Democrats - Cause of Credit Crisis

obvious Child · 09-19-08, 08:37 PM

So a few users here have been blaming the Credit Crisis solely on the Democrats.

Can someone explain to me how they are to blame when the crisis started in July 2007, less then a year after they took power?

As I understand it, the crisis is predicated on the issue of bad loans. These subprime loans were offered to people at teaser rates which would go up in 2 years. Therefore, at absolute minimum the origin of the crisis was actually July 2005. Clearly within the time frame of Republican control of both houses of Congress. But let's drill down some more. The problem of the investment houses is that they bought securitized mortgages. These take time to create, from the selling of the loan by the initial bank, to Freddie/Fannie buying it, to repacking it by some firm like AIG to resell to firms like Lehman. So add on at least 1~2 months. Again, still easily within GOP control.

So how can the Democrats be at fault for this when the origin and building of the crisis happened during the GOP's control of Congress? Given how massively and thoroughly the GOP shut out the Democrats of decision and legislative processes, what rational, objective argument is there to fault the Democrats for this problem other then their slow reaction to the outbreak?

PeteEU · 09-20-08, 04:06 AM

The crisis started long ago.. could say it started in 1980 when the deregulation band wagon started. There are 2 or 3 dates where legislation was passed, that made the present crisis possible. One date is 1996 and another is 2000. The blame is on both parties, however the people behind the written legislation are not as non partisan.

GottaHurt · 09-20-08, 06:31 AM

Quote:

Originally Posted by obvious Child

So a few users here have been blaming the Credit Crisis solely on the Democrats.

Can someone explain to me how they are to blame when the crisis started in July 2007, less then a year after they took power?

Because they hold key positions, and the two biggest culprits did absolutely nothing to stop the avalanche.

Barney Frank (D-MA), he's the Chairman of the House Financial Services Committee. He should have seen this coming, it's his job to oversee Financial Services. What just collapsed? Companies that deal in Financial Services.

Chris Dodd (D-CT), he's the Chairman of the Senate Banking Committee, again, where has he been? His job is to oversee the Banking Industry.
How come he didn't step forward and at least mention something was amiss? Maybe because he was too busy getting a sweetheart deal from Countrywide.

Here's a few nuggets from the Democratic leadership:

Quote:

Until now, Congress has been surprisingly passive. As Sen. Majority Leader Harry Reid put it, "no one knows what to do" right now.

Quote:

House Speaker Nancy Pelosi recently barked "no" at reporters for daring to ask if Democrats deserved any blame for the meltdown.

Quote:

"These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis," said Rep. Barney Frank, then 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."

Investor's Business Daily: Congress Lies Low To Avoid Bailout Blame

Democrats hold the two top positions in regard to Banking & Finance, and they did nothing. The Senate majority leader doesn't know what to do, Pelosi say's Democrats are not to blame what-so-ever, and Barney Frank say's "Fannie Mae and Freddie Mac are not facing any kind of financial crisis."

In contrast:

Quote:

"If Congress does not act," McCain said in 2005, "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."

President Bush in 2003 tried desperately to stop Fannie Mae and Freddie Mac from metastasizing into the problem they have since become.

Here's the lead of a New York Times story on Sept. 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."

Even the ultra liberal no friends of Bush NY Times pointed it out.

missypea · 09-20-08, 12:42 PM

Quote:

Originally Posted by obvious Child

So a few users here have been blaming the Credit Crisis solely on the Democrats.

Can someone explain to me how they are to blame when the crisis started in July 2007, less then a year after they took power?

As I understand it, the crisis is predicated on the issue of bad loans. These subprime loans were offered to people at teaser rates which would go up in 2 years. Therefore, at absolute minimum the origin of the crisis was actually July 2005. Clearly within the time frame of Republican control of both houses of Congress. But let's drill down some more. The problem of the investment houses is that they bought securitized mortgages. These take time to create, from the selling of the loan by the initial bank, to Freddie/Fannie buying it, to repacking it by some firm like AIG to resell to firms like Lehman. So add on at least 1~2 months. Again, still easily within GOP control.

So how can the Democrats be at fault for this when the origin and building of the crisis happened during the GOP's control of Congress? Given how massively and thoroughly the GOP shut out the Democrats of decision and legislative processes, what rational, objective argument is there to fault the Democrats for this problem other then their slow reaction to the outbreak?

In his book, Freakonomics, Stephen Levitt suggested that the crime rate dropped in the 90's because of the Supreme Court decision regarding Roe v Wade.....an event that happened 20 years prior.

It's an interesting theory and one that could be applied here. I don't know enough about this topic to apply the theory, but I do know that some decisions we make today will impact our world years later.....such as the enviornmental issues.

It will be interesting to hear what the DP economists have to say.

DarkWizard12 · 09-20-08, 01:01 PM

Quote:

Originally Posted by missypea

In his book, Freakonomics, Stephen Levitt suggested that the crime rate dropped in the 90's because of the Supreme Court decision regarding Roe v Wade.....an event that happened 20 years prior.

It's an interesting theory and one that could be applied here. I don't know enough about this topic to apply the theory, but I do know that some decisions we make today will impact our world years later.....such as the enviornmental issues.

It will be interesting to hear what the DP economists have to say.

LEvitt also said the study was highly flawed and rejected his own study.

donc · 09-20-08, 04:25 PM

Lets here it for Nanny Government on steroids Comrades.

" Socialism" is indeed alive and well, but this is socialism for the rich, the well connected and corp. welfare of the first order, especially for the Oil Companies with Annual profits of $50 billion getting subsidized to the tune of $13 billion. A socialism where profits are privatized, losses are socialized, with the US taxpayer and their descendents are on the hook for the tab.

All this occurring while ragging on spending some of the borrowed money our grandchildren, and our grandchildren’s ,children, will eventually have to pay, on adequate health care.

The hypocrisy, championing the welfare of giant corporations, there overpaid executives, with the golden parachutes that are in place before they get aboard and run the companies to the edge of bankruptcy; no problem, we have our boys in place, they’ll take care of it. We’ll let the diminishing middle class foot the bill.

We have this band of fools that the Supreme Court elected, come into power, spewing the rhetoric of free markets, slashing government intervention in economic affairs, cant have nanny government looking over our shoulder now can we?

So what do they do? In mid July of this year federal regulators seized Indy Bank and its $32 billion in assets, that could cost the FDIC $4 billion to $8 billion.

Not to be deterred, on a roll from IndyMac, our merry band sets there sights on,(drum Roll) the greatest nationalization in the history of humanity. At least up too September 2008, when our great leader seized control of Fannie, Freddie, and 80% control of insurance/whatever giant AIG, to the tune of $285 billion.

What a bargain Fannie, Freddie was, with assets of almost $6 trillion; of course it does have a bit of a downside, a debt to equity ratio of 30 ($6,000 billion of debt against $200 billion of equity.

Hey don’t look at the glass as if its half empty, think of it as half full, after all we own the printing presses at the Treasury Dept and plenty of ink.

The last election had me scratching my head wondering how this band of fools could pass themselves off as Republicans. Unless somehow I managed to slip thru a wormhole and passed into some strange parallel universe, these birds sure aren’t any kind of Republicans that I’m familiar with.

I’ll go even further and say their not like any conservatives that I’m familiar with as well. What kind of conservative likes to nationalize businesses? Indeed, what kind of conservative would run the economy down to the point that the messes were in would even be an option.

MC.no.spin · 09-20-08, 04:41 PM

There are many responsible for this crisis, both Democrat and Republican. The Fed is also responsible (Greenspan) for little regulation, refusal to raise interest rates and give stern warnings to slow the growing housing bubble.

One person who is responsible for the amazing work going on today to save the economy from a Depression, is Treasury Secretary Hank Paulson. He is a saviour for all of us.

ARealConservative · 09-20-08, 04:56 PM

Quote:

Originally Posted by obvious Child

So a few users here have been blaming the Credit Crisis solely on the Democrats.

Can someone explain to me how they are to blame when the crisis started in July 2007, less then a year after they took power?

As I understand it, the crisis is predicated on the issue of bad loans. These subprime loans were offered to people at teaser rates which would go up in 2 years. Therefore, at absolute minimum the origin of the crisis was actually July 2005. Clearly within the time frame of Republican control of both houses of Congress. But let's drill down some more. The problem of the investment houses is that they bought securitized mortgages. These take time to create, from the selling of the loan by the initial bank, to Freddie/Fannie buying it, to repacking it by some firm like AIG to resell to firms like Lehman. So add on at least 1~2 months. Again, still easily within GOP control.

So how can the Democrats be at fault for this when the origin and building of the crisis happened during the GOP's control of Congress? Given how massively and thoroughly the GOP shut out the Democrats of decision and legislative processes, what rational, objective argument is there to fault the Democrats for this problem other then their slow reaction to the outbreak?

1913 is the start of this crisis - and the lions share of the blame goes to the democrats.

John1234 · 09-20-08, 04:59 PM

I am curious.
This trillion dollar bailout makes me nervous and suspicious.

Will this not cause the value of the dollar to fall which in turn will cause the price of gas and food to increase?

And what would be the effect on the low income class if they let these companies fail and the Government only backed the insured funds it is suposed to?
Of this i have no idea.

I saw Ron Paul's former economic advisor on TV and he seemed to think the bailout is a terrible idea and will cause food and gas to dramitically increase.

Is anyone capable of explaining to me the expected effect on the poor for both scenarios?

ARealConservative · 09-20-08, 05:05 PM

Quote:

Originally Posted by John1234

I am curious.
This trillion dollar bailout makes me nervous and suspicious.

Will this not cause the value of the dollar to fall which in turn will cause the price of gas and food to increase?

And what would be the effect on the low income class if they let these companies fail and the Government only backed the insured funds it is suposed to?
Of this i have no idea.

I saw Ron Paul's former economic advisor on TV and he seemed to think the bailout is a terrible idea and will cause food and gas to dramitically increase.

Is anyone capable of explaining to me the expected effect on the poor for both scenarios?

The poor certainly do suffer, but it is also a way to export some of the burden on foreign nations. Because they hold so much of our debt, inflation makes their holding of our debt less valuable.

I would be surprised if anybody on DP can say with any certainty the exact ramification of not doing the bailouts. The consensus I have come to understand is it would be far more brutal now, but the recovery period would come faster.

If anybody could explain it for us, my money is on "The Don" (Sutherland)