“We want auto finance companies to be able to raise the money they need to finance more auto purchases.” Well I bet you do, Ms. American Financial Services Association spokeswoman Lynne Strang. But c’mon, are we really talking about Uncle Sam taking over bad car loans? Yes, we are. “The American Financial Services Association is asking Congress to allow auto finance companies and other institutions to tap the $700 billion bailout fund designed for the troubled mortgage industry,” Automotive News [sub] reports. “The trade association, based here [Washington], also is proposing that automobile loans be classified as ‘troubled assets’ along with home mortgages.” Just another lobby group wanting a suck on the federal teat? Well, yes. But this hungry mouth could well get fed. “U.S. purchases of distressed assets would help people, Mr. [Secretary] Paulson told The Wall Street Journal, by enabling lenders to resume making loans for homes, cars and small businesses, and by keeping the economy from sliding into a deep decline that would cost jobs.” When private enterprise depends on government largesse to survive, when an economy depends on bad debt rather than good productivity to thrive… where’s John Galt when you need him?
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I am thinking perhaps our leaders have lost their damn minds.
Since when is a car an “asset” ? Unless you are holding on to that Ferrari Spider California of yours, most cars are liabilites, not assets. And depreciation sees to that.
It’s absolutely mind-boggling how initial discussions about a $25 billion injection into the auto industry has morphed/devolved into a dialogue about managing bad car loans on the heels of the mortgage-fueled bail-out plan. On the one hand, I applaud the bi-partisan desire to act quickly and decisively to avoid what is perceived to be a U.S.-induced melt-down in the capital markets. On the other, is the pendulum swinging too wildly the other way, sweeping up all liabilities in the process? There’s a difference between fiscal responsibility & prudent stewardship of the nation’ economy, and an unbalanced, undisciplined, uncompromising, and potentially unwieldy debt load that is potentially being assumed. There’s no right answer here, and everyone wants to do the right thing. However, it’s always easier to assume incrementally more debt as needed than it is to choke on a smorgasboard of debt that detracts, rather than inspires confidence in the well-meaning, yet potentially mis-guided $700 billion bail-out initiative. Let’s hope we execute it with foresight, vision, discipline, and….dare I say it…. a healthy dose of faith!
What Paulson and Bernanke want us to sign up for is not a plan, it’s an expression of absolute trust that is completely unjustified based on their performance to date. Not long ago they were telling us the subprime mess would not spread. They had to be lying because even I, and many others, knew this was untrue. They were conning us then and I think they’re doing the same now.
They don’t know what the hell is going on or what to do about it. At best, they just want to throw some shit in the air and wave their arms hoping the panic will subside and they, or someone, will think of something. I would not be at all surprised if some nefarious scheme is afoot. I don’t really see why they absolutely positively must have the $700B right now. It’s not enough that a grave-faced statement by themselves along with the congressional ‘leaders’ be made as to their acknowledgment of the problem and determination to address it. No, that wouldn’t do it; Paulson must have the $700B now. Boy this is so much like the WMD justification for unfettered power.
Socialism for the rich, capitalism for the little people. The bail-out recipients are the same people who rant about free enterprise and getting the government off big business’ back. At the first sign of trouble they become instant socialists and reach for the begging bowl.
Actually, it’s not about socialism, but capitalism in its truest sense. But you’ll have to do your homework and read your Marx and Huberman to get the big picture. Essentially, capitalism comes in cycles of good times and bad times. In good times, the rich makes large profits and the poor ends up paying the bill, in bad times some rich people end up loosing everything, while others make a profit, and the poor ends up paying the bill. In the end, everything is about making money on someone elses expense, and that usually means you and me. The point is, this talk about bailout is not about socialism, it’s about having a party like there is no tomorrow, and when tomorrow comes, finding out that the purse is empty and refuse to sign on the dotted line…
Socialism for the rich, capitalism for the little people. The bail-out recipients are the same people who rant about free enterprise and getting the government off big business’ back. At the first sign of trouble they become instant socialists and reach for the begging bowl.
The awful part is that we’re probably going to have to give into them, if for no other reason than our own protection. I’d really like to, punatively, see some of these agencies take the fall, but realistically they’d probably take me and a lot of other people down with them.
A bailout, were one to occur, must come with strings attached: smarter regulation, defined recovery plans, no pork. Bailout or not, the people who instigated this are going to make out like bandits: at least government buy-in might give me the satisfaction of, hopefully, seeing a few holes punched in some golden parachutes. Or at least some accountability forced upon the boards of directors that more or less allowed (if not encouraged) this to happen.
Believe me, as a leftist, I hate, hate, HATE the idea of giving money to corporations for what amounts to a betrayal of the public trust, but I dislike double-digit unemployment even more.
Ron Paul was right.
If I’m going to be find myself in a scenario whereby I have no choice but to relinquish my money to the government, I’d much rather the funds go to business, which might produce, than to people who won’t produce no matter how much they receive.
If that sounds mean, so be it. And if it sounds like a bum deal, well, that’s because it is. But the government bailout that this crisis demands is, ironically, a product of the undue government involvement in free markets that brought us to this point.
Our troubles today in the financial markets have to do with too much regulation and the attendant collusion that led to corruption among the mixed company of business and government.
That’s right. Too much deregulation had very little, if anything, to do with this.
Furthermore, who was it that called for reformation of Freddie Mac and Fannie Mae multiple times over the past couple years? Yes, it was conservatives who made the calls; liberals stonewalled.
Efforts to pin this mess on conservative principles are not only disingenuous; they are in fact disgusting and an insult to the intelligence of thinking citizens who understand that the government creates nothing without first taking our money away. And then, what it creates is, well, typically best left uncreated in the first place. To have socialist pinheads claim responsibility for our rapidly dwindling greatness is a travesty.
I here debt is bought up from those that first lend the money to car buyers. So those that have bad mortgage loans may also have bad loans is what it seems. So taking away one type of loan may not be enough for such companies. Although some folk will probably lie.
psarhjinian — although the following is at odds with my last comment, I’m posting it just to illustrate that by saying you hate giving tax money to corporations because you’re a LEFTIST, you’re being just plain silly. Quite honestly, I infer from your statement that your “understanding” of political ideologies is uninformed:
http://www.npr.org/templates/story/story.php?storyId=94900671
Really, this whole episode is not the consequence of capitalism or socialism gone awry…these economic systems are best practiced by countries other than the US (there is a world, quite an amazing one, beyond our shores and borders…). Rather, this train wreck of a collapse is uniquely, very uniquely American. I’m at a loss to define how we operate. I guess one more day in a giant manic-depressive nation-state. Very hard to be proud these days.
Greed is the essential oil of our modern society; without it, we would be without a national character, and absent a defining purpose. I can’t wait for the day when circumstances beyond our control force us to adopt a more noble posture.
In the meantime, the hard-working folks out in the fields growing and harvesting the food all of us need, many if them citizens despite the blubbering of Bush and his ilk, are doing those tedious demanding chores for 60 hours a week before a penny of overtime pay kicks in (as per statute) with nay a benefit such as health insurance to be seen.
All praise American capitalism and golden parachutes and out elite classes.
The issue is Restoration. Not capitalism, not socialism. It’s time to be pragmatic, Americans are behaving dogmatically, clinging to paradigms. The solution to your current problems is a patchwork of ideas.
At present individual Americans are about as ideologized as they portrayed the Soviets to be during the Cold War and it has blinded “you all” to massive structural problems.
The solution will begin with competent government intervention in the markets. Governments in the rest of the world function very well in this respect–I am tired of the bullshit about how your government can’t. Have you considered electing competent representatives, and backing them up with a well staffed and funded bureaucracy? Lobbyists writing legislation doesn’t seem to be working.
Mature industries need to be treated differently from developing ones. This means protection for the former, and incentives for the latter. Corporate accountability needs to be reinstated and underlined with some hefty prison sentences. It is not possible that this level of malfeasance is unaccompanied by criminal behaviour, more scrutiny will result in more prosecutions, and ultimately more scrupulous behaviour.
Americans are going to relearn the role and value of Government, or continue to struggle impotently. You may well expect condescension and lecturing from thug states like China and Russia, or well run democracies with mixed economies like France and Germany. It’s the prerogative of the winners, get used to it.
Finally, in answer to the question “Who is John Galt?”; he is a character in a novel. Written by a novelist, not a philosopher. A novelist has control over the outcomes of a fictional situation, a philosopher has no such influence on reality.
Choose your future accordingly.
although the following is at odds with my last comment, I’m posting it just to illustrate that by saying you hate giving tax money to corporations because you’re a LEFTIST, you’re being just plain silly. Quite honestly, I infer from your statement that your “understanding” of political ideologies is uninformed:
I’m a mild socialist (by global, not American standards) and have been for some time. Silly is as silly does. That said, I don’t like (and have spoken up in the past about) using terms like “left” or “right” without giving context, so I’ll use “anti-corporatist” where “corporatism” is defined the modern, not classical or Italian neofascist sense. You got me there on my lack of clarity.
To expand: if I had a choice for where I’d like to see seven hundred billion dollars spent, ideologically speaking, I don’t want it to cover the collective ass of the epitome of capitalism gone wrong. But I don’t have that choice because, much as I’d like to be purely ideological, I’m not a twentysomething university student anymore, and if action isn’t taken, this results will go on a long time, and hurt a lot people.
In my view, inaction is worse, in net economic terms, then a bailout with strong provisos, and likely worse than a carte-blanche one as well.
Just because Newt Gingrich doesn’t support a bailout it doesn’t make that stance a conservative platform by default–it’s why one doesn’t support it that determines such. Personally, it doesn’t bother me one whit that a bailout is government interference in the market, it bugs me that we’re redistributing wealth (from my ideological perspective) in exactly the wrong way: from the poor, to the rich, to further the wills of robber-baron capitalism, and that we’re doing so because said barons (in government and industry) drove the market full-steam into a brick wall either with no thought of the consequences, or no sense of accountability because they knew they wouldn’t feel the effects.
But the robber-barons are going to do quite well out of this no matter what I want, so I may as well cast my vote for lessening the hurt.
eh_political,
If I could clap in text, I’d applaud your post. Well said.
The current treasury proposal would allow them to buy any debt obligations on the market, including those which bundle up auto loans.
Bernanke has also said that the government should pay more than the current fair market value for the debts it buys in order to put more cash in the hands of the lenders
( http://news.yahoo.com/s/ap/20080923/ap_on_bi_ge/bailout_prices_bernanke_4 ).
“If I’m going to be find myself in a scenario whereby I have no choice but to relinquish my money to the government, I’d much rather the funds go to business, which might produce, than to people who won’t produce no matter how much they receive.”
The financial wheeler dealers don’t PRODUCE anything. They, in fact, siphon resources away from those who actually are producing things. They take huge fees for “advising” on all sides of transactions. They trade for their own account in a manner which makes the financial markets nothing but a big casino. Wall Street is where the money is taken, not where the value is produced.
Here we go:
http://www.nytimes.com/2008/09/23/opinion/23brooks.html?_r=1&hp&oref=slogin
I didn’t say it would be palatable…
Editing the words of eyeonthetarget:
There’s a difference between fiscal responsibility & prudent stewardship of the nation’s your personal economy, and an unbalanced, undisciplined, uncompromising, and potentially unwieldy debt load that is potentially being was imprudently assumed.
Perhaps some suffering would be good for the American soul right about now?
I guess if the Government buys the auto loans for 10 cents on the dollar and some of them get repaid it could show a profit. However, given that the rationale for buying up “troubled” mortgages is that the property will recover its value (eventually …) and the Government will recover its investment, the idea of buying auto loans is, well, strange. Who expects a used SUV to recover its value?
Of course, the real question of interest to TTAC readers is, if I buy that Porsche, will the Government bail me out?
And the answer is, only if you own a large bank.
John Galt is a “producer” at odds with the “looters” of the world. it is his philosophy which the people of this country should demand of our elected government. another Ayn Rand character, Howard Roark, further exemplified the benefits inherent in the productivity of the individual vs. the collective. amazing how books written over 50 years ago are so pertinent to today’s environment.
“Efforts to pin this mess on conservative principles are not only disingenuous…”
True so far as it goes. But to call the actions of those who cloak themselves in conservative principles actually conservative stretches all credibility. That’s the real problem. There are precious few real economic conservatives left. We have the wosrt of both worlds, uncontrolled spending and reckless disregard for funding those spending programs. And when it is suggested that we raise tax revenue to actually pay for that spending, those who do find themselves described as “disingenuous”.
I would suggest that the average “conservative” politician consider the words of William Shakespeare from Julius Caesar: “The problem, dear Brutus, lies not with our stars but with ourselves”.
brent: The current crisis is the directly the fault of conservative ideology, specifically the repeal of Depression-era regulation that you no doubt consider socialist:
http://www.politico.com/blogs/thecrypt/0908/Dingell_prophet_of_doom.html?showall
Sucks when your worldview doesn’t match up with reality, doesn’t it?
faster_than_rabbit, please read the following links, which provide a much more honest assessment and description of our circumstances and what led to them:
http://online.wsj.com/article/SB122212948811465427.html
http://gatewaypundit.blogspot.com/2008/09/bush-called-for-reform-of-fannie-mae.html
700 Billion? Where are you guys getting your facts? The bill up for the vote is for MUCH MORE than 700 billion. The treasury can only take 700 Billion at ONE TIME but can cycle UNLIMITED debt onto the taxpayers via buying and selling. With NO review and no challenge to how it’s done.
Guess who gets the good deals and who gets stuck with the liabilities?
This bill, if it passes, destroys the US Government’s credit rating and ability to sell bonds.
MrNiceGuy — indeed, which is why I’d like Congress to adopt the following conservative’s approach to the entire matter:
http://corner.nationalreview.com/post/?q=ZGE5MmE0YmRiODA3YTRiNzFlN2FmNDU5N2I0ZDc3YTE=
I’d like Congress to adopt the following conservative’s approach to the entire matter
Conservative approaches created the current disaster. It’s a bit amusing to hear the architects of disaster to blame the tenants, instead of acknowledging their design of the building that fell apart.
It’s a shame that in the spirit of accountability that the right won’t take credit for its wonderful handiwork. They keep pretending that this implosion was someone else’s idea, when we gave them exactly what they wanted.
While excessive regulation is also not a solution, handing even more economic power to private, unelected institutions is clearly not an answer. This necessarily socializes the losses, whether we want to or not. When their failure leads to our failure, that linkage cannot be avoided, no matter what Ayn Rand might have thought about it.
Pch101…a primary reason for the financial meltdown is that left-leaning Congress members with their excessive, ideologically-driven regulations forced the lending community to lend to people who could not afford mortgages — all in the name of fairness (e.g., “it’s not fair that people without good incomes can’t experience home ownership…” etc.). In fact, Fannie Mae and Freddie Mac are government-affiliated lending institutions that expanded subprime mortgages precisely to fulfill this mandate.
This has all been done in the name of Lyndon Johnson’s Great Society. So to say that the current scenario is because of a lack of regulation is just plain wrong.
No one wants to admit it, but the root of the entire problem is people living beyond their means and over-extending. If you make $50k/yr, live within $50k/yr. If you make $100k/yr, live within $50k/yr and save or invest the remainder. How many people actually “need” all the crap they own. “Capitalistic minimalism”…..maybe I should copyright that…
a primary reason for the financial meltdown is that left-leaning Congress members with their excessive, ideologically-driven regulations forced the lending community to lend to people who could not afford mortgages
I’m sorry, but that is false. Credit standards deteriorated across the board, at all levels. Primes and non-primes are also defaulting.
This is not a subprime problem, but one of excessive credit. We haven’t even gotten to the commercial loan defaults yet…but we will.
It’s very simple — when no equity is required, defaults go up. That’s human nature, and cannot be fixed with derivatives and exotic loan products. The conservatives thought that they could insure for this, but such insurance is impossible, because no insurance system can withstand a nuclear detonation.
1996MEdition: “No one wants to admit it, but the root of the entire problem is people living beyond their means and over-extending.”
…and a government that’s encouraging and facilitating this behavior among those who are least able to pull it off.
The percentage of portfolio going to subprime at Fannie/Freddie increased from 8 percent to something around 20 percent or 25 percent over the past two to three years, Pch101. Furthermore, last time I checked, greater than 95 percent (perhaps an even higher percentage) of mortgages are not in danger of defaulting. Just how many of these “across-the-board” loans could there possibly be?
Furthermore, last time I checked, greater than 95 percent (perhaps an even higher percentage) of mortgages are not in danger of defaulting. Just how many of these “across-the-board” loans could there possibly be?
All you need is a mortgage default rate of a couple of percent to create a downturn.
This is much like an onion, and you’re only looking at the skin. Much of the onion has rotted, but you haven’t yet peeled most of it off. If you bothered to do that, you would see it.
If you don’t think that other categories of loans are defaulting and are going to default, you’re fooling yourself. Those rates are already on the rise and spreading into other categories.
Subprimes are a symptom of a larger problem that is much larger than you seem to appreciate. They are simply the first and worst to go, but they aren’t all there is to it.
1996MEdition: No one wants to admit it, but the root of the entire problem is people living beyond their means and over-extending. If you make $50k/yr, live within $50k/yr. If you make $100k/yr, live within $50k/yr and save or invest the remainder. How many people actually “need” all the crap they own.
Amen to that. This meltdown is due to your neighbors living beyond their means, this no one wants to say either. The banks AND politicians (of all stripes) are the enablers (pushers) but the individual consumers (junkies) are to blame.
“Subprimes are a symptom of a larger problem that is much larger than you seem to appreciate.”
Trust me; I appreciate the gravity of this.
So far, I’ve seen no facts to back up your statements. This is my problem with your comments. In contrast, I’ve provided facts and articles to back up my assertions.
Furthermore, your rhetoric reflects the common tactic we see, which is to use sweeping generalities that paint a hypothetical picture that the vast majority of Americans are hanging on by a thread. It is in no way provable, and yet it is hyperbolic and scary to read. And it therefore resonates with many.
Brent, your “sources” consist of right-wing bloggers and diatribes from the National Review. Sorry, those don’t support anything, other than the fact that you have a preconceived desire to dwell in a conservative lair.
It’s pretty clear from the default data that default rates are increasing in all classes, not just subprimes, and that all categories, including commercial loans, are showing signs of weakness. I know that you want to ignore that to prove a point, but it is what it is.
And yet both liberals and conservatives wish to blame others instead of demanding people accept responsibility for their actions. “Vote for me and I’ll pass legislation that will solve all your problems!” A pox on both of your houses!
The seeds to this current mess were planted when the federal government began pressuring lenders to make credit available to poor communities. These poor commjnities were disproportionately minority, so standards that had kept them from getting credit (primarily mortgages) were deemed “racist.” Thus, lending guidelines were caught in up racial politics. And this happened long before George W. Bush became president. It happened in the early 1990s.
Of course, soon lending institutions discovered that they could make more money by relaxing lending standards for EVERYONE, and not just for mortgages or home equity loans.
So we had middle-class couples making maybe $75,000 a year being approved for $375,000 mortgages without a big downpayment. And the auto financing companies were happy to join the party by giving financing to anyone with a pulse, which kept the lines moving and inflated sales numbers.
In a sense, both sides are correct. This all started with good intentions, but over the long haul it had a disastrous result as short-sighted lenders and government officials encouraged the availability of easy credit for EVERYONE.
The “more regulation” we need is really just a return to sane lending standards, where the bank manager made you feel as though you were taking his or her own money when you got a loan, and put the fear of God into you should you even think of skipping a payment. Which will, once again, knock many people OUT of the credit market, so we will be right back where we started about 18 or so years ago.
But for now, the party is ending. Unfortunately, most of these “rescue” measures are only putting off the inevitable. (And encouraging virtually everyone to line up at the trough.)
For example, New Jersey Governor Corzine said recently that falling housing prices are “the problem.”
Uh, no, falling housing prices are the NECESSARY CORRECTION. High housing prices were the PROBLEM, as they encouraged the creation of ever-more-exotic loans and financing agreements that were very risky. Housing prices need to fall to the point where they are reasonably related to income. And, no, your house is not an “investment.” It is a place to live.
The government should not be trying to prop up the prices of homes. They have been wildly inflated over the last decade, and this correction is necessary.
In the auto sector, sales – especially for the domestics – have been artificially boosted by the availability of ridiculously easy financing terms.
That will end, too, but ending this practice may just take GM and Chrysler down. And no bailout of automobile financing companies will prevent this.
The simple fact is that GM and Chrysler, and, to a lesser extent, Ford, are too big for their current market share, and that market share is not going to grow. If anything, they will be lucky to hold on to what they have as this contraction knocks many of their customers back to the used-car market where they belong. But UAW contracts, dealer franchise agreements and, in the case of GM and Chrysler, management myopia, prevent them from accepting the inevitable.
The bailout being proposed for the auto companies themselves isn’t much better. What particularly concerns me about the auto sector bailout is that I see very little accountability. At least the Chrysler loan guarantees came with some pretty tough conditions, and the federal government made sure that Iacocca had put in place a viable product plan that would return the company to profitability. I see nothing of the sort coming from GM and Chrysler. (Ford, at least, has some semblance of a viable turnaround plan in place.)
From GM, I keep hearing about Volts and Camaros, while I see rebadged Aveos being sold as Pontiacs, and I hear nothing about trimming unnecessary brands.
You don’t have to be a free-market ideologue to feel skeptical about having your tax dollars being used to rebadge mediocre Chevrolets as mediocre Pontiacs, or wonder why the Volt sounds less impressive (and more expensive) with each successive press release.
From Chrysler, I see…a new Ram debuting as the pickup market continues to deteriorate. And not much else.
In the meantime, just as people have to start looking at their house as a “home” instead of a piggy bank or appreciating asset, people will have to take another look at their transportation preferences. For many people, it will mean looking at the used-car lot instead of the new-car lot. For others, it will mean that a Honda Accord of Ford Fusion will have to take the place of that 3-Series, and commuting to work in a SUV will no longer be all that smart. And for everyone, the rule that one should only buy a new car when the old one is paid free-and-clear will have to be dusted off and remembered.
lending institutions discovered that they could make more money by relaxing lending standards for EVERYONE, and not just for mortgages or home equity products.
This was possible because lenders thought that turning the loans into securities, insuring and rating them was a solution to their risk problem.
The failure of that lies in the fact that you cannot use private institutions to insure for systemic risk at that level. During times like this, the AIG’s of the world collapse, which forces the taxpayer to bail them out because the consequences are worse.
Insurance cannot eliminate risks like this. Those risks are inherent to loans that have variable interest rates and no equity, no matter who is borrowing the money.
That being said, I have my doubts that GMAC is going to get bailed out, nor do I believe that GMAC should be bailed out. Unlike AIG, Fannie, Freddie, etc., GMAC can fail without inflicting much damage to the economy. These proceeds are going to help the major banks, not the regionals and not the auto credit companies.
Pch101, one of my sources, the WSJ, is the newspaper of record regarding matters of business. I have at least provided sources. Furthermore, where are the inaccuracies in the sources I’ve cited? While people might make the sweeping statement that my comments are to be disregarded because of the “leanings” of the sources I’ve cited, it is very much worth mentioning that one of these sources simply provides an indisputable chronology of events and that another is a contributed article from a conservative who questions the wholesale bailout of our financial markets. On the merits of the actual contents of these sources I cite, what’s the problem? I realize that the following is a tangent, but are we only to believe ostensibly impartial sources that are in fact left-wing sources, e.g., the NYT, WaPo, and on and on it goes?
And for everyone, the rule that one should only buy a new car when the old one is paid free-and-clear will have to be dusted off and remembered.
How about saving money until you can afford to pay cash for a new car?
one of my sources, the WSJ, is the newspaper of record regarding matters of business.
You didn’t provide a news article from the WSJ, but an editorial from a member of the American Enterprise Institute, a right-wing think tank. That was not news, but loaded content that just happened to show up in the WSJ.
You are only providing self-selecting opinion that says what you want to hear. Do a bit more objective research, and you will see the rising default rates across asset classes for yourself.
It was an op-ed in the WSJ. Sweeping, discounting rhetoric, does a disservice to the points I’m making, and its only purpose, it seems, is to discredit them. But it does not bring us to understanding. Nor does it properly acknowledge the truth. Furthermore, parallel statements about a broadening financial crisis, while possibly true, again serve to browbeat the reader into line with the writer’s opinion as they functionally conflate multiple arguments while feigning to intend communicate just one argument.
Show me where you can refute what my sources state. The chronology provided in another of the links I provided is independently verifiable, and the information in the WSJ article is pretty cut and dry; the AEI scholar who co-wrote it is also a finance and economics at Columbia Business School. Are we also to disregard Columbia Business School?
Sweeping, discounting rhetoric, does a disservice to the points I’m making
Pointing at a single class of loan defaults while ignoring the rest of the problem does a disservice to an analysis of the situation. All of your sources are biased, so it’s understandable that you carry their same bias.
I know that you want to blame subprimes and only subprimes, but defaults are rising across the spectrum, from student loans to credit cards to commercial payables to primes and non-primes, including markets outside of the US. Sorry, but that’s just reality.
The subprimes are obviously the weakest link, but they are not the only problem. Higher risk loans always have higher default rates than lower risk loans, but that is not the same as lower risk loans being free of default.
The market got overheated because lenders believed that securitization and insurance eliminated their risks. In theory, they did, but in practice, the system cannot adequately insure for systemwide defaults. Government bailouts become necessary, like it or not, because the private sector can’t bear the cost of that degree of failure.
The failure to understand the disconnect between theory and practice is really the core of the problem. Rather than pretending that insurance and ratings can spare us from our problems, we need to acknowledge that risks need to be minimized, whether or not they can pawned off onto other people.
I don’t understand how my comments can be construed to say that I only blame this on subprime. My primary concern in all this has been to make the case for the proper parties to receive their fair blame. And we therefore necessarily go back to the very first comment I made on this blog entry. For liberals to run around saying this mess is all the conservatives’ fault is just plain inaccurate — grossly so, a lie, really.
Furthermore, I again challenge you to substantively characterize my sources as bias ones. Until you do so, I will have trouble taking anything else you state without suspecting ulterior motives.
And now, honestly, I must get back to work — make as much money as possible and stow it away in the hole behind my house before the sky falls. ;-)
I again challenge you to substantively characterize my sources as bias ones.
You need a source to prove that the National Review is a conservative magazine or that the American Enterprise Institute is a conservative think tank? Seriously?
Yes and no. Why? Because while these sources are known to be conservative, the information within the particular articles I cited was factual.
Because while these sources are known to be conservative, the information within the particular articles I cited was factual.
You honestly don’t understand that polemicists cherry pick their data to prove their points?
I would suggest that you review data from within the mortgage industry, instead of using political bloggers and right-wing magazines for your research.
This source is a blog, but it’s an industry blog that shows an understanding of mortgage mechanics. That I can’t discern their politics, whatever they may be, from the content would be a good sign:
http://www.housingwire.com/2008/06/05/primed-for-trouble-pace-of-mortgage-distress-shifts-to-prime-borrowers
http://www.housingwire.com/2008/08/04/ny-times-picks-up-the-prime-meme-but-misses-the-point
To discount facts coincidentally reported by a source because of that source’s perceived biased is a logical fallacy.
To discount facts coincidentally reported by a source because of that source’s perceived biased is a logical fallacy.
So I suppose that you would have no problem quoting the World Socialists Worker website for your labor and unemployment data. You can do what you like, but I know that I wouldn’t.
What’s next – the furniture companies telling us the folks who have owed $200 a month for the last 10 years on their bedroom set is a “distressed loan”?
How about the folks who got LASIK for $49 a month?
Everybody line up now!!
“So I suppose that you would have no problem quoting the World Socialists Worker website for your labor and unemployment data. You can do what you like, but I know that I wouldn’t.”
Please…you’re not seriously comparing the World Socialists Worker website with the National Review or American Enterpreise Institute, are you? That’s hyperbole. A more apt comparison would be The New York Times, a putatively impartial source of news.
Even so, yes, I would cite facts reported at the World Socialists Worker website if those facts were sound on their own merit.
you’re not seriously comparing the World Socialists Worker website with the National Review or American Enterpreise Institute, are you?
The only difference is that you agree with one set, and disagree with the other. All of them are skewed toward extreme, preconceived positions; none of them are objective.
I attempt to rely upon objective sources, and draw conclusions based upon that data. As noted in the links in my post above, you can look at data from the MBA that shows what exactly I’m talking about.
The data may be inconvenient to your political philosophy, but it shows that the position taken by you and your favored pundits is factually wrong.
If you can’t find objective sources to support your argument, as you failed to do here, that is an indication that your argument is difficult to support.
My challenge to you: go find non-political sources to support your point, as I have. Otherwise, it makes it appear that you formulated your point of view before you had any facts to support it.
This is going nowhere, Pch101.
I’m not arguing with the data in the MBA source you’ve provided. What do you think I am? I want the facts to come to light, and this is precisely why I shared those sources you’ve subsequently discounted.
Why?
Regardless of their leanings, those sources reported facts. Those facts are legion, and they overwhelmingly show that excessive, ideologically-fueled regulation has had much too much to do with the circumstances we face.
This is the point within the point that I wish to make. Why do you insist, as a prerequisite to your point having any merit, that mine be necessarily illegitimate?
Regardless of their leanings, those sources reported facts.
No, they provided an opinion, with bits of data specifically cherry picked to support an agenda.
Once again — if you can’t find objective sources to support your position, then your position is suspect. Locating objective support should not be difficult for you to do if your position is a reasonable one.
It was more than “cherry-picked bits.”
This is what I mean. The sweeping statements. The discrediting in hand of valid points made. The refusal to acknowledge the subtleties of another’s position. I refer to the debating style I’m battling here. It’s impossible to work toward understanding in the face of it.
You wish to peg this mess on deregulation, when we know for a fact that excessive, ideologically-inspired regulation dating back to the early ’90s played a huge part.
Do you honestly buy the notion that it’s one or the other? I don’t. The national discourse on this has been bifurcated — e.g., it’s the entire fault of deregulation or the entire fault of over-regulation — when we know neither provides an accurate depiction of the reality on the ground.
This was the impetus for my very first comment on this string, and I imagine folks like geeber agree. We must do everything possible to disallow the anti-free marketeers from hijacking this debate.
Brent, is there some reason that you can’t just find an objective source?
For the sake of your own intellectual edification, I would think that you’d want to. That is, unless you are so heavily invested in believing whatever it is that you want to believe that you can’t accept that the facts just don’t support your position.
Pch101, with most of your comments, you have divined your premise from highly debatable “postulates” in order to paint me in a certain way. With this last comment, you conveniently ignore the transparent statements I just made in my previous comment; furthermore, with this last comment of yours you seem to wish to lure me into defending my position as you state it to be. I refuse to do so.
Brent, then just admit that you can’t find an objective, non-political source to support your argument, and be done with it.
Again, I rely upon industry data to form conclusions. I do not use political journals, on the right or the left, to do my thinking for me.
I don’t care which way you tilt politically, but your approach is inherently biased, self-limiting and not prone to fact finding. I would no sooner quote the National Review and the AEI for my data than I would cite The Nation or Noam Chomsky. The reasons for this are pretty obvious, or should be.
“Brent, then just admit that you can’t find an objective, non-political source to support your argument, and be done with it.”
No, because that’s not the point to make here, and I suspect that you know this. And by pretending you don’t, you do our debate a disservice.
You attempt to steer this conversation in a direction subtly yet significantly at odds with my positions and points.
In the blog I cited, the information was a factual log of White House communication with the Democrat-controlled Congress. Nothing in that log is opinion.
Can we not agree that Fannie Mae and Freddie Mac collapsed because of their crushing subprime liabilities? And can we not agree that these institutions were government-affiliated and flocked to subprime lending as a direct result of ideologically-inspired regulations that mandated lending to people who can’t afford to pay back loans?
The sources you cite hardly support the all-encompassing conclusion you have made. Furthermore, in order to refute my points about a scenario that has already played out, you are employing the specter of a possible scenario that has yet to play out. Additionally, you have yet to directly refute my position; you’ve instead run very clever interference that almost imperceptibly circumvents my point entirely to make an entirely different one.
You attempt to steer this conversation in a direction subtly yet significantly at odds with my positions and points.
Of course, I am at odds with your position, and the facts contradict you.
You are trying to fit a political argument into an economic hole, while missing a whole lot of data in the process. A biased, flawed and ultimately inaccurate approach.
Can we not agree that Fannie Mae and Freddie Mac collapsed because of their crushing subprime liabilities?
No. They were overleveraged, period.
Pch101…what I meant — and you know it — is that you have attempted to steer this conversation away from having to address my points and positions specifically, instead opting for the diversionary tactic of attacking my sources. The facts do not contradict me. You have provided no evidence of facts contradicting my original point.
“You are trying to fit a political argument into an economic hole, while missing a whole lot of data in the process. A biased, flawed and ultimately inaccurate approach.”
I have yet to see you support statements like these with a “how so.”
And even if we can’t agree on why Fannie Mae and Freddie Mac collapsed, those entities were government-affiliated, and the mismanagement of them has directly led us to the brink of so much else. And that mismanagement is not deregulation’s fault, or somehow the fault of conservatives asleep at the wheel. Just look at the unbiased log.
You seem to argue for the exclusion of any and all political shenanigans as evidence in this discussion. I infer from your stance that you take the simplistic mantra of “more regulation is needed” at face value.
That attitude misses the big picture. This stuff does not happen in a vacuum bereft of political meddling and neglect, and it does not happen simply because “there wasn’t enough regulation.”