Tlaloc:
What sounds like a campaign soundbite can indeed be a fact.
Rarely. Soundbites almost by definition distill complicated issues down into simple phrases that are almost always inadequate to capture the whole situation.
Tlaloc:
Tell me, how does a "neutral" debate go?
Sorry, perhaps I should have said "objective" instead of "neutral." Basically what I mean is that partisan slogans and soundbites don't really do much for anyone. I imagine we've both heard most of them, and their not going to change anyone's minds, so lets skip them and aim for substance. Also, I meant looking for, as best we can, a goal of determining what happened and why, rather than setting out to prove one side evil and the other side blameless. I sort of get the impression you want me to defend the democrats while you attack them, but I'm not particularly interested in that role.
In other words, "I oppose Obama's policies X, Y, and Z because I think the harm the economy in manners A, B, and C" is fine, and can lead to good discussion. "Obama declared war on prosperity," is just sloganeering, and isn't very useful.
Tycho:
But not all banks are subject to it. *snip*
Tlaloc:
You didn't include the part where I point out that Clinton revised the CRA and that was when it really became toxic. Nor do you address it in any way.
Well, I guess I'm not seeing that revising the CRA matters all that much, if most of the problematic lending, in any period, was done by banks that weren't subject to it. If you want me to say that the banks that were subject to CRA engaged in more and worse lending after Clinton's changes, I could probably agree with that. But it doesn't really seem crucial if non-CRA banks were doing it even more so of their own accord. Going back to my comment about a more neutral discussion, I'm looking more at whether or not CRA banks caused the problem, or were "just" a contributing factor. You seem to be more interested on which politician to blame. We might have different goals/expectations of the conversation which are making communication difficult. I don't feel the need to defend Clinton's decision, because I can agree it wasn't a good one. I just don't think it can be blamed for the whole crisis, if banks not subject to CRA were giving out more bad loans than those that were. It sounds like you feel my lack of defending Clinton's decision is somehow underhanded or slippery, but at the same time don't feel the need to address my point that non-CRA banks did more bad lending than the CRA banks did. Are we just looking for too different things from the discussion?
Tlaloc:
Is selective quoting part of our "neutral" arsenal in this back and forth? If it is then you can count me out.
I apologize if you feel I didn't quote enough of your post, or if you feel that I didn't address your point. I assure you it wasn't meant as a dirty trick. Rather, I felt your point was sort of a non-issue with regards to mine. But to be fair, if you look back at my post, and how much of your words it contains, and compare it to your post, and how many of mine it contains, I hope you'll agree I'm not the only one who "selectively" quoted. I'd like to keep the discussion about the issues, rather than trying to insult each other, or seek out insult where none was meant. Shall we give it a try?
Tlaloc:
This is telling because it is those revisions that substantially increased the number and aggregate amount of loans to small businesses and to low and moderate income borrowers for home loans. It is also a common tactic to avoid talking about the Clinton revisions and focus only on CRA's beginnings.
I wasn't focusing on CRA's beginnings, and my intent wasn't to "avoid" talking about Clinton. If you say Clinton's changes increased the loans, I can probably agree with that. But only from the banks subject to CRA. The banks and mortgage lenders that weren't subject to it were responsible for more of the subprime lending than those that were. In that respect, it doesn't seem to make sense to me to blame it all on that revision, because that revision didn't change anything for the none CRA banks, as far as I'm aware at least.
Tlaloc:
The increase in home loans was due to increased "efficiency" in creating them and the way the revisions of the CRA allowed for the creation of lenders, like Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization.
Again, though, many banks are subject to CRA, and went along with the same practices, even though they weren't required to. It seems odd to me to blame the change of CRA for their bad loans. That's not a defense of CRA, its just pointing out that CRA doesn't seem to be the whole story.
But, to be clear, are you saying that the problem is that Clinton change regulations to
allow a type of lending that wasn't allowed before, and that the proper alternative is to
restrict that type of lending? If so, I could quite possibly agree, though it seems at odds with the "the government should get out of the way and let companies grow as much as possible" idea you mentioned earlier. Is this a case where you're saying the government was wrong to get out of the way?
Tlaloc:
Those revisions allowed the securitization of CRA loans containing subprime mortgages. The first public securitization of CRA loans started in 1997 by Bear Stearns. The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent. It was this securitization that made the risk filter through the global markets.
Okay, again, this sounds like you're saying that Clinton
removed obstacles and the banks took advantage of this. Did Clinton's changes change what Bear Stearns was allowed to do? Are you saying that Clinton
relaxed regulations, and that this was a bad thing? That might be something I could agree with, though I'd have to see more info on how the degree to which Bear Stearns was subject to CRA.
Tlaloc:
The revisions gave Fannie and Freddie extraordinary leverage to allow them to hold just 2.5% of capital to back their investments, vs. 10% for banks. By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market. Thus leading us to the problems of today.
I can agree with most of it, but the trouble is "nearly half the mortgage market" isn't the same as "nearly half the bad loans." I can agree that it held way more bad loans than it should have, and can agree this was a contributing factor, but if Fannie and Freddie held all the bad mortgages, then none of the other banks would have gotten into trouble. So I can agree with your basic description of things, but the "thus..." part is where we seem to run into problems.
Tlaloc:
So blame "the market" if you wish but the market adjusts to the rules laid down by governments.
I can agree with this (though, again, many of the bad lenders weren't subject to the "rules" of CRA), but I don't think that changes things. If the government changes the rules, and the market reacts in a way that leads to financial collapse, that indicates to me a problem in the market as well as in the government. Or perhaps more accurately, the market+government combination.
Tlaloc:
When they interfere in markets it causes nothing but trouble. I prefer to lay blame on those who create the environment and write the rules rather than those who try to work according to them.
Fair enough. I tend to disagree, but its more a matter of opinion, I suppose. To me, a bad decision made "within the rules" is still a bad decision. But I'm less interested in who I can point my finger at, and more interested in what we can do to avoid it happening again. So, blame whoever you like, as far as that's concerned.
Tlaloc:
Krugman, whom I read religiously and disagree with totally, does not call the stimulus a success.
Yep, you're right on that. If I had said he felt it was a success, I'd be wrong.
Tlaloc:
He calls it a failure. Why? Because it wasn't large enough for his liking.
Yep. And he was saying this from the start, and predicting that the stimulus that did get passed would lead to a weak recovery, but not put a big dent in unemployment, and that this weak recovery would make it harder to do more because the sense of urgency would be lost compared to when everyone was talking about a second great depression. On that prediction he seems to have been pretty accurate, as far as I can see.
Tlaloc:
He was also the man who, in 2002, called for the housing bubble to solve the dot-com bubble! Is that the kind of economist whose opinion you would trust?
Yeah, bad idea on that one. Though, in his defense, he was looking at ways to address one problem, which the housing bubble did. The downside of the bubble was way worse than what he was trying to solve, we see now. So it was less that he was factually wrong, and more that he supported a bad idea. And that he didn't see how bad the bursting of the housing bubble would be, but I think that's a crime 99.99% of the world was also guilty of, so I'm not going to be too harsh on him for it (feel free to do so yourself, though--like i said, I'm less worried about whom to point fingers at than figuring out how to avoid similar problems from happening again).
But do you have an alternative economist who you feel has a much better record? If you have a better suggestion, I'm happy to look at their views.
This message was last edited by the GM at 18:35, Fri 18 Feb 2011.