Danger said:
The last financial crisis was caused by excessive debt, fueled by Fannie Mae, Freddy Mac, the Federal Reserve and Banks who knew they could sell faulty mortgages. The combination of Socialistic policies (price setting via the Federal Reserve), MORE Socialistic policies (Fannie and Freddy setup by a Government who believes people are ENTITLED to a home), and Banks who saw an opportunity to profit from said Socialistic policies and took steps to loan money to people whom they knew would never be able to pay it back.
According to Paul Krugman, a journalist for
The New York Times, this is
not true.
In his article
Wall Street Whitewash he discusses how republican commission members have sabotaged the investigation into the financial crisis.
Mr. Krugman says, "We should have realized the modern Republican Party is utterly dedicated to the Reaganite slogan that government is always the problem, never the solution. And, therefore, we should have realized that party loyalists, confronted with facts that don't fit the slogan, would adjust the facts."
Now I am not saying that you are a republican (I have no idea) but it seems to me you have a conservative view (what he calls "Reaganite" view) of the market and deregulation. I am just pointing out, that according to Mr. Krugman, you have "adjusted the facts."
He goes on to say, "It's not as if the story of the crisis is particularly obscure. First, there was a widely spread housing bubble, not just in the United States, but in Ireland, Spain, and other countries as well. This bubble was inflated by irresponsible lending, made possible both by bank deregulation and the failure to extend regulation to 'shadow banks,' which weren't covered by traditional regulation but nonetheless engaged in banking activities and created bank-type risks."
Next, he goes on to talk about after the bubble burst, we found out that Wall Street had created "a web of interconnection nobody understood." Because of this, when Lehman Brothers, which he notes is a medium sized bank, failed it threatened to "take down the whole world financial system."
"It's a straightforward story, but a story that the Republican members of the commission don't want told. Literally."
Okay now that you have the back story, finally, we get to the part where you and Mr. Krugman disagree. (Danger, if you have read this far, mad props, I know this is a lot, but I'm doing my best here to provide you with enough information so you can see where Mr. Krugman is coming from, and, more importantly, for a fair rebuttal.)
Now to the meat.
According to the article, "In the world according to the G.O.P. commissioners, it's all the fault of government do-gooders, who used various levers --- especially Fannie Mae and Freddie Mac, the government-sponsored loan-guarantee agencies --- to promote loans to low-income borrowers. Wall Street --- I mean the private sector --- erred only to the extent that it got suckered into going along with this government-created bubble."
Again, I have no idea of your political affiliations at this point,
but I do think this fairly summarizes your argument, or at least you would agree with the G.O.P.'s view here.
Mr. Krugman counters this saying, "It's hard to overstate how wrongheaded all of this is. For one thing, as I've already noted, the housing bubble was international --- and Fannie and Freddie weren't guaranteeing mortgages in Latvia. Nor were they guaranteeing loans in commercial real estate, which also experienced a huge bubble."
Further, "Beyond that, the timing shows that private players weren't suckered into a government-created bubble. It was the other way around. During the peak years of housing inflation, Fannie and Freddie were pushed to the sidelines; they only got into dubious lending late in the game, as they tried to regain market share."
He explains the Republican commissioners' view as, "just doing their job, which is to sustain the conservative narrative. And a narrative that absolves the banks of any wrongdoing, that places all the blame on meddling politicians..."
Finally, he ends the article by saying, "Never mind relearning the case for bank regulation; what we learned, instead, is what happens when an ideology backed by vast wealth and immense power confronts inconvenient facts. And the answer is, the facts lose."
Alright, we've gotten through all of it. Now just to say a few things. First, please don't kill the messenger, I found this article and when I read it, sadly, what I though was, "oh this guy on sosuave posted something about this I wonder what he would say about this." Secondly, I would post a link to this article but you have to be a member of the website to read it, the only reason I have it is because I have the NYT Iphone app. This is why I tried to make this so comprehensive, so you can have the important parts of the article. (If you have an Iphone, it is under today's popular section, and the title is listed earlier.)
Hope to hear a response from you. Later.
