How the Democrats Created the Financial Crisis Posted on: September 22nd, 2008 Bloomberg News How the Democrats Created the Financial Crisis Kevin Hassett Sept. 22 (Bloomberg) -- The financial crisis of the past year has provided a number of surprising twists and turns, and from Bear Stearns Cos. to American International Group Inc., ambiguity has been a big part of the story. Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex. But really, it isn't. Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally. Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street's efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves. In the times that Fannie and Freddie couldn't make the market, they became the market. Over the years, it added up to an enormous obligation. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home. The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them. Turning Point Take away Fannie and Freddie, or regulate them more wisely, and it's hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.
That article was relatively informational, what does it have to do with the Dems? It mentions nothing of them and simply states the obvious that these companies put themselves in this position. So why is the title of this thread "Democrats to Blame"?
I don't know why he didn't cite the whole article, or atleast provide a link. But here is the basic premise, from the article:
Blaming democrats for the current economic crisis? Isn't that running away from the responsibility by republicans? Certainly democrats have also contributed to setting up the fiscal mechanics that would allow this meltdown, but let us not forget one very important fact: Republicans have had the presidency and thus responsibility for the economy in 20 of the last 28 years. Not least of which are the last 8 years under the vigilant guard (cough) of Bush the lesser. Share the blame how you wish, but failing to give republicans the bear share of it is just a silly attempt at shifting blame, not honestly trying to understand what led to this situation.
This meltdown isn't due to any socializing of your economy. On the contrary, it is due to deregulations that allowed financial institutions to seek new, high risk, avenues of profit. Whatever "socializing" happening now, is pushed through by your republican administration. The US have been under Republican management for 20 of the last 28 years. Whatever the democrats managed to do under Clinton, the republicans still have had the last 8 years to change it if they thought it was so bad. But no. The US have the last 8 years turned a record trade surplus into a record trade deficit. Started two wars costing in the trillions and increased government spending across the board. Funded on growing foreign debt. They've blown up a gigantic bubble, and now it is bursting. Not due to democrats, but because of republican insane spending. This would not happen with a trade surplus. The weakest end of the marked is always the first to burst as an economy falters. Unsecured bad loans fits that bill nice. As a house of cards, much will now fall to the ground. Time to start building the economy on something more real than magic free-market ideology perhaps?
Actually it was Clinton who allowed for fanny may and freddy mac to have so much leway, the entire problem we face right now, this huge bailout was caused by the problems Clinton created with fanny may and freddy mac. Clinton did many great things for the US, but it is evident that our national debt has not been away since Thomas Jefferson. You obviously have no idea what you are talking about if you are going to blame the republicans with a problem created by Bill Clinton, stick to norweigan politics.
ive said this before, and ill say it again. WE are given the choice by our elected officials, which is odd, of either a man dubbed Democrat or a man dubbed Republican. But if you look at Clintons record he would fall more under the independant category, much like every candidate besides a lot of the dubbed republicans. so blaming the democrats for such a huge fuck up doesnt make sense, Clinton may have been able to do a lot to stop this crisis, but Bush could have done a lot more. The last eight years peeps, like economists and congressmen, have been tellin the bushies about this crisis coming, my dad even started talkin bout the depression to me two or three years ago, and the bush administration never caught word of this. its either that or they didnt care
I've already said that the democrats are accomplices in this financial meltdown. But seeing as republicans have ruled 20 of the last 28 years, how the hell do you justify giving the major share of the blame to democrats? The last 8 years alone could be used to continue the policy of trade surplus, but that was not done, was it? Do you think record trade deficits are good for any economy? The real danger isn't some domestic bad loans. The real danger is loss in confidence of your dollar, your international economy. That confidence loss is entirely due to republican fiscal insanity. --- Oh, and I got a tip for you IGOTJOINTS4YA, don't try your little ad-hominems on me. I got a good idea what I am talking about, and me being norwegian make me no less informed on the situation. If you want to debate dirty, you do so. I'll be more than happy to point it out whenever you try.
Zylark knows more on most subjects that have to do with American politics than many of the American posters on this site, and I, for one value his (or her) opinion, please confine your comments to something you have any knowledge of whatsoever. Thomas Jefferson had nothing to do with the National Debt, you make yourself sound very under ripe in your understanding when you say things like that. Blaming Clinton for everything is a Republican cop out that they have been using to cover for Bush's missteps and dangerously deluded doctrines, for years. According to some posters on here, Bush is not to blame for anything he's done. (Cause it was all Cheney anyway).
The bailing out of AIG was caused directly from mortgage problems, The clinton administration was the ones that caused the problems with mortgages because they socialized the ability for americans to make investments into houses they could not afford. This was not caused by any of the Republicans in the past 28 years, it was caused by the clinton administration. Thomas Jefferson was the only president that abolished our national debt and created the only true surplus in the history of the US, that was my point I am sorry for not articulating this to you. This is why partisan politics does not work, I refuse to vote partisan, I am a registered republican that is voting for Obama. Bush created many problems by lowering taxes so much, but the bailout problem is not Bushes fault or any republican in office before him.
You clearly have never heard of the Federal Reserve or GSE's. We have propped up housing prices through artificial interest rates and subsidized loans since the early 1990s, causing the boom which led to the bust. It's rare to see the GOP acting like conservatives, but Democrats are the only ones in full support of the current bailout, the GOP is not in support.
yea thats why i hope we have seen the end of his seemed plans, otherwise some event that is going to happen that wraps up all the knowingly letting the economy get this bad, or the plan failed already or something.
Still does not change that republican insane fiscal policy have led to this meltdown. The housing loans bust is not the cause of this crisis, it is a symptom of something much more dangerous to the US economy. Namely inflation. And you cannot blame that on the democrats. Under Clinton, there was a record trade surplus. National debt was under control and downpayments was made. Inflation was low and the USD was never stronger. The US was, fiscally, on the right track, and the world had every confidense in the US economy. Bush the cheerleader ruined that. Now that Bush, a republican lest you forget, have cranked up foreign debt to over 9 trillion USD, the dollar have neared halfed in value. Meaning imports have become nearly twice as expensive. That is an inflation on foreign goods of nearly 100% over an 8 year period. This means your average citizen have less money to spend, seeing as wages in effect have lowered at the rate of your dollars decline. Not a problem if most products bought by your average american is made domestically. A huge problem if most commodities are imported. As it is, the US economy is entirely dependant upon foreign imports. From oil and gas to t-shirts and matching sneakers. Most such products have american brands on them, but don't think for a second those companies manufacture domestically. Less money in the wallets and bankaccounts, means less ability to pay off mortages. The most vulnerable debtors are the first to suffer. That is why you now have a housing bubble bursting. But that is peanuts compared to the massive divestment now happening around the world. Away from US dollars and into other currencies. The world do not any longer regard the dollar as a safe bet. This means that the US quite simply cannot continue to run at a deficit. No-one will lend the US the money to do so, since they see no good profit in such an investment, just risk and losses. What you've seen of financial trouble thus far, is just the beginning. Bailouts won't help. That is just printing more money, weakening the dollar further, causing higher inflation. What is needed is financial regulations and smart government spending. A new "new deal". And the first order of business would be giving financial aid to families suffering under heavy debt loads. People using all their money paying down debt, don't use much money in the rest of the economy. Giving money to the financial institutions themselves, helps no-one but the big-cats who already have made fortunes gambling away other peoples money. It might delay a total crash, until the cash run out again. It won't change a system that is not working, just prop it up for a limited time. Like if you got a leaky gas tank, you "fix" it by filling up more often, instead of plugging the leak.
During Clinton there was no surplus on national debt (intergovernmental + public debt), only on public debt. Our debt only increased, along with spending. You are victim of political double speak. His last term he ran a huge deficit as well, something that Bush would have to continue in order to deal with the collapsing credit boom of the 90's. All the growth the markets saw throughout the 90's was lost in 1 year. Bubbles arise through price fixing, and Clinton's bubble was left on Bush's shoulders. I agree that Bush's spending had a negative impact on the world view towards the dollar and US markets, but this again is only another symptom of the cause, fiat money and the Federal Reserve. The only way to control government spending is to remove their power to destroy the currency. Financial regulations? What are you talking about in specific? That and 'oversight' too, right? Again, I'll quote Nobel Prize winner in economics during the first Great Depression... and Woodrow Wilson, creator of the Fed: Oversight and regulation of a broken system is retarded.
Eh, world media portrays Bush as the king of all American decisions, and Norway is a parliamentary monarchy, so maybe he's confused as to the political system in America. The increase in executive powers under Bush does give him the sense of being supreme ruler though. To place all the blame on one man even though he was supported by both Democrats and Republicans in congress, even Obama voted with him 40-50% of the time, is typical of the race to the White House.
He doesn't deserve all the blame, but he (and by that, I mean his administration) is much, much more than a figurehead.
In terms of spending, I disagree. Just because congress decides to give in doesn't resolve them of responsibility. If I am wrong let me know.