Category Archives: politics

Guess what? Government housing policy did NOT create the subprime crisis:

A couple of economists at the Federal Reserve actually did the research, and what do you know?  The government policy of supporting home ownership didn’t encourage the unworthy peasants to borrow beyond their means, as the Republicans would like to tell the story today.

It was actually the slimy mortgage lenders who gave undocumented mortgages to anyone who was breathing.  They did it because they could sell them off to unscrupulous Wall Street investment houses.  They in turn bought them because they could buy AAA ratings from the ratings agencies for the bundles they made from them.

And then the Wall Street could slice and dice the bundles and sell them to unsuspecting pension funds and charitable organizations looking for safe yields to replace the bonds they could no longer invest in because they were only yielding paltry interest rates.  Why?  Because Alan Greenspan kept interest rates so low in the early 2000’s that charities couldn’t meet their obligations to pay out 5% of their assets and still grow with the safe investments they were used to investing in.

So let’s not drink the Kool-Aid we’re being sold.  Here it is from the horse’s mouth- first the Abstract, then the link to the entire research paper:

ABSTRACT

A growing literature suggests that housing policy, embodied by the Community Reinvestment Act (CRA) and the affordable housing goals of the government sponsored enterprises, may have caused the subprime crisis. The conclusions drawn in this literature, for the most part, have been based on associations between aggregated national trends. In this paper we examine more directly whether these programs were associated with worse outcomes in the mortgage market, including delinquency rates and measures of loan quality.

We rely on two empirical approaches. In the first approach, which focuses on the CRA, we conjecture that historical legacies create significant variations in the lenders that serve otherwise comparable neighborhoods. Because not all lenders are subject to the CRA, this creates a quasi-natural experiment of the CRA’s effect. We test this conjecture by examining whether neighborhoods that have been disproportionally served by CRA-covered institutions historically experienced worse outcomes. The second approach takes advantage of the fact that both the CRA and GSE goals rely on clearly defined geographic areas to determine which loans are favored by the regulations. Using a regression discontinuity approach, our tests compare the marginal areas just above and below the thresholds that define eligibility, where any effect of the CRA or GSE goals should be clearest.

We find little evidence that either the CRA or the GSE goals played a significant role in the subprime crisis. Our lender tests indicate that areas disproportionately served by lenders covered by the CRA experienced lower delinquency rates and less risky lending. Similarly, the threshold tests show no evidence that either program had a significantly negative effect on outcomes.

http://www.federalreserve.gov/pubs/feds/2011/201136/201136pap.pdf

 

 

 

 

 

 

 

 

 

 

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Canada is the first country to sign the Ottawa Protocol on Anti-Semitism!

Canada first to sign antisemitism protocol
Breaking News
By ANDY LEVY-AJZENKOPF, Staff Reporter
Tuesday, 20 September 2011
Fittingly, Canada is the first country to sign the Ottawa Protocol on combating antisemitism.The document was drafted in Ottawa at the November 2010 Conference on Combating Antisemitism and was signed last week by Citizenship, Immigration and Multiculturalism Minister Jason Kenney and Foreign Affairs Minister John Baird.It represents the outgrowth of a series of conferences by the Inter-Parliamentary Coalition to Combat Anti-Semitism (IC-CA), which co-hosted the Ottawa conference along with the government of Canada last year.

The protocol contains a series of measures that seek to end hateful propaganda online and in places such as university campuses and distinguishes valid criticism of Israel from antisemitism.

“Criticism of Israel similar to that levelled against any other country cannot be regarded as antisemitic,” the protocol states. “But singling Israel out for selective condemnation and opprobrium – let alone denying its right to exist or seeking its destruction – is discriminatory and hateful, and not saying so is dishonest.”

Jewish community leaders and groups hailed the government’s signing of the document last week.

The Centre for Israel and Jewish Affairs (CIJA) commended the signing. In a statement, CIJA CEO Shimon Fogel called the document “groundbreaking” in its findings and recommendations.

The Ottawa Protocol “will serve as the basis of the renewed international effort against antisemitism. The fact that this important document was crafted in Ottawa is further testimony to Canada’s leadership role in this vital global battle,” he said.

Fogel added: “We are hopeful that the recommendations of the Ottawa Protocol will not only be adopted by other countries, but will serve as a model for countering all forms of hatred and discrimination.”

At the signing, Kenney said Canada is fighting anti-Semitism in a number of ways.

“The Ottawa Protocol complements what Canada is already doing to combat hatred and discrimination, including antisemitism,” he said. “We are a member of the Task Force for International Co-operation on Holocaust Education, Remembrance and Research. Here at home, we have launched programs to promote integration and social cohesion of Canadians from all backgrounds.”

The Canadian Friends of Simon Wiesenthal Centre  (FSWC) also praised the government for becoming the docu-ment’s first official signatory.

In a statement, Avi Benlolo, president and CEO said his organization applauded the government’s “principled leadership” on the issue.

“With the exceptional and pernicious rise of antisemitism throughout the world, the Ottawa Protocol sets an exam-ple for other nations to follow,” Benlolo said. “This announcement is particularly meaningful as Jews around the world watch in sadness as the racist Durban III conference in New York provides yet one more international forum for attacking the Jewish people, while here in Canada we read about another antisemitic inci-dent in which a swastika was carved on an Edmonton hill.”

To read the full text of the Ottawa Protocol, go to www.antisem.org/archive/ottawa-protocol-on-combating-antisemitism/.

Barry is right again! How to prevent the next banking crisis

The author of “Bailout Nation”, Barry Ritholz, has it right again.  His common sense solution, unfortunately, has no chance of getting done because too many vested interests are making money from the ‘new’ rules that let them get us into the crisis in the first place.  But his suggestions would just do it.  If only….

http://www.ritholtz.com/blog/2011/09/10-steps-to-prevent-the-next-bank-crisis/

Read it and weep! Why this country is headed for the dustbin of history

This is the best discussion of politics in America that I have read in years – long and covers the demise of civility in politics in the last 30-40 years.  It is written by a just-retired Republican congressional staffer and is a tell-all of the inner workings of Republican strategy and why the Democrats don’t have a snowball’s chance in hell of making this country sit up and take notice.  It covers politics, demographics, economics and human psychology and will make you cry if you care about this country and its future!

Goodbye to All That: Reflections of a GOP Operative Who Left the Cult

Saturday 3 September 2011

by: Mike Lofgren, Truthout | News Analysis

Barbara Stanwyck: “We’re both rotten!”

Fred MacMurray: “Yeah – only you’re a little more rotten.” -“Double Indemnity” (1944)

Those lines of dialogue from a classic film noir sum up the state of the two political parties in contemporary America. Both parties are rotten – how could they not be, given the complete infestation of the political system by corporate money on a scale that now requires a presidential candidate to raise upwards of a billion dollars to be competitive in the general election? Both parties are captives to corporate loot. The main reason the Democrats’ health care bill will be a budget buster once it fully phases in is the Democrats’ rank capitulation to corporate interests – no single-payer system, in order to mollify the insurers; and no negotiation of drug prices, a craven surrender to Big Pharma.

But both parties are not rotten in quite the same way. The Democrats have their share of machine politicians, careerists, corporate bagmen, egomaniacs and kooks. Nothing, however, quite matches the modern GOP.

Read the rest here:

http://www.truth-out.org/goodbye-all-reflections-gop-operative-who-left-cult/1314907779

Andy Borowitz does it again!

 

SEPTEMBER 10, 2011

‘Credible Threats’ Made to US Government

Homeland Security Studying Two-Hour Video from Wednesday Night

WASHINGTON (The Borowitz Report) – The Department of Homeland Security said today that it was studying several “credible threats” made to the United States government in a two-hour broadcast Wednesday night from a location believed to be the Reagan Library in Simi Valley, California.

Homeland Security spokesman Harland Dorinson said that the Department did not want to alarm the American people, “but whenever you have a group of individuals threatening to dismantle the US government piece by piece, it has to be taken seriously.”

In reviewing the two-hour tape, Homeland Security officials said they found threats to some of the most essential functions of the US government, from Social Security to the Federal Reserve.

While stopping short of saying that the speakers were engaged in some sort of jihad, Mr. Dorinson did note that a tone of religious extremism dominated the video.

“One speaker in particular, seemed bent on rolling back the advances of science and plunging America back into the Dark Ages,” he said.

But the most terrifying moment in the tape came when that same speaker received thunderous applause from the audience after threatening to execute people.

“We’re posting pictures of this individual on our website,” Mr. Dorinson said.  “Hopefully he will be captured before he can carry out any of his plans.”

I’ve been away and this is what happens….

Like my current idol, Barry Ritholtz, who says that every time he goes away, the world breaks loose and things happen, I’ve been away from my computer and look what has been going on!  Rather than try to catch up, I’ll just let a few of my favorites sum it up – Paul Krugman, Barry Ritholz, and Andy Borowitz, for a little levity in these turbulent times.  Enjoy –

The Hijacked Crisis – by Paul Krugman

Has market turmoil left you feeling afraid? Well, it should. Clearly, the economic crisis that began in 2008 is by no means over.

But there’s another emotion you should feel: anger. For what we’re seeing now is what happens when influential people exploit a crisis rather than try to solve it.

For more than a year and a half — ever since President Obama chose to make deficits, not jobs, the central focus of the 2010 State of the Union address — we’ve had a public conversation that has been dominated by budget concerns, while almost ignoring unemployment. The supposedly urgent need to reduce deficits has so dominated the discourse that on Monday, in the midst of a market panic, Mr. Obama devoted most of his remarks to the deficit rather than to the clear and present danger of renewed recession.

What made this so bizarre was the fact that markets were signaling, as clearly as anyone could ask, that unemployment rather than deficits is our biggest problem. Bear in mind that deficit hawks have been warning for years that interest rates on U.S. government debt would soar any day now; the threat from the bond market was supposed to be the reason that we must slash the deficit now now now. But that threat keeps not materializing. And, this week, on the heels of a downgrade that was supposed to scare bond investors, those interest rates actually plunged to record lows.

What the market was saying — almost shouting — was, “We’re not worried about the deficit! We’re worried about the weak economy!” For a weak economy means both low interest rates and a lack of business opportunities, which, in turn, means that government bonds become an attractive investment even at very low yields. If the downgrade of U.S. debt had any effect at all, it was to reinforce fears of austerity policies that will make the economy even weaker.

So how did Washington discourse come to be dominated by the wrong issue?

Hard-line Republicans have, of course, played a role. Although they don’t seem to truly care about deficits — try suggesting any rise in taxes on the rich — they have found harping on deficits a useful way to attack government programs.

But our discourse wouldn’t have gone so far off-track if other influential people hadn’t been eager to change the subject away from jobs, even in the face of 9 percent unemployment, and to hijack the crisis on behalf of their pre-existing agendas.

Check out the opinion page of any major newspaper, or listen to any news-discussion program, and you’re likely to encounter some self-proclaimed centrist declaring that there are no short-run fixes for our economic difficulties, that the responsible thing is to focus on long-run solutions and, in particular, on “entitlement reform” — that is, cuts in Social Security and Medicare. And when you do encounter such a person, you should be aware that people like that are a major reason we’re in so much trouble.

For the fact is that right now the economy desperately needs a short-run fix. When you’re bleeding profusely from an open wound, you want a doctor who binds that wound up, not a doctor who lectures you on the importance of maintaining a healthy lifestyle as you get older. When millions of willing and able workers are unemployed, and economic potential is going to waste to the tune of almost $1 trillion a year, you want policy makers who work on a fast recovery, not people who lecture you on the need for long-run fiscal sustainability.

Unfortunately, giving lectures on long-run fiscal sustainability is a fashionable Washington pastime; it’s what people who want to sound serious do to demonstrate their seriousness. So when the crisis struck and led to big budget deficits — because that’s what happens when the economy shrinks and revenue plunges — many members of our policy elite were all too eager to seize on those deficits as an excuse to change the subject from jobs to their favorite hobbyhorse. And the economy continued to bleed.

What would a real response to our problems involve? First of all, it would involve more, not less, government spending for the time being — with mass unemployment and incredibly low borrowing costs, we should be rebuilding our schools, our roads, our water systems and more. It would involve aggressive moves to reduce household debt via mortgage forgiveness and refinancing. And it would involve an all-out effort by the Federal Reserve to get the economy moving, with the deliberate goal of generating higher inflation to help alleviate debt problems.

The usual suspects will, of course, denounce such ideas as irresponsible. But you know what’s really irresponsible? Hijacking the debate over a crisis to push for the same things you were advocating before the crisis, and letting the economy continue to bleed.

 

Barry Ritholtz:  Speaking Soothing Words vs. the Truth Bomb (Aug. 11, 2011) – an excerpt from his comments – calling out those who were trying to calm markets for their own purposes:

My comment on Bloomberg Tuesday that Bank of America should seek a pre-packaged, GM-like bankruptcy reorg generated a stern phone call from a Mr. Someone, a regular on BubbleTV. Understand, I have been saying this exact same thing for over 3 years (only adding the GM part since their reorg). The other party was a bit of an ass, and when I called them on it (Long BAC are we?), we had a few choice words.  When they crossed a line, I informed them all of our calls were recorded — I could practically hear the sphincter tighten on the other end of the line — I added a few choice words the only way I knew how: My exact phrase to this person was a less than eloquent expression involving self-love that is not possible amongst those who are not double jointed.

Which brings me to pundit motivation: People who try to soothe the savage market psychology do so because its their jobs, and it is in their self-interest. They may work for Fed or the Treasury or a firm so large they cannot be tactical investors. Hence, their calming words amount to little more than propaganda, self-interest, and crowd control.

If you think people are sheep, then you try to manipulate their fears and psychology via the media. You engage in color coded terror warnings, you threaten total financial Armeggedon, you warn of an economic seizure. You say what cows the masses into a corner to be harvested and sold off for parts.

I prefer the Truth bomb. Precision guided, accurate to within millimeters, high yielding explosive truths.

If you have the slightest respect for Humanity, you tell them what is. You give them the facts. You honor the Truth, and let the chips fall where they may. Despite my curmudgeonly world views, I still have enough respect for my fellows that I believe Truth telling is the only way to go. And I am more than happy to call out anyone who wants to tell lies to reach their objectives…….

Andy Borowitz:
AUGUST 22, 2011

Gaddafi Found Running for Republican Nomination

Libyan Madman Turns Up in New Hampshire

CONCORD, NH (The Borowitz Report) – The mystery surrounding Col. Muammar Gaddafi’s whereabouts was resolved today as the dictator announced his candidacy for the Republican presidential nomination in a town hall meeting in Concord, New Hampshire.

In announcing his candidacy, the Libyan madman joins a Republican field which is believed to number in excess of seven hundred candidates.

While some New Hampshire Republicans seemed surprised to see Col. Gaddafi shaking hands and kissing babies at the Concord town hall, an aide to the Libyan strongman said his transformation to GOP candidate made perfect sense.

“In those final days in Tripoli he was becoming increasingly disconnected from reality,” said the aide.  “So I think he’ll fit right in.”

Mr. Gaddafi, dressed in his trademark yellow turban and matching robe, got mixed reviews in his first appearance on the campaign trail, with some New Hampshire citizens saying that his six-hour stump speech was badly in need of pruning.

Additionally, some felt that his rhetoric needed to be toned down, especially his closing line about fighting for the Republican nomination “until the last drop of blood.”

But others gave him high marks for his grasp of history and geography, which most agreed was stronger than Michele Bachmann’s.

Perhaps underscoring the challenges that lie ahead for Mr. Gaddafi in his quest for the GOP nod, current polls show him in the back of the pack, leading former Senator Rick Santorum but trailing the pizza guy.

“Unfortunately for Muammar Gaddafi, he might be out of step with the current crop of Republican candidates,” one pollster said.  “There’s a perception that he’s too moderate.”

The Two-Headed Monster:

A fascinating read about the history of Left and Right

For a sociologist’s take on the history of Left and Right around the world, in politics, society and psychology, do read this interesting article from William Domhoff of the University of California, Santa Cruz.  I think it explains some of the semantics behind the Right’s demagoguery and the Left’s inability to counter it effectively.  There just seems to be a “natural” human bent toward the right, order, cleanliness, up, etc. that all relates to “right” vs. “left” that is difficult to counter.  All the studies cited point that way and it is very depressing to think that people’s altruistic tendencies towrd the group are so hard to elicit against all the forces of the right.

Barry always has it RIGHT!

His column today in the Washington Post is right on the money.  Basically, he reiterates that we should not blindly follow Europe off the austerity cliff, which will not help to create a recovery after this credit crisis:

Wall Street analysts and economists have this recession recovery wrong

The recession is well behind us now, and Wall Street seems to think this recovery should be all wrapped up.

Consider this: The federal non-farm jobs report for June was pretty awful. The private sector created 57,000 jobs. Federal, state and local governments cut 39,000 positions (the eighth straight monthly decrease in government employment). We picked up a mere 18,000 net new jobs.

Graphic

No run-of-the-mill recession

No run-of-the-mill recession

Not a single forecaster in Bloomberg’s monthly survey of 85 Wall Street economists got it anywhere close to right. The most common reaction was “surprise.” That any professional can sincerely claim to be surprised by continued weakness — in employment, GDP or retail sales — was the only revelation.
Let’s put the number into context: In a nation of 307 million people with about 145 million workers, we have to gain about 150,000 new hires a month to maintain steady employment rates. So 18,000 new monthly jobs misses the mark by a wide margin.

Why have analysts and economists on Wall Street gotten this so wrong? In a word: context. Most are looking at the wrong data set, using the post-World War II recession recoveries as their frame of reference.

History suggests the correct frame of reference is not the usual contraction-expansion cycles, but rather credit-crisis collapse and recovery. These are not your run-of-the-mill recessions. They are far rarer, more protracted and much more painful.

Fortunately, a few economists have figured this out and provide some insight into what we should expect. Among the most prescient are professors Carmen M. Reinhart and Kenneth S. Rogoff. Back in January 2008 (!), they published a paper warning that the U.S. subprime mortgage debacle was turning into a full-blown credit crisis. Looking at five previous financial crises — Japan (1992), Finland (1991), Sweden (1991), Norway (1987) and Spain (1977) — the professors warned that we should expect a prolonged slump. These other crises had a number of surprisingly consistent elements:

First, asset market collapses were prolonged and deep. Real housing prices declined an average of 35 percent over six years, while equity prices collapsed an average of 55 percent. Those numbers were stunningly close to what occurred in the U.S. crisis of 2007-09.

Second, they’ve noted that the aftermaths of banking crises “are associated with profound declines in employment.” They found that following a crisis, the average increase in the unemployment rate was 7 percentage points over four years. U.S. unemployment climbed 6 percentage points (from about 4 percent to about 10 percent), while the broadest measure of joblessness gained over 7 percentage points (from about 9 percent to about 16 percent). Again, they were right on the money.

Third, the professors warned that “government debt tends to explode, rising an average of 86 percent.” Surprisingly, the primary cause is not the costs of bailing out the banking system, but the “inevitable collapse in tax revenues that governments suffer in the wake of deep and prolonged contractions.” They also warned that “ambitious countercyclical fiscal policies aimed at mitigating the downturn” also tend to be costly.

Hmmm, plummeting tax revenues just as the government tries to stimulate the economy . . . does any of this sound familiar? It should.

Read the rest here in the Washington Post, or on his blog,  here.

In conclusion, we are in for a long haul, no matter what we do, but austerity, or slashing government spending is the WRONG way to go, unless, like Republicans, you want to follow ideology and damn the little people, with no power, who will get hurt.

 

 

Another take on the WSJ :)

From the Washington Post:

An absolute must-read on Rupert Murdoch and the Wall Street Journal

As usual, Barry Ritholtz has called the Emperor naked again.  The WSJ has done an abysmal job of not reporting on the scandal of immense proportions going on all over Murdoch’s empire, the WSJ being one of his prize holdings.  This just proves what all of us thought when he bought it – that he was actually buying the mouthpiece for his political views and not buying a media asset for his business empire.  Just like Faux News – oops, I mean Fox News – it has just proven itself a tool of its owner and buried the story on page 16.  Do read it here.  It makes you shiver at what we call “the freedom of the press”.