The end of capitalism? - Page 2 - Political Fever

mwillman · #11 (**permalink**) 09-28-2008, 11:54 PM

I am talking about the rampant deregulation of the American economic system that started with Reagen and has continued with both Bushes.

Finny no offense but I think you are the one grasping at straws.

Giving Wall Street and Banks the chance to come up with thousands of get rich quick schemes was not a good idea. If we had privatized Social Security this economic collapse would have been much worse.

Finny · #12 (**permalink**) 09-29-2008, 12:07 AM

Quote:

Originally Posted by mwillman

Giving Wall Street and Banks the chance to come up with thousands of get rich quick schemes was not a good idea. If we had privatized Social Security this economic collapse would have been much worse.

Quote:

Originally Posted by IBD, Terry Jones

One of the most frequently asked questions about the subprime market meltdown and housing crisis is: How did the government get so deeply involved in the housing market?

The answer is: President Clinton wanted it that way.

Fannie Mae and Freddie Mac, even into the early 1990s, weren't the juggernauts they'd later be.

While President Carter in 1977 signed the Community Reinvestment Act, which pushed Fannie and Freddie to aggressively lend to minority communities, it was Clinton who supercharged the process. After entering office in 1993, he extensively rewrote Fannie's and Freddie's rules.

In so doing, he turned the two quasi-private, mortgage-funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democratic voting blocs and handed favors, jobs and money to political allies. This potent mix led inevitably to corruption and the Fannie-Freddie collapse.

Despite warnings of trouble at Fannie and Freddie, in 1994 Clinton unveiled his National Homeownership Strategy, which broadened the CRA in ways Congress never intended.

Addressing the National Association of Realtors that year, Clinton bluntly told the group that "more Americans should own their own homes." He meant it.

Clinton saw homeownership as a way to open the door for blacks and other minorities to enter the middle class.

Though well-intended, the problem was that Congress was about to change hands, from the Democrats to the Republicans. Rather than submit legislation that the GOP-led Congress was almost sure to reject, Clinton ordered Robert Rubin's Treasury Department to rewrite the rules in 1995.

The rewrite, as City Journal noted back in 2000, "made getting a satisfactory CRA rating harder." Banks were given strict new numerical quotas and measures for the level of "diversity" in their loan portfolios. Getting a good CRA rating was key for a bank that wanted to expand or merge with another.

Loans started being made on the basis of race, and often little else.

"Bank examiners would use federal home-loan data, broken down by neighborhood, income group and race, to rate banks on performance," wrote Howard Husock, a scholar at the Manhattan Institute.

But those rules weren't enough.

Clinton got the Department of Housing and Urban Development to double-team the issue. That would later prove disastrous.

Clinton's HUD secretary, Andrew Cuomo, "made a series of decisions between 1997 and 2001 that gave birth to the country's current crisis," the liberal Village Voice noted. Among those decisions were changes that let Fannie and Freddie get into subprime loan markets in a big way.

Other rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. 10% for banks.

Since they could borrow at lower rates than banks due to implicit government guarantees for their debt, the government-sponsored enterprises boomed.

With incentives in place, banks poured billions of dollars of loans into poor communities, often "no doc" and "no income" loans that required no money down and no verification of income.

By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market -- a staggering exposure.

Worse still was the cronyism.

Fannie and Freddie became home to out-of-work politicians, mostly Clinton Democrats. An informal survey of their top officials shows a roughly 2-to-1 dominance of Democrats over Republicans.

Then there were the campaign donations. From 1989 to 2008, some 384 politicians got their tip jars filled by Fannie and Freddie.

Over that time, the two GSEs spent $200 million on lobbying and political activities. Their charitable foundations dropped millions more on think tanks and radical community groups.

Did it work? Well, if measured by the goal of putting more poor people into homes, the answer would have to be yes.

From 1995 to 2005, a Harvard study shows, minorities made up 49% of the 12.5 million new homeowners.

The problem is that many of those loans have now gone bad, and minority homeownership rates are shrinking fast.

Fannie and Freddie, with their massive loan portfolios stuffed with securitized mortgage-backed paper created from subprime loans, are a failed legacy of the Clinton era.

Now come back to me when you have some facts.

Twig · #13 (**permalink**) 09-29-2008, 12:08 AM

Pure capitalism could never work Humans are far from perfect and capitalism alone can‘t change that. Capitalism is good at creating wealth but, not so good at fairly distributing it.

You need a small number of wealthy people, a lot of consumers with money to buy products, and around 6% unemployed people who want jobs. Capitalism requires this to operate.

If capitalism isn’t helped along in making sure that consumer are plentiful and have money to buy products, it collapses. 2/3 of US economy is consumers spending. Humans can be greedy bastards. Left unchecked, greed affects the consumers ability to consume.

Finny · #14 (**permalink**) 09-29-2008, 12:10 AM

Quote:

Originally Posted by Twig

Pure capitalism could never work Humans are far from perfect and capitalism alone can‘t change that. Capitalism is good at creating wealth but, not so good at fairly distributing it.

You need a small number of wealthy people, a lot of consumers with money to buy products, and around 6% unemployed people who want jobs. Capitalism requires this to operate.

If capitalism isn’t helped along in making sure that consumer are plentiful and have money to buy products, it collapses. 2/3 of US economy is consumers spending. Humans can be greedy bastards. Left unchecked, greed affects the consumers ability to consume.

Oh the irony.. So who regulates it? People.. thus regulation is doomed to fail is it not?

Twig · #15 (**permalink**) 09-29-2008, 12:32 AM

Quote:

Originally Posted by Finny

Oh the irony.. So who regulates it? People.. thus regulation is doomed to fail is it not?

You have been under capitalism with regulation for quite some time. Capitalism with regulation can work. It can work better and it could work worse. The regulation of our capitalism changes all the time.

Could capitalism with regulation fail? Sure. People are far from perfect. Is regulation doomed to fail? No.

Finny · #16 (**permalink**) 09-29-2008, 12:50 AM

Quote:

Originally Posted by Twig

You have been under capitalism with regulation for quite some time. Capitalism with regulation can work. It can work better and it could work worse. The regulation of our capitalism changes all the time.

Could capitalism with regulation fail? Sure. People are far from perfect. Is regulation doomed to fail? No.

I think we already proved it. Government stance on Mortgage Backed Securities, Lending Practices, Leverage ratios between Commercial Banks, Investment Banks and GSEs was to heavily regulated despite what the talk heads tell you. The Fed devaluing the dollar with low Interest Rates which allowed cheap mortgages to be made by the Billions.. also led to this current crisis.

Thus.. all the regulation in the world didn't protect anyone, but those who actually designed the regulations. The SEC, the Treasury Department and the Fed are going to get more "regulation" power out of this. Those who were forced by the Government to lend will be bailed out... and Main Street will bear the burden. It's typical Keynesian policy. Its down right socialist.

So how can you claim capitalism can survive with the regulation when the regulation is only created to manipulate the markets in a design to control the markets?

The only "regulation" that Capitalism (true Capitalism as we haven't had that since the run on the banks in 1929-1933), understands is complete failure, it has to be allowed get the bad out of the system before self-regulation is reached. But Capitalism did not have that chance, as the system has always been bailed out. So I reject this notion that we have Capitalism. I propose maybe the issue is not the Capitalism side of our Economy but the Socialist side which bails out and never wants to see anyone get punished.

Twig · #17 (**permalink**) 09-29-2008, 01:50 AM

Quote:

Originally Posted by Finny

I think we already proved it. Government stance on Mortgage Backed Securities, Lending Practices, Leverage ratios between Commercial Banks, Investment Banks and GSEs was to heavily regulated despite what the talk heads tell you. The Fed devaluing the dollar with low Interest Rates which allowed cheap mortgages to be made by the Billions.. also led to this current crisis.

Thus.. all the regulation in the world didn't protect anyone, but those who actually designed the regulations. The SEC, the Treasury Department and the Fed are going to get more "regulation" power out of this. Those who were forced by the Government to lend will be bailed out... and Main Street will bear the burden. It's typical Keynesian policy. Its down right socialist.

So how can you claim capitalism can survive with the regulation when the regulation is only created to manipulate the markets in a design to control the markets?

The only "regulation" that Capitalism (true Capitalism as we haven't had that since the run on the banks in 1929-1933), understands is complete failure, it has to be allowed get the bad out of the system before self-regulation is reached. But Capitalism did not have that chance, as the system has always been bailed out. So I reject this notion that we have Capitalism. I propose maybe the issue is not the Capitalism side of our Economy but the Socialist side which bails out and never wants to see anyone get punished.

We have 3 branches of government with checks and balances. It doesn’t work a 100 percent of the time but, sometimes it does. Do you want to move to a dictatorship and let failure correct itself?

Some regulation works at the same time other regulation fails. Does the current failure mean that labor laws aren’t helping in some ways to keep money in consumers pockets?

History shows a time in America when a great many people, including children, worked sun up to sun down, 7 days a week, and were still extremely poor. Do you want the market to be able to go back to this?

Look how many time in resent history Chinese products have had problems? The market can weed these out on their own. Should regulations be stripped and the markets allowed to correct this?

At any point in time, money is a pie and each person has a piece of it. Capitalism can get to a point where a few have too much of the pie and consumers stop consuming. The market can not self correct and put money into the consumers hands.

Sometimes the market can correct itself and should be allowed to do so. To say this is always the case is foolish. Capitalism can’t work all by itself.

Finding the right regulations is the key. Sometime the right regulation won’t be any regulation at all. But Capitalism always requires some regulation.

Finny · #18 (**permalink**) 09-29-2008, 05:30 AM

Quote:

Originally Posted by Twig

We have 3 branches of government with checks and balances. It doesn’t work a 100 percent of the time but, sometimes it does. Do you want to move to a dictatorship and let failure correct itself?

What does this have to do with the price of tea in China? Nada. But if that's your argument, why can't we view no regulation the same way? Eh... don't answer that, since you still haven't answered this question: So how can you claim capitalism can survive with the regulation when the regulation is only created to manipulate the markets in a design to control the markets?

I'll lay out answer for you. It can't, once moved to manipulate the markets it does not stay Capitalism, it moves towards Socialism.

Quote:

Originally Posted by Twig

Some regulation works at the same time other regulation fails.

So!?! some times pure Capitalism is good but sometimes it not. Your arguments are very elementary right now.

Quote:

Originally Posted by Twig

Does the current failure mean that labor laws aren’t helping in some ways to keep money in consumers pockets?

Labor Laws are flawed. To give you an example, Min. Wage. A person earning 1 USD an hour in 1913 would have to earn 22.13 USD per hour in 2008 to equal the value of $1 USD in 1913. So a USD in 1913 went further then the value of the USD in 2008.

In 1970 1 USD would need 5.65 USD in 2008 for that person in 1970 to make 1 USD.

This is due to inflation. Inflation harms workers far more then having to work more then 8 hours a day. Because you can work 8 hours a day but if your wages does not keep up with inflation you are not earning a livable wage. Since 1913 inflation has increased by 2113.0%. Have you seen min. Wage go up by 2113.0%? No.

Another issue with Min. Wage is that high skilled workers take low skill jobs displacing low skill workers.

Quote:

Originally Posted by Twig

History shows a time in America when a great many people, including children, worked sun up to sun down, 7 days a week, and were still extremely poor. Do you want the market to be able to go back to this?

Poor by what standards? Americans today are poorer then they were back then. Today, every American is saddled with $32,338.42. of Debt when they are born.

Quote:

Originally Posted by Twig

Look how many time in resent history Chinese products have had problems? The market can weed these out on their own. Should regulations be stripped and the markets allowed to correct this?

Ok? Are you questioning if they've had problems are not? You do not need regulation to correct issues such as that. There is this thing called Crimes. You know if you knowingly harm someone, you have to go to trial, end up being put in jail. Then face a Civil Law suit which will cost you (if you are company) millions, maybe even billions.

Tell me what's more harsh and corrects the issue better. A) getting a $250,000 fine and a slap on the wrist... or B) a chance at complete bankruptcy?

A) is done with Regulation... B) is done by criminal and civil law.

Quote:

Originally Posted by Twig

At any point in time, money is a pie and each person has a piece of it. Capitalism can get to a point where a few have too much of the pie and consumers stop consuming. The market can not self correct and put money into the consumers hands.

Wow, lets go through this. Capitalism doesn't get to that point.

Capitalism is: individuals and firms have the right to own and use wealth to earn income and to sell and purchase labor for wages with little or no government control. The function of regulating the economy is then achieved mainly through the operation of market forces where prices and profit dictate where and how resources are used and allocated.

This means if there is too little unemployment wages rise, which means more wealth for workers and consumer income for them to spend which goes to companies which is passed on to workers as wages.

If there is high unemployment wages fall, which means a loss of wealth for the workers but also a loss for companies.

In true (pure) Capitalism, you live and die (so to speak) by market forces. The invisible hand. I.E today, Samsung TVs might out sell Sony TVs. Tomorrow it could be the opposite.

Quote:

Originally Posted by Twig

Sometimes the market can correct itself and should be allowed to do so. To say this is always the case is foolish. Capitalism can’t work all by itself.

I thought it was working pretty well when Banks decided they wanted to make risky loans to risky folks by force of the Government. If Banks fail and nobody buys up the risky mortgages the home owner is free and clear. But now, those folks will have to pay their mortgages just this time to the US Government. In the end, my way would have allowed Americans to save $700 billion and allowed at least 50% of the sub-prime mortgage folks to keep their homes without paying another dime.

Quote:

Originally Posted by Twig

Finding the right regulations is the key. Sometime the right regulation won’t be any regulation at all. But Capitalism always requires some regulation.

But did you address the key question I asked in this post and the previous post.

So how can you claim capitalism can survive with the regulation when the regulation is only created to manipulate the markets in a design to control the markets?

I answered the question for you earlier in this post. Once regulated it is not Capitalism. So all of your elementary arguments are based on flawed thinking of what Capitalism is. To refresh your memory... Capitalism: An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.

Panhandle Slim · #19 (**permalink**) 09-29-2008, 11:21 AM

Quote:

Originally Posted by RSDavis

"The Cheneys said that their total contributions to charitable organizations during the years Mr. Cheney has served as vice president totaled $7.96-million."

Bush and Cheney Disclose Details of Their 2007 CharitableGiving - Philanthropy.com

Write it off and let the taxpayers cover it!