Gramm-Leach-Bliley Act and our current economic collapse

[jkjsooner]

So how much does the repeal of the Glass-Steagall Act have to blame for our current economic crisis/near collapse?

I keep hearing Republicans blame our current climate on the Gramm-Leach-Bliley Act which Clinton signed. In some respects I agree.

However, looking a little closer, only one Democrat voted for the first version of this act and no Republicans voted against it. (Democrats did vote for it after getting some concessions.) This anti-regulatory act screams of Republican dogma.

If you want to blame Clinton then turn around and point the finger right back at the conservative ideology. (In many financial regulatory matters Clinton was considered very moderate if not somewhat conservative.)

I don't know who is mostly to blame for our current crisis. One thing I do know is that the modern conservative idealogy that financial regulation is almost always counter-productive has been revealed to be absolutely and utterly wrong.

With Reagan, Clinton, Bush, etc. we slowly rid ourselves of all the safeguards we put into place during/after the Great Depression.

And how were conservatives rewarded? Almost a complete government takeover of the financial industry. Kinda wish you wouldn't have pushed the deregulation route so hard, huh?


P.S. I'm pretty conservative in many areas but financial regulation isn't one of them. Time and time again we've proven that industries will, at best, only look after their short term best interests and definitely not our long term best interests.

[Frozen Sooner]

I don't know that I've heard any conservatives claim that GLB was a Clinton thing. GLB was a big-time Republican baby from the get-go.

GLB has some pretty nice provisions (such as privacy regulation) by the way. Don't throw the baby out with the bathwater.

[sooner n houston]

Yea, I don't know of any conseratives trying to blame this mess on that bill. Got any links?

I think most of us blame the dems for legislation that has forced banks to loan money to people who were not credit worthy. The dems were of course trying to help the poor and disadvantaged.

[Frozen Sooner]

Yea, I don't know of any conseratives trying to blame this mess on that bill. Got any links?

I think most of us blame the dems for legislation that has forced banks to loan money to people who were not credit worthy. The dems were of course trying to help the poor and disadvantaged.

And again, that argument has been disproven several times. In fact, that's the argument the Republicans are trying to use to obfuscate how this mess is the result of GLB.

[85Sooner]

Carters :Community Reinvestment Act certainly had its effects.

[Frozen Sooner]

Really?

The majority of lenders who caused the sub-prime runup were not covered by the CRA, as the CRA only impacts FDIC or NCUA insured lenders.

Not only that, but the CRA specifically does not mandate that loans be made to individuals that are outside the bounds of prudent business practice-ie with unacceptable credit or ability to repay.

[Frozen Sooner]

Correction: the CRA does not apply to NCUA-insured lenders, as credit unions are exempt from the CRA by being presumed to service their neighborhoods.

[AggieTool]

There's plenty of blame to go around.

CRA, GLB, Foreign Commodities Modernization Act (oil speculation), SOX (mark-to-market)..etc...

Not to mention the 8 years of spending like a drunken sailor and one BS war based on yellowcake and aluminum tubes.

Even now, corporate crooks are taking OUR tax dollars and giving each other bonuses.:mad:

I sure would like to know where the conservatives are?:(

[Jerk]

I sure would like to know where the conservatives are?:(

There are none left.

And with Palosi changing the rules so that Republicans can't offer amendments to legislation, they have no say so what-so-ever. All they can do is vote up or down. God, I wish that when Republicans were in power, that we had the balls to treat them like they treat us.

You people that wanted change are going to get it. We're on our way to becoming a 3rd world sh*t hole with a massive and intrusive centralized government, which will be made permanent after amnesty passes and enough people are put on the dole (made dependent).

I hope you're happy. And don't try and take any joy from my grief. I'm going to laugh my *** off when, one day, you guys finally figure out that this system can't support itself. It is just not sustainable. Yes yes I know many Republicans contributed, including GW. Now we're going to do it full-speed! 4 billion for ACORN. Haha what a joke.

[AggieTool]

There are none left.

And with Palosi changing the rules so that Republicans can't offer amendments to legislation, they have no say so what-so-ever. All they can do is vote up or down. God, I wish that when Republicans were in power, that we had the balls to treat them like they treat us.

You people that wanted change are going to get it. We're on our way to becoming a 3rd world sh*t hole with a massive and intrusive centralized government, which will be made permanent after amnesty passes and enough people are put on the dole (made dependent).

I hope you're happy. And don't try and take any joy from my grief. I'm going to laugh my *** off when, one day, you guys finally figure out that this system can't support itself. It is just not sustainable. Yes yes I know many Republicans contributed, including GW. Now we're going to do it full-speed! 4 billion for ACORN. Haha what a joke.

You people?

I complain that republicans haven't been conservative enough and you say "you people".:D

Incurring a huge nat'l debt and deficit isn't very conservative. Even if I'm not too happy with the current proposed remedy, republicans have made it impossible for REAL conservatives to have any credibility. (not to mention all the disgusting scandals)..way to go GOP!

Meanwhile, back at the cave.......

[Jerk]

You people?

I complain that republicans haven't been conservative enough and you say "you people".:D

Incurring a huge nat'l debt and deficit isn't very conservative. Even if I'm not too happy with the current proposed remedy, republicans have made it impossible for REAL conservatives to have any credibility. (not to mention all the disgusting scandals)..way to go GOP!

Meanwhile, back at the cave.......

Actually, I can't disagree with that. My bad. I've been kind of bitter lately. You know, watching our country destroy itself.

[85Sooner]

Correction: the CRA does not apply to NCUA-insured lenders, as credit unions are exempt from the CRA by being presumed to service their neighborhoods.

That would make sense since they were not around in the 70's.

[Frozen Sooner]

Credit unions have been around in the US since the 1800s.

The one I work at has been around since 1954.

[bluedogok]

I don't know who is mostly to blame for our current crisis.
John Maynard Keynes and John Kenneth Galbraith.....

As for those who blame the current crisis on "free market" economic policies, their full of it. This country hasn't followed free market principles since 1890, it has been a regulated economy since then and became a managed economy since the depression.

[soonerscuba]

And with Palosi changing the rules so that Republicans can't offer amendments to legislation, they have no say so what-so-ever. All they can do is vote up or down. God, I wish that when Republicans were in power, that we had the balls to treat them like they treat us.Changing House rules to silence the minority is almost a sport in Congress. I don't particularly like the new recommit restrictions, but Republicans seriously abused the procedure the last few years and kinda had it coming. It's going to take a long time before the House isn't as contentious as it used to be because, in my opinion two events really turned things sour. The first was the revenge of the Republicans in '94. They had been a minority for 40 years and pretty much did to the Democrats what OU did to Miami last year, took out a few decades of frustration in a really violent fashion. The second, was the impeachment of Clinton and Whitewater investigations. You have to be pretty naive to think that the Dems would forget impeaching a popular president that was bound to fail in trial. This is why I don't think the Dems didn't go after Bush or Cheney regarding Iraq, even after the '06 wins.

I think we are probably always going to disagree about Congress, in that I think term limits are dumb and reward starpower more than legislative skill, but the traditional role of the House minority is to provide quorum and pick up a pay check, always has always will.

[Okla-homey]

If you want to blame Clinton then turn around and point the finger right back at the conservative ideology. (In many financial regulatory matters Clinton was considered very moderate if not somewhat conservative.)

I don't know who is mostly to blame for our current crisis. One thing I do know is that the modern conservative idealogy that financial regulation is almost always counter-productive has been revealed to be absolutely and utterly wrong.

And how were conservatives rewarded? Almost a complete government takeover of the financial industry. Kinda wish you wouldn't have pushed the deregulation route so hard, huh?


P.S. I'm pretty conservative in many areas but financial regulation isn't one of them. Time and time again we've proven that industries will, at best, only look after their short term best interests and definitely not our long term best interests.

Nothing has been "disproven" except the unworkability of socialism. When people are stymied in achieving their maximum potential by a system that rewards mediocrity, as on Detroit auto assembly lines, people tend to say to themselves "what's the point of working harder?" and the result is the rolling crap boxes Detroit has been churning out the last thirty years. The same thing happens on a macro-level in an over-regulated economic system. Ever been to France? Italy? Nice to visit, cool old buildings, but you wouldn't want to live there.

I know this, our history proves that American politics is cyclical. I'm old enough that I remember the Dem post-mortems after the first Clinton mid-term in 1994 when the GOP roared into DC achieving majorities in Congress and after Billy Jeff left town in disgrace, owning the WH for eight years. Everyone said the donks were down, never to rise again in '94. They were of course wrong. The nattering nabobs are now spewing the same bunk about the Party of Lincoln and conservatism. It'll swing back after this flirtation with the flavor-of-the-month.

Oh, and the GOP still owns the federal judiciary. It'll take more than eight years of donkness to undo 28 years of GOP judicial appointments (RMN, GF, RR, GHWB and GWB) over the last 40 years.

[Jerk]

Changing House rules to silence the minority is almost a sport in Congress. I don't particularly like the new recommit restrictions, but Republicans seriously abused the procedure the last few years and kinda had it coming. It's going to take a long time before the House isn't as contentious as it used to be because, in my opinion two events really turned things sour. The first was the revenge of the Republicans in '94. They had been a minority for 40 years and pretty much did to the Democrats what OU did to Miami last year, took out a few decades of frustration in a really violent fashion. The second, was the impeachment of Clinton and Whitewater investigations. You have to be pretty naive to think that the Dems would forget impeaching a popular president that was bound to fail in trial. This is why I don't think the Dems didn't go after Bush or Cheney regarding Iraq, even after the '06 wins.

I think we are probably always going to disagree about Congress, in that I think term limits are dumb and reward starpower more than legislative skill, but the traditional role of the House minority is to provide quorum and pick up a pay check, always has always will.

Bullsh*t even Newt Gingrich did things to make the process more open to the minority party. The rule changes the dems just made revert to the old ways of pre-1994.

Fact is, Palosi is a class A partisan old c**t ( I rarely use that word). If revenge is what the Democrats are after, they are setting themselves up for a major **** up. They'll end up doing something very stupid without thinking it through (and this Generational Theft Act of 2009 might be it). It wouldn't surprise me that their motivations are based on emotion.

[sooner n houston]

Senate Banking Chairman Chris Dodd has been in typically indignant form this week, opining on the financial crisis. Before his Tuesday hearing on Bernard Madoff, he demanded that regulators get to the bottom of any crime: "American investors deserve an explanation and the responsible parties must be held accountable!" And yesterday the Connecticut Senator denounced Wall Street bonuses and said, "I am urging -- in fact, not urging, demanding -- that the Treasury Department figures out some way to get the money back."

Pardon us, Senator, but how about taking your own advice?

We refer to his promise to release mortgage documents for the two properties that he and his wife refinanced with Countrywide Financial in 2003. In June a former Countrywide loan officer charged that Mr. Dodd received preferential rates and had fees waived on those loans as part of a VIP program the company had for "friends" of the company's then-CEO Angelo Mozilo. Mr. Dodd first issued a denial and then, days later, acknowledged that he was a "VIP" with Countrywide but said he thought it was "more of a courtesy." In late June he pledged to make all pertinent documents public "at some point." We're still waiting.

Increasing accountability is critical to rebuilding public trust in the financial system, as the Senator keeps telling us. Countrywide was one of the most irresponsible lenders in the subprime frenzy but it did not act alone. One reason it could pump out so much bad paper is because Fannie Mae and Freddie Mac were around to buy it and then resell it with a taxpayer guarantee. Messrs. Dodd and Mozilo were two of Fan and Fred's biggest supporters, with Mr. Dodd playing a role in pushing the companies to take on "affordable housing" loans from outfits like Countrywide.

Perhaps Connecticut's longest serving Senator was bamboozled by Mr. Mozilo and used bad judgment in backing the reckless lender. But loan officer Robert Feinberg, who oversaw Countrywide's VIP program, says Mr. Dodd knew he was getting favors from Mr. Mozilo. Mr. Feinberg says his job was to remind beneficiaries at every step of the process that they were getting a special deal because they were "Friends of Angelo." If true, it would mean that the Senator had a clear conflict of interest as a legislator promoting the business of a company doing him personal favors. Recall the Ted Stevens precedent.

http://online.wsj.com/article/SB123327803577131539.html?mod=djemEditorialPage

[Jerk]

If it weren't for these stupid bailouts, maybe we would have found the bottom by now and started working on the recovery.

[AggieTool]

If it weren't for these stupid bailouts, maybe we would have found the bottom by now and started working on the recovery.

Interesting point.

[OklahomaTuba]

No matter who is to blame, spending BILLIONS on STDs, welfare to illegals, ACORN payoffs and starting a trade war with the EU and China is not going to help get the economy moving again.

[jkjsooner]

If it weren't for these stupid bailouts, maybe we would have found the bottom by now and started working on the recovery.

How do you figure? These bailouts have long term negative affects but there's no way to argue that they're causing or contributing to our short term problems - unless you argue that it had a deep negative psychological impact.

Most economists I've heard recently, whether conservative or liberal, have argued that if we don't pump money into the system, the deleveraging we're seeing now will result in something as bad or worse than what we had in the '30s.

We have to worry about inflation in the long run but int the short term we have no choice but to fight the devastating deflation.

I don't like how the bailouts have been handled and it does seem that our government (either admin) has been in a panic and doesn't really know what to do. Nevertheless, I'm no economists but I do trust them when they say we're in deep trouble.

Don't get me wrong, I don't fully trust the economics profession as too many of them were oblivious to the storm that was brewing. They had a good talk about it on BBC this morning about how the economics profession deserves as much scorn as the banking sector and how they thought they had controlled economic cycles and thought they had become smarter than they really were. Nevertheless, when even the idiots who didn't see the economic collapse coming are saying we're in deep trouble, I have to take notice.

[AggieTool]

No matter who is to blame, spending BILLIONS on STDs, welfare to illegals, ACORN payoffs and starting a trade war with the EU and China is not going to help get the economy moving again.

Psssttt...

The STD stuff was removed.

[Jerk]

How do you figure? These bailouts have long term negative affects but there's no way to argue that they're causing or contributing to our short term problems - unless you argue that it had a deep negative psychological impact.

Most economists I've heard recently, whether conservative or liberal, have argued that if we don't pump money into the system, the deleveraging we're seeing now will result in something as bad or worse than what we had in the '30s.

We have to worry about inflation in the long run but int the short term we have no choice but to fight the devastating deflation.

I don't like how the bailouts have been handled and it does seem that our government (either admin) has been in a panic and doesn't really know what to do. Nevertheless, I'm no economists but I do trust them when they say we're in deep trouble.

Don't get me wrong, I don't fully trust the economics profession as too many of them were oblivious to the storm that was brewing. They had a good talk about it on BBC this morning about how the economics profession deserves as much scorn as the banking sector and how they thought they had controlled economic cycles and thought they had become smarter than they really were. Nevertheless, when even the idiots who didn't see the economic collapse coming are saying we're in deep trouble, I have to take notice.

Let me give you an example how the bailouts are affecting things: Right now there are a metric sh*t ton of houses in foreclosure, and the banks are sitting on them. They're not selling them at their market value (because they would lose money). You know what they're waiting on? Uncle Sugar, of course.

[Jerk]

All we are going to do is reward bad decision making. And the people who saved money for a 20% down-payment on a fixed rate note are going to foot the bill.

Do you know how many homes are in foreclosure right now plus the ones that are expected to go in foreclosure soon? The peak of the ARM lending boom was in 2005 and in 2 years the interest payment will be "called in." (bear with me on the language) and it will be just as bad if not worse than the sub-prime mess. We are truly screwed and the only way to deal with it is to let it play itself out. Let the losers lose and don't put a tax burden that can't be repaid on the next 3 generations. Right now we are rewarding bad behavior and the CEO's are turning around and using the money to buy foreign made corporate jets. It's b*ll****. Let's just get it over with. Yes, It's going to be painful.

[jkjsooner]

All we are going to do is reward bad decision making. And the people who saved money for a 20% down-payment on a fixed rate note are going to foot the bill.

Do you know how many homes are in foreclosure right now plus the ones that are expected to go in foreclosure soon? The peak of the ARM lending boom was in 2005 and in 2 years the interest payment will be "called in." (bear with me on the language) and it will be just as bad if not worse than the sub-prime mess. We are truly screwed and the only way to deal with it is to let it play itself out. Let the losers lose and don't put a tax burden that can't be repaid on the next 3 generations. Right now we are rewarding bad behavior and the CEO's are turning around and using the money to buy foreign made corporate jets. It's b*ll****. Let's just get it over with. Yes, It's going to be painful.

I'm not disagreeing with you about the problems with the bailout but you can't blame the bailout for our current financial crisis. Nope, that storm has been brewing for a long time.

[Jerk]

I'm not disagreeing with you about the problems with the bailout but you can't blame the bailout for our current financial crisis. Nope, that storm has been brewing for a long time.

I'm not! I'm just saying...it's delaying the inevitable. We might as well get it done with.

[bluedogok]

Most economists I've heard recently, whether conservative or liberal, have argued that if we don't pump money into the system, the deleveraging we're seeing now will result in something as bad or worse than what we had in the '30s.

We have to worry about inflation in the long run but int the short term we have no choice but to fight the devastating deflation.

I don't like how the bailouts have been handled and it does seem that our government (either admin) has been in a panic and doesn't really know what to do. Nevertheless, I'm no economists but I do trust them when they say we're in deep trouble.

Don't get me wrong, I don't fully trust the economics profession as too many of them were oblivious to the storm that was brewing. They had a good talk about it on BBC this morning about how the economics profession deserves as much scorn as the banking sector and how they thought they had controlled economic cycles and thought they had become smarter than they really were. Nevertheless, when even the idiots who didn't see the economic collapse coming are saying we're in deep trouble, I have to take notice.
That is because most of them are reading from the same manifesto, just because most of them are saying the same thing doesn't mean what they say is always right.

[Vaevictis]

I'm not! I'm just saying...it's delaying the inevitable. We might as well get it done with.

Actually, delay can be useful. A moderate loss of income can be easier to adjust to, even if it lasts longer, than a large loss of income for a shorter period of time.

I'd rather take a 10% pay cut for 12 months than a 60% pay cut for two, for example.

[Jerk]

Actually, delay can be useful. A moderate loss of income can be easier to adjust to, even if it lasts longer, than a large loss of income for a shorter period of time.

I'd rather take a 10% pay cut for 12 months than a 60% pay cut for two, for example.

True, but, is it worth passing trillions of dollars of debt down to the next generation?

Even if one can argue that the national debt doesn't matter, our yearly interest payment in the annual budget certainly does.

[SoonerProphet]

i would think that if you are going to allow for massive deregulation, you better be able to back it up when businesses make poor decisions and allow for better run organizations to take their place.

[Vaevictis]

True, but, is it worth passing trillions of dollars of debt down to the next generation?

Even if one can argue that the national debt doesn't matter, our yearly interest payment in the annual budget certainly does.

Honestly, I don't know.

The several trillion that we're adding is not really the problem, it's the fact that's on top of the already existent trillions we've run up. If we had the discipline to reign it in in good times and pay down debt when we can, I'd be less wary of it. But, the fact is that we don't.

In the long run, I think we're going to end up either having the debt forgiven or we're going to inflate our way out of it. Not a pretty thought, but there you have it.

(Actually, inflating our way out of it over a long period of time wouldn't be all that bad, if we'd just stop adding to it.)

[Jerk]

Honestly, I don't know.



Me either. I'm just a dumb truck driver. But I'm smart enough to see a train wreck when it's happening.

[Vaevictis]

The problem is that this is one of those issues where only hindsight is going to tell you whether it was worth it.

If we don't do it, and you end up having a 6-7 year depression / recession, we're all going to be looking back and wishing we did. On the other hand, if for some bizarre reason the economy comes rushing back in Q4, we're going to wish we hadn't.

[SoonerProphet]

Me either. I'm just a dumb truck driver. But I'm smart enough to see a train wreck when it's happening.

http://upload.wikimedia.org/wikipedia/en/2/22/Unfrozen_Caveman_Lawyer.jpg;)

[Chuck Bao]

Jerk, I don't think that anyone is disputing that there is a train wreck in progress. We are debating the options that will produce the least number of casualities.

Regardless of the long-term public sector debt of the bail-out / rescue packages, the federal government has no choice but to step in, restore confidence in the banking system and get banks lending again. This must take precedence over all other stimulus measures, which was clear with the first phase of the TARP funds.

I haven't been following the recent news with more banks going under. But, my gut reaction is that the tight rope that the government is walking just got higher with the consequences of falling off that tight rope that much more dire.

A multi-faceted approach of tax cuts, spending measures and mortgage sector bail-outs would be a good idea. However, Washington doesn't seem to be clued into this mess with their pork barrel measures.

There is still a lot of money in the system and there has been a flight to quality - to US treasuries. The key thing now is getting that money to go back into the banks so that they can recapitalize and lend. Personally, I'm not recommending it. But, maybe that is just part of that walking the tight rope analogy or it could be train wreck analogy.

[Jerk]

Jerk, I don't think that anyone is disputing that there is a train wreck in progress. We are debating the options that will produce the least number of casualities.

Regardless of the long-term public sector debt of the bail-out / rescue packages, the federal government has no choice but to step in, restore confidence in the banking system and get banks lending again. This must take precedence over all other stimulus measures, which was clear with the first phase of the TARP funds.

I haven't been following the recent news with more banks going under. But, my gut reaction is that the tight rope that the government is walking just got higher with the consequences of falling off that tight rope that much more dire.

A multi-faceted approach of tax cuts, spending measures and mortgage sector bail-outs would be a good idea. However, Washington doesn't seem to be clued into this mess with their pork barrel measures.

There is still a lot of money in the system and there has been a flight to quality - to US treasuries. The key thing now is getting that money to go back into the banks so that they can recapitalize and lend. Personally, I'm not recommending it. But, maybe that is just part of that walking the tight rope analogy or it could be train wreck analogy.

Good post.

There are only a few ways out of this mess and neither of them are good. We're either going to have to inflate our way out or let it collapse. Our government will go for option 1. Now here is my partisan streak: I don't see how a 4 billion dollar payoff to ACORN, tripling the money that congressmen get for their expenses, and putting a tax cheat in charge of the treasury are going to help things.

The "Generational Theft Act" of 2009 should have focused on infrastructure, public works projects, and vo-tech + higher education. The days of putting hubcaps on wheels as they go down an assembly line for 75$/hr are over.

But anyway, here is what bothers me the most: We are going to punish the winners and take care of the losers. We are going to socialize all risks and punish success . And we will be left with a tax burden that is mind boggling.

Talk about a dog eat dog world...I just read that the reason that our dollar is doing well is because the rest of the planet's economies have gone to sh**.

[Chuck Bao]

Good post.

There are only a few ways out of this mess and neither of them are good. We're either going to have to inflate our way out or let it collapse. Our government will go for option 1. Now here is my partisan streak: I don't see how a 4 billion dollar payoff to ACORN, tripling the money that congressmen get for their expenses, and putting a tax cheat in charge of the treasury are going to help things.

The "Generational Theft Act" of 2009 should have focused on infrastructure, public works projects, and vo-tech + higher education. The days of putting hubcaps on wheels as they go down an assembly line for 75$/hr are over.

But anyway, here is what bothers me the most: We are going to punish the winners and take care of the losers. We are going to socialize all risks and punish success . And we will be left with a tax burden that is mind boggling.

Talk about a dog eat dog world...I just read that the reason that our dollar is doing well is because the rest of the planet's economies have gone to sh**.

Ditto with a few million !!!!! thrown in.

Here's where we may disagree. STOP PISSING AROUND WITH WALL STREET AND A FREE MARKET!

Wall Street is just a bunch of shysters and supporting cast of media goons. That should not be more plain than we have seen over the last year.

I'm saying nationalize the banks and get them lending again. Don't worry so much with selling off assets at this point at a big discount. Forget about "Good Bank and Bad Bank".

You know there is a lot of money waiting to come in at the right time and clean up and that's their game. I hate to think that taxpayers get caught with the bill and these people make out like bandits.

And, I have to say my view is skewed by the Asian economic crisis and some pretty smart people telling Thailand to do some pretty stupid things that went into the pocket of the shyster Wall Street types.