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"In the city of my birth, I had a dream..."
"Change," you say? Please define your terms. 
28th-Mar-2008 12:14 pm
And yet again, Princeton economist and New York Times columnist Paul Krugman cuts through the bullshit like a hot knife through butter and takes us straight into the heart of the three presidential candidates' policy proposals:
All in all, the candidates’ positions on the mortgage crisis tell the same tale as their positions on health care: a tale that is seriously at odds with the way they’re often portrayed.

Mr. McCain, we’re told, is a straight-talking maverick. But on domestic policy, he offers neither straight talk nor originality; instead, he panders shamelessly to right-wing ideologues.

Mrs. Clinton, we’re assured by sources right and left, tortures puppies and eats babies. But her policy proposals continue to be surprisingly bold and progressive.

Finally, Mr. Obama is widely portrayed, not least by himself, as a transformational figure who will usher in a new era. But his actual policy proposals, though liberal, tend to be cautious and relatively orthodox.
Clearly, my jaw wasn't the only one to, well, go a bit slack with surprise upon hearing that Clinton was suggesting that the federal government ought to buy up peoples' mortgages en masse. Krugman was impressed, too. I mean, can you hear the shrieks of righteous right-wing outrage? Not only is she suggesting that the government interfere with the free market, she's also suggesting that ordinary Americans should not have to take the full consequences of their financial gambles. But let's face it: the government takes the lion's share of the blame for creating an environment where the real estate price run up was possible in the first place...why should ordinary Americans suffer the brunt of the inevitable outcome?

Underpinning this policy proposal are both the same pessimistic view of human nature and the same optimistic, liberal philosophy of communal responsibility that characterize Clinton's incorporation of mandates into her universal healthcare proposal--you need both sticks and carrots to institute sweeping social change. When you are given no choice but to help others, and they are given no choice but to help you, all members of the group are cared for. This is socialism pure and simple, people! Can you believe it?! No guarantee she'd actually be able to ram these proposals through even if she did win the White House (and boy is it not looking good), but all those people crying for a change in one breath and cursing Clinton in the next don't know what they're talking about.
28th-Mar-2008 06:11 pm (UTC)
Well, buying mortgages is really more of a bailout for banks than for homeowners.. The homeowners still have to pay their mortgages, just now they owe the money to the government rather than a bank.. Banks, presumably, will have to sell off at a discount and take some loss, but they get to clear their books of potentially bad loans..

It could be helpful to homeowners if they can refinance into a low interested fixed 30-50 year or something..

I blame this fiasco on the mortgage bankers.. My whole job in this industry was verifying that people could and would repay their loans, and that basically got stripped out of the process in the name of pure greed.. And surprise, big loans with bad terms went to people who couldn’t repay them and didn’t understand what they were getting into >_< Still, total failure of government oversight…
28th-Mar-2008 06:22 pm (UTC)
It's NOT a bailout for the banks more than the homeowners. After all, if the homeowners default, the bank forecloses and takes a loss selling your house out from under you. This way, the bank takes a loss selling your mortgage to the gov't instead, and you don't lose your house now that your payments and debt load has been reduced.

I blame this fiasco on the mortgage bankers..

All they did was take advantage of the climate our government created in the first place. It's not JUST a failure of oversight after the fact.
28th-Mar-2008 06:51 pm (UTC)
Well the banks win, they clear out all uncertainty and walk away from the mess they created.. Pretty much the definition of moral hazard, and there needs to be a heck of a lot of new industry regulation to prevent this from happening again in 5 years..

Homeowners may win, if they can afford the new payment they won’t get foreclosed on, but I’d assume they still would get foreclosed on if they still can’t make payments.. I doubt homeowners would actually owe any less money than they do right now, they’d just get better terms..

The government should have been regulating lending practices to prevent people from getting loans they clearly couldn’t afford, or getting onerous terms pushed on them to boost bank profits.. Other than that I don’t know how the government was supposed to regulate real estate prices, though it sure didn’t help that we had years of the Ownership Society where everyone should own their own home and your house is your best possible investment (until suddenly you owe more than the thing is actually worth)…
28th-Mar-2008 07:09 pm (UTC)
Unfortunately, you HAVE to bail out the financial system BEFORE start making new rules 'cause if you don't do that the whole system destabilizes. The question remaining is how to do that in a way that doesn't hurt the people on the bottom. Of course the big institutions get away; it's too late to change that. It's all fine and good, Gary, to sit on a high horse and bitch about who needs to be punished. But the fact of the matter is that the "collateral damage" will be a huge number of ordinary people who will be hurt waaay worse on an individual level than the suits ever will be--and if you don't take steps to protect them, then boy oh boy will other things things start to destabilize in a really ugly fashion.

The fed deliberately encouraged the housing bubble and created the conditions under which it could happen. Low interest rates, no regulation, etc. Who's more to blame: the opportunist who took advantage of the situation or the guy at the control panel who created the situation in the first place, sat back, and watched it all play out?
28th-Mar-2008 07:54 pm (UTC)
Actually, I’m all for it, I’m just afraid that the regulation to prevent this stuff in the future will somehow fall through the cracks ^^

I’d blame the lack of industry regulation and irresponsible/unethical industry behavior far more than the fed playing with interest rates.. Buyer greed too, a lot of the pending foreclosures are properties bought on speculation by people who thought that demand and prices could only ever go up…
28th-Mar-2008 07:51 pm (UTC)
We have a similar situation here. Banks granting loans to people who can't afford to pay them back with the inevitable result being that people get up to their necks in debt. The government has recently stepped in to stop this but it's too late for most people.
28th-Mar-2008 08:12 pm (UTC)
I don't know about the situation in Kuwait, but there is this corrosive ideology circulating here that people ought to suffer if they did something stupid. But the problem is that people are not entirely free, and their "bad decisions" were not entirely their fault. These sorts of problems have become institutionalized. It would be like blaming a poor black man for his failure to pick himself up by his own bootstraps.
28th-Mar-2008 08:19 pm (UTC)
It's not quite the same situation and I don't have Gary's understanding of the mechanisms of it, but basically both the banks and the people here were being opportunistic. To which end they both harmed their own interests. Only now is the government stepping in because the banks have loads of bad debts and the people don't have enough to live by>_< The US isn't the only country with real estate problems.
28th-Mar-2008 08:30 pm (UTC)
*laughs* No, the US isn't the only country with debt problems. You know, I just read last week that England has THE highest personal debt load in proportion to GDP in the world. (I thought the US did...but I was wrong. ^^; )
28th-Mar-2008 08:32 pm (UTC)
A big English bank went poof last month(?) or something like it. I heard the UK government is issuing Islamic bonds, of all things!, to try to get more money into their treasury. Desperate times eh?^_^
28th-Mar-2008 10:25 pm (UTC)
Keep in mind that Krugman is a Clinton supporter and should be taken with a grain of salt. He's not objective.

Hillary talks a big game but just look at how liberal her husband's administration was. She won't do half the things she is saying she'll do. Besides, she wants to bring in Greenspan, the same guy who destroyed the economy in the first place, to fix the problem. That alone proves she can't be trusted.
28th-Mar-2008 11:45 pm (UTC)
Your icon suggests that I should take your suggestion with a grain of salt as well, since clearly you're not objective either. ^_~
29th-Mar-2008 02:28 am (UTC)
Well, obviously :). I'm not making claims though, simply stating that Krugman is impartial and that Hillary wants Greenspan on her economic recovery team. Those are easy enough to prove. I guess it's a matter of opinion whether Greenspan actually screwed up the economy or just sat idly by while others screwed the economy but in my opinion he shouldn't be anywhere near any Democratic administrations.

Edited at 2008-03-29 02:30 am (UTC)
29th-Mar-2008 03:50 pm (UTC)
It's not a matter of opinion whether or not Greenspan screwed up the economy; what IS a matter of opinion is whether or not putting him on a prestige "advisory" panel actually matters that much. I'm more interested in the things the candidates propose that will net immediate, real results. Having the federal government buying up bad mortgages en masse is quite ballsy; by comparison Obama's proposals (more regulation of the industry combined with tax cuts WTF?!) are limp-wristed. Which doesn't eliminate the fact that he's miles better than McCain. But when you're yelling about how transformative you're gonna be, I expect TRANSFORMATIVE. And I've yet to see it in Obama's actual policy proposals. It's ironic, but Obama's neo-liberal proposals remind me more of Bill Clinton's presidency than Hillary Clinton's slightly more populist proposals. (Although if there's a married couple out there with reason to disagree, it's the Clintons. Heh.)
30th-Mar-2008 04:05 pm (UTC)
Even if he has no actual policy impact, which is unlikely given his experience, putting him there has symbolic value. It would be like putting Bush on an advisory panel for ending the war, I don't care if he has no authority, it still sends the wrong message.

The government is in massive debt, I don't know if we could even afford to do that. Ballsy does not always equal prudent or possible. I think Obama is being far more realistic. Besides, I don't believe a word Hillary says and have no doubt she'll renege on this and other promises. She's a consummate politician and will say anything to get elected. The fact that she seems intent on nuking the party should she not be the candidate proves this.
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