So true, so true. All presidents take credit for roaring economies but rarely take the blame when things tank.

No kidding. Many people consider Bill Clinton's greatest accomplishment to be the economic prosperity of the mid-late 1990's. Of course, the economy was already turning around when the elder Bush left office and it was slowing down when Clinton left office (and people were blaming that slowdown on the younger Bush even though it started before he was elected).

[bachanon]

people don't realize, and i wonder if the media does, that a president's budget continues well in to the following president's term. also, the congress, as well as economic forces determine the condition of the economy. the president is one factor, and not a predominant one at that.

[TheNiche]

Maybe I don't fully understand the roles of government players, but I'm thinking the Administration isn't the only one who knows and can try and make change to regulate the market. I don't know, did congress or whoever else deals w/ that just sit on their hands when they too saw this? I need a govt. refresher course.

Congress and the President generally don't like intervening in various asset valuation bubbles. If the legislation takes effect before the pop (and bubbles rarely just deflate at a modest pace, regulated or not), then they expose themselves to blame by political opponents for having caused it. If the legislation is too late in coming, then its sponsors can be blamed for exacerbating the pain.

Bush took credit because that's what politicians do when times are good. When times are bad, they pass the buck. IMO Bush only deserves blame from those that were gullible enought to take him at face value a couple years back...that is to say, only morons blame Bush for the housing bust.

[jfre81]

The lenders. The government. And then the idiot people who got greedy and ignored their limits. They all have a share of the blame.

If there is a single culprit, it is the collective culture of debt we've created and lived by. I couldn't tell you when exactly, but sometime in the last 25 years it became not only acceptable, to borrow money and spend in prodigious amounts, to the point that somehow it became the modus operandi of people who confess to be "conservatives," both in government and in society at large. Of course such a thing is contradictory, but so are a lot of things in this country.

You've also got some realtors who went around telling everybody how they needed to buy a house, that it was an "investment" and that their equity would somehow make them rich. Your equity is only money earned when you decide to sell; until then all it can earn for you is more debt in the form of refinancing. Which of course people did, because maybe they were having money troubles (they might have decided it would be better to remortgage the house to pay off the credit cards)...or they refinanced so they could redo the landscaping in their front yard or buy a Hummer and impress/outdo/outspend the neighbors. We had to keep up with the Joneses. (Who, by the way, are paying off their third mortgage and their credit cards.)

So then you have a bunch of people racking up more mortgage debt than their house, their supposed "investment," is worth. They fell behind. They lost everything. They're now renting, which was exactly what the realtor told them they should never be doing because it's throwing money away. So they go and sell them a house they won't be able to afford their payments on, and when the bank comes calling, everything they paid into their house is essentially retroactive rent, it's down the drain and so is the homeowners credit.

And here we are today, just because one group needed to make a buck and another group needed to impress with their 50K millionaire pipedream financed entirely on debt, while the people in charge of everything sat back and let it happen. Whoever's fault it is, it's a big mess all the same, and we all get to wallow in it.

[houstonmacbro]

I thought this article by George Soros was interesting:

The worst market crisis in 60 years

By George Soros

Published: January 23 2008 02:00 | Last updated: January 23 2008 02:00

T he current financial crisis was precipitated by a bubble in the US housing market. In some ways it resembles other crises that have occurred since the end of the second world war at intervals ranging from four to 10 years.

However, there is a profound difference: the current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency. The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years.

Boom-bust processes usually revolve around credit and always involve a bias or misconception. This is usually a failure to recognise a reflexive, circular connection between the willingness to lend and the value of the collateral. Ease of credit generates demand that pushes up the value of property, which in turn increases the amount of credit available. A bubble starts when people buy houses in the expectation that they can refinance their mortgages at a profit. The recent US housing boom is a case in point. The 60-year super-boom is a more complicated case.

Every time the credit expansion ran into trouble the financial authorities intervened, injecting liquidity and finding other ways to stimulate the economy. That created a system of asymmetric incentives also known as moral hazard, which encouraged ever greater credit expansion. The system was so successful that people came to believe in what former US president Ronald Reagan called the magic of the marketplace and I call market fundamentalism. Fundamentalists believe that markets tend towards equilibrium and the common interest is best served by allowing participants to pursue their self-interest. It is an obvious misconception, because it was the intervention of the authorities that prevented financial markets from breaking down, not the markets themselves. Nevertheless, market fundamentalism emerged as the dominant ideology in the 1980s, when financial markets started to become globalised and the US started to run a current account deficit.

Full article here: http://www.ft.com/cms/s/0/1a7af090-c956-11...0077b07658.html

[RedScare]

No kidding. Many people consider Bill Clinton's greatest accomplishment to be the economic prosperity of the mid-late 1990's. Of course, the economy was already turning around when the elder Bush left office and it was slowing down when Clinton left office (and people were blaming that slowdown on the younger Bush even though it started before he was elected).

True, the slowdown began in the 2nd half of 2000. The recession occurred from March to October 2001, a recession being negative growth, as opposed to a slowing of growth. This situation perfectly illustrates the insistence of presidents to claim expansions and not recessions, as Bush and Clinton camps have argued for years about the date on which the recession started. No intelligent person would ever claim that Bush caused a recession 2 months into his term, yet he routinely talks of the recession that "occurred in 2000", while claiming his tax cuts ended it.

The current slowdown cannot be sloughed onto another president, so he merely refuses to admit it is happening, while simultaneously offering a stimulous package. Doublespeak at its finest.

people don't realize, and i wonder if the media does, that a president's budget continues well in to the following president's term.

While this has little to do with the recession, it does explain why Bush had a surplus in his first year, as the fiscal year extends to October. The bad news is that this means Bush crammed his $3.6 Trillion in deficit spending into 6 years, as opposed to 7.

[CDeb]

While this has little to do with the recession, it does explain why Bush had a surplus in his first year, as the fiscal year extends to October. The bad news is that this means Bush crammed his $3.6 Trillion in deficit spending into 6 years, as opposed to 7.

Republicans talk a good game about cutting spending, but the spend like drunken sailors on shore leave.

[lockmat]

While this has little to do with the recession, it does explain why Bush had a surplus in his first year, as the fiscal year extends to October. The bad news is that this means Bush crammed his $3.6 Trillion in deficit spending into 6 years, as opposed to 7.

Regardless if you think the war was a good idea or not, is that really a fair number considering the expenses needed to fight it?

How have other war time presidents faired in regards to a debt or surplus?

[crunchtastic]

What I find very interesting in all this, is the very different tack the Europeans are taking. Our own economic stimulus package, rate decreases, etc are standard playbook moves for getting the credit bubble to deflate, rather than pop. What they don't take into account are the greater issues surrounding the value of the dollar worldwide, and inflation. On NPR this morning they were speaking to the woman who is world markets editor of the Financial Times, talking from Davos about the mood there-- where unlike in the US, is frustrated by siginificant concern for inflation (specifically food and energy, which we of course don't count in our infllation numbers) and why the European Central Bank won't cut rates.

Then I read stories like one in the NYT yesterday about impending food riots in parts of South Asia, because cooking oil crops (palm oil) have been turned into biofuel sources. This is the kind of stuff,with tentacles far beyond the credit crisis, that can give me the Mad Max heebie jeebies.

[RedScare]

Republicans talk a good game about cutting spending, but the spend like drunken sailors on shore leave.

To be fair, both sides spend like drunken sailors. The difference is that Republicans simply refuse to pay for it, while Democrats hike taxes to pay for their shopping sprees. Wouldn't it be a nice change of pace to debate which is better, buying on credit, or pay as you go, instead of the intellectually dishonest crap that we hear today?

Regardless if you think the war was a good idea or not, is that really a fair number considering the expenses needed to fight it?

How have other war time presidents faired in regards to a debt or surplus?

Well, Bush has a $3.6 Trillion deficit with his war. Reagan/Bush had a $3.1 Trillion deficit without a war. All other presidents COMBINED had a $2.5 Trillion deficit, including 2 world wars, Viet Nam, the Civil War, and every other war that is not Iraq/Afghanistan.

So, you tell me. What is fair?

[lockmat]

Well, Bush has a $3.6 Trillion deficit with his war. Reagan/Bush had a $3.1 Trillion deficit without a war. All other presidents COMBINED had a $2.5 Trillion deficit, including 2 world wars, Viet Nam, the Civil War, and every other war that is not Iraq/Afghanistan.

So, you tell me. What is fair?

I'm just fact gathering. That is a staggering statistic, and I'm sure the numbers could be just as enormous, but I wonder what the figures are adjusted to inflation.

And I'm not trying to defend the GOP's spending habits, in case anyone is wondering.

[CDeb]

To be fair, both sides spend like drunken sailors. The difference is that Republicans simply refuse to pay for it, while Democrats hike taxes to pay for their shopping sprees.

Yeah, they both spend like drunked sailors, but the Republicans routinely use "cutting spending" as a key part of their platform. The Democrats tell us that they're going to spend our money like it's radioactive.