Late Night Video — How Bain Capital Destroyed Jobs
This is round one from the Obama Camp, working at defining Romney. This is being played in a handful of swing states — not a big ad buy, but if the cable news is an indicator, this is a big deal and nicely played. More like this, gang:
[youtube]http://www.youtube.com/watch?v=sWiSFwZJXwE[/youtube]
As it turns out, Romney wasn’t at Bain Capital when it was involved in GST Steel (the company profiled in this ad). He had left two years earlier to head the Olympics at Salt Lake City. So, a bit misleading, wouldn’t you say?
@M “So, a bit misleading, wouldn’t you say?”
No. Romney was involved when they purchased the company and suck it’s lifeblood.
That he wasn’t there for its final death rattle hardly matters.
Adds like this are exactly why mitt romney will be elected. I hope the dnc spends at least 100 million on this ad. As I have pointed out before, 70 percent of the US electorate believe in the free enterprise system. Which also means they believe in the risk vs reward concept. They understand that business do not always suceed. Romney was involved in starting or growing around 100 business. And only FOUR failed. That is a 96 percent success rate. That is phenomenal.
The average bussiness success rate after 4 years is only 44 percent. Thats right, look it up, 56 percent of all business fail before they start their fifth year. Romney only had a 4 percent failure rate after 15 years. That is increadable.
Also, another thing, like my dad used to say, it takes two to tango.
Meaning, the former business owner who wanted to sell out, also gets some credit for the success, and also must take some of the responsibility for failure. It is just to bad no one from the delaware liberal believes in the free enterprise system
@Rd “It is just to bad no one from the delaware liberal believes in the free enterprise system”
Sure we do. We just don’t want to see the parasites that our system produces become President.
Picking up a company, sucking out its assets, borrowing more for *improvements* that go into your pockets and then leaving the people who did the day to day work holding the bag isn’t free enterprise by any stretch of the imagination. Rmoney was at Bain when this process started — and it is a process designed to kill the business while extracting as much as possible out for the Bain’s of the world. These people created nothing in this thing except money for themselves.
But it is amusing that they all come out of the woodwork to defend this vulture capitalism. So what do we take from this, gang? These people are going to support this kind of resource extraction if their guy gets to be in charge. So expect your taxes to pay for another huge round of tax cuts for rich people, while your kids get to pay in the form of less money for their education, medical care and other services.
Based on the morning news, Romney parried this very well. The last word was from workers who loved vulture capitalism. This race is closer than it looks.
Interestingly, those workers were quite anonymous. So who knew actors would love vulture capitalism?
Interesting how the observers of the *horserace* can’t bother to tell you when the participants aren’t running on the same track.
For profit news needs what it needs.
Progressives don’t oppose capitalism. But they recognize that capitalism produces poverty as well as wealth. Consequently, progressives favor social programs to cushion the blows of the market economy. In a democratic society, there should be protections for those hurt by the “free market.”
Capitalists used to be afraid of the immiserated masses. That is how we got the New Deal, to protect the market by softening the blows it inflicts on the unemployed and others. These days they are no longer afraid.
http://en.wikipedia.org/wiki/Creative_destruction
Romney served an important role in our economic system.
Though, creative destruction is why unemployment insurance and training programs are important.
Creative destruction is an interesting way to characterize this bit of what private equity does. It creatively strips a company of its assets and it destroys the live of the people who work there.
But make no mistake that Bain created absolutely nothing in the bust out of GST except wealth for themselves and their investors. At the expense of the people who were working there. In many ways, this is a perfect example of how trickle-down economics simply does not work and hurts working class and middle class people.
I love Rick Perry’s term for it: “vulture capitalism.”
@Cassandra: The destruction of companies frees capital (and labor) to be re-allocated to more productive uses (e.g., invested in the creation (and growth) of companies).
Bain plays the role of the destroyer, and the economy compensates Bain for playing the role. Firms like Bain are necessary for a healthy economy. Society should not demonize firms like Bain.
Instead, society should provide programs that reduce frictional and structural unemployment and/or diminish the burden of such unemployment.
Bain plays the role of the destroyer in order to suck capital out of the system. Why do you think Romney has two Swiss bank accounts and a Cayman Islands account? To create jobs for Swiss and Caymen accountants? Please.
Right, Jason, after profits are extracted from the sweat of workers, companies like Bain “free” that capital to be reallocated into either jobs or people’s personal bank accounts.
There are more productive and beneficial ways to redistribute capital. Maybe workers ought to have a say in how the profits they all work together to produce are used.
@jason330: Most likely, Romney’s money is invested in stocks, bonds, and similar investments, not cash.
And, when Bain purchases a company, Bain pays the owners for the company. Most likely, the (now former) owners invest the proceeds in stocks, bonds, and similar investments OR a new business entirely. Bain frees capital, which allows it to flow to its most productive uses.
I recommend a quick Google search on creative destruction and Bain Capital. Articles raise both positives and negatives. The major negative is the human toll. And, this is why society should address the human toll through programs like unemployment insurance and retraining, rather than by demonizing Bain and other similar firms.
Most likely your naivety is a put on.
@Valentine: German corporate governance requires worker representation on a company’s supervisory board if the company has at least a certain number of employees. This board monitors the management board and approves important decisions.
http://en.wikipedia.org/wiki/Aktiengesellschaft
But, honestly, a company compensates its workers with wages. No system gives workers a right to a company’s profits.
Bain frees capital, which allows it to flow to its most productive uses.
Have you been following what capital has been doing for the last decade or so? Seriously, guy, get back to us when you actually get how capitalism actually works and not whatever bullshit you get from CNBC. Which is specifically programmed for people like you.
@Davy – Bain may pay the owners, but the workers get nothing. That is one of the points of the video. That is the human toll you mention.
@jason330: It’s not naivety. It’s a product of economics. Bain and similar firms increase efficiency, which improves real standards of living. Increases in wages without accompanying increases in efficiency only increase prices. There is a short-term human toll to gains in efficiency. And, society should help the afflicted.
@Valentine: I am suggesting that demonizing Bain for playing its role is wrong. The focus should be on social programs that provide a bridge between destroyed jobs and new jobs.
@Davy — Now you are losing me. Bain’s practices contribute to the redistribution of wealth to the top and the immiseration of the bottom sector (the 99%). So it may increase standards of living for Romney et. al., but not for most people. And they did not increase wages. They fired people.
@Davy — As I always say, you can’t blame businesses for trying to make money. It is not their responsibility to do anything other than make money. It is the responsibility of the democratic citizenry to decide what is and is not an acceptable way of making money and to put constraints on companies like Bain. That, of course, is not happening.
You say we are demonizing Bain, but you are whitewashing it.
@D “The focus should be on social programs that provide a bridge between destroyed jobs and new jobs.”
And there’s another thing that folks like Mitt Romney wants to get rid of.
So… You have no interest in policies that prevent a runaway Gini index in America?
When you step back and look at it, the main thing the workers union movement of the last century did was to put the brakes on the Gini index. Who plays that role today? And why do you see that role as being somehow illegitimate?
There’s no increasing of efficiency if you’ve effectively bankrupted the company. You’ve just looted it. In the case of GST, they did nothing to ensure its long-term viability. They just took the money and ran.
And this:
Bain and similar firms increase efficiency, which improves real standards of living.
The laid off workers got no improved standards of living. But Rmoney is getting his car elevator, so I guess there is a point there.
“There’s no increasing of efficiency if you’ve effectively bankrupted the company. You’ve just looted it.”
Good point, Casandra.
This deserves its very own comment:
And, society should help the afflicted.
Amazing isn’t it? How working people can go from valued and capable to *afflicted*.
These people aren’t afflicted — they were highly skilled workers making something that is important to the building of this country. I’ve made the point in another thread, but there are big sections of the new Bay Bridge that are being made in China because we no longer have that capacity. That just kills me. A people who created much of the world’s building miracles can no longer do that. But somehow putting these builders out of work so that Rmoney and his friends can get rich is supposed to be something to be admired.
“The focus should be on social programs that provide a bridge between destroyed jobs and new jobs.”
The focus is on that… in the form of eliminatng any current programs and demonizing the people who need them.
Good lord, is Davy serious, or is just messing around? No one could be this clueless… could they? And enough with the Wiki links!
Looting is the correct word for what Romney and Bain did. There was no interest in growing anything outside of their personal income.
Here’s a frightening thought… I think Davy thinks he’s an intellectual and that he’s educating us.
I think he is just trying to say that he thinks the market mechanism is fine, but that we just need social programs to compensate those who are hurt by market adjustments. I don’t see that as so far outside the box.
@Valentine: Increases in efficiency improve the standard of living for all people. Read this article:
http://www.nytimes.com/2012/02/19/opinion/sunday/the-danger-of-too-much-efficiency.html?pagewanted=all
The article agrees that increases in efficiency improve the standard of living for all people. Further, the article asserts that the rate of efficiency growth is too high because the economy cannot reduce frictional and structural unemployment quick enough. This is the human toll. This needs to be addressed. I want more social programs, not less efficiency growth. But, I could be persuaded to change my mind.
@Liberal Elite: Unemployment insurance and job training are state programs. If elected President, Romney cannot end such programs. Now, to the extent the federal government funds those state programs, Romney could de-fund them. I hope that he would not de-fund them. Right now, his focus is on reducing the costs of long-term entitlements, like Medicare and Social Security, not short-term entitlements, like unemployment insurance. Romney has not addressed short-term entitlements. Though, Obama would never touch short-term entitlements. We’ll learn more as the campaign moves forward.
And, I have little interest in income or wealth inequality. I am interested in the standard of living for all people. No one can argue that people were better off in 1900 than 2012. I don’t think you can argue that people were better off in 1990 than 2012. People forget the tremendous impact that technology, and associated efficiency gains, have had on the lives of the 99%. That being said, society needs programs to prevent people from falling between the cracks.
@Cassandra: The company is not an isolated system. Through Bain’s actions, the efficiency of the entire economic system increases. Yes, the company is destroyed, but investors re-allocate capital to more productive uses – new or growing companies. In the long-run, workers will find better jobs if (1) they survive the short-run and (2) they are qualified for a better job. Society provides programs to satisfy conditions (1) and (2) – (1) unemployment insurance and (2) job training.
@p “Looting is the correct word for what Romney and Bain did.”
Exactly. And now he wants to loot the rest of America. We’re just another troubled asset.
We’ll be going from:
TARP — Troubled Asset Relieve Program, to
TAKE — Troubled Asset Killing Exploitively.
@Pandora: Sorry that you find my ideas objectionable. But, in most cases, the choice is not between Bain Capital and a company + jobs. Often, the choice is between Bain Capital and insolvency/bankruptcy (usually, liquidation bankruptcy).
@Pandora & Liberal Elite: “Looting” is a charged word. You’ve been watching too much “Wall Street.”
@D “I hope that he would not de-fund them.”
Have you seen Ryan’s budget?? These are most certainly on the chopping block. And with the pull back on the DoD budget cuts, they are as dead as can be. This in itself is a great reason to vote against Romney.
And the GOP efforts on Medicare and Social Security should be the 3rd rail of politics. Obama just needs to electrify that 3rd rail, since the MSM has failed to do so.
@D ““Looting” is a charged word.”
Yea.. Thats why we’re using it. And it fits quite well. Just because it’s legal doesn’t make it not ‘looting’.
“You’ve been watching too much “Wall Street.””
LOL. I haven’t had a TV for years. Not at any of my houses.
@Davy — A couple comments about the article.
When they talk about the standard of living of society rising, that is an aggregate measure. It tells us nothing about distribution. The standard of living as a whole could rise, while the rich get richer and the poor get poorer. In other words, it is the standard of living overall, not the “standard of living for all,” as you say.
Second, the article says that you can’t increase wages without increased efficiency because increased wages require companies to raise prices. Well, not if they take the increased wages out of their profits.
I also found this quote remarkable: “Nor are they interested in improving the lives of consumers by making products and services better and cheaper. They are interested in profit — for themselves and their shareholders. Sometimes a Bain success will lead to more jobs and better products. Sometimes it will not.”
In war, soldiers traditionally engaged in looting — decimate and grab what you can for yourself. That is what Bain does essentially.
but investors re-allocate capital to more productive uses – new or growing companies.
Once again, you haven’t been watching what capital has been doing recently. Capital is specifically protecting itself — it hasn’t been in the mix for constructive creation of new firms or employment opportunities for awhile now. And there is no way to argue that money sitting in treasuries is anything other than sheltering capital.
Second, the article says that you can’t increase wages without increased efficiency because increased wages require companies to raise prices. Well, not if they take the increased wages out of their profits.
Bingo. What the Bain Capitals rely on (as do most companies these days) is that they will get a great deal of productivity out of their workers without having to pay those workers a share of the gain derived from that productivity. Gains in productivity are allocated to shareholders — not to workers.
@Cassandra: Capital sitting in treasuries is keeping the United States’ costs of borrowing at record lows. If capital shifted away from treasuries, then the federal deficit would balloon.
Also, many treasury bills, notes, and bonds are sitting on the Federal Reserves’ and China’s balance sheet. This gives a warped impression of the standard investor’s risk appetite, which was increasing until 2 weeks ago.
And, the S&P 500 was over 1400 until the past 2 weeks. And, the S&P 500 Total Return was even higher (The S&P 500 TR is a better indicator of capital growth). But, Europe’s problems are driving investors to safer investments – like treasuries. Now, the S&P 500 is hovering around 1330.
@Liberal Elite & Cassandra: The distribution of gains from increases in productivity depends on the price elasticities of the labor supply curve and the labor demand curve.
For example, payroll taxes are nominally split evenly between employers and employees. But, in reality, payroll taxes burden employees (in the form of lower wages) more than employers. This is the economic concept of tax incidence. The precise distribution of burden depends on the price elasticities of the labor supply curve and the labor demand curve.
The concept applies to any gain or cost. Regardless, both employers and employees share benefits, and only the precise distribution is subject to reasonable debate.
Capital sitting in treasuries is keeping the United States’ costs of borrowing at record lows.
I do know this. And I also know that this means that this money isn’t being used for efficiencies, job creation or any of the other BS you keep claiming. It is just protecting itself. So apparently we will agree on this point.
Now, the S&P 500 is hovering around 1330.
So? The S&P isn’t much of an indicator of job creation or inefficiencies, either. At best you can characterize it as the day’s temperature of investors.
Regardless, both employers and employees share benefits, and only the precise distribution is subject to reasonable debate.
And this is just BS too. What you are trying to do with this statement is to justify the devaluing of labor. There is nothing but data showing the 30+ year flatlining of American wages. There is nothing but data showing the 30+ year explosion in American productivity. And there is nothing but data showing that owners have been raking in the dough. You can’t dispute any of that. The only thing that you can do is pretend that somehow Americans are better off working harder, for less wages just so that the Bain Capitals of the world can put more money into Treasuries.
@Cassandra: Your point was that capital was lying idle in treasuries. Until recently, capital was flowing to equity, which the S&P 500 does measure.
It’s not just a story of wages. It’s a story of real compensation and prices. And, more importantly, not all data points toward decreasing real compensation or increasing real prices.
http://www.nber.org/papers/w13953.pdf
“The period since 2000 appears to be a time in which productivity has grown more rapidly than wages. The average rise in real productivity was 2.9 percent while the average rise in real compensation as conventionally measured using the consumer price index averaged just 1.7 percent. This difference of 1.2 percentage points is however very misleading because of the use of the consumer price index. If we instead compare the average rise in nominal productivity (5.4 percent from 2000 through the third quarter of 2007) with the average increase in nominal compensation (5.0 percent), the gap is reduced to 0.4 percent. In real terms, productivity rose 2.9 percent while the corresponding measure of compensation rose 2.5 percent.”
Pandora is right. Not even Bain board members believe that they are looting these companies out of some noble sense of duty to the ecosystem. You could probably get them to say it, but not without betraying the truth with a smirk.
They are doing it for the money. Cash. Cash that Mitt Romney has stashed in his Swiss and Cayman Island bank accounts. That’s the highest and best use of cash from Romney’s perspective.
To claim otherwise is to feign naivety.
@j “Not even Bain board members believe…”
The wolf keeps the deer strong.
Does is matter what the wolf thinks as he devours deer meat?
@jason330 & Liberal Elite: I’ll quote myself:
“FINALLY, the motives of Bain are not benign. But, the profit motive leads to good results, on average. Lower real prices. Same real wages buy more goods, more services, more products – a better well-being.”
@Davy — It does not lead to good results — see our jobs, housing, education, and economic situations for evidence.
Romney is scum. He has absolutely nothing other than callous disregard for the feelings and welfare of anyone other than himself and his people. He was that way in high school, and he is that way today.
@jason303: Romney’s capital is not in cash – otherwise he would not earn $21 million in investment income, including $3.1 million in ordinary dividends, $1.9 million in qualified dividends, $4.1 in taxable interest (which includes interest from bonds), $10.7 million in capital gains, and $2.8 million in other investment income (real estate rents, partnerships, s corporations, etc.).
Instead of complaining about Romney, Bain, and private equity, offer a solution to the perceived problem – besides my solution of unemployment insurance and job retraining.
Part one of the solution is don’t vote for Romney. Part two, don’t vote for any Republicans. Then we can have a rational conversation.
@Valentine: Our economic situation is a result of housing subsidies gone awry. Did Romney create Freddie Mac and Fannie Mae? Did Romney create the deduction of mortgage interest? The Republicans and Democracts in D.C., especially Barney Frank, fed those monsters and led us to ruin.
@Valentine: You can’t have a conversation with one side. 😉
@Davy — The Democrats and the Left include many sides!!
I am not suggesting Romney caused the recession. But the ideology he embraces did, and he and his party want to make things worse and will destroy the country.
Really, you should read the whole thing, rather than just bits:
And this is just dead bang wrong:
Our economic situation is a result of housing subsidies gone awry.
This is abit of wingnut theology right here. The subsidies were NOT the proximate cause — it was unaccountable credit.
This is exactly how I know you aren’t serious. And wingnut theology won’t be taken seriously here and nor will you. More of *this* BS and you are gone. Because this is no longer about ideas, it is about ideology.
@D “You can’t have a conversation with one side.”
…and we all know which side that is. 😉
Nobody keeps stocks in Swiss and Cayman island bank accounts. They keep cash that they want to shield from taxation. So that issue is hereby resolved.
In closing, I’ll quote myself. Your naivety is a put on. You seem to get off on it, and if it keeps you from being cruel to animals, go for it.
@c “And this is just dead bang wrong”
Yes it is. And he should know it. I’m sure he does. So why then?
“More of *this* BS and you are gone.”
Don’t pull that trigger just yet. If he’s a paid troll, he’s gone above and beyond the call of duty. Even though his knowledge of physics and cosmology is somewhat lacking, I have learned a few things from his posts.
@Cassandra: Lol. So you’re solution to ideas is internet violence? I’ll quote Brandeis:
“If there be time to expose through discussion the falsehood and fallacies, to avert the evil by the process of education, the remedy to be applied is more speech, not enforced silence.”
The remedy to bad speech is more speech.
Also, do you think the sub-prime mortgage market bubble inflates without subsidies from the GSOs? Do you think the prime mortgage market bubble inflates without the mortgage interest rate deduction? Perhaps, but to deny any causation is foolish.
I’d like to hear who your bogeyman is. Predatory lenders?
@jason330: You’re a troll. There’s no rational explanation for being in cash (because of inflation), except to satisfy short-term liquidity needs. Does Romney plan on spending every dime soon?
4 companies out of 100 went out of business. What are your thoughts about the other 96 companies who grew and were and are successful. There are more than 120,000 jobs at those companies.
Explain how that is bad to me, Cassandra, I have to hear this explanation, I am sitting down, go ahead, tell me why these 96 successful companies with over 120,000 jobs created are a bad thing that romney did. Go ahead, explain it, I want to hear it.
@Rusty Dils: In general, jobs created and jobs saved numbers are bogus, whether it’s Romney or Obama. The only thing worse is jobs created OR saved.
So you’re solution to ideas is internet violence?
There’s nothing wrong to reacting to violence with violence. If you want to be here with bad data, no facts and GOP talking points, you’ve committed the first violence. You are not entitled to your own facts in this place. Absorb that rule of the road. You’ll survive here longer with it.
Perhaps, but to deny any causation is foolish.
Fannie Mae and Freddie Mac causing this meltdown is not true. Alan Greenspan admits this, all 12 Fed Governors admit this, big investors admit this (and they got burned on the derivatives) — there is no credible source that can argue otherwise. And the only reason you people do it is so that you can blame the government. What is fun about this particular argument is that the data to *prove* your statement — if you can do it — is readily available to you over at the St. Louis Fed website. If you can get Excel to work with the large datasets, you’ll get your answer soon enough. And yet, and yet, and yet — not one of you will do it.
In the meantime, this is the last time you show up here with this stupidity about Fannie Mae and Freddie Mac. It is just a wingnut talking point and I’m not having it. No further warning. There are plenty of places for you to live with your alternate universe and this ain’t one of them.
@D “Does Romney plan on spending every dime soon?”
We all know that the main purpose for Romney hiding money in Swiss and Cayman Island bank accounts is to avoid paying taxes. Only scoundrels put their money there:
“These Islands Aren’t Just a Shelter From Taxes”
http://www.nytimes.com/2012/05/06/opinion/sunday/these-islands-arent-just-a-shelter-from-taxes.html
“The secrecy laws in these tax havens are at the root of serious crimes: fraud, money laundering and international terrorism.”
Simply put, Romney is a tax cheat. Sure it may be legal, but he’s still cheating the American people. …tax cheat.
Why the pretense? Why pretend that he’s a clever investor? Why pretend that those who park money in offshore island accounts aren’t scoundrels?
If you really do have all of that background, then it isn’t a stretch to ask you to show your homework. Sourced from FREd, of course. Long time readers of this blog will know what I’m talking about. Mortgage originationsduring the bubble and crash will tell the tale.
Put up or shut up. There’s lots of places that will tolerate the talking points.
Republicans will nominate an individual that makes millions annually and pays less than 15% in annual income tax, keeps his money in offshore account, destroyed more jobs than he created by many multiples during his career and will continue to mislead us on his record. This morally deprived individual may win this year’s election for the presidency. Will the neo-cons win again? God help us.
Krugman put forth your argument.
Krugman claims that restrictions on Freddie and Fannie kept their share of total originations down, even while housing prices increased. But this is not relevant. What is relevant? – the amount of Freddie and Fannie’s originations in the sub-prime residential mortgages. In 2004, this part of Freddie and Fannie’s portfolio increased dramatically. From 2004 to 2006, Freddie and Fannie bought about $430 billion in sub-prime MBSs. In 2004, Freddie and Fannie bought 44 percent of the market for sub-prime MBSs. By the end, Freddie and Fannie owned or guaranteed 11.9 million of the 26.7 million bad loans.
Others have performed the leg work:
http://www.aei.org/files/2010/03/15/PintoFCICTriggers.pdf
The author does not confine his criticism to Freddie and Fannie. Both politicians and other government agencies get some.
The point: Freddie and Fannie Mae exchanged higher quality mortgages for lower quality mortgages from 2004 to right before the crisis. In essence, Freddie and Fannie became the #1 buyer of sub-prime mortgages and drove demand for them.
Davey, please elaborate. Job creation numbers are bogus. What do you mean by that. If every 20 years or so there are millions more people working, why are job creation numbers bogus
@D “Krugman put forth your argument….”
That’s all very fine and well. We know what role Freddie and Fannie played. But here is what you said that was off the mark (and pissed off cassandra):
“Our economic situation is a result of housing subsidies gone awry.”
These are different issues. Your comment is simply wrong, or at the very least, quite misleading.
Spot on Nick. We are seeing conservatives here trying to talk themselves into thinking that Romney was a good pick.
That triggers paper does an interesting bit of prestidigitation and one might expect from the AEI. It faults Fannie and Freddie for not having better definitions of Alt-A and subprime loans that all of the originators could classify to. Awesome. That better definitions would have prevented it all.
Well. What that still ignores is actually *who* originated these loans. What that ignores is that Fannie and Freddie had statutory limits on the loans that they can directly acquire (even though you conveniently find it irrelevant and some of that has been recently changed). What that ignores is that it was the lenders themselves who were the prime moversof the massive bubble of bad loans that blew up in everyone’s faces. Because Fannie and Freddie wouldn’t have had these mortgages available to acquire if in fact private lenders weren’t originating them, right? So the original sin isn’t Fannie or Freddie’s — it is with the private lenders who found that they could pass on all of this bad risk via securitization.
No doubt that Fannie and Freddie pushed the envelope on what they acquired so they wouldn’t lose too much market share in the *securitization* portion of this, but that means that they were guilty of selling securities with iffy loans that had an implied Government guarantee. That still isn’t a proximate cause of the meltdown.
So you are trying to confuse the process of making the loans with their subsequent securitization. And it was sin the faulty making of the loans that the bomb was planted.
And since you won’t go look at the data yourself, the chart you want to see in terms of loan originations is here.
Last point — there was an official inquiry into this, one that concluded that there were widespread failures of the mortgage system. Failures that started with orginations, and featured lax regulatory oversight and engagement by those in the government who should have been regulating these mortgages. Predictably, it was the GOP members of this commission who held on to their alternate view of the universe. One not supported by any of the available data.
So for the last time and there will not be further warnings — the no-facts view of the meltdown simply will not be tolerated. And neither will you, working so hard at insulting the intelligence of people here.
@Cassandra: The paper I provided was written by Freddie’s former chief credit officer. He wrote it for the FCIC, not the AEI. He is now a fellow at the AEI, and the paper is hosted there.
Do a text search for Freddie and Fannie in the FCIC report. They’re mentioned a lot AND prominently. Further, data from the paper that I provided is presented in the report.
Finally, the Wall Street banks needed to sell the securities. Otherwise, origination was pointless. Freddie and Fannie bought about 44% of sub-prime MBSs in 2008 and slightly smaller amounts every year until the FHFA became their conservator. There is no origination without demand for Wall Street’s products – and Freddie and Fannie were the chief buyers.
You’re done.
Come back when you get how mortgages get done. In the meantime, there are plenty of wingnut sites who would be delighted with your inability to even read the references you cite. And your inability to address the data provided you.
Bye Davy.
Davy: Very nice one-sided portrayal. IN fact, I’m sure you know more about this than Paul Krugman does.
You’re not here for “interesting conversation.” You’re a troll, and I don’t care if you believe me or not.
Cassandra, I honestly don’t understand why your kicking Davey off. I found his information very informative. Maybe you don’t agree with his information, But I thought alot of his information was enlightening. Just because he is thinking “outside the box, does not mean he is trolling. I think trolling is very subjective anyway. I have not seen a definition of trolling I fully understand anyway. But I don’t think it is presenting a different viewpoint
BTW – I just read another Bain horror story. Watching the evidence of Romney’s guilt mount by the day is going to be fun.
RD — you’re on the next wingnut watch. This was not “outside of the box”, this was just a massive amount of spin to hold on to an already quite discredited bit of wingnut theology. You can’t be here with nothing but spin and all of that crazy deflection that you depend on for people not see through the BS — people here are smarter than that and I’m not tolerating the everyone has their own facts BS that you people do. If you want to do that, the internet is filled with sites that will welcome you. Cable TV will welcome you. Stop doing it here.
aww let rusty stay. every court needs a good jester
😆
Rusty: Davy is very articulate, but his views are pretty much consistent with any apologist for unfettered capitalism.
“society should address the human toll through programs like unemployment insurance and retraining, rather than by demonizing Bain and other similar firms.”
Bullshit. “Bain’s role” exists because people with lots of capital have lobbied to have the rules set up the way they are. Bain is not being “demonized”; we’re calling bullshit on Romney’s claim that he was a “job creator.” He was actually a “profit creator.”
Cass: Banning him is cowardly. If you don’t want to answer him, ignore him. But you’re in danger of setting the bar for banishment at “pisses off Cassandra.”
Banning him is not cowardly. He wouldn’t be allowed to be in my RL house for long insulting my intelligence like that and I don’t see why he should be in this house doing the same thing.
YMMV.
But there really are places for Davy to do his clown tricks. There’s no reason for them here.
@Cassandra: Lol. It’s funny – you take Krugman’s word as gospel, yet I point toward the FCIC report, and you get mad.
Demand driving supply is consistent with Keynesian economic theory. This is Freddie and Fannie buying mortgages.
And, if you think I’m a clown, then you’ve never had a serious debate on policy.
There is serious debate on policy going on all over this blog. Debate that you are clearly not capable of participating in. When you ditch your clown shoes, feel free to come back.
@Cassandra: Lol. Have you even looked at the FCIC report?
@Davy: What difference does it make? Either you favor government regulation to protect ordinary people from financial speculators and other predators or you think that people should be able to enrich themselves at the expense of others without government interference.
@Cassandra: “Fannie and Freddie continued to purchase subprime and Alt-A mortgage–backed securities from 2005 to 2008 and also bought and securitized greater numbers of riskier mortgages. The results would be disastrous for the companies, their shareholders, and American taxpayers.”
I did read the FCIC report. Why did you think I made the comment I did?
What didn’t get read was any of the data I sent you. And nor did you run off to the FRED to run those datasets I told you to run. You are just sticking here arguing your completely discredited clown show.
And just so you know I can read, what you just posted restates my own point on Fannie and Freddie. Except that their buying and selling of these bad securities is NOT a proximate cause of the meltdown. Because if there were no originations, there would not have been any securities to blow up.
Davy, all of your citations and links support your argument. No one doubts that. The problem everyone here is having, is with the philosophy of vulture capitalism BEHIND your argument. Your argument is solid, your point is…. disagreeable to lots of folks inclined to read this blog.
Cassandra is also a ….. please insert type of kick ass predatory cat here that is not in any way offensive….. so i’d be careful going toe-to-toe. *runs and hides.
Actually, his links DON’T support his argument. That is part of the river of contempt coming his way. He cites a paper then rips one bit out of it that should support what he is saying. Except when you read the whole thing it really doesn’t. Davy thinks that they way this works is that the *theater* of respectable data is somehow supposed to trump, you know, actual data.
And really, I’m so over being treated like this by these people.
@Valentine: That is too simplistic. The government cannot protect people from every danger. Instead, the government must balance protection and personal responsibility. The question is whether a reasonable person can understand the danger and protect herself against the danger.
If a reasonable person can understand a danger and protect herself against it, then the government should have a smaller role with regard to that danger.
If a reasonable person cannot understand a danger or protect herself against it, then the government should have a larger role with regard to that danger.
This is why reasonable minds can disagree about whether society should protect mortgagees from mortgage originators.
Some people believe a reasonable person understands mortgages and can protect herself from counterparties.
Other people believe a reasonable person cannot understand mortgages or cannot protect herself from counterparties.
In all, it’s not a simple question.
I dont understand why you fight them. They arent interested in hearing your facts… especially when it debunks their argument. When faced with the total failure of Reaganomics, the guys say we need MORE trickle-down. Save your smarts for people who need to be convinced with reason and facts. Fools are much more easily defeated when everyone in the room points and laughs at them.
@Cassandra: You’re only reading the bullet points at the beginning.
Here’s more:
“[A]s of 2007, the five major investment banks—Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley—were operating with extraordinarily thin capital. . . . The kings of leverage were Fannie Mae and Freddie Mac, the two behemoth government-sponsored enterprises (GSEs).”
40:1 for Wall Street banks.
75:1 for Freddie and Fannie.
@sb “Your argument is solid”
No. His argument is misleading. He’s trying to assign a simple cause to a complex event, and in doing so, deflect blame from vulture capitalism and other financial misdeeds. He’s found a whipping boy and has lots of arguments and data as to why the other true scoundrels should be absolved.
You can dress up that pig as much as you like. It’s still a pig.
@Cassandra: “We conclude dramatic failures of corporate governance and risk management at many systemically important financial institutions were a key cause of this crisis.”
Freddie and Fannie are among the systemically important financial institutions.
Anyone can understand a mortgage if it is their full time job to understand mortgages. Unfortunately, not everyone’s job is to understand them, but they still need to work a full time job to pay it. Imagine if these wall street bankers had to cook their own food, or build their own houses, or put out their own fires. If they ever had to do the jobs of the people they prey on…. MOrtgages would be a whole hellovalot simpler.
@Liberal Elite: Don’t misunderstand my argument.
Buy-side investors, two of which were Freddie and Fannie, fueled the crisis.
Buy-side investors include mutual funds, hedge funds, and proprietary trading units at Wall Street banks.
Freddie and Fannie had a role though. The fact that they slowed the growth of their portfolio is minor, because they also twisted to higher risk MBSs and CMOs.
@Davy — It is simple. Do you stand with working people or do you stand with the 1%? That is what matters. It’s a values question, not a data question. And it’s a bigger question then what Fannie and Freddie did or didn’t do at a particular juncture. Let’s not get caught up in minutia.
@All: Do mortgage originators originate “bad” mortgages if there are no buy-side investors willing to buy the “bad” mortgages?
The same concept underlies fiscal stimulus.
@D “Don’t misunderstand my argument.”
And don’t misunderstand mine. The financial downturn goes well beyond the mortgage mess.
By focusing on a a few people in a small part of the whole mess, you inhibit policies that would move the nation forward. This is the game they play… this is the game you’re playing.
@Valentine: The values question is when is government intervention appropriate. I said that it depends on whether a reasonable person can understand and prepare against a danger.
It cannot be always. That’s an absurd result, as government can strip you of all rights. (Think a child being removed from her home because her parents are gay.)
It cannot be never. That’s an absurd result.
The question is when is government intervention appropriate.
@Liberal Elite: You’re right, and we discussed this in another thread.
But remember, the government offers FDIC insurance to protect ordinary people from bank failures. All interventions have a price. All choices have a price – the opportunity cost.
There have *always* been bad mortgages — they predate the securitization of them. The only way there are no bad mortgages is to not originate any.
And your clown show marches on.
Next time, do us the courtesy of dealing with the real data that you keep running away from.
@ Davy: “When is government intervention appropriate”? Not when a “reasonable person can understand and prepare against a danger”?
There should be laws that protect people against dangerous financial practices, so that we don’t have to be constantly worried about getting screwed.
@Valentine: The reasonable person standard is venerated. In fact, the reasonable person standard is the basis of negligence:
Negligence is a failure to exercise the care that a reasonable person would exercise in like circumstances.
In general, the law requires people to act reasonably. This is nothing new.
I am not saying it is something new.
@Valentine: So what’s the argument for not requiring people to exercise reasonable care in financial transactions?
@Davy — I am saying that the government needs to regulate banks so that they do not prey on customers or make money trashing the economy. Just like Bain should not be allowed to pad the pockets of executives, at the expense of working people. It is a structural argument that has little to do with the micro decisions of individuals. Focusing on minutia takes the conversation away from the political point. It’s a distraction.
@Valentine: Policy is based on how individuals act. Hence, the new emphasis on behavioral economics.
@Davy — I guess we are going to have to agree to disagree.
Good luck with that.
LOL – I will agree to disagree, whether or not the man keeps on arguing.
@Valentine: That’s fine. 🙂
You should read “Nudge: Improving Decisions About Health, Wealth, and Happiness” by Richard Thaler and Cass Sunstein.
Thaler is important in the field of behavioral economics.
Sunstein was on Obama’s short list of Supreme Court nominees. He’s also married to Samantha Powers, a special assistant to the President.
It provides a good introduction to cutting-edge regulatory ideas. I hope you read the book – regardless of whether you agree with me. 🙂
Thanks Davy. I just ordered Zombie Economics: How Dead Ideas Still Walk Among Us, which sounds great:
“The recent financial crisis laid bare many of the assumptions behind market liberalism–the theory that market-based solutions are always best, regardless of the problem. For decades, their advocates dominated mainstream economics, and their influence created a system where an unthinking faith in markets led many to view speculative investments as fundamentally safe. The crisis seemed to have killed off these ideas, but they still live on in the minds of many–members of the public, commentators, politicians, economists, and even those charged with cleaning up the mess. In Zombie Economics, John Quiggin explains how these dead ideas still walk among us–and why we must find a way to kill them once and for all if we are to avoid an even bigger financial crisis in the future.”
Sounds like a good read
Recently, I’ve read “The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It” and re-read “”When Genius Failed: The Rise and Fall of Long-Term Capital Management.”
I still recommend “Nudge.” [I forgot to mention that Sunstein is Obama’s regulatory czar as the head of the White House Office of Information and Regulatory Affairs (OIRA).]
Regardless, good luck with the new book!