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Old 03-08-2018, 02:29 PM
 
Location: The Republic of Gilead
12,716 posts, read 7,780,183 times
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I am seeing this argument more and more from the right; that Democrats taking control of Congress after the 2006 midterm election caused the Great Recession and it wasn't until the GOP took control again in 2010 that things started to improve. To me, this looks like blind partisanship and willful ignorance of reality.

My assumption was that the Great Recession was caused by the bursting of a massive real estate bubble that had been building since the 1990s or maybe even before that. No single party or President can be blamed for it, though Bush bears a large part of the responsibility due to deregulation. Clinton had his hands in it as well, as did Greenspan and Bernanke.

So for those on the right who are pushing the narrative that the Great Recession was caused by the 2006 Democratic takeover of Congress, what exact policy was enacted in 2007 that caused it?
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Old 03-08-2018, 05:15 PM
 
Location: Ohio
24,623 posts, read 19,108,889 times
Reputation: 21738
Quote:
Originally Posted by bawac34618 View Post
I am seeing this argument more and more from the right; that Democrats taking control of Congress after the 2006 midterm election caused the Great Recession and it wasn't until the GOP took control again in 2010 that things started to improve. To me, this looks like blind partisanship and willful ignorance of reality.

My assumption was that the Great Recession was caused by the bursting of a massive real estate bubble that had been building since the 1990s or maybe even before that.
The so-called Real Estate Bubble was a product of the recession, not the cause.

The Bubble burst only because of massive numbers of defaults on mortgages.

The reason for the massive numbers of defaults on mortgages was a decline in household income.

The cause of the decline in household income was massive job losses. Even when those who lost jobs were able to find new employment, it was often at a lower wage/salary.

The cause of the massive job losses was a shift of Capital from the US to Southeast Asia, and in particular, to China. Manufacturing plants in the US were closing, and reopening elsewhere outside of the US.

The job losses were accelerated by the increase in the federal minimum wage as a result of the Fair Minimum Wage Act of 2007, enacted by Congress and signed into law by President Bush.

If Capital is not shifted to Southeast Asia, then no jobs are lost and household income does not decline, which results in people keeping up with their mortgage payments and the so-called Real Estate Bubble never bursts.
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Old 03-08-2018, 05:41 PM
 
Location: Texas
37,937 posts, read 17,809,401 times
Reputation: 10366
Quote:
Originally Posted by bawac34618 View Post
I am seeing this argument more and more from the right; that Democrats taking control of Congress after the 2006 midterm election caused the Great Recession and it wasn't until the GOP took control again in 2010 that things started to improve. To me, this looks like blind partisanship and willful ignorance of reality.

My assumption was that the Great Recession was caused by the bursting of a massive real estate bubble that had been building since the 1990s or maybe even before that. No single party or President can be blamed for it, though Bush bears a large part of the responsibility due to deregulation. Clinton had his hands in it as well, as did Greenspan and Bernanke.

So for those on the right who are pushing the narrative that the Great Recession was caused by the 2006 Democratic takeover of Congress, what exact policy was enacted in 2007 that caused it?
Where are seeing the right blame the left on this? That's not something one hears. Especially nowadays with more people educated on the subject and the crash happening over 10 years ago.

Bipartisanship caused the crash. Violating a basic economic principle when you lower standards, quality and efficiency suffer. We made a ton of loans to people who didnt normally qualify. Those loans should never, ever have been made. The free market didn't do that in the past. The managed market did it. Don't play with the free market.

Deregulation had nothing to do with the cause of the crash. Tons of companies that didn't combine investment with commercial banking failed.
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Old 03-08-2018, 05:57 PM
 
33,387 posts, read 34,750,280 times
Reputation: 20030
Quote:
Originally Posted by bawac34618 View Post
I am seeing this argument more and more from the right; that Democrats taking control of Congress after the 2006 midterm election caused the Great Recession and it wasn't until the GOP took control again in 2010 that things started to improve. To me, this looks like blind partisanship and willful ignorance of reality.

My assumption was that the Great Recession was caused by the bursting of a massive real estate bubble that had been building since the 1990s or maybe even before that. No single party or President can be blamed for it, though Bush bears a large part of the responsibility due to deregulation. Clinton had his hands in it as well, as did Greenspan and Bernanke.

So for those on the right who are pushing the narrative that the Great Recession was caused by the 2006 Democratic takeover of Congress, what exact policy was enacted in 2007 that caused it?
Quote:
Originally Posted by Mircea View Post
The so-called Real Estate Bubble was a product of the recession, not the cause.

The Bubble burst only because of massive numbers of defaults on mortgages.

The reason for the massive numbers of defaults on mortgages was a decline in household income.

The cause of the decline in household income was massive job losses. Even when those who lost jobs were able to find new employment, it was often at a lower wage/salary.

The cause of the massive job losses was a shift of Capital from the US to Southeast Asia, and in particular, to China. Manufacturing plants in the US were closing, and reopening elsewhere outside of the US.

The job losses were accelerated by the increase in the federal minimum wage as a result of the Fair Minimum Wage Act of 2007, enacted by Congress and signed into law by President Bush.

If Capital is not shifted to Southeast Asia, then no jobs are lost and household income does not decline, which results in people keeping up with their mortgage payments and the so-called Real Estate Bubble never bursts.
mircea is right, and wrong. the real estate bubble was building for quite some time, since the mid 90s in fact when sub prime mortgages really got going. in the late 90s they added interest only loan payment plans, that had a balloon payment of the unpaid principle over a ten year period.

at the time people were big into flipping houses to make money, and it worked for a while.

thirteen times after bush was elected, he tried to rein in fannie mae and freddie mac, but the democrats were not having any of it as barney frank and chris dodd both claimed there was nothing wrong with those companies.

at the same time, the big banks were buying and selling bundled mortgages to make money, as well as getting into investment banking as well. these two efforts over extended the banks assets. the trigger though was rising oil prices when a few companies tried to corner the market on crude oil, in part to drive another company out of business. these fuel surcharges, and rising as prices added costs to an already over stressed economy, and when the credit markets seized up, people needed money, so they cashed in their stocks and bonds, causing the markets to virtually collapse.

in the end i dont just blame the democrats, since they could have headed off the problem in 2007, i also blame republicans for pushing to repeal glass-steagle, and clinton for going along with it. it was bad for the country then and still bad now. and dodd/frank didnt even scratch the problem, in fact it kind of made things worse by harming the small banks.
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Old 03-08-2018, 06:33 PM
 
22,629 posts, read 24,490,853 times
Reputation: 20284
Recessions happen for various reasons, they are a normal part of the USA's economic-cycles.

Last edited by tickyul; 03-08-2018 at 07:30 PM..
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Old 03-08-2018, 06:35 PM
 
13,711 posts, read 9,207,897 times
Reputation: 9845
Quote:
Originally Posted by Loveshiscountry View Post
Where are seeing the right blame the left on this? That's not something one hears. Especially nowadays with more people educated on the subject and the crash happening over 10 years ago.
I have seen the Right push this spin many, many times. Just search this forum.

.
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Old 03-08-2018, 06:41 PM
 
13,711 posts, read 9,207,897 times
Reputation: 9845
Quote:
Originally Posted by rbohm View Post
thirteen times after bush was elected, he tried to rein in fannie mae and freddie mac, but the democrats were not having any of it as barney frank and chris dodd both claimed there was nothing wrong with those companies.
Wrong. The Bush administration actively silenced investigation into the fraudulent lending practices and kept the fraud, er, gravy train going.

Read the following from the NY State Attorney General who tried to bring down the fraud but was sued by the Bush Administration to force NY to drop the investigation.


Quote:

Predatory Lenders' Partner in Crime - Bush

What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.
Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.



But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation. When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.

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Old 03-08-2018, 06:44 PM
 
Location: Alameda, CA
7,605 posts, read 4,835,644 times
Reputation: 1438
Here is an article from May 2007 talking about the coming ARM adjustments.

https://www.kiplinger.com/article/re...m-adjusts.html

Although Wild isn't sweating the change, a lot of homeowners are. As home prices started to soar about five years ago, many buyers took advantage of low-rate ARMs just to get a foot in the door. At the same time, mortgage rates were flirting with historic lows, and lenders began offering more interest-only loans and option ARMs, which allow borrowers to make low minimum payments. "So many people did exactly the wrong thing at the wrong time," says Barry Glassman, a financial planner with Cassada & yCo., in McLean, Va. While many borrowers said they'd take the lower interest rate and put the money aside to offset higher payments later, most didn't.
ARMs accounted for just 22% of mortgage originations last year. But in 2004 and 2005, ARMs accounted for about a third of home loans. The short-term indexes to which ARMs are tied have moved up sharply as the Federal Reserve has tightened credit. Of the ARMs due to reset this year, half will be refinanced, predicts the Mortgage Bankers Association. Glassman describes the coming wave of adjustments as an "ARM tsunami."


Combine the above with investment banks growing their CDO securitization business where they didn't care about the quality of mortgages within a CDO because they believed that the structure of the CDO would minimize any downside of risk. Investment banks had replaced Fannie and Freddie as the leading buyers of loans and had lower loan standards then Fannie and Freddie. Regulating CDOs had been resisted by both political parties and anyone who expressed concern was roundly criticized. Fannie and Freddie did not create a single CDO.


The seeds of the collapse were laid well before 2007. The root of the problem was OTC derivatives like CDOs which could be created with little or no transparency as to the quality of the assets that made up the CDOs. BTW, the same is true today and a few of the regulations that grew out of the collapse were rolled back several years ago with a support from both political parties.
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Old 03-09-2018, 06:00 AM
 
Location: Texas
37,937 posts, read 17,809,401 times
Reputation: 10366
Quote:
Originally Posted by WilliamSmyth View Post
Here is an article from May 2007 talking about the coming ARM adjustments.

https://www.kiplinger.com/article/re...m-adjusts.html

Although Wild isn't sweating the change, a lot of homeowners are. As home prices started to soar about five years ago, many buyers took advantage of low-rate ARMs just to get a foot in the door. At the same time, mortgage rates were flirting with historic lows, and lenders began offering more interest-only loans and option ARMs, which allow borrowers to make low minimum payments. "So many people did exactly the wrong thing at the wrong time," says Barry Glassman, a financial planner with Cassada & yCo., in McLean, Va. While many borrowers said they'd take the lower interest rate and put the money aside to offset higher payments later, most didn't.
ARMs accounted for just 22% of mortgage originations last year. But in 2004 and 2005, ARMs accounted for about a third of home loans. The short-term indexes to which ARMs are tied have moved up sharply as the Federal Reserve has tightened credit. Of the ARMs due to reset this year, half will be refinanced, predicts the Mortgage Bankers Association. Glassman describes the coming wave of adjustments as an "ARM tsunami."


Combine the above with investment banks growing their CDO securitization business where they didn't care about the quality of mortgages within a CDO because they believed that the structure of the CDO would minimize any downside of risk. Investment banks had replaced Fannie and Freddie as the leading buyers of loans and had lower loan standards then Fannie and Freddie. Regulating CDOs had been resisted by both political parties and anyone who expressed concern was roundly criticized. Fannie and Freddie did not create a single CDO.


The seeds of the collapse were laid well before 2007. The root of the problem was OTC derivatives like CDOs which could be created with little or no transparency as to the quality of the assets that made up the CDOs. BTW, the same is true today and a few of the regulations that grew out of the collapse were rolled back several years ago with a support from both political parties.
Anything besides focusing on bad loans would be a symptom. After the fact. One could make the argument that it made things worse, but it wasn't the cause. It wasn't the root of the problem.

The loans were a bad risk since standards were lowered in order to get loans to those who didn't normally qualify. When you lower standards, quality and efficiency suffer. A basic economic premise that was violated.
Easy lending once again led to our demise.
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Old 03-09-2018, 06:02 AM
 
Location: Texas
37,937 posts, read 17,809,401 times
Reputation: 10366
Quote:
Originally Posted by beb0p View Post
I have seen the Right push this spin many, many times. Just search this forum.

.
I believe YOU "think" you've seen it. Doesn't make it true. And if you make a statement it isn't up to me to "look it up". Either show proof or don't say anything.
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