Saturday, October 11, 2008

THOMAS SOWELL ON THE ECONOMY --DEMS AT FAULT

Do Facts Matter?
by Thomas Sowell
Friday, October 03, 2008

Abraham Lincoln said, "You can fool all the people some of the time and some of the people all the time, but you can't fool all the people all the time."

Unfortunately, the future of this country, as well as the fate of the Western world, depends on how many people can be fooled on election day, just a few weeks from now. Right now, the polls indicate that a whole lot of the people are being fooled a whole lot of the time.

The current financial bailout crisis has propelled Barack Obama back into a substantial lead over John McCain-- which is astonishing in view of which man and which party has had the most to do with bringing on this crisis.

It raises the question: Do facts matter? Or is Obama's rhetoric and the media's spin enough to make facts irrelevant?

Fact Number One: It was liberal Democrats, led by Senator Christopher Dodd and Congressman Barney Frank, who for years-- including the present year-- denied that Fannie Mae and Freddie Mac were taking big risks that could lead to a financial crisis.

It was Senator Dodd, Congressman Frank and other liberal Democrats who for years refused requests from the Bush administration to set up an agency to regulate Fannie Mae and Freddie Mac.

It was liberal Democrats, again led by Dodd and Frank, who for years pushed for Fannie Mae and Freddie Mac to go even further in promoting subprime mortgage loans, which are at the heart of today's financial crisis.

Alan Greenspan warned them four years ago. So did the Chairman of the Council of Economic Advisers to the President. So did Bush's Secretary of the Treasury, five years ago.

Yet, today, what are we hearing? That it was the Bush administration "right-wing ideology" of "de-regulation" that set the stage for the financial crisis. Do facts matter?

We also hear that it is the free market that is to blame. But the facts show that it was the government that pressured financial institutions in general to lend to subprime borrowers, with such things as the Community Reinvestment Act and, later, threats of legal action by then Attorney General Janet Reno if the feds did not like the statistics on who was getting loans and who wasn't.
Is that the free market? Or do facts not matter?

Then there is the question of being against the "greed" of CEOs and for "the people." Franklin Raines made $90 million while he was head of Fannie Mae and mismanaging that institution into crisis.

Who in Congress defended Franklin Raines? Liberal Democrats, including Maxine Waters and the Congressional Black Caucus, at least one of whom referred to the "lynching" of Raines, as if it was racist to hold him to the same standard as white CEOs.

Even after he was deposed as head of Fannie Mae, Franklin Raines was consulted this year by the Obama campaign for his advice on housing!

The Washington Post criticized the McCain campaign for calling Raines an adviser to Obama, even though that fact was reported in the Washington Post itself on July 16th. The technicality and the spin here is that Raines is not officially listed as an adviser. But someone who advises is an adviser, whether or not his name appears on a letterhead.

The tie between Barack Obama and Franklin Raines is not all one-way. Obama has been the second-largest recipient of Fannie Mae's financial contributions, right after Senator Christopher Dodd.

But ties between Obama and Raines? Not if you read the mainstream media.

Facts don't matter much politically if they are not reported.

The media alone are not alone in keeping the facts from the public. Republicans, for reasons unknown, don't seem to know what it is to counter-attack. They deserve to lose.

But the country does not deserve to be put in the hands of a glib and cocky know-it-all, who has accomplished absolutely nothing beyond the advancement of his own career with rhetoric, and who has for years allied himself with a succession of people who have openly expressed their hatred of America.


Sowell is a syndicated columnist, a black conservative, with impeccable credentials and reputation.





"God is not willing that any should perish, but that all should come to repentance and have eternal life."--the Bible

17 comments:

Anonymous said...
This comment has been removed by a blog administrator.
steve said...

That was uncalled for! That's why the country is in the crapper, because people can't act civil toward one another and present their argument without a personal attack. The powers that be have won, because they have truly divided us. That was just an awful thing to say and presenting yourself in such a manner only diminishes whatever argument you had.

Crusader09 said...

I am so offended that I don't even know what I wanted to say about the economy now...

Crusader09 said...

Okay, I re-read the post and have my thoughts together:

1. It is the fault of the dems that we're in this position, and I did not know the things that Sowell wrote in this article, but I did know why the dems are at fault.

2. I hear a lot about wanting to blame the Clinton administration, and some blame lies there, but not the bulk of it:

3. Jimmy Carter (the more I learn about him, the more I don't understand how he was elected) and his administration is to blame for the crisis we are having today. His ideas about lending were such that he forced banks and lending institutions to make 25% of their mortgages be to low-income families. Then, during Clinton's time in office, that number was raised to 50%.

4. The consequences of those actions are that Jimmy Carter forced the banks and institutions to loan to people who couldn't afford to borrow, 25% of the time. Then, Clinton, (and this is the reason his administration wants to claim some economic victory: people were in better shape during the Clinton years. Bull. They were just allowed to borrow money they couldn't afford to pay) in his idiocy, forced the banks to up the percentage of low income mortgages to 50% of their mortgage portfolio. So, 50% of the people who own homes now can't afford to pay back the loan, and wouldn't be permitted to borrow according to traditional standards, but own homes now because the libs think everyone should own a home.

5. Anonymous, I understand that the Reps have been in control for, at the very least, the last eight years, but that has nothing, NOTHING, to do with the current collapsed of the financial institution system and the subsequent instability of our markets. But its clear that you have neither the desire nor the knowledge to engage in real conversation, based on your filthy comment above. I speak only for myself, but I don't think anyone here comes for that kind of language or ignorance...

Barb said...

Bad language will be deleted here.

Murdrake, that was you. Possibly microdot--but it really sounded just like you.

GOP hasn't been in charge with a clear majority even though we've held the presidency for 8 years --and lost the congress the last 2 years.

We need a bigger majority in Congress to end gridlock --OR people who are committed to correcting problems instead of partisan posturing. As it is, we spend all our time investigating each other's parties, looking for dirt (muck-raking) --and finding it.

some things were accomplished in Clinton years because he signed legislation by the GOP Congress.

But in his last year, we had a market slump or crash --and a recession was inherited by Bush.

then we had every major natural disaster and went hog wild in generosity to the 9/11 victims and NYC --that worried me at the time because we didn't enrich our soldiers' widows and families that much.

National security is where federal money should go --plus to help the truly needy--

And I dare say the 1 per cent can stand a higher tax --but we need to be grateful to the 1 to 5 percent who pay almost all the income tax, supporting the gov't and providing the jobs.

In America, if the rich get richer by honest means, we all do better. But we see that the corrupt, like Raines have gotten richer while letting their companies fail. We need to take guys like him to court and get the money back for the investors and pension holders --and pay CEO's for being profitable --not for collapsing their companies.

And what CEO or movie star or athlete or TV personality like Leno and Letterman wouldn't settle for 1 million a year instead of the multi millions they contract for? I'd sure be satisfied with far less than these corporate execs are getting. and I bet they would too.

steve said...

Thomas Sowell throws out an aquarium full of red herrings and rods and reels go into action.

No, what caused our current financial crises is not the fact that different politicians wanted to make home ownership wide spread.. (should I cut and paste some bush and reagan quotes to back this statement up?).. but anyway, that's not the issue. This whole mess started with Phill Graham's banking deregulation act that made it legal for banks to package mortgages into "colateralized debt obligations" of which they could sell to investers. Both parties assumed that housing values would continue to rise into infinity. Unfortunately home values have tanked. So now these "colateralized debt obligations" are worthless, and all the investment banks that bought into this ponzi scheme are now suffering because nobody can value these investment instruments.. Most of these "colateralized debt obligations" were bizare "no interest" mortgages and readjusting baloon mortgages of which the banking industry peddled like crack. Remember "Ditech"? Also, credit was so loose that people were taking out loans against their homes like an all night ATM machine. So this has nothing to do with trying to make home ownership possible for people, but everything to do with the republican desire for there to be no referee keeping the wolves of capitalism at bay.. because they themselves are the wolves. And now they're trying to do some switcho chango and blame it on the Democrats while they laugh their way to the bank... um wherever... to count their 700 billion of our money they swindled.

And don't even mention the word "socialism" again... ever... Republicans have lost all credibility when it comes to stopping government interference into the free market.. ie.. "command economy" ie.. socialism. I have 700 billion reason why that sentement is a complete crock.

This is just a tangent, but if we solve the energy independence problem, we solve our security problem and our economic problems as well. If we are energy self sufficiant then we can bring the legions home from protecting the oil fields and the oil sea lanes. It will create millions of jobs and make the USA once again an exporting nation.. where one of our exports is success and democracy. That's why just trying to "drill our way" out of the problem is a dead end. because all you have to do is look at a flipping chart and see the potential that domestic oil could potentially make in contrast to our actual oil needs. It's completely ludicris to think that domestic drilling will have ANY impact. I believe that algae will be our savour.

mud_rake said...

You righteous thing! I always get blamed for anybody who posts something negative on your nutty blog! I've been gone all day today from 8 this morning to 9 PM with family responsibilities.

Stop your obsession with me!!!!

Rob R said...

Thanks for sticking up for mom and for sticking up for common courtesy Steve.

Antipelagian said...

Steve said:
This whole mess started with Phill Graham's banking deregulation act that made it legal for banks to package mortgages into "colateralized debt obligations" of which they could sell to investers.

Colateralizing debt, ironically, should make investing *safer*. When you *spread risk* you are, mathematically, better assured of a return on your investment.

What made colateralized debt dangerous was sub-prime lending that politicians insisted was necessary..."or else". Instead of spreading risk, more risk got packed into the ball of debt. Think of it like Russian Roulette...before sub-prime lending was enforced, you'd have a chamber that's practically empty...maybe one bullet, but you'd suffer a mere flesh wound...well, the chamber of the gun had to be exchanged for a clip, and the clip was loaded with bullets.

Sub-prime is not the only problem...the Fed controls interest rates...our economy is not a free market, the economy is created by the Fed and controlled by it. The Fed drove housing prices up with low interest rates...credit became easier and easier to come by...before you knew it, people with no downpayments are in homes they can't afford...they make it fine for a while, but then something changes financially...the housing market gets soft and they are now upside down on a house that is one out of a plethora for sale.

You are right, Steve, about this bailout being socialism...it is socialism for big business...and Republicans and Democrats *agreed* on this decision.

The U.S. gets itself into trouble with debt...financial blow-back created by the Fed...so the Fed decides the answer is more government (and more debt)...we'll be taxed and the government will print more money...the value of the dollar will go down, our economy will still get weaker, home prices will still drop since no one wants to buy a home when their job is uncertain, and we will be all worse off in the end.

Barb said...

I see you stopped in, Mudly! Why?

glad to hear you aren't as verbally vile as I thought.

Barb said...

Ethics and ethical people in lending business are what we began to lack, obviously.

People expect their realtor to look out for them --and they (I) assumed that there were laws governing lending --and that the banks/mortgage companies would not encourage lending that would have variable interest rates except for people expected to become rich enough to handle it --who would do it to get started in home ownership more painlessly in the beginning when they were of lower income.

There seems to be a lot of guilt to go around --but little remorse.

There have always been unscrupulous business folks, and that's where the law was supposed to protect the citizens.

kateb said...

I know some people aren't interested in history - but why then do they feel entitled to then comment on it?

This mess has a start date and a name to go with it.

In 1977 President Jimmy Carter signed the Community Reinvestment Act. This was intended to regulate the banking industry with regard to requiring loans to low and moderate income households.

First Union Capital Markets and Bear, Stearns & Co launched the first publicly available securitization of Community Reinvestment Act loans in 10/97 to the tune of about 385 MILLION dollars. Guess who's dollars those were? And that was under President Clinton's watch.

77 was the start of what we are facing now. This act has been used to interfere with bank mergers and acquisitions since that time and inspired the flurry of house sales that has skewed the property values and set us up for the collapse we now have.

This also set up a cottage industry known as the subprime lending industry.

You take that and simple human greed in trading this sad set of events on the stock market and we crashed the world. Anybody else ever heard of a REIT?

Reagan indeed. I've been working in the banking industry for almost a decade and a history buff for 40 years. It really amazes me what some people come up with in lieu of taking the time out to actually research history they don't know.

kateb said...

crusader09 I believe the percentages you are looking for are closer to 10 and 25%

Rob R said...

You are right, Steve, about this bailout being socialism...it is socialism for big business...and Republicans and Democrats *agreed* on this decision.

I'm not saying anything for or against the bailout, but I would suggest that this specific action doesn't necessarily make a lawmaker a socialist if we think of socialism as a consistent systematic economic affair, and the bailout was and hopefully will be an exceptional event intended to thwart an economic crisis (and I emphasis "intended" as I know it may only be one of many delays for an impending economic crisis and not a true fix)

Barb said...

kateb --thanks for the history. I assume you are right.

Of course, loaning to people of low and middle income isn't a bad idea in itself --but when unscrupulous lenders run the process, and there was no legal oversight, the devil did his deeds--apparently!

kateb said...

What is in the O.T. about usury? I can't find it.

Anonymous said...

what are you guys a bunch of students? Steve the rebuttal to your argument is assessing why home prices fell not just that they fell for no real reason. Thomas Sowell is a man of economics not politics and go ahead and check his credentials he is one of the most highly respected in the field of economics from both sides of the political spectrum