From the Office of Ironic Endorsements
Get a load of this…
We are very fortunate to have a Congressional delegation that has been tuned into financial services since Day One. Rep. Mike Castle and Sen. Tom Carper sit on their respective banking committees and thoroughly understand the issues. And Sen. Joe Biden, with his record in foreign affairs, knows the interconnection between our economy and the global network. They showed leadership and understanding when they voted, and make no mistake, they voted for you and our resilient democracy. When history records this period, it will be viewed not as the day Congress and the Administration bailed out Wall Street, but as the day they looked beyond any one bank or one person or one vote and thought clearly about generations to come and the effects this current crisis would have on them if we simply sat idly by.
Written (with presumably a straight face) by David G. Bakerian the president of the Delaware Bankers Association.
The record on the Treasury stabilization will be written later but the time for action in this area was years ago not this past two weeks.
First Castle brings us “No Child Left Behind” and now his bailout brings us “No Banker left Behind!” Castle’s millions in personal wealth only suffered a fender bender while the rest of the American public was ‘totaled’ by the rout on Wall St. Thanks Mike for the 700 Billion that left the stock market at 8500 and a depression looming.
To Protack’s point — Matt Yglesias annotated a TED Spread graph wondering why Paulsen did not have his hair on fire a year or so ago. Mike, of course, is still stuck on the thoroughly discredited notion that Fannie and Freddie and all of their mortgages to poor people on welfare (oy) as the reason why the system blew up, but hey.
Wonder, though, what Mr. Bakerian is going to say after Paulsen decides to nationalize a bunch of his paymasters.
“Castle’s millions in personal wealth only suffered a fender bender while the rest of the American public was ‘totaled’ by the rout on Wall St.”
Prove it.
I would be interested in seeing the breakdown of how many of the foreclosure numbers are on investment properties vs. primary residences. All of this talk of people losing their homes (coming from both candidates, btw) may be a slight distortion of the facts. While there are likely higher-than-average foreclosure numbers in primary residences, I would guess that a majority of mortgage defaults are from investment property purchases.
I used to work in the mortgage industry and many of my former clients have investment properties in foreclosure because their renters are defaulting. I now work for a real estate law firm and our landlord/tenant dispute numbers are increasing rapidly for the very same reason. Our leaders should probably be focusing more on creating good jobs (so renters can keep from falling behind) and less on assigning blame and worrying about people losing their homes.
Obama’s main platform for US economic recovery is job creation. What does Dominique say to that?
40% of $4-8 Million leaves $2.4-$4.8 million. I am sure Castle’s retirement is not in jeopardy. Now take the mere $150,000-250,000 for the rest of us and do the math you get $90,000-$150,000. The rout on Wall St. crippled the little guy and the Mike Castles’ of the world are able to hold their own because of their great wealth.
Cassandra,
You have no idea what you are talking about. I have never subscribed to your uniformed remarks. I have never mentioned poor people or welfare recipients. Poor credit risks should have not gotten these loans. There is a huge difference between poor people and poor credit risks.
This crisis like most has a long history and many actors who are at fault.
Yes, the start was Fannie Mae/Freddie Mac loans which were pushed by Pres Clinton. Good intentions, bad execution. The subprime loans were terrible policy and in the end have exploited the same people it was supposed to help.
Next, you had all of these loans being bundled and sold to make room for more risky loans. Then you had the SEC change the net capital rule and no oversight. On top of that you had derivatives which literally parlay huge amounts of money into financial ventures which are not tied to any value.
Both parties and every level of the federal government are at fault.
Mike, the whole idea that Fannie and Freddie are the cause of this meltdown has been quite thoroughly debunked just everywhere (everywhere that doesn’t have an ideological investment in being able to blame Bill Clinton). It only exists still with the 29%ers who still think that GWB is an awesome president. You are just wrong on this. I am heartened that you are finally talking about the credit derivatives, which means that you are getting closer to the real problems here.
Cassandra is correct. The debunking is thorough but that doesn’t mean that any GOPerhead shill is going to pull the wool off their goggles any time soon.
I just read through this missive from the remarkable Will Bunch
http://www.philly.com/philly/blogs/attytood/Its_not_easy_being_Greenspan.html
whose main thrust is on how the ball got dropped and it wasn’t at the level of the crappy mortgager/mortgagee. It was mainly in the deregulation of the toys (derivatives) of the big-boyze of Wall Street. The slightly-taxed hedge fund players’ game was in sliding these products up the ladder with the cream laddled out the along the way.
Carper and Castle understand this alright but you won’t catch them being honest brokers of the facts any time soon. Notice in Bunch’s essay that both Clinton and McCain espoused great faith in the architect of this mess:
“See, it wasn’t a Democratic thing or a Republican thing, just an inside-the-Beltway thing. As recently as March, no one was willing to admit that the emperor had no clothes:
But others hold a starkly different view of how global markets unwound, and the role that Mr. Greenspan played in setting up this unrest.
“Clearly, derivatives are a centerpiece of the crisis, and he was the leading proponent of the deregulation of derivatives,” said Frank Partnoy, a law professor at the University of San Diego and an expert on financial regulation.
The derivatives market is $531 trillion, up from $106 trillion in 2002 and a relative pittance just two decades ago. Theoretically intended to limit risk and ward off financial problems, the contracts instead have stoked uncertainty and actually spread risk amid doubts about how companies value them.
If Mr. Greenspan had acted differently during his tenure as Federal Reserve chairman from 1987 to 2006, many economists say, the current crisis might have been averted or muted.
If you want to tell people what happened, say this:
“It was risky bets made on risky bets made on risky bets made on risky assets. When the risky asset bets failed, so did all the bets up the line, so $1 of failed asset led to $50 of lost bets.”
Pyramid schematic alright.
“Obama’s main platform for US economic recovery is job creation. What does Dominique say to that?”
Wow. What a genius concept. I wonder why every other presidential candidate in modern history never thought to put that at the top of the to do list.
Oh blow off with those excruciating side steps!
Your whole animus against Obama is “dearth of ideas”. Stick to your program honchette.
McCain and land deals (for Mike P.)
http://www.montereyherald.com/ci_10703347?nclick_check=1
Nancy – I don’t see how increasing taxes on businesses results in job creation. I’d love to hear someone explain how that would work.
My point was that every one of them promises job creation. Doesn’t mean it’s going to happen.
The problem was that the banks and the stock market got addicted to mortgage-backed securities but did not know how to determine their risk properly. At the same time, investment banks were able to get around regulations thanks to laws championed by McCain best buddy Phil Gramm. This allowed the banks to have absolutely no reserve to cover their defaults. Meanwhile the thirst for mortgages led to a housing bubble.
The job creation ‘idea’ isn’t directly tied to his promise of tax increases on the 20% of the wealthiest Americans and closing the loopholes that make their American butts payin their due share. In fact, small business owners who ticket income above $250K are doing pretty damn well and some form of universal health care that cuts out the middleman HMO insurance payments will be a great boon to those ‘job providers’ who fall in and under that threshold.
Obama is going to funnel much needed capital into US jobs re-building infrastructure, you know, the bridges and schools, highways and alternative energy plants that we need.
Part of the cash to do that will be from the draw down in Iraq. Part will be attaching taxes to more than just the income from labor.
So, you are saying Fannie Mae and Freddie Mac didn’t matter? That is incredibly misguided.
Pres Clinton did indeed push for the increased loans to marginal loan applicants. That push was the start of the problem. No wonder Rep. Waxman is delaying a probe into the excesses of both GSE’s.
The crisis has nothing to do with the stupid statement of the “29 per centers”. All up and down the chain the federal government was asleep and in some cases made the problem worse.
Take a look at the concept of “preemption” and how some states tried to reduce the risks.
To say I am a late comer to derivatives is very shallow. I have been talking about Wall Street excesses for years.
I am pretty sure I am the only person who comes to this blog who has lost over a million dollars because of corporate greed and the federal government’s indifference to workers.
For what it is worth if Obama is elected nothing will change in this area, nothing.
Here is a bigger problem and that is why I say Obama will do nothing.
• Compared with the hundreds of billions of dollars that the rescue will cost based on current plans, entitlement programs will add $41 trillion to the federal government’s $12 trillion in existing debt and other commitments, or an additional $455,000 per household.
• Tax rates would have to more than double to keep up with the cost of the federal debt.
• Economic growth can’t do the job — the economy would need to grow more than 10 percent a year for decades to keep the government afloat.
• Eliminating congressional earmarks, revoking the Bush tax cuts, and ending the wars in Iraq and Afghanistan would trim this burden by only 15 percent
What say Mr. Obama to this challenge?
Nope, Mike, you still aren’t in the right game yet. The housing and credit boom that we are paying for now has its vintage in 2002 – 2006. Bill Clinton had nothing to do with this period. During this period, most of the mortgage loans made were not Fannie and Freddie conforming, so that means that you can take Fannie and Freddie out of the picture and this meltdown still happens. And the meltdown happens because the derivatives based on all of the private sector loans made went sour AND all of the bets made on those derivatives went bad.
You know, Mike, I wish you knew how misguided you look here. If you are planning on running for anything again, you’ve written much here that demonstrates that you will not grapple with the existing data to understand the issues, but will reach immediately for the talk radio ideology. And we already know how well that works.
I second Cassandra. It’s not only Fannie and Freddie that were in trouble, the biggest losses have come from places like Bear Stearns, Lehmann, Merrill Lynch, AIG. A lot of these banks were not even covered by the CRA.
“I don’t see how increasing taxes on businesses results in job creation. ”
Two words: Build infrastructure.
Hey Mike, if this is true:
“I am pretty sure I am the only person who comes to this blog who has lost over a million dollars because of corporate greed and the federal government’s indifference to workers.”
and you are a millionaire (or were) then how on earth didn’t you see clear to giving yourself a few campaign loans?
Come on now fella!
UI are you still voting to put Mike Castle back into office to hinder the DEMs agenda? I hope not. It is bad enough that we don’t have the luxury of voting Carper out for a few more years.
Five words: How will you fund it?
I’m not an economist, so I can only look at this from a very simple, basic point of view. We have a multi-trillion dollar national debt. We have a trillion dollar economic bailout/recovery debt. We have entitlement programs that are bleeding cash. And you think that Obama’s tax increase on the top 5% and scaling back/ending the Iraq war is going to take care of all of that AND leave enough to fund infrastructure projects? I’ve never been much of a math whiz, would you mind explaining that calculation to me?
Oh, and healthcare. While you’re at it, please explain how he’s going to fund universal healthcare, too.
I’ve never said I’m voting for Mike Castle! I don’t think KHN is a great candidate but she’s not Mike Castle.
hummmm, okay then,
Dominique, the thrust will be to fix America first not the global speculators. As you have cautioned elsewhere on this blog, the market swings by its nature so we know it will reboot just not how soon.
With the concentration of the assets of this, the greatest nation yet, we can turn things around. but it certainly will take putting in universal healthcare…D’OH, the savings there is against the huge lobby of big pharma and big insurance. You act as though you believe that this country is broke because all your pitifully sagging spirit wants to absorb is the conservative wingnut talking points – geared of course to preserve the fascists HA!
Think instead of a reprioritization. I don’t think such an unhinging of corporate interests could be done except in such times as these. This is actually the perfect storm and opportunity to make things right as far as the individual laboring tax-payer vs the elitist corporate stock holder (I sense the collective shivering of Centreville on that one, don’t you?).
As a few friends over on Eschaton said just now:
“Buy oil at $140 and selling it at $78 is not a good idea. Damn those minority sub prime losers!
leibniz leibkins”
“I’m curious about this. Was it because of speculation or what? How could the price of a barrel of oil drop from $140 to $78 in the matter of a couple of months?
mer
pure speculation, $281 billion leveraged in pursuit of $61 billion worth of oil (world stock). Now you know why Bu$hCo, is finally concerned, they could give a shit about the housing, but their precious oil bubble burst too.
1Watt, Hermit ”
“I saw someone on CNBC discussing how the oil crash and stock market crash are going hand in hand.
You can buy oil futures on margin. $125 buys $1000 worth.
As oil goes down, the speculators who did that are experiencing margin calls. Evidently, a lot of them are selling their stocks to raise the cash they need to meet those margin calls.
On the other side of the coin, hedge funds and the like are selling their oil contracts to raise cash to pay off the folks who are getting out of those funds.
Richard “
‘You act as though you believe that this country is broke because all your pitiful spirit wants to absorb is the conservative wingnut talking points’
Actually, Dems talk about the deficit way more than the GOP. We are broke. You can’t owe trillions of dollars and not be broke.
‘With the concentration of the assets of this, the greatest nation yet, we can turn things around. but it certainly will take putting in universal healthcare…D’OH, the savings there is against the huge lobby of big pharma and big insurance.’
What does that mean? What concentration of assets? How do we derive enough savings to pay for universal healthcare by doing away with the pharma and insurance lobbyists?
‘I don’t think such an unhinging of corporate interests could be done except in such times as these.’
You do realize that both candidates are tools of corporations, right? Obama has received millions in corporate donations just as McCain has. What do you expect either of them will/can do to ‘unhinge corporate interests’?
‘This is actually the perfect storm and opportunity to make things right as far as the individual laboring tax-payer vs the elitist corporate stock holder’
That sounds a lot like a redistribution of wealth and that doesn’t sit well with me. We are a country whose core belief is that anyone can be successful if they work hard enough. What’s anyone’s incentive to bust their ass to get ahead if the government is going to take away their income and hand it to those who make less?
Here’s the thing, I had a baby the year after I graduated from high school. I didn’t go to college or law school or medical school. That’s not the fault of the attorneys and the doctors of this country. That’s my own fault. Why should they have to pay more taxes so I can pay less? I could have and should have made more responsible decisions. I think life is, in fact, fair. People get what they deserve. I have a great life. I’ve worked hard to get to where I am (middle class, btw), but I know I can do better. Should I manage to get to a point where I’m making over $250K, I don’t want the government taking more than their share simply because they can.
“Five words: How will you fund it?”
You invest in infrastructure so that the economic benefit and tax dollars returned over time are far greater than the initial tax dollar invested.
If you knew that you could get a guaranteed 6% on money that you borrowed at 5%, would you do it?
Of course you would, if you’re rational.
Same thing with the government borrowing money – if they can borrow money at a rate lower then the GDP, then they should do it.
(I am not a total deficit hawk like many of my liberal and conservative friends. If the government can make money (increase GDP) over the cost of borrowing, then it should. The funds can be used to fund projects that would otherwise have to be funded by direct tax revenues.)
“Should I manage to get to a point where I’m making over $250K, I don’t want the government taking more than their share simply because they can.”
Sure, Dom. People like you are first to send people off to kill and die in wars, but ask a small sacrifice of $$ from those with the most to keep our country great, and they throw a fit. Disgusting.
“Oh, and healthcare. While you’re at it, please explain how he’s going to fund universal healthcare, too.”
By reallocating the funds currently spent on healthcare to be much more efficient, like reducing the 30 cents on every dollar of healthcare costs that goes to admin.
WTF are you talking about? What does not wanting a tax increase on the rich have to do with sending people off to war? I am not in favor of sending anyone’s child off to war. What a completely stupid and disjointed argument. That said, if a ‘small sacrifice’ needs to be made, why shouldn’t we ask it of everyone? Why would we only ask it of the rich? Aren’t we all American? Why does it have to be about class warfare? Why can’t we all just get along and respect each other’s accomplishments without jealousy and a sense that we’re entitled to a portion of someone else’s good fortune?
Disgusting, indeed.
‘By reallocating the funds currently spent on healthcare to be much more efficient, like reducing the 30 cents on every dollar of healthcare costs that goes to admin.’
Which funds would those be? The funds spent by the insurance companies? How exactly are you going to reallocate those funds? How are you going to reduce 30 cents on every dollar that goes to admin when you’re bringing the government in to manage it? Do you know anything about how our government functions? It’s a complete administrative clusterfuck. And you think the administrative costs will actually go down with them at the helm? Please.
If you want someone to blame for the financial services mess look to Mike Castle and his republican cronies when in 1999/2000 they passed two bills that really sounded good.
1. The financial services modernization Act of 1999.
2. The Commodities moderinization Act of 2000.
It is these two bills that has lead to the unrestricted looting of the American public in terms of mortgages and gasoline prices.
Mike Castle, George Bush and the republicans of 2000 shafted the American public bigtime while Wall Street gets a pass and a $700 billion bonus for work well done.
It has everything to do with it. From those that have the most, more should be expected.
You can’t see the hypocrisy in the same people that think that making the ultimate sacrifice for your country is an honorable, patriotic, and noble thing also thinking that being asked to kick in a few extra tax dollars so our government can function is abhorrent and terrible?
Poor sacrificing lives for the country: Good and patriotic
Rich and well-heeled sacrificing a few extra $$: Never
Why would we only ask it of the rich?
Because economic policy was out of balance, tilted inordinately in favor of the rich for the last 8 years. With the playing field tilted, all the money ran into the pockets of the rich.
It isn’t fair just to make the field level again – some of the money has to start running back the other way for a while.
The failed economic policies created by the rich have nearly killed the goose (the middle class) that laid the golden eggs for the rich. But the rich have the eggs. So it is time for us geese to take back the eggs.
Also, there is a profound moral hazard, if we allow the rich to think that they can always privatize profit and socialize costs at no penalty to themselves. There has to be a reckoning to prevent the same thing from happening again.
Learn more about the Mike Castle Republican bill where concerns were raised that the banks would become “too big to fail” at:
http://m.rockymountainnews.com/news/2008/oct/11/hefley-one-of-few-to-vote-no-in-1999-on-bill/
Isn’t the real difference between the rich and the middle class the percentage they pay in taxes and not the dollar figure?
I believe it was Warren Buffet (and if I’m wrong I’m sure someone will correct me!) who said that his secretary paid a larger percentage of her income in taxes than he did.
One thing that scares me in this financial crisis is the term “too big to fail.” If that’s so why are we allowing some banks to get even bigger?
How the tax system works
(using beer):
A brilliant explanation of our tax system using actual percentages, the impact of a tax cut, and the public reaction that even Obama should be
able to understand.
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do.
The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20.
Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still drink for free.
But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share’?
They realized that $20 divided by six is $3.33.
But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so –
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33% savings).
The seventh now pay $5 instead of $7 (28% savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
“I only got a dollar out of the $20,”declared the sixth man. He pointed to the tenth man,” but he got $10!”
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too.
It’s unfair that he got ten times more than I!”
“That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only two? The wealthy get all the breaks!”
“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”
The nine men surrounded the tenth and beat him up. The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him.
But when it came time to pay the bill, they discovered something important.
They didn’t have enough money between all of them for even half of the
bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
For those who understand, no explanation is needed. For those who do not, or will not understand, no explanation is possible.
“Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.”
Sure they will. Just like they fled these shores when the top marginal tax rate was 90%.
The problem with your analogy is that it’s a lot easier to switch bars than to switch countries. (And your numbers are way, way off the real percentages involved).
Now if you’re talking corporations, that’s a different story. But for individuals, anyone who wants to flee overseas to avoid an extra 5% or whatever on his taxes, good riddance. I think we’ll survive.