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The Sissies Of Wall Street, The Suckers Of Main Street: Welcome To Casino Capitalism

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Let me get this straight.

First you con people who can’t afford to buy a home that they can get one with no deposit down at a great rate, which will shoot up next year but never mind, don’t worry — your house will be worth so much more then, you’ll be able to borrow more money against it to pay off your mortgage.

Then you take these mortgages, bundle them with other mortgages in various packages called credit derivatives, and you sell these debts to another company and take your commission on the sale. Then that company resells the debt to another company, who sells it to another company, on and on, each company repackaging it, and each taking a commission, till nobody knows who holds what or what it is they hold anymore. Some time along the line, insurers watch all these commissions being made, and they say, hey, for a commission, we’ll insure your debt (in things called credit default swaps).

Now the funny thing is, these debts are being bought by debt. Yes, the people buying the debt have borrowed tons of money from other people to buy the debt with. In fact, for every dollar in real money they have, they’ve borrowed $30 with which they’ve bought more debt.

People figure all this debt in the world amounts to around $45 trillion plus. To give you an idea how much this is, people say the Iraq War will cost us around $1 trillion. So we’re talking 45 Iraq Wars of debt here.

This is not money printed by the government. This is money made up out of nothing but bad deals by Wall Street institutions, i.e. investment banks like Bear Stearns, Lehman Brothers, Morgan Stanley, and Goldman Sachs, and insurers like AIG, and mortgage holders like Freddie Mac and Fanny Mae, in some new kind of Ponzi scheme.

Why do they do it? Listen, every time they sell the debt, they make a commission, and all the busy sellers get million-dollar Christmas bonuses — the 2006 Wall Street bonus payout was $62 billion. They call this raising capital, but it’s actually just going into more debt.

Sooner or later, the poor saps who were suckered into the American dream of owning their own homes find they can’t keep up with the mortgage when the rate shoots up the second year. Plus, instead of going up, home prices start to drop, because what goes up often comes down. The Ponzi scheme starts to unravel. Pop goes the bubble.

So what happens?

The guys who’ve been borrowing money to buy debt find that nobody wants to buy the debt they peddle or own anymore, and the insurance they took out is not there anymore, so they’re holding worthless debt, and their stock price is tanking, so what do they do?

They run to the government. Please help us, they say. We’re the financial system, the Masters of the Universe, and we’re going to collapse, and everyone will suffer most grievously, so do something.

Don’t worry, boys, says the government, who in this case is a guy called Henry Paulson, the Secretary of the Treasury, who two years ago was the CEO of one of the using-debt-to-buy-and-sell-debt companies, Goldman Sachs, an ex-Master of the Universe himself.

He’s their guy, so of course he’s going to help his buddies on Wall Street. He takes $85 billion of the tax-payers’ money and gives it to the guys who insured a lot of the debt, AIG – but, he says, now we own you, so we’re firing the guys who ran your company, but they can walk away with $100 million plus severance packages (which is what failed CEOs in this world get for messing up).

To failing Lehman Brothers he says: I’m not going to help you, because I’m a former Goldman Sachs man, and as a competitor of my old firm, you can go screw yourself.

Then he says, what the heck, to help the rest of you out, my old buddies, I’m going to use $700 billion of the tax-payers’ money to buy all your bad debt, and tell everyone I’ll resell it later when everyone is not so panicky anymore. Meanwhile, we’re going to stop people from short-selling the tanking shares of all my buddies on Wall Street.

Note that Paulson doesn’t say, I’m going to use $700 billion to give credit to those deserving firms who were hoping to get credit from the failing institutions and now can’t. Or I’m going to use $700 billion of the tax-payers’ money to buy the mortgages of the poor suckers who are losing their homes, to help them hold on to their American dream of owning their own home.

No. I’m going to use the tax-payers’ money to help the guys who conned these saps. We’re not going to help the suckers, we’re going to help the predators.

This is what they call the free market. A better name would be the free-for-all market. An even better name for it is casino capitalism.

But it’s slightly different from honest gambling. The way Wall Street gambles, you bet with someone else’s money, and when you lose it all to the casino, you say, hey, I want my money back, and you get the casino management to get the maids who clean the hotel rooms to fork over their taxes to you.

Let’s note that personally these guys never suffer. They’ve been drawing millions in hard cash from their gambling commissions, and they’ve stashed these millions in big houses and yachts and cellars of fine wine and art works by Van Gogh and Francis Bacon and shower curtains spun from pure gold. The only things that will suffer are their corporations. Corporations are a great invention, because what they do is protect the guys who own and run them from personal accountability. If my corporation pollutes your water, the corporation is responsible, not me. If my corporation goes bust, you have to sue it for the debt I’ve made, while I walk away with hundreds of millions, which I’ve been drawing out of the corporation while it’s been screwing you on my orders.

So the casino capitalists want the government – that’s us poor taxpayers — to bail them out of their own bad deals. Or the sky will fall on everyone, they claim. As Martin Luther King used to say about capitalism, it’s socialism for the rich and free enterprise for the poor.

One thing you have to know about capitalism is that there is only one good thing about it. It lets you, an individual, start your own business. And it lets you build your business by raising capital for it — from your family, from venture capitalists, from banks, and on the stock market. That’s a terrific thing, and it’s the reason capitalism works great, because it encourages entrepreneurs. The rest that capitalism does is mostly massive harm, and that’s why we need government — to make regulations so corporations are forced to clean up after themselves when they pollute; so Enron crooks can go to jail; so deals can be transparent; so intellectual property laws can be enforced; etc. etc. If there were a truly free market, capitalism would quickly devolve into monopoly capitalism, because that’s what happens if you don’t regulate it. Which is why we have too many monopolies already since voodoo economics started under Ronald Reagan — from Microsoft to agribusiness, from media to car makers.

Milton Friedman and the Chicago Boys and the Washington Consensus and the Wall Street Journal and Reaganomics and all the rightwing conservative Republican Party “free-market” propagandists are all wrong, and have been finally proven hideously wrong with this latest blowup. Reagan killed Savings and Loam regulations, and the Savings and Loan scandal duly followed. Warren Buffett warned us all back in 2003 when he called credit derivatives “financial weapons of mass destruction.” He knew then what the rest of us have found out today. The “free-market” fundamentalists should please shut up forever. Their philosophy is bunk. The Wall Street Journal should fire their propagandists. Unfettered free-marketers are the terrorists lurking in the bosom of capitalism. Only highly regulated capitalism works. The minute any corporation complains about a regulation, you know it’s necessary, because they wouldn’t be complaining if it weren’t.

Let’s face it, these Wall Street guys are sissies. They can’t stand to suffer themselves the pain they cause others. They love to pass their pain on to Main Street. They are not men. They don’t know how to take responsibility. They come from Ivy League universities that teach their entitled students how to stay entitled without ever taking responsibility for anything they do. Sometime, some Ivy Leaguer has to write a thesis on how it is that our Ivy League has consistently, over the last 30 years, produced the worst elite in the world – a greedy American elite who is worse than the Russian, African and Arab elite combined.

These casino capitalists don’t create anything solid. They don’t, like Steve Jobs, make products that people like to own. They don’t build things. All they do is make money from making debt. They’re parasites. Over 30% of our corporate profits last year came from these financial corporations. It’s the non-productive side of capitalism – FIRE (finance, insurance, and real estate).

These FIRE guys are Ivy League scum. At their posh Ivy League universities, and from their entitled parents and peers, these entitled elite bastards learn that greed is everything. They think it’s OK to take this precious thing they have, their lives, and use it to do nothing but make money. They are not teachers, or doctors, or firefighters, or nurses. They’re bottom-feeders in the same moral universe as thieves. Worse: they prey on poor people. They are the predators of the American Dream.

So how is it possible for Wall Street to pull this latest major casino con on Main Street?

Easy. You just go to Congress. You’ve heard of the military-industrial complex, haven’t you? That boondoggle of the century that uses our taxes to build a military machine that’s bigger than the rest of the world’s armies combined, with over 700 military bases in every corner of the world – this in a country that no other country would ever dare to attack, given the fact that the first and last country who tried it, Japan at Pearl Harbor, got two whole cities nuclear-holocausted for their hubris? Heard of it?

Well, there’s a financial-congressional complex that is just as bad. A senator called Phil Gramm masterminded two pieces of deregulation — the 1999 repeal of the 1933 Glass-Steagall Act and the Commodities Futures Modernization Act of 2000. The last one was passed by tagging 262 pages of dense language onto an 11,000-page omnibus bill on the Friday before the Christmas recess. “The act freed complex derivatives from any regulation,” says Michael Greenberger, who served in the Commodities and Futures Trading commission in the late 1990s. “It set the stage for the present mess.”

Phil Gramm is the guy who said we’re having a “mental recession” and we’re “a nation of whiners.” He was John McCain’s chief economic adviser and is the guy most likely to be Treasury Secretary in a John McCain administration. In which case, Wall Street will once again have their man in the Treasury, so they’ll be free to invent a new game to con all us suckers on Main Street.

Because hey, John McCain might just make it to president. After all, he’s pulling a great con on the suckers of Main Street right now with Sarah Palin and his story of what a big war hero he is.

Let’s take a look at this candidate for president, and see why he would be even worse than Bush.

1. John McCain came bottom of his class at Annapolis but gained promotion in the Navy because his Dad was a big-shot admiral. He became a navy pilot, and crashed more planes than anyone, but kept his job because his Dad was a big-shot admiral.

2. He was shot down over Vietnam and became a POW. They beat him up and put him in a few stress positions (nothing as bad as what we’ve done to guys in Afghanistan, Abu Ghraib and Guantanamo). So what does John McCain do? He sings like a canary. He tells his captors the secret US flight routes over Vietnam and they use this information to shoot down his buddies. When they find out he’s the son of a big-shot admiral, he gets better treatment than all the other POWs, and they even offer him early release, which he heroically refuses. Afterwards they treat him OK. Check out pictures of McCain when he was released. He looks sleek and well-fed, as fit as a fiddle.

3. While he’s a POW, his loyal wife back in the States gets into a disfiguring accident. When he sees her again, he’s somewhat freaked and starts cheating on her. He finally dumps her for a rich, beautiful heiress. His new father-in-law bankrolls his first run for Congress.

4. He spends the rest of his life mooching off his rich wife. He owns seven homes. He wears $600 Italian handmade shoes.

5. His bosom buddy Keating went to jail for his major role in the Savings and Loans scandal, but John McCain escaped jail and got a slap on the wrist from the Senate. His bosom buddy Phil Gramm created the deregulation that led to our current crisis and John McCain wants to make him his Secretary of the Treasury.

6. He picked Sarah Palin as his running mate, a woman who can connect with an audience and read a speech great that someone else writes for her, but who is the Earmark Queen of Alaska and got more pork for her city and her state than anyone, and got the Evangelicals behind McCain because she believes the earth was created in seven days 6,000 years ago.

This is John McCain, the joker who is trying to con Main Street into voting for him. Many of them are falling for his con, especially regular folks. They think this rich elitist who cruised on his Dad’s name and his wife’s riches will be able to understand the problems of regular folks. They think he’ll be a terrific Commander-in-Chief because he was a POW in Vietnam. WTF? A terrific Commander-in-Chief? The man is legendary for his bad temper. He’s given to fits of uncontrollable rage. You think he’s got the temperament to be our Commander-in-Chief? He’s on six medications a day to keep himself stable. It’s very probable something happened to his mind in those years of being a POW – something that made him unfit to be our Commander-in-Chief. But nevermind, we’ll vote for this angry old geezer who wants to start another war with Iran.

Anyway, the Big Wall Street Con is working. Paulson will get the money to bail out his buddies on Wall Street. Things will get worse before they get better, but Wall Street is going to make out like bandits again because the casino capitalists who are too sissy to drink their own medicine will get the socialism for the rich – corporate welfare — they always ask for. As for the rest of us on Main Street, we’ll get suckered again and, if we’re dumb enough to vote John McCain, it’ll happen sooner than later.

This is America, folks, where you and I live. The last best hope of humankind. Dream on, suckers.

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About Adam Ash

  • http:://www.republicofdave.com Dave Nalle

    Nice to see you back, Adam. I liked your simple and clear explanation of derivatives. Pity about all the mindless anti-corporatism that follows it.

    And for the record, deregulating derivatives is not a problem if the loans they derive from have value. The root problem is the making of worthless loans, and that was not Phil Gramm’s fault. That fault lies with Jimmy Carter and Bill Clinton.

    1. John McCain came bottom of his class at Annapolis but gained promotion in the Navy because his Dad was a big-shot admiral. He became a navy pilot, and crashed more planes than anyone, but kept his job because his Dad was a big-shot admiral.

    ‘more planes than anyone’? There’s a nice specific stat. In fact, quite a few other pilots crashed more planes than McCain.

    2. He was shot down over Vietnam and became a POW. They beat him up and put him in a few stress positions (nothing as bad as what we’ve done to guys in Afghanistan, Abu Ghraib and Guantanamo).

    Fundamentally untrue. Read up on the things which were done to McCain. There’s no comparison.

    So what does John McCain do? He sings like a canary. He tells his captors the secret US flight routes over Vietnam and they use this information to shoot down his buddies.

    The evidence actually doesn’t support this claim.

    When they find out he’s the son of a big-shot admiral, he gets better treatment than all the other POWs,

    You mean like breaking his leg and then never setting it properly? Or keeping him in a box for a year? Or perhaps the regular beatings?

    and they even offer him early release, which he heroically refuses. Afterwards they treat him OK. Check out pictures of McCain when he was released. He looks sleek and well-fed, as fit as a fiddle.

    Seems like you’ve only seen the photos from when he got back to the states. Here’s a photo from when he was on shipboard on his way back. Sure looks like the picture of health. Of course from that picture you can’t see that he’s unable to walk or lift his arms, and it’s before his leg was broken and then reset multiple times and the dozens of operations for his other injuries from his pleasant little stay in Vietnam.

    4. He spends the rest of his life mooching off his rich wife. He owns seven homes. He wears $600 Italian handmade shoes.

    Nice class envy. What does this have to do with anything? You think Obama buys his clothes at a thrift store?

    Dave

  • Pablo

    Wow, this is the first article that I have read on this site in months that was any good. Thank you, I enjoyed it thouroughly.

    Me being the coinspiracist that I am can not help but point out the cfr connections to this current looting. The following players are all members of the cfr. For those of you that are not aware, the cfr was created by and continues to be in the interest of JP Morgan, who not only bought out Bear Stearns for 2 bucks a share, but just today acquired Washington Mutual. They are coming out like, uhhhm bandits! Like they say in Hollywood, just follow the money!

    Paulson
    Bernanke
    Phil Grahmm

    We sure could use the 2,300,000,000,000 now that the pentagon conveniently cannot account for (dissappeared) that Rumsfeldt announced on 9/10/01
    The looting continues! And im just a paranpoid conspiracist hehehehe. :)

    The looting continues!

  • Zedd

    Beautiful! Simply stated = Smart!!

  • Lisa Solod Warren

    Good work taking off from my piece from yesterday. I think, between the two of us we make our case for NOT buying into Paulson’s plan.
    Unfortunately, it is going to happen anyway, in some form.

  • http://www.associatedcontent.com/user/39420/joanne_huspek.html Joanne Huspek

    Nice piece, well written, sassy and put the words from the top of my head out there, but you forgot one thing. Barack Obama and the Democrats were in there too, along with McCain and the rest. The whole Fannie/Freddie deal was set up with the Dems leading the way, and even Obama took money from them.

    You can’t blame a cesspool of corruption and greed on one man or even one party. The Congress is full of jokers who will willingly sell out all of us on Main Street for some moolah.

    I used to wonder why anyone would run for public office, be it mayor, senator, president. Now I know why. It’s the freakin’ new age cash cow.

    I trust none of them.

  • Les Slater

    I agree with much of what Dave says. Class envy, or dumping on an individual, for whatever privileges they may have had, misses the real points, many of which, Adam presented. They also lead, due to imbalance, to the conclusion that Obama will be better, and therefore we should vote for him.

    The problem is systemic. Investing in productive capacity has not been very attractive of late. Adam’s mention of 30% of all profits coming from parasitic ‘enterprise’ is probably understated. This trend had started in the mid to late 60’s and has put the economy into a crisis for about two decades now. The 1987 crash signaled the maturing, and irreversibility, of this crisis.

    Any bailout of Wall Street does not fundamentally solve any problems. At best, it will just delay the meltdown. It does not at all address the deteriorating living standards of a significant minority, if not a majority, of the population.

    There is no excuse whatsoever that a modern, cultured, technically advanced nation can’t provide all the necessities of life, comfort and security for all its population. It has been suggested that the U.S. has made a deliberate ‘moral’ decision to not do this.

    The majority of us can’t afford a SYSTEM with that sort of morality at the very heart of its essence. That morality, as George W. Bush puts it, the ‘Ownership Society’, is at the heart of the INTENSIONAL creation of the housing bubble.

    In his memoirs published last year, Alan Greenspan, defending the feds role in pumping up the housing market stated, “Protection of property rights, so critical to a market economy, requires a critical mass of owners to sustain political support.”

    To sustain political support! In other words, a bribe. That’s why the poor were such targets. They did believe housing prices would continue to rise. They had the brightest of their economic strategists work out what would be needed to pull this off. GWB’s ‘ownership society’ was part of this but this was planned, and the necessary legislation enacted, during the Clinton administration.

    It is the private ownership of key aspects of the functioning of society that is at the root of the problem.

    It is not out of envy, but from the basic necessity for our survival, that we must take the very critical functioning of society out of private hands.

  • Lisa Solod Warren

    Joanne, The Fannie Freddie thing was set up in the 60s…..

    It was really made possible by Bush (see my post under my piece) who allowed them, encouraged them, to make loans to poor people with no money down.

    Yes, both dems and repubs took money from their lobbyists….

    Lobbyists of all kinds need to be abolished.

    By FM and FM are only a small part of it.

    Please remember that the deregs by the Repubs (esp. Gramm et al) are hugely responsible for this and Republican support for deregulation, as well as much greed at the top is the big player.

    The Repubs have had either the entire Congress or the Presidency and The Congress for most of the Past 20 years….

    Keep that in mind. Thanks

  • Clavos

    500000000

  • Homeless

    Alexander Cockburn writes..,In 1999 John McCain’s friend and now his closest economic counselor, then a senator from Texas, was the prime Republican force pushing through the Gramm-Leach-Bliley Act. It repealed the old Glass-Steagall Act, passed in the Great Depression, which prohibited a commercial bank from being in the investment and insurance business. President Bill Clinton cheerfully signed it into law.

    A year later Gramm, chairman of the Senate Banking Committee, attached a 262-page amendment to an omnibus appropriations bill, voted on by Congress right before a recess. The amendment received no scrutiny and duly became the Commodity Futures Modernization Act which okayed deregulation of investment banks, exempting most over the counter derivatives, credit derivatives, credit defaults, and swaps from regulatory scrutiny. Thus were born the scams that produced the debacle of Enron, a company on whose board sat Gramm’s wife Wendy. She had served on the Commodity Futures Trading Commission from 1983 to 1993 and devised many of the rules coded into law by her husband in 2000.

    Somewhat stained by the Enron debacle Gramm quit the senate in 2002 and began to enjoy the fruits of his own deregulatory efforts. He became a vice chairman of the giant Swiss bank UBS’ new investment arm in the US, lobbying Congress, the Federal Reserve and the Treasury Department about banking and mortgage issues in 2005 and 2006, urging Congress to roll back strong state rules trying to crimp the predatory tactics of the subprime mortgage industry. UBS took a bath of about $20 billion in write offs from bad real estate loans this year.

    Long acknowledged as one of the most mean-spirited men ever to reach Congress, utterly charmless, (he managed to win only eight delegates in a hugely expensive bid for the Republican nomination in 1996) Gramm kept close contacts with the man dubbed McNasty when he was at the Naval College in Annapolis. Aside from their affinities in viciousness of character Gramm had access to big campaign funders in Texas, necessary from McCain’s 2008 bid. He became McCain’s campaign chairman and chief economic advisor.

    Gramm is a prime exhibit in any list of the architects of the current economic mess. At the behest of the banking industry he wrote the laws that enabled the huge balloons of funny money debt that exploded this year. The deregulatory statutes bearing his name prompted Wall Street’s looting orgy in the subprime thievery…

    Dave Nalle wrote a lick-spittle fawning piece on the same Phil Gramm ,the very same miserable,malevolent,sad sack of shit ,one of the nastiest politicians in America, jeering about Americans suffering from a “mental recession,” and becoming “a nation of whiners.”…

    Look who is whining for a bailout now…..or is that a giveaway?

  • http://www.futonreport.net/ Matthew T. Sussman

    Well, if I could blame one man for this whole mess, it’d be Jim Cramer. “Don’t Buy” Diet Pepsi my ass. I LOVE DIET PEPSI.

  • bliffle

    Adam Ash is right.

  • Lisa Solod Warren

    Clav, dear, what are you counting?

  • Adam Ash

    Lisa,
    Thank you for your kind words. I read your article and thoroughly enjoyed it. I also read the comments, which included the mind-boggling stat that we have $550 trillion in paper (extrinsic value) riding on $45 trillion in real assets (intrinsic value), i.e. houses, cars, factories, tools, etc. which I guess means that our entire economy is leveraged 1 to 12. Is that a good thing?
    Adam Ash

  • Lisa Solod Warren

    how could it be a good thing:)

    however, I still don’t support the bailout, either:)
    There are other, much more creative ways of helping our economy and I keep hearing them from everyone but the government.

  • bliffle

    The leverage we have is the same as 1929, just before the stock market crash. we swore we’d never do that again.

  • Sarah

    If you lose your job, don’t worry. John McCain will be expanding his staff of foreign policy experts after he is elected president.

    Just keep enough money for a flight to Alaska. Go to the outlying island where you can see a piece of the barren Russian landscape. With that foreign policy experience, you’ll be a shoe-in for job in a McCain administration.

    The job should be good for at least $100,000.

  • Doug Hunter

    Here’s a different finger pointing a different way, directly from the NY Times in 1999.

    “In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

    The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

    Fannie Mae, the nation’s biggest underwriter of home mortgages, HAS BEEN UNDER INCREASING PRESSURE FROM THE CLINTON ADMINISTRATION to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.”

    Hmmm, here we have a democratic president pushing for lenders to lend more money to low income (read people who cant afford to pay it back) groups. I know it’s popular for your lefties to just blame everything on Bush but this problem existed long before his policies took hold. You should read the rest of the article anyway as the author seemingly has a crystal ball looking forward to today, predicting exactly what will happen if housing prices ever start coming down with these risky loans in place.

  • Doug Hunter

    Here’s John McCains take 3 years before this current crisis in 2005. Here is an excerpt from a speech to the senate pushing for new regulations regarding Fannie and Freddie.

    “Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.

    The Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

    The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

    For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.

    I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

    I urge my colleagues to support swift action on this GSE reform legislation.”

    Wow, now that’s vision and leadership for you. I know the economic issues voters will be won or lost in 10 sec soundbytes and clever one liners, but the records speaks for itself. John McCain is the one who recognized this problem for what it was years before it happened and tried to do something about it.

  • Doug Hunter

    Also, additional factual information from the NY Times Sep 11, 2003:

    “The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

    Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

    The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

    The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates……

    Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

    ”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

    Representative Melvin L. Watt, Democrat of North Carolina, agreed.

    ”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.”

    Hmmm, looks like Bush was on to something. I suppose even a blind hog finds a nut sometimes.

  • http:://www.republicofdave.com Dave Nalle

    Oh Doug. How dare you disrupt the discussion with the truth.

    Good work taking off from my piece from yesterday. I think, between the two of us we make our case for NOT buying into Paulson’s plan.
    Unfortunately, it is going to happen anyway, in some form.

    Lisa. So are you glad McCain came back to DC, rallied the Republicans and got them to stop the bailout and demand that we start looking for more sensible solutions?

    The leverage we have is the same as 1929, just before the stock market crash. we swore we’d never do that again.

    Really, Bliffle? Show me some evidence of this. Leveraging was not a major factor in the depression. Nor was expansion of the money supply. Credit played a relatively small role. The problem was contraction of world markets, which is not a factor in the current economy. Very much the opposite, really.

    Dave

  • Cannonshop

    #21

    Dave, I guess education changes with the times, but when I took U.S. History in high-school, we were told that Leveraging was a major contributing factor to the crash of 1929. Now, admittedly, it was in a public school circa 1989 or so, and in Washington State, so there’s every chance the textbook, teacher, and nifty VCR video were slanted or even utterly wrong…

  • Lisa Solod Warren

    Dave, don’t be silly, McCain didn’t do a thing. The Republicans were already doing what they were doing… it was all a dog and pony show. You don’t really believe he had anything to do with Boehner’s decisions, do you?

  • Lisa Solod Warren

    I know that, Doug. So why DID Bush go on television in 2002 and encouage Fannie and Freddie to keep making those loans to poor people? Only to turn around and change his mind a year later? Because he was a lousy president and had no effing idea what he was doing.

    And Clinton admiitted he startd screwing with this in 1999. A big mistake, he said, that began with “good intentions.”

    I think there is enough blame to go around.

    Unfortunately…… it was never to put to rest. NOT in 2003 or 04 or 05 or 06 or 07….
    and then along with everything else, we got to 08
    and the Bush admin’s famous 700 Billion dollar bailout.

    Good money after bad.

  • bliffle

    The burste housing bubble is at the heart of the credit problem. If we propose to solve the problem by throwing $700billion at it, then why not attack the problem where it occurs: with the 2 million foreclosures.

    Let’s see: with $700billion to work with and 2 million foreclosures that gives us $350,000 to lavish on each foreclosure.

    We should be able to do something with that. the gov could take over the mortgages and form new credit institutions, leaving the establishment out in the cold.

  • http:://www.republicofdave.com Dave Nalle

    Dave, I guess education changes with the times, but when I took U.S. History in high-school, we were told that Leveraging was a major contributing factor to the crash of 1929. Now, admittedly, it was in a public school circa 1989 or so, and in Washington State, so there’s every chance the textbook, teacher, and nifty VCR video were slanted or even utterly wrong…

    Revisionism? Or are you sure you remember it as leveraging or just bad real estate loans? The difference in 1929 compared to now is that huge amounts of mortgaged property lost much more value than is the case today. Leveraging didn’t need to play a big role, because the same effect was achieved by having many more loans go bad. And I say this with the personal knowledge that my great grandfather is probably actually mentioned in your history book as responsible for kicking off the real estate collapse with the largest failed real estate speculation in US history, and the loans he used to buy 2/3 of the land in Florida were not leveraged, just made on land which was overvalued. If he’d been able to hold onto the land for another decade the value would have risen and he and his partners wouldl have made a fortune.

    Dave, don’t be silly, McCain didn’t do a thing. The Republicans were already doing what they were doing… it was all a dog and pony show. You don’t really believe he had anything to do with Boehner’s decisions, do you?

    Odd. Every account of the meeting where the democrat schemes got shut down seems to credit McCain with providing the unifying leadership to get Republicans to stand firm and to get some democrats to stand with them.

    Dave

  • jamminsue

    Dave:

    Wow, this is the first time I have seen you do something like this!

    “That fault lies with Jimmy Carter and Bill Clinton.”

    It wasn’t Jimmy or Bill that said the toxic words “trickle down,” began the union-busting, deregulation, or ushered in the post Vietnam negative spending. Besides, if you want an clear example of greed, how about calling Ketchup a vegetable?

    Jimmy said we need to start being responsible consumers and spenders and was kicked out of office for being naive.
    Bill worked to balance the budget and managed to actually do so, once or twice.
    How are they responsible for greed?
    Oh, because they were not able to stop it? Then Bush and Bush are equally responsible.

    Sorry that canard won’t fly; I think greed is as old as humanity.

  • http://ruvysroost.blogspot.com Ruvy

    Adam,

    This article would have been a lot better without the attempts to paint McCain as nothing better than a cowardly traitor. The casino gambling pricks on Wall Street have destroyed enough lives without his help.

    So, when are you going to finally admit that your adopted country is going down the toilet almost as fast as your native one? And how warmly will an empty suit like Obama embrace a thug like Zuma?

    Shana Tova…..

  • Kwaayesnama

    ARIZONA VOTED AGAINST MCCAIN

    I love the fact that John McCain blames the vote going against the bailout on Obama. But there is an interesting fact out there. ALL the representatives from Arizona voted against the bailout? It just shows how much the other reps from AZ respect McCain. If he can’t get the republicans from his home state to vote with him how is he going to get the rest of the nation to work with him. Maybe they are angry because while McCain brags that in 26 years he has never done anything for his home state, they are all stuck working for the people of Arizona in DC.

    ARIZONA
    Democrats — Giffords, N; Grijalva, N; Mitchell, N; Pastor, N.
    Republicans — Flake, N; Franks, N; Renzi, N; Shadegg, N.

  • Vera

    This is something you need to think about if you are planning to vote for the McCain/Palin ticket. Do you think McCain cares about the average American? – Think again! In 26 years John McCain voted against increasing the minimum wage 18 times.
    In the same 26 years he voted for tax breaks for the wealthiest 2% of America 27 times. Why should that matter to you? McCain believes in a trickle down economy. You know if the wealthy get wealthier they will share with you. Obama believes in a trickle up economy, higher salaries for workingmen and women. When they earn more money they are able buy or keep homes, resulting in more employment in building trades. They buy clothes for their children, resulting in more Wal-Mart and GAP jobs. They will purchase new trucks and cars that will keep auto workers employed. Now what is better for this nation a trickle down economy or a trickle up economy? This republican is voting for Obama because we have tried a trickle down economy for eight years and look where this nation is now! Could it get any worse with Obama/Biden?
    The old John McCain before he developed Alzheimer’s.

  • http://www.republicofdave.com Dave Nalle

    This is something you need to think about if you are planning to vote for the McCain/Palin ticket. Do you think McCain cares about the average American? – Think again! In 26 years John McCain voted against increasing the minimum wage 18 times.

    If only it had been 19. Do you realize that the minimum wage is completely meaningless? the natural wage set by the market is higher even than the new minimum wage passed by Congress. The legislation is a meaningless waste of time.

    In the same 26 years he voted for tax breaks for the wealthiest 2% of America 27 times.

    No, he voted for tax breaks. That fairly distributed tax breaks benefit the top 2% (who btw pay 50% of the taxes) is just the way math works. Those tax breaks also benefited many of the rest of us.

    Why should that matter to you? McCain believes in a trickle down economy. You know if the wealthy get wealthier they will share with you.

    Do you know what ‘trickle down’ really means? Keeping the people who build businesses and hire other people solvent so that they can employ more people and pay them higher wages.

    Obama believes in a trickle up economy, higher salaries for workingmen and women. When they earn more money they are able buy or keep homes, resulting in more employment in building trades. They buy clothes for their children, resulting in more Wal-Mart and GAP jobs. They will purchase new trucks and cars that will keep auto workers employed. Now what is better for this nation a trickle down economy or a trickle up economy?

    There is no such thing as a trickle-up economy. Raising wages artificially just leads to workforce cutbacks, outsourcing and businesses moving overseas.

    This republican is voting for Obama because we have tried a trickle down economy for eight years and look where this nation is now! Could it get any worse with Obama/Biden?

    It sure could. We could lose more control over our lives and our civil liberties and end up completely and irreversibly saddled with an all-encompassing nanny state from which there will be no escape.

    Dave

  • bliffle

    But Dave, isn’t this exactly what the neo-republicans are doing in the Bush administration?

    “We could lose more control over our lives and our civil liberties and end up completely and irreversibly saddled with an all-encompassing nanny state from which there will be no escape.”

    I’m sure many are familiar with the liberties we’ve lost (habeus corpus, torture, false imprisonment, government kidnapping, etc.), and another example is the higher cost of escape since the 50% devaluation of the dollar has made escape from the USA twice as expensive.

  • Homeless

    This rant by Marcy Kaptur deserves worldwide attention
    The Rules of Lets Play a Wall Street Bailout