Greenspan Uses The Bush Excuse: Financial Crisis Was ‘Broader Than Anything I Could Have Imagined’
Greenspan Uses The Bush Excuse: Financial Crisis Was ‘Broader Than Anything I Could Have Imagined’
In a House Oversight Committee hearing today, former Fed Chairman Alan Greenspan claimed the credit crisis is a “once in a century credit tsunami” that policy makers did not anticipate. Greenspan repeatedly distanced himself from the financial meltdown, however, saying he didn’t foresee the crisis because of a “flaw in the model.”
Greenspan claimed he was “shocked” because his model “was working exceptionally well” for 40 years, adding that the crisis is “broader than anything I could have imagined”:
GREENSPAN: I also want to discuss how my thinking has evolved and what I have learned this past year. In 2005, I raised concerns that the protracted period of the underpricing of risk if history was any guide would have dire consequences. The crisis, however, has turned out to be much broader than anything I could have imagined.
Watch it:
Bush administration officials seem to have a systemic lack of imagination, often claiming major — and predictable — crises simply caught them off guard:
–9/11: “And I said, ‘No one could have imagined them taking a plane, slamming it into the Pentagon’ — I’m paraphrasing now — ‘into the World Trade Center, using planes as a missile.’” – Condoleezza Rice, to 9/11 Commission
– Hurricane Katrina: “The destruction left by Katrina reaches beyond anything we could have imagined.” — Bush, 5/11/06
In December, Edward M. Gramlich, a former Federal Reserve governor, told the New York Times that he “privately urged Fed examiners to investigate mortgage lenders affiliated with national banks,” but “he was rebuffed by Alan Greenspan.” In his recent memoir, Greenspan wrote:
I was aware that the loosening of mortgage credit terms for subprime borrowers increased financial risk. … But I believed then, as now, that the benefits of broadened home ownership are worth the risk.
It seems Greenspan was so willing to accommodate Bush’s ownership society that he refused to take into account the economic risk of subprime borrowing.
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“No one could have imagined…”
NO original thinking in this clusterphuck.
October 23rd, 2008 at 4:02 pmhe has an excuse – he got drunk.
October 23rd, 2008 at 4:06 pmalong with Wall Street and Dumbass.
Greenspan lacks imagination.
The 9/11 commission faulted the Bush administration for a lack of imagination.
Yet, somehow, they sure are good on ‘the dark side,’ imagining how to empty the public treasury into their own pockets and covering up their tracks as they work ‘in the shadows.’
They just imagine that the public doesn’t care or aren’t paying attention. Oh, look over there, another blond female is missing, drunk or having sex.
October 23rd, 2008 at 4:07 pmThis might be the absolute dumbest post I’ve ever read on this site.
Are you kidding me? He says at the end of the previous sentence: DIRE CONSEQUENCES!!!
I always find it infuriating when, people who have no f-ing what in god’s name they’re talking about, try to make some sort of sophmoric argument in support of their predetermined beliefs. The roots of this credit crisis are something this site has never been and will never be able to fully grasp and should cease and desist from commenting on it.
Also, please don’t ever try to compare the current mortgage crisis to 9/11 or Katrina again.
At this current moment, I’m embarassed to be a progressive.
October 23rd, 2008 at 4:08 pmThe Fun Is Just Beginning
Oct. 23 (Bloomberg) — Hundreds of hedge funds will fail and policy makers may need to shut financial markets for a week or more as the crisis forces investors to dump assets, New York University Professor Nouriel Roubini said.
SHUT DOWN FINANCIAL MARKETS FOR A WEEK?
http://www.bloomberg.com/apps/news?pid=20601103&sid=aTHELG0dV_e8&refer=news
October 23rd, 2008 at 4:10 pmIsn’t thinking about this type of financial disaster PRECISELY why Greenspan was paid the big bucks?
October 23rd, 2008 at 4:13 pmaapatel11982 Says:
At this current moment, I’m embarassed to be a progressive.
If you are a progressive, why is this the first time I have seen you post here?
It sounds like you may have some reading comprehension issues along with not being able to use a spell checker.
embarassed is spelled embarrassed, btw.
October 23rd, 2008 at 4:16 pmaapatel11982, what, exactly, are you talking about? Who is making a sophmoric argument in support of their predetermined beliefs? The crash of the world economy can be summed up in about five, maybe ten sentences. Why don’t you take a stab at it?
October 23rd, 2008 at 4:16 pm…
are we waking up yet?
October 23rd, 2008 at 4:16 pmDeregulation, no oversight and just look how the free market corrects itself… some have walked away with the bags of gold while most are screwed.
October 23rd, 2008 at 4:17 pmZooey Says:
Isn’t thinking about this type of financial disaster PRECISELY why Greenspan was paid the big bucks?
That is only if he is Democrat, then he would be called a socialist/communist/unamerican as well as it being his fault.
IOKIYAR.
October 23rd, 2008 at 4:19 pmGREENSPAN: … The crisis, however, has turned out to be much broader than anything I could have imagined.
Be honest, for once, Bubbles. You were too busy creating the illusion of a “Bush Boom” to worry about the consequences of your actions.
October 23rd, 2008 at 4:20 pmFirst, I really don’t care about spell checker, so get used to the spelling mistakes.
Second, this thing can’t really be summed up in 10 sentences. Maybe 10 really long sentences.
The predetermined belief here is that Wall Street is bad. This country’s engine of economic growth has as much to with the innovations of Wall Street as anything else. Wall Street brought cheap capital to Main Street and other large corporations, which allowed them to continually grow and expand.
October 23rd, 2008 at 4:24 pmWall Street brought cheap capital to Main Street and other large corporations, which allowed them to continually grow and expand.
Until it didn’t. Then Wall Street caused them to contract and die. And, borrowing became more expensive if it was even available.
October 23rd, 2008 at 4:28 pmGreenspan was a petty little tin god of a frog who arrogantly arrogated to himself a status of oracle. He pandered to Bush and his destructive tax policy in order to keep his throne and he not only contributed to the sub-prime debacle, but, as I wrote in December 2007, also contributed to the Dot.Com bust through his lack of imagination about the unintended consequences of his monetarist policies.
October 23rd, 2008 at 4:29 pmThis world-wide financial collapse is directly the result of absurd lack of oversight and the relentless deregulation by Greenspan, Gramm, McCain and Bush and the GOP free marketeers. Greedy Wall Street idiots just kept on inventing new derivatives that were based, ultimately, on insecure sub-prime mortgages which and been bundled together and then resold an rssold. This whole greed machine was very highly leveraged (i. e., based on borrowed money), so when values went down say, 5% or 10%, there was a margin call and oops, the whole house of cards collapsed. Heck of a job, greedy Republicans…
October 23rd, 2008 at 4:29 pmI’ve always thought that Repubs, conservatives in particular, lacked imagination. Just goes to show.
October 23rd, 2008 at 4:31 pmWayne Says:
aapatel11982 Says:
At this current moment, I’m embarassed to be a progressive.
If you are a progressive, why is this the first time I have seen you post here?
It sounds like you may have some reading comprehension issues along with not being able to use a spell checker.
embarassed is spelled embarrassed, btw.
=======================================================
That’s the same kind of ’smugness’ conservatives hate us for by the way.
Let’s try and be a little more accepting, he obviously has no idea what’s going on.
October 23rd, 2008 at 4:34 pmAfter reading your posts I think you might consider taking your own advice.
I don’t believe you are a progressive either:
Cheap money and trading paper is exactly what got us in this mess, again.
by the way…..mismanagment of resources and assets caused 911 due to not stopping a prevenable attack, katrina because the bush admin put a horse trainer in charge of it…doomed to failure in a real test which katrina was and this financial debacle which would not have happened if a democrat had been elected in 2000……
October 23rd, 2008 at 4:36 pmAapatel- Yeah, well, nice try. That’s not even close.
October 23rd, 2008 at 4:37 pmI guess he failed to read the August 6 briefing titled
October 23rd, 2008 at 4:41 pm“Unregulated Credit Market determined to collapse in US”.
aapatelwhatever: “The roots of this credit crisis are something this site has never been and will never be able to fully grasp and should cease and desist from commenting on it.”
Hey professor! I’d like to give it a shot. Is it the deregulation of financial markets???!!! Professor, maybe it’s time for you to go back and re-read Wealth of Nations.
October 23rd, 2008 at 4:41 pmI always say, NO ONE COULD HAVE ANTICIPATED that George W. Bush would be the worst President in American history.
October 23rd, 2008 at 4:42 pmMy uninformed and completely emotional lefty opinion is that it might have something to do with the gutting of the Glass-Steagall Act of 1933 which was crafted partly to keep what just happened from happening. By shear coincidence, McCain’s trusted economic advisor Phil Gramm was the main force in the gutting of Glass-Steagall…. but, let’s not point fingers, right patelwhatever?
October 23rd, 2008 at 4:45 pmpatelwhatever: “This country’s engine of economic growth has as much to with the innovations of Wall Street as anything else.”
Wrong. This is a corporatist myth. “Innovations” on Wall Street simply create more paper wealth without a corresponding service or good added to the economy. The engine of economic growth is jobs, mainly manufacturing jobs. We need to bring manufacturing back to this country to build up our middle class again. Capital follows labor, not the other way around as corporatists have been led to believe.
October 23rd, 2008 at 4:49 pmWell golly, Mr. Greenspan. You didn’t need to “imagine” it would get so bad because leading economists, who’s only fault is not being Bushco insiders, were imagining it for you. All you had to do was listen.
October 23rd, 2008 at 4:50 pmLet’s not forget that it was Allen Greenspan who told the public a few years ago that it was a good idea to re-finance with an adjustable loan. How many people took that advice and got screwed, blued and tatooed.
Meanwhile, the detested and vile Paul Krugman, at the same time, said, “I don’t know what he’s thinking. I’m getting a fixed and I suggest you do too.”
October 23rd, 2008 at 4:53 pmOne might also say that, if someone in Mr. Greenspan’s position failed to “imagine” a catastrophe that so many were predicting, he should have been fired months ago for gross incompetence. I was his job to “imagine” things like this.
October 23rd, 2008 at 4:54 pmGetplaning, what happened then? And then, please tell me where you get your qualifications to speak on this? Because I have lived and breathed this for the past 5 years, so I’d like to think how you know something that I don’t. There are many reasons this happened, and the largest being deregulation and lack of oversight, but that’s not the only one.
1. Lack of oversight – self evident
2. Deregulation – I think that this started with the repeal of Glass-Steagel which allowed amatuers like BOA JPM and Wachovia into a world reserved for MS, GS, LEH and BS.
3. 9/11 coupled w/ the Bush Tax Cuts – This one is tough to stomach, but after 9/11 we went into a mild recession and the monetary policy of the FED was to cut interest rates. When the economy started to grow afterwards, it grew at an explosive rate, which led the FED to increase rates to stem inflation. This increase in rates caused people to default on their ARMs.
4. People / Predatory Lenders- The people who took out 15-year adjustable ARMs based on their current income, without the realization that their interest could go up if the base rates went up. It’s important to note that the investment banks that are the target of most of this invective weren’t the lenders. They just bought them and sold them quicly. Avg. hold time was 2 weeks.
5. Self fulfilling prophecy – When people first started to default on mortgages, which was a REALLY REALLY small portion of the outstanding number of mortgages, bond holders/investors thought that ALL mortgages and loans were bad, when this clearly wasn’t the case. So, they dumped the bonds on the market, driving down their prices, hence banks having to take mark-to-market losses.
6. Illiquid CDS – First of all, this whole thing began in March of 2007. That’s when people first defaulting on their mortgages. But after that, speculation ran rampant and the best way to speculate was in a wholly unregulated market of CDS and other credit derivatives. These intruments were innovated as a useful tool for hedging purposes, but this market got completely out of control. There could be many times the amount of notional CDS trading than the actual underlying derivative. So, if company X defaults on $1Bn of loans, the actual loss to the market could reach far greater than that.
All of this, along with rampant rumors, counterparty credit risk and a whole host of other items drove the market over the a cliff.
October 23rd, 2008 at 4:55 pmNettles Says:
I do blame bush for these failures, go back to gay bashing and race baiting since you have nothing else.
sucks to be you right now…..heh.
October 23rd, 2008 at 4:57 pm“You, sir, are the very reason why democrats are viewed world-over as whining cowards”
That’s odd as they are about to take over all branches of government.
October 23rd, 2008 at 4:57 pmNettles: “Lots of finger pointing here, Fred. You’ve basically pinned Katrina, the recession, AND 9/11 all on GW Bush. You, sir, are the very reason why democrats are viewed world-over as whining cowards: All blame, zero accountability.”
You couldn’t invent a better example of the psychological trait many conservatives have called “projection.” This guy cites 3 disasters, all of which happened on republican watch and are directly related to policy and/or performance, and his thing is that DEMOCRATS will not assume responsibility for them??!! Come on, now. That’s just nuts!
And on top of that, he’s flat out delusional. Go to BBC, poindexter, and take a look at their latest world-wide polls on how the rest of the world wants us to vote.
October 23rd, 2008 at 4:58 pmOh, I’d be remissed if I didn’t mention this one:
CDO squareds. These were just dumb to begin with and wall street created alot of them, but so did the hedge fund community. But the blame really needs to be placed at the people that bought them. What the hell were they thinking?
October 23rd, 2008 at 5:01 pmWell, stupid troll, I tend to blame those who hold power for their screw ups. It just seems so logical and rational.
October 23rd, 2008 at 5:01 pm“Lot’s of finger-pointing here,” says the deeply troubled conservative.
He’s right. We should remember how conservatives react when things go wrong on their watch. If you remember, right after the 9-11 attack, they all basically said, “this happened on our watch, we’ve had nine months to prepare and blaming the Clinton administration won’t help anything.”
Ah, the good old days.
October 23rd, 2008 at 5:03 pmaapatel: “But the blame really needs to be placed at the people that bought them.”
Right! Because if I set up a stand on the corner, put Draino into nice-looking bottles and sell them as a sexual stimulants, it’s your fault if you buy a bottle and drink it!
October 23rd, 2008 at 5:04 pmExcuse me but bush took a budget surplus that was enormous in itself and had the national debt clock running backwards to a 10 trillion dollar national debt and huge annual deficits….
tax cuts for the wealthy is where the surplus went….you probably think that is appropriate since they nor business contributed much to it, in conjuntion with deregulation and not enforcing regulations that were in place.
This is the republicans recession with bush at the helm. Same story that hoover tried to sell in the 20′ when de-industrialization, tax cuts for the wealthy and deregulation were the buzzwords of the financial elites.
rumors….I think your’s can be called dounright lies.
October 23rd, 2008 at 5:04 pmIf Greenspan could not imagine a complete meltdown why did he have the job? Aren’t these guys supposed to plan for possibly the worst thing that could come along, then take action to make sure it doesn’t happen? If you see the sh*t heading for the fan, turn the damn fan off. They are supposed to stick their noses into these publicly held corporations to make sure they do not screw the rest of us.
October 23rd, 2008 at 5:05 pmAnd, aapatetc, don’t forget to factor in the collapse of the “oil bubble”. No one seems to want to explore the effect of passing “peak oil” and the recent downturn in demand and price. I, almost, pity the poor saps who are sitting on oil futures purchased at $140.00 a barrel. Too bad the banks were not forbidden from speculating in volatile markets.
October 23rd, 2008 at 5:06 pmpaulson knew!
bernanke knew!
greenspan guided the market to trade in these risky derivatives, encouraged risky investments, and “cried wolf” years ago… how could he possibly claim that this has turned “out to be much broader than anything I could have imagined”.
he’s full of it.
those of you above who are engaged in a partisan pissing match, please get educated. please extricate yourselves from the dialectic of cause/effect “politics”. this is a quintessential example of problem-reaction-solution manipulation.
do the research!
October 23rd, 2008 at 5:06 pmFred – If you read the whole thing, you’d understand the context of that comment. Unless you can’t read, or think.
October 23rd, 2008 at 5:06 pmWTF? Is it a new McTroll from McSpin’s McSite?
October 23rd, 2008 at 5:09 pmpete – that’s a fair point. I didn’t mention it, because I that happened sort of towards the end. But the oil bubble on it’s way up is definitely a contributing factor. More money off ourshores, because of our weaking dollar, for the same amount of product.
October 23rd, 2008 at 5:09 pmdamned right it’s partisan…..all bush appointees.
October 23rd, 2008 at 5:11 pmNot the first chesspiece move on the board of the global financial meltdown, but one worth paying attention to:
http://www.bloomberg.com/apps/news?pid=20601087&sid=asNwY4vTynsY&refer=worldwide
Up to $50 billion in high risk, high yield debt could subject to forced sales. What might that trigger?
October 23rd, 2008 at 5:12 pmThen, of course, one must factor in the effect of the whole bleeping banking industry stepping on each other to hand out mortgages that exceeded the real value of property. Who forced those banks to give out $300,000 loans on properties that were only worth $150,000?
October 23rd, 2008 at 5:12 pmyears in the making.
this blog has been following this for quite awhile… good reading.
October 23rd, 2008 at 5:13 pmNo one here coupled them except you for a convienient yet deceptive way of deflecting blame for both. They are seperate and equal failures.
October 23rd, 2008 at 5:15 pmAnd how about commercial property? When’s the last time we saw malls and office buildings filled to capacity? It seems to me that certain parties, outside Bushco, have been screaming about this for years.
October 23rd, 2008 at 5:15 pmStateofthedivision – I don’t think this will have that great signficant of an impact. I could be completely wrong though. The reason I think this is that investors are selling these. And they are being forced to by banks. Banks aren’t taking losses, the private institutions are (Not all private, but mostly). So, this shouldn’t really affect bank balance sheets, because most of the banks have already marked these down to very low levels.
October 23rd, 2008 at 5:16 pmfred, how conveniently they fail… no?
means, motive, opportunity.
probably a bit too “big picture” for you though.
/shrug
October 23rd, 2008 at 5:17 pmThis is also known as the Sgt. Schultz defense. Back then it was funny.
October 23rd, 2008 at 5:18 pmAnd any discussion of the meltdown must include the trillion dollars, give or take, poured into the sands of Iraq. Not to mention the blood of untold innocents.
October 23rd, 2008 at 5:18 pm#had enough Says:
Deregulation, no oversight and just look how the free market corrects itself… some have walked away with the bags of gold while most are screwed.
That’s right. The people who knew this was coming because they were responsible for creating the situation all cashed out and let the stock market tank. They probably stashed their cash in some off-shore account and are just waiting for the market to bottom out (probably around 7,000) and then they will come back and buy up all those cheap stocks.
October 23rd, 2008 at 5:19 pmPete – I’m not sure what you’re talking about when you refer to commercial property. Since 2001, vacancy rates had declined significantly, but we’ve begun to see widening again over the past 6 months.
But, I’m not sure what you’re trying to say.
And Fred, I’m not sure what you’re trying to say. The Bush tax cuts (which I didn’t support then) brought huge amounts of capital to the market, and people were in turn able to leverage that using cheap interest rates, which were lowered because of 9/11. Apologies for not wording it the other way around, which in hindsight, I should have.
October 23rd, 2008 at 5:21 pmdenials?
October 23rd, 2008 at 5:21 pmOf course, if we had been paying attention to the world markets, we should have asked the international banking industry why they lowered our credit rate as soon as Chimpy was elected. The general consensus seems to have been that they knew he was an irresponsible moron who wouldn’t pay his bills and he surrounded himself with greedy (bleeps) who would steal from their crippled grandmothers.
October 23rd, 2008 at 5:21 pmpete – On Iraq, 100% agreement. I don’t think not being in Iraq would have prevented, but atleast we would have sufficient capital, or if we paid down the debt like I wanted, sufficient borrowing capacity to address this crisis without letting the national debt get ridiculously out of control.
October 23rd, 2008 at 5:22 pmIs it just me or is this new troll totally impossible to understand. It’s like it is speaking a different language. Or speaking in “word salad”. That’s a psychological condition where people string words together that are real words but have no relationship to each other.
October 23rd, 2008 at 5:27 pmAs far as commercial property. The problem is in the new properties which were financed the artificially inflated value and have stood empty from the day they were completed because no one is stupid enough to pay the enormously inflated rent.
And my point is that there were so many warning signs, across the board, that I don’t give a rats rump what excuses they try to fly. Bushco was in charge, they were warned, and, when they took any action at all, it’s been proven to be the wrong action. All too often it has been the worst possible action.
October 23rd, 2008 at 5:27 pmYour condecention tells me that you think what: That this financial downturn would have happened if bush was not elected in 2000? Is that what you think, really?
As for the “denials” comment at 57, are you saying you believe that shit?
You do know that it is documented that Powell was in Afganistan in July just before 911 and made them an offer/threat about a pipeline from Georgia going across Afganistan don’t you.
You believe what you want but I believe that bush and his people “should” have seen this coming if they didn’t actually expect it. Yet they did nothing to prevent it. failure/republican.
economy failure/republican.
katrina aftermath preventable failure/republican.
October 23rd, 2008 at 5:34 pmaapatel1982, isn’t there a risk of those high risk, high yield debt funds having to be closed out, i.e. liquidated, to meet their loan obligations?
The sharp blade of leverage, in reverse can sever limbs.
October 23rd, 2008 at 5:38 pmI’d like to see at least one of them admit that he screwed up big time, he’s heartily sorry, and he will work for gratis now in a supreme effort to help clean up the mess he made.
I agree, none of the Bushies have any imagination — none of them foresaw anything coming, from planes hitting the WTC to the financial crisis and everything in between (and there have been many crises, and many warnings) — everything is more than they ever imagined.
October 23rd, 2008 at 5:39 pmWhat the hell do they do all day? Pat each other on the back?
Hell, lets just go back to the Beirut boming, who gets credit there. How about sticking to this decade to maintain relevance. We can carry your charrade back as far as you want to go. We’re talking about todays events.
October 23rd, 2008 at 5:40 pmGreenspan stayed in office long enough to figure out the White House scam on the US Economy. He explained on 60 minutes how he wasn’t bothered by the Stock Market crash or the recession. He long ago put his money oversease and even changed the US currency when he knew the dollar would drop. He just never told the American people, as he sit back and watched the plan unfold. Now Andrea Mitchell who is an insider to the White House also knew and even kept the secret about knowing there were no WMD’s and the hold story the White House was saying was lie. She didn’t want to get caught so she refused to testify against Scooter Libby. So many once honest people sold out to the Bush Administration for personal greed, but it’s all coming to light as to who they are.
October 23rd, 2008 at 5:40 pmWhen the right has nothing left they use racism, gay bashing or Clinton did it….so predictable…..so sad.
October 23rd, 2008 at 5:41 pmI don’t think it matters if they have to be liquidated. Ultimately, these loans are held by funds, which are in turn held by high net worth individuals, sovereign wealth funds, etc. I do want to mention that most State pension funds invest in these hedge funds and debt funds, but they do a pretty could job of spreading their exposure around, given that might not matter in this market. But to the original point of these debt funds, I don’t think it will be that great of an impact.
October 23rd, 2008 at 5:43 pmaapatel, yes, I agree the unwinding won’t impact banks. They’re in an improved situation after Treasury capital injections. My concern is the spread to other financial institutions, hedge funds, insurance companies, etc.
Deleveraging and recapitalization is needed in more than just banking.
October 23rd, 2008 at 5:43 pmpete Says:
WTF? Is it a new McTroll from McSpin’s McSite?
Sounds more like an old troll in new fake progressive clothing to me.
October 23rd, 2008 at 5:44 pmThe Clinton Presidency is completely irrelevant to this topic. If the stupid troll were not a stupid troll, perhaps the stupid troll would realize this?
I mean, seriously, Bushco had seven years to identify and fix whatever problems they may have inherited from Clinton yet, they came up empty.
October 23rd, 2008 at 5:45 pmHi Nettles,
October 23rd, 2008 at 5:45 pmWhat do you think? Should we give Adam Smith some credit for this too?
Their admittedly inadequate imagination is one thing, but they have been disastrously wrong about a single question, and still do not get it: the policies that have lead to the enormous debt of the federal government. Consider ThinkProgress’s report of 2 Oct 08, telling us “National debt passes $10 trillion”, and showing a graph of the debt as a percentage of the gross national product over time. Look at that plot, and ask yourself what were the policy arguments and who were the people who implemented them.
But consider a graph that is even more clear about this error, which is simply the debt plotted over time. And its shock value is unchanged when inflation is figured in. In fact, the changes one see in the debt over time are what is important: who made it go up, or go down?
To summarize, Reagan started taking from the future in 1981, and introduced great uncertainty as a byproduct. His theories (and that of others including Greenspan) were proven wrong soon after, yet he gave America the fingers, so to speak, with a hand gesture in the 1984 debate and thereby lied to us, when he told us income from his boosted economy would overtake the increase of the debt. And he was in all fairness proven wrong again in his second term. And those theories were still again proven wrong by the first Bush presidency. The ideologically driven supply-side hoax, the tax cut con, was implemented for 12 years.
When Clinton got in, his leadership and fulfillment of a central campaign promise proved the opposite of Reagan’s theories to be correct.
And yet, when our current Bush got in, Casey Greenspan the fiscal engineer, put the pedal to the metal with his approval, and now the debt is 4 times the federal budget.
This is not an economic or fiscal problem, It is a physics problem. The system will implode. Is the demagogue alive today who will scream out to his followers, perhaps in 2020, ‘why are we paying this debt off– that was created in the 1980s and 90’s!’ Somehow I think we will then replaythe history of the fascist and economic meltdown of the 1920’s and 30’s, at about 1/3 speed.
It is quite rightly termed a ‘fiscal train wreck’. Hmmm– sound like fiscal terrorism.
But as far as the choice between the debt as a percentage of the gross national product (a scheme cooked up by the perpetrators, the republic party), or simply a plot vs. time, I wonder what would happen if you wanted a loan, and the bank said- ‘no- you owe too much already’, and you countered that you past debt should be ’scaled’ by your income increases over time.
October 23rd, 2008 at 5:48 pmThat de-levering is happening now. A lot of these funds are getting hammered with margin calls, and a lot of them will ultimately fail. But that capital has always been risk-reward capital, right? They invested in those companies knowing the risks. But, now that you mention it, I can see this spiraling into a whole knew thing. Hopefully a lot these banks have unwound the counter-party risk to these other institutions that may fail.
Also, i’m glad I can have an informed conversation on here. It’s actually refreshing. So, thanks.
October 23rd, 2008 at 5:48 pmSOTD says: Deleveraging and recapitalization is needed in more than just banking.
Yes, but at whoms expense? I for one don’t think the taxpayers should take the losses.
October 23rd, 2008 at 5:50 pmBesides which, If FDR had done his duty and stopped WW2, before it began, we wouldn’t be in this position because we would have never become a super-power in the first place. Damn that FDR to Heck!
For that matter, maybe it’s Lincoln’s fault because he didn’t just let the South secede? Just imagine how great the Northern States of North America would be without the constant drain of supporting the South.
October 23rd, 2008 at 5:52 pmJust a reminder to you guys before you get too chumy with this troll. This was his opening salvo.
October 23rd, 2008 at 5:53 pm
RandomChaos – For the purposes of the conversation above, they won’t. We were talking about the institutions that are not and will probably not getting government funds. These are the one’s that will fold.
October 23rd, 2008 at 5:55 pmI know one group that wants to buy their mortgage securitized debt on the cheap. The Carlyle Group’s David Rubenstein spoke months ago about buying his affiliates debt back on the cheap.
He’d love to buy ManorCare’s CDMO’s for pennies on the dollar. Will Hank Paulson serve as the middleman for such a transaction?
The Bloomberg piece noted high risk, high yield loans plunged to a record low 66 cents on the dollar last week from 88.5 cents at the beginning of September.
Forced sales could drive those numbers lower. Some of this stuff could end up in Hank Paulson’s TARP.
Private equity and sovereign wealth funds remain on the sidelines. They must think things are going lower, or are doing confidential deals.
October 23rd, 2008 at 5:58 pmfred… i don’t mean to be as condescending as i appear. it’s actually my cynicism for a completely broken system, and so my sincere apology if i offended you. i redact my statement.
while people here like to keep the discussion locked in some crouching tiger/hidden dragon style struggle of republicans/democrats, i see us all mercilessly manipulated by the ruling elite. we live in a corporatocracy. in my worldview, we are cattle to the overlords.
if you follow the themes of my posts here you’ll notice that i point to various articles and ideas that are beyond the pale of mainstream/alternative political discourse. of course, you’ll also see me lean to decidedly more “democratic” ideas, but in truth i see our political system as failed because we as a people have failed as its custodians. moreover, i believe that political ideology is meaningless in a world occupied by almost 7 billion. hunger, famine, drought, disease, pollution, etc cannot be fixed by politics… but the elite play in this arena because it’s the easiest way for them to wield their influence.
in truth, they have to flex a lot of muscle to maintain their grip, but they will do so regardless of who wins this election. trust me fred… they will.
i promote 9/11 truth because it is an x-ray glimpse into the ruling elite’s agenda (and implementation methods). i applaud thinkprogress.org for establishing the link between greenspan’s denial and the neocons’ denial for their so-called “intelligence failures” of 9/11. it is a brilliant link and it is 100% accurate.
i want for us as a people to wake up from nightmare and not fall prey to partisan nonsense. again, my apologies if i offended you.
October 23rd, 2008 at 6:00 pmRandomChaos, I think Hank Paulson has wide discretion as to what he calls a financial institution. “Mortgage related securities” include credit derivatives, credit card debt, and student loans.
The big money boys continued sticking their handout, even as their prior demands were met. Buying commercial paper, guaranteeing interbank lending, etc.
Stuff’s happening fast and furious. Stay tuned.
October 23rd, 2008 at 6:03 pmwearechange Says:
I understand completely and I am not very tactful myself, my wife tells me so.
I agree with all you say in your last post but have a hard time with the partisanship problem.
I just feel that the bitterness and vile and harsh partisanship that is part of politics now is a product of people like newt ginrich and lee attwater and karl rove.
They have used division, anger, all maner of emotionally charged issues to divert the publics attention from thier activities.
I blame the right for allowing the partisanship to get so bad. They own it just as they do this financial corruption scandal which always follows in thier wake.
Don’t forget that they told the democrats when they came to power to sit down and shut up that the republicans were in power now.
The rhetoric from the right is unnacceptable. They created the enviornment where it is eat or be eaten.
As for the corporatocracy…….I agree but we have to live by the same rule as aloholics, figure out which things you can do something about and acknowledge the ones you can’t.
All I know is that American working class people live better under a democrat.
A democrat will do more for the working class accidentally than a republican will do for them on purpose. I believe that.
October 23rd, 2008 at 6:14 pmI can’t say I blame you, wearechange. Kurt Vonnegut said, “There are two parties in America. The powerful and the powerless. The powerful are split into two clubs. The Republicans and the Democrats. There is little substantial difference between them.” That’s a paraphrase but it’s close, and disturbingly true.
However, there are still strengths built into our system and, the righteous anger of the populace is a powerful force for change. As disturbing as our time is, there is hope. Crisis is a great motivator and, throughout history, people have used crises to make things better.
The fact, as I see it, is that the good ol’ GOP has become a rogue party and turned us into a rogue nation. We have a chance to strip them of power and the only tool at our disposal is the Democratic party. Then, once the GOP gets slapped down, We The People might be able to actually regain some measure of control.
It’s far from a sure thing but we, as a nation, would be stupid not to try.
October 23rd, 2008 at 6:16 pmExactly what Sarah Palin does.
October 23rd, 2008 at 6:19 pmaapatel11982 Says:
First, I really don’t care about spell checker, so get used to the spelling mistakes.
Second, this thing can’t really be summed up in 10 sentences. Maybe 10 really long sentences.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Sure it can
Glass Steagal went away. Greedy financial pigs bundled bad loans and sold the debt without caring if the loans were paid back BECAUSE they were going to bundle and sell them to financial institutions. Financial institutions bought them wholesale without caring because it looked good on the short term bottom line and the US taxpayer would always be there to bail them out long term. This country has always had socialism for the rich and they knew it. That may be an oversimplification but its a valid less than 10 sentence summary of the crisis.
It isnt that Wall St is good or bad they are what they are systemically that is all about maximizing profits. That priority is not always in the best interest of the country or everyone in it.
October 23rd, 2008 at 6:21 pmIf you haven’t seen it, two British comedians named Bird and Fortune saw the worst coming. And they also knew what the government would do because it was already starting. I guess they are just more “imaginative” than Greenspan?
http://www.youtube.com/watch?v=mzJmTCYmo9g
October 23rd, 2008 at 6:28 pmFred, the Republican mantra, that even McCain has recently spewed, is that elections have consequences. And since Democrats had no power they had to sit down and shut up. Then after 2006 they did everything possible to stop progress between vetoes and filibusters. Well this election is going to have consequences for the crooks.
October 23rd, 2008 at 6:29 pmI’m pissed at Greenspan but I respect the fact that today he stood up and accepted some of the responsibility for this national nightmare. So far, he’s the only one who has.
October 23rd, 2008 at 6:41 pmShayne, I couldn’t agree more. This election is shaping up to be one of the biggest spankings in U.S. history. The old GOoPers will be eliminated via replacement but, we also send a message to the Dems. If they are not following through by the 2010 midterms? They’ll be getting replaced too.
Giving a new generation of politicians power in a desperate time forces them to rise to the challenge or find honest work. If the Dems screw up we could see a viable third or even fourth party. We could see the GOP clean house and be reborn without the reckless radicals.
But, if nothing else, we have to repudiate the neocon GOP for our sakes and to send a clear message to the world community. Until that happens we are screwed.
October 23rd, 2008 at 6:42 pmYet Greenspan is on Anderson Cooper’s most wanted list for those who caused this crisis. Thank you to Cooper for dragging these greedy losers into the spotlight.
October 23rd, 2008 at 6:44 pmBilbo Hussein Baggins Says:
Is it just me or is this new troll totally impossible to understand. It’s like it is speaking a different language.
That, and it’s obvious he went to school at the c.c. cummings art of non capitalization.
October 23rd, 2008 at 7:12 pmI couldn’t agree more. My whole point was that they actually said it. It is the condecending tone and bitter snarking that has made things so partisan. The right owns it as you say…….reap what you sow.
October 23rd, 2008 at 7:19 pmAmerican International Group may need even more money than the $122.8 billion that the federal government is loaning the giant insurance company to avoid collapse, according to its chairman and chief executive, Edward M. Liddy.
Mr. Liddy said A.I.G.’s cash needs were tied to the fortunes of the capital markets. “To the extent they continue to go down and we have to keep posting collateral, as it’s called, the vernacular in the industry, it’s possible it may not be enough,” he said.
http://dealbook.blogs.nytimes.com/2008/10/23/aig-may-need-even-more-money-its-chief-says/
October 23rd, 2008 at 7:25 pmIsn’t it pretty rare for Greenspan to admit to making a mistake?
October 23rd, 2008 at 7:40 pmI meant, of course, e.e. cummings.
October 23rd, 2008 at 7:42 pmc.c. cummings was the lead guitarist for Poison.
I think.
.
If Greenspan isn’t thinking…
… Then what the hell is he being paid to do?
.
October 23rd, 2008 at 9:51 pmFred, going back to your post #78, I think after re-reading these posts, my point has been proven that only two, three, maybe four people that fully understand ALL the underlying circumstances that led to this credit crisis.
Pete and stateofdivision are two, and I think they would agree with me, no? So, my I think that my first post, which I admist was quite antagonistic (but at the time, I was pretty ticked off after reading this entry not the comments afterwards).
Eugenedebs – No, what you posted wasn’t an oversimplification, it was utterly inane. And mostly wrong. That was a Sarah Palin answer. Because if you knew anything at all, people were bundling mortgages long before Glass-Steagal was repealed. The repeal just allowed more people to enter the arena, when they had no business being there.
October 24th, 2008 at 12:20 amaapatel11982 Says:
I didn’t read where anyone said you were right…..
everything is a contest with your types though so you just enjoy that false feeling of superiority.
October 24th, 2008 at 12:57 amDidn’t the obscene salaries and greedy retirement benefits of the financial elite resonate, and that the systems were unstable.
October 24th, 2008 at 5:33 amIn Engineering,and Nature, a correct amount of negative feedback (Regulation) is needed to maintain stability.
Nero, it seems, fiddled while Rome burned.
the flaw in his model…he thought he wouldnt get caught, his thinking hasnt evolved, hes just begining to feel the heat
October 24th, 2008 at 9:20 amaapatel11982, I appreciate the chance to dialogue on the financial meltdown, with all its complexity.
After Lehman fell, I poured through their SEC reports looking for what could have taken the storied institution down. High leverage and off balance sheet items (i.e. derivatives) seemed the most likely culprits.
That began a wild week, which turned into a wilder month. Many of the causal factors are still in play. When hosptial giant HCA has $652 million in untradeable auction rate securities in their professional liability insurance subsidiary, the poison is deep in the system. KKR, HCA’s owner, could show up at Hank Paulson’s TARP window.
I look at these boards as a place to share information. If someone doesn’t get my point, I assume there’s a better way to get it across and work to do just that. If we disagree, we disagree. Not such a big deal. I wish you and Fred the best navigating whatever comes next.
October 24th, 2008 at 2:57 pmWaPo just reported Treasury is moving to bail out insurance companies:
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/24/AR2008102401715.html?hpid=topnews
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