Questioning Obama's Critics: Why the Dislike?

[LowlyPion]

Whether you think they "deserve" the bonuses or not, they met the contract requirements.

Well then the action by Congress to recover from those ill advised bonus contracts, that failed to recognize for circumstances of abject failure, and treated bonus awards on a virtually guaranteed basis, should get AIG itself off the hook. They honored their contracts. Congress is merely modifying a business reality, that the contracting failed to account for.

If AIG had gone out of business those bonuses would have been nullified in recievership.

 

[LowlyPion]

As a point of interest Obama managed to pick 14 of the 16 teams remaining in the NCAA Basketball tourney.

What's to hate about that, unless he picked against your picks and was right?

 

[Al68]

Meanwhile you had an administration that was philosophically bred on thinking the market would work things out without damage - like Hoover once did - until Lehman suddenly failed amid great surprise. Now that we've gotten rid of Bush and his general ineptness (Katrina, Guantanamo, etc.) and his ideological blindspots about regulation and less government, there seems to be some hope.

Pure nonsense. The solution to problems caused by gov't regulation isn't more regulation. None of these problems would even be possible without the gov't regulation.

I wouldn't call the enlightened notion that people should be free to make their own economic decisions a blindspot. The idea that people need to be "regulated" by government is bred into people that don't know any better by the people who want to oppress them.

 

[Al68]

Well then the action by Congress to recover from those ill advised bonus contracts, that failed to recognize for circumstances of abject failure, and treated bonus awards on a virtually guaranteed basis, should get AIG itself off the hook. They honored their contracts. Congress is merely modifying a business reality, that the contracting failed to account for.

If AIG had gone out of business those bonuses would have been nullified in recievership.

"modifying a business reality", huh? Pretty fancy way of saying "thievery".

Not to mention that that's what contracts are for, to "guarantee" payment. Nothing virtual about it. They were guaranteed the payments in exchange for meeting conditions that they subsequently met. That's the end of the issue for honest people.

What about the big picture consequences of setting even more precedent that contracts and "guarantees" don't necessarily have to be honored? Not to mention the moral/ethical issues.

 

[mheslep]

That's just outright false. The reason was regulation, not deregulation. The Fed Gov't created the demand for the bad mortgages by regulation. That demand wouldn't and couldn't exist in a free market.

AI68 - one can certainly argue about how government action or inaction helped create the current situation, but even genuinely free markets can sometimes run away with themselves. You may mean that generally, markets tend toward equilibrium, but not always. Larry Summers recently summed up a great deal of economic theory on the subject:

One of the most important lessons in any introductory economics course is that markets are self-stabilizing.

* When there is an excess supply of wheat, its price falls. Farmers grow less and others consume more. The market equilibrates.
* When the economy slows, interest rates fall. When interest rates fall, more people take advantage of credit, the economy speeds up, and the market equilibrates.

This is much of what Adam Smith had in mind when he talked about the "invisible hand."

However, it was a central insight of Keynes' General Theory that two or three times each century, the self-equilibrating properties of markets break down as stabilizing mechanisms are overwhelmed by vicious cycles. And the right economic metaphor becomes an avalanche rather than a thermostat. That is what we are experiencing right now.

* Declining asset prices lead to margin calls and de-leveraging, which leads to further declines in prices.
* Lower asset prices means banks hold less capital. Less capital means less lending. Less lending means lower asset prices.
* Falling home prices lead to foreclosures, which lead home prices to fall even further.
* A weakened financial system leads to less borrowing and spending which leads to a weakened economy, which leads to a weakened financial system.
* Lower incomes lead to less spending, which leads to less employment, which leads to lower incomes.

http://www.whitehouse.gov/the_press_office/Remarks-of-Lawrence-Summers-Director-of-the-National-Economic-Council-at-the-Brookings-Institution/

 

[Al68]

AI68 - one can certainly argue about how government action or inaction helped create the current situation, but even genuinely free markets can sometimes run away with themselves. You may mean that generally, markets tend toward equilibrium, but not always.

No, I meant that private companies in a free market would not purposely issue mortgages that they know will lose money.

 

[LowlyPion]

The idea that people need to be "regulated" by government is bred into people that don't know any better by the people who want to oppress them.

This is merely a notion of Government that goes back to the Founding Fathers recognition of the need for checks and balances, for the observation that power corrupts and absolute power corrupts absolutely.

Oddly the Government has endured. And the need for regulation has clearly not disappeared.

 

[LowlyPion]

No, I meant that private companies in a free market would not purposely issue mortgages that they know will lose money.

Sure they would. Just look at the recent behavior. The unregulated derivatives that were created to "pool risks" of mortgages, turned it into a contest whereby the more mortgages you dumped in the pool, the more you made, without regard to quality of what you were dumping.

 

[Al68]

This is merely a notion of Government that goes back to the Founding Fathers recognition of the need for checks and balances, for the observation that power corrupts and absolute power corrupts absolutely.

Oddly the Government has endured. And the need for regulation has clearly not disappeared.

Here's a timely quote:

"Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves." - William Pitt

 

[mheslep]

I have, let's say, an affinity for the argument that regulation causes at least as many problems as it might cure. The problem lies in the fact that modern big government has in many cases taken on liabilities of the marketplace, attempted to prop it up through devices like deposit insurance, pension insurance, flood insurance, and through price controls and subsidies. Now one can argue about the wisdom of doing these things in the first place, but once done, the government is required to do due diligence to make sure it is not left holding the bag when 'irrational exuberance' occasionally visits. Unfortunately that's a primary flaw in the recent Republican execution of domestic governance IMO. They've gotten lazy in working through the idea of smaller government, or 'slothful' as WF Buckley said, as downsizing an organization of that size is a daunting task. You can't just turn out the lights and go home. As TJ O'Rourke says:

The Republicans are the party that says government doesn't work and then they get elected and prove it.

Oh, for those who are currently in power, he also said:

Giving money and power to government is like giving whiskey and car keys to teenage boys.

 

[Al68]

Sure they would. Just look at the recent behavior. The unregulated derivatives that were created to "pool risks" of mortgages, turned it into a contest whereby the more mortgages you dumped in the pool, the more you made, without regard to quality of what you were dumping.

Well, you're claiming that they would engage in that in a free market, then you give an example where gov't regulation is the reason for the behavior.
The demand for these bad mortgages was created by government regulation to begin with. Basically you're claiming that regulation is needed to fix the problems caused by other regulation.

 

[mheslep]

Mortgage bundles, or MBS, were almost entirely a creation of the government created financial firms - Fannie Mae, Freddie Mac, and Ginnie Mae (the GSEs). Also, the ratings agencies that gave the MBS's top ratings were all selected and sanctioned by the federal government. All asset backed securities that are not issued by the GSEs are regulated by the SEC. Credit Default Swap derivatives which were often applied against MBS's were not regulated, though the SEC had the power to do so (my take).

Useful: http://www.mortgagebankers.org/files/Library/IssuePapers/SECRegulationonAssetBackedSecurities.pdf

 

[turbo]

Mortgage bundles, or MBS, were almost entirely a creation of the government created financial firms - Fannie Mae, Freddie Mac, and Ginnie Mae (the GSEs). Also, the ratings agencies that gave the MBS's top ratings were all selected and sanctioned by the federal government. All asset backed securities that are not issued by the GSEs are regulated by the SEC. Credit Default Swap derivatives which were often applied against MBS's were not regulated, though the SEC had the power to do so (my take).

Useful: http://www.mortgagebankers.org/files/Library/IssuePapers/SECRegulationonAssetBackedSecurities.pdf

It would be really helpful if you can provide some links illustrating how the federal government created a framework under which the federal government encouraged the the bundling of worthless real-estate mortgages and let them be sold after being high-rated. Did Obama do all of this? Just checking.

 

[Al68]

It would be really helpful if you can provide some links illustrating how the federal government created a framework under which the federal government encouraged the the bundling of worthless real-estate mortgages and let them be sold after being high-rated.

www.fanniemae.com
www.freddiemac.com
They actually were refusing to buy any good mortgages unless they were bundled with bad ones. And anyone who didn't like it just didn't care about poor people. Remember?

Did Obama do all of this?

No. Is anyone suggesting he did?

 

[mheslep]

It would be really helpful if you can provide some links illustrating how the federal government created a framework under which the federal government encouraged the the bundling of worthless real-estate mortgages and let them be sold after being high-rated. Did Obama do all of this? Just checking.

President Obama had nothing to do with it. MBS links coming...
Edit: oh - subtly pointing out that we're off topic in this thread..sorry.

Anyway.
http://www.house.gov/financialservices/media/pdf/110503cc.pdf
Page 2.

...
Mortgage-Backed Securities
The first mortgage-backed securities arose from the secondary mortgage market in 1970. Investors had traded whole loans, or unsecuritized mortgages, for some time before the
Government National Mortgage Association (GNMA), also called Ginnie Mae,
guaranteed the first mortgage pass-through securities that pass the principal and interest payments on mortgages through to investors. (Ginnie Mae is a government agency that guarantees securities backed by HUD- and Veterans Administration-guaranteed mortgages.) Ginnie Mae was soon followed by Fannie Mae, a private corporation chartered by the federal government—along with Freddie Mac—to promote homeownership by fostering a secondary market in home mortgages.
Pass-throughs were a dramatic innovation in the secondary mortgage market. The whole-loan market, the buying and selling of mortgages, was relatively illiquid. This presented a risk to mortgage lenders who could find themselves unable to find buyers if they wanted to sell their loan portfolios both quickly and at an acceptable price. Holding the loans also meant exposure to the risk that rising interest rates could drive a lender's
interest cost higher than its interest income. But trading whole loans meant a raft of
details and paperwork that made the business relatively costly. MBS changed that. By combining similar loans into pools, the government agencies are able to pass the
mortgage payments through to the certificate holders or investors. This change made the secondary mortgage market more attractive to investors and lenders alike. Investors now had a liquid instrument and lenders had the option to move any interest rate risk associated with mortgages off of their balance sheet.
Growth in the pass-through market inevitably led to innovations especially as originators
sought a broader MBS investor base. In response, Fannie Mae issued the first
collateralized mortgage obligations (CMO) in 1983...

The mortgage market was relatively small change back then. Later in the 90's and in this decade private banks also bundled mortgages, but it was Fannie/Freddie that turned it into a 40:1 multi-trillion dollar monster.

Now certainly the mortgage originators, over leveraged investment banks, the CDS cowboys, and the SEC deserve blame, but my point continues to be, that since nobody else a) had access to credit at government rates and b) had the political clout to keep the regulators away, then if there were no Fannie/Freddie/Ginnie this whole credit disaster never happens at anything close to this scale.

 

[LowlyPion]

No. Is anyone suggesting he did?

Not to be overly picky, but the nominal topic of the thread is about Hating Obama.

 

[Al68]

Well then the action by Congress to recover from those ill advised bonus contracts, that failed to recognize for circumstances of abject failure, and treated bonus awards on a virtually guaranteed basis, should get AIG itself off the hook. They honored their contracts. Congress is merely modifying a business reality, that the contracting failed to account for.

In fairness to Obama, I just read that the AP is reporting that "President Obama has signaled opposition to the House's tax bill on constitutional grounds."

A small pleasant surprise amid all the thievery being contemplated.

 

[Al68]

Not to be overly picky, but the nominal topic of the thread is about Hating Obama.

Granted, but the thread took a slight detour. And the post you replied to was about the mortgage problem that Obama obviously didn't cause.

 

[NeoDevin]

Continuing off topic:

Why does everyone seem to think that this is a dichotomy? Regulation or no regulation? It was (somewhat) regulated with poorly considered regulations before, what is required now is not a complete absence of regulation, or total government control, but simply better thought out regulations. The choice is not between regulation and no regulation, but between bad regulation (what was) and good regulation (hopefully what will be).

 

[Al68]

Continuing off topic:

Why does everyone seem to think that this is a dichotomy? Regulation or no regulation? It was (somewhat) regulated with poorly considered regulations before, what is required now is not a complete absence of regulation, or total government control, but simply better thought out regulations. The choice is not between regulation and no regulation, but between bad regulation (what was) and good regulation (hopefully what will be).

Because one person's "good regulation" is another person's "bad regulation".

And nobody is complaining about what they consider "good regulation". But plenty of people are blaming problems caused by bad regulation on "free market economics".

Government "regulation" of people's behavior is by definition anti-liberty, so the burden should be on the people advocating the regulation, not the people advocating liberty, to justify it.

As far as "good regulations", show me one that protects individual liberty instead of restricting it, and I'll be all for it.

 

[Ivan Seeking]

Continuing off topic:

Why does everyone seem to think that this is a dichotomy? Regulation or no regulation? It was (somewhat) regulated with poorly considered regulations before, what is required now is not a complete absence of regulation, or total government control, but simply better thought out regulations. The choice is not between regulation and no regulation, but between bad regulation (what was) and good regulation (hopefully what will be).

This goes all the way back to Reagan and the notion that markets will act rationally and in their own best interest. We now know this is not true. Markets are driven by short-term gains, and chaos. So it is not a question of regulation or no regulation, it comes down to the essence of markets and how they operate. For example, today, no one in their right mind can argue that AIG was acting rationally, responsibly, or in their own interest. No one can argue that banks betting on an infinite housing bubble were rational. And no one can argue that we have free markets when we have companies that are too big to fail; that can take down the national and global economies.

Taleb argues that we don't even have a model for the emerging global economy; that the old rules don't apply anymore.

 

[Cyrus]

Government "regulation" of people's behavior is by definition anti-liberty, so the burden should be on the people advocating the regulation, not the people advocating liberty, to justify it.

I have no idea what that means. Anti-Liberty? That sounds like a bunch of PC mumbo jumbo. (But I agree with your general sentiments).

As far as "good regulations", show me one that protects individual liberty instead of restricting it, and I'll be all for it.

Again, what is "individual liberty". This is a bogus statement. By definiton, a regulation would restrict liberty. What's your point?

 

[Ivan Seeking]

I have no idea what that means. Anti-Liberty? That sounds like a bunch of PC mumbo jumbo.



Again, what is "individual liberty". This is a bogus statement.

We have a right to be protected from people like the crooks at AIG who would destroy the world for their private gain.

Profits are privatized; risk is socialized. Where is the liberty in that?

 

[Cyrus]

We have a right to be protected from people like the crooks at AIG who would destroy the world for their private gain.

What right do you have? You, and I, have no such rights.

The only thing you and I have is the ability to hold them accountable for breaking laws. The End. That's not a "right" you have.

Correction: You and I don't even have that ability. The government does.

http://legal-dictionary.thefreedictionary.com/Right

 

[Ivan Seeking]

What right do you have? You, and I, have no such rights.

The only thing you and I have is the ability to hold them accountable for breaking laws. The End. That's not a "right" you have.

Correction: You and I don't even have that ability. The government does.

http://legal-dictionary.thefreedictionary.com/Right

False. We also have the right to make laws. That's why we have representitives. Are you forgetting that Congress represents us?

What's more, when a single company can threaten the entire economy, it becomes a matter of national security. If things were to continue to spiral downward, we may be lucky if this doesn't result in WWIII. Times like these can easily lead to protectionism, and war.

Bernachy was most alarmed because he is an expert on the Great Depression. We were falling into what could have been an "unrecoverable spiral" that would lead to the greatest depression of all.

 

[Cyrus]

False. We also have the right to make laws. That's why we have representitives.

Heheh, False. YOU don't have the right to make laws. The congress makes laws. They have to vote on it. Which means YOU, and ME, and that guy you don't like down the street, have to majority support it.

PS: I listen to CSPAN radio every day. The congress is a bunch of IDIOTS. My god they are dumb. Not only are they stupid, they give HORRIBLE HORRIBLE speeches.

I'll never forget one bozo congressman who said "AND THIS BILL WILL SEPARATE THE MEN FROM THE BOYS AND THE GIRLS FROM THE WOMEN"

What a clown. There fools.

They like to hear themselves talk and get money under the table.

Then there's that 1100 page bill no one read and passed. Good greif. What do they do all day - anything?

 

[Al68]

Profits are privatized

What does that mean?

Using the word "privatized" implies that you're referring to something that isn't already private. Are you referring to a public or government entity's profits?

 

[Ivan Seeking]

Heheh, False. YOU don't have the right to make laws. The congress makes laws. They have to vote on it. Which means YOU, and ME, and that guy you don't like down the street, have to majority support it.

Actually, have you ever heard of a petition and a vote; such as proposition 8 in California? But beyond that, ultimately Congress does answer to the people.

You know that I didn't mean that we pass Federal laws directly as citizens.

 

[Ivan Seeking]

What does that mean?

Using the word "privatized" implies that you're referring to something that isn't already private. Are you referring to a public or government entity's profits?

I mean this:

Who made all of the money? A relatively small group of individuals.

Who is now paying for it? All of us. The risk did not reside solely with the individuals who profited; and to the greatest extent, those who engineered this disaster made the most money of all! The bonuses were the ultimate slap in the face in this regard.

As soon as we had companies that were "too big to fail", the free market ceased to exist.

 

[Cyrus]

Actually, have you ever heard of a petition and a vote; such as proposition 8 in California? But beyond that, ultimately Congress does answer to the people.

You know that I didn't mean that we pass Federal laws directly as citizens.

Please, listen to CSPAN radio for a week if you can stomach it. The congress is full of clowns. I don't mean that lightly either. They really are a bunch of stupid folks. They use catch phrases all day long. They love to use them to the point of absurdity. And they use stupid folksy analogies. So if the crisis is like a guy going to his car and the car is full of gunpowder ready to explode, why would he have a stick of dyno-mite in his pocket?

Well, its more like he was driving an ox-cart and the wheel was loose but he decided to go fast into the pot hole.

Well, if the road has pot holes why is he driving the car??

...well you see, its like the car is out of gas but keeps rolling.

<Head Explodes>

Im not making this up. They REALLY do BS like this all day long.

Oh yeah, and the love to "reach across the isle". I guess they high five each other when they reach across. No wait, they're just exchanging money.

 

[Al68]

I mean this:

Who made all of the money? A relatively small group of individuals.

Who is now paying for it? All of us. The risk did not reside solely with the individuals who profited; and to the greatest extent, those who engineered this disaster made the most money of all! The bonuses were the ultimate slap in the face in this regard.

As soon as we had companies that were "too big to fail", the free market ceased to exist.

I was asking what the phrase "profits are privatized" means. The word "privatize" is a verb. It means to make something private which previously was not. So you must be referring to the profits of some government entity. Which one?

And those that engineered this problem are still in congress, now with even more power than before.

 

[mheslep]

This goes all the way back to Reagan and the notion that markets will act rationally and in their own best interest. We now know this is not true. Markets are driven by short-term gains, and chaos. So it is not a question of regulation or no regulation, it comes down to the essence of markets and how they operate. For example, today, no one in their right mind can argue that AIG was acting rationally, responsibly, or in their own interest. No one can argue that banks betting on an infinite housing bubble were rational. And no one can argue that we have free markets when we have companies that are too big to fail; that can take down the national and global economies...

Government is driven by short-term political gains, and chaos. For example, today, no one in their right mind can argue that the Congress was acting rationally, responsibly. And so on.

 

[Ivan Seeking]

Government is driven by short-term political gains, and chaos. For example, today, no one in their right mind can argue that the Congress was acting rationally, responsibly. And so on.

We elect political leaders who can be removed by the will of the people. We don't elect CEOs.

Are you arguing that since free-market theory has failed catastrophically - since the Republicans have have nearly destroyed the country through their blind ideology - we should revoke the Constitution?

Democracy is messy. Even the founding fathers knew that. But free-market theory has failed essentially - fundamentally.

 

[mheslep]

We elect political leaders who can be removed by the will of the people. We don't elect CEOs.

Are you arguing that since free-market theory has failed catastrophically - since the Republicans have have nearly destroyed the country through their blind ideology - we should revoke the Constitution?

Democracy is messy. Even the founding fathers knew that. But free-market theory has failed essentially - fundamentally.

I was making a point about making wild, completely unsubstantiated statements by doing a simple word swap. The point didn't get through.

 

[Ivan Seeking]

A man-on-the-street TEA Party protestor interviewed by CNN today. [11:10 AM PDT] The man was carrying a picture of Obama made to look like Hitler.

Obama is a fascist!
Why?
Because he is!
Why?
Because we need term limits!
What does that have to do with being a fascist? Why is Obama a fascist?
Because he is!

Okay, moving on now...

Thank God these people are out of power. You don't suppose he watches Fox News...?