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    The Republican Suicide Strategy

    By Michael Wolraich on Fri, 01/04/2013 - 10:13am | Politics

    A suicide bomber walks into a bar. He shouts at the bartender, "Gimme the money, or I blow this place to bits!" The worried bartender hands him a wad of cash, and the bomber departs.

    The next day, the suicide bomber returns to the same bar. He shouts at the bartender, "Gimme the money, or I blow this place to bits!"

    "Are you nuts?" answers the bartender. "If I give you money every day, I'll go out of business. Plus, you're scaring away the customers."

    "I tell you what," replies the bomber, "Gimme the money, and I won't come back until the day after tomorrow."

    Welcome to the art of negotiation, Republican style. Since the election of 2010, the United States has narrowly averted three Republican-built suicide bombs: one government shutdown, one debt default and one fiscal cliff. We have two more scheduled for February: across-the-board spending cuts and another debt ceiling expiration.

    Read the full article at CNN.com

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    Politics

    Comments

    Good morning and happy New Year, Michael.

    How do you interpret Boehner's re-election to the Speakership? 

    I had thought his days were numbered and still am unable to imagine a scenario where he survives.  I am also unable to imagine a scenario in which a Speaker Cantor allows a bill he vehemently opposes to come to the House floor for a vote.  

    Sometimes politicians become more "statesmanlike" when they assume greater responsibilities.  Who knows, but I don't get the sense we are likely to see that from Cantor.  He has the look and feel of a Robespierre to me, committed to going down in flames rather than "compromising" his "principles".    Does Cantor really want that job?  It's a lot easier to take purist positions as Majority Leader than as Speaker.  Or at least that used to be the thought.  Maybe not so any more with today's extremist GOP.

    Obama may need to resort to unilateral Executive Branch action if the House refuses to extend the debt ceiling other than on extortionary terms suggesting they think their party won the 2012 elections.  In which case we could be in for a constitutional crisis.  It should have been entirely forseeable that this was at least a very possible destination in which we were headed if we retained a GOP majority in the House. 


    by AmericanDreamer on Fri, 01/04/2013 - 10:41am

    Good morning, Dreamer. I haven't found any credible accounts of the internal politics in Republican House caucus. Obviously, Boehner's support is weak, but Cantor's may not be stronger. Alternatively, Cantor may feel that his career is better served as Majority Leader. That way, as you keenly observe, he doesn't have to make hard decisions between wrecking the economy and alienating the base. I would add that the Majority Leader can be pretty damn powerful. Remember Tom Delay?

    I think Obama should let the House GOP drive the country's nose into the ground until the Chamber of Commerce gives 'em a proper wallop. I predict that will happen before we actually feel much pain.


    by Michael Wolraich on Fri, 01/04/2013 - 11:09am

    On internal House GOP caucus dynamics, this story in Politico appeared today, "Conservatives rebel Against John Boehner", by Jake Sherman and John Bresnahan:

    One graph from the story:

    Majority Leader Eric Cantor (R-Va.) — long a foil to Boehner — got three votes. As a trio of Republicans lawmakers cast their votes for him, Cantor shook his head on the House floor, visibly displeased. His office declined to comment on the vote.



    Read more: http://www.politico.com/story/2013/01/conservatives-rebel-against-boehner-85749.html#ixzz2H1nJWgAG

    From this evidence it seems Cantor clearly is not seeking the Speakership and is just fine with his current role.  He can make all sorts of trouble while not having the buck stop with him, in the end.  He can continue to pull Boehner's chain and force him to try to bring up for a vote bills which Cantor and his followers oppose, again, or hold out and get better terms on a final deal.  (Ryan voting for the recent deal seems to me best interpreted as a signal he is trying to moderate his image, perhaps in order to keep the pot boiling for a possible 2016 presidential run).

    Although the pace of change is not what Cantor and his followers would like, right now they own the conversation in Washington.  It's all about reducing the deficit.  So they don't even need to argue against any new spending (that they don't like, that is) right now, and have a much better crack at getting spending cuts they support.  Why would they kick Boehner out when they can continue to milk good cop/bad cop for all it's worth to extract further concessions and continue to own the debate on economic policy? 

    Hard to tell whether Boehner truly is angry with his caucus--which might eventually raise the issue of whether he would consider resigning--or whether at some level he is privately just fine with, or reconciled to, the current arrangement, given that he is going to continue to get kicked around in the court of public opinion so long as the current dynamics remain in place. 

    One way to read his remarks yesterday on the House floor (having to do with why members of Congress come to serve, it not being about public praise, etc.) is as his attempt to come to terms with his role as Cantor's (and the majority of the GOP caucus that is almost surely more in line with Cantor's views and goals and preferred timelines for starving the government beast right now than Boehner's) lapdog.  Given how much he has wanted the Speakership it sounds as though it would really take a lot more public abuse directed at him for him even to consider stepping down.  

    Also hard to see why the Chamber would be anything other than delighted with the current charades and shenanigans in Washington over the debt ceiling and the budget.  They'll milk the mess for all it's worth to try to get the Democrats to blink on SS and Medicare especially (because concessions erode support for Democrats and promote dissension within its ranks), and step back from the precipice at the last possible moment.  So while it's all ugly as hell, if they can get Obama and the Democrats to blink next month I think they'll see it as well worth it, and continue with more of the same for as long as the voters keep returning them to majority power in the House.  


    by AmericanDreamer on Fri, 01/04/2013 - 12:41pm

    Just b/c Cantor didn't promote himself for Speaker doesn't mean that he doesn't want it. When you strike at a king, you must kill him, as they say. He may have tested the water and concluded that he didn't have the votes.

    The Chamber of Commerce was quite disturbed during the last debt ceiling debate. They'll tolerate it if it doesn't go too far, but they won't permit a default (if they can stop it).


    by Michael Wolraich on Fri, 01/04/2013 - 2:13pm

    One does wonder how many of those House Republicans that voted yes on the fiscal cliff bill received phone calls from their wealthy donors concerned about a recession.


    by Elusive Trope on Fri, 01/04/2013 - 2:26pm

    Nobody's going to take the job of the guy standing knee-deep in sh*it just because they don't like the way he holds his shovel.


    by erica20 on Fri, 01/04/2013 - 4:15pm

    Right? who really wants the job?

    Congress' approval rating is what? 12 percent? that means Boehner's approval rating is probably even lower- as it should be.


    by demunchained on Sat, 01/05/2013 - 7:13am

    Thanks for the link.

    Hilarious. ha

    Thank the Good Lord that Senate seats and the Executive cannot be gerrymandered!

    On the other hand, the nutsiness of the House reflects the nutsiness in our nation.

    People who make less than $50,000 a year are worried about an increase in the Estate Tax.

    People who will have access to health care for the first time in years think that Obamacare will result in their deaths by some governmental panel.

    People who have not paid Federal Income Taxes for decades think their taxes will go up due to a socialist Presidency.

    People who have an old shotgun and a '22' think that their President is planning to take their guns away.

    We live in a nation where a sizeable portion of the electorate believe the Earth is only ten thousand years old; believe that Sharia Law rules the White House; believe that climate change is a communist conspiracy...

    Moyers once quoted a Texas Lawmaker as saying:

    If you think some of these legislatures are nuts, you should meet some of their constituents!


    by Richard Day on Fri, 01/04/2013 - 11:15am

    Excellent column.

    "The joke has a hidden punchline. It turns out that the suicide bomber is a part-owner of the bar. The folks who will lose the most if the bomb goes off are the investors, bankers and businesspeople who still retain large stakes in the Republican Party. When the Republicans threatened to let the government default in 2011, the U.S. Chamber of Commerce and other industry advocates objected with growing concern. If the Democrats refuse to negotiate this time around, industry advocates will not sit idly while the party they finance deliberately ruins their businesses."

    It's funny but when I first saw Steve King out there saying that any New Yorker or New Jerseyian would be a fool to give money to the Republican party, I didn't immediately associate the sentiment with the House failure to pass Sandy relief before the end of 2012 -- I thought he meant that people who work in the securities or investment industries would have to be downright nuts to give money to those people.  Republicans have clearly put politics ahead of economic sense.


    by Michael Maiello on Fri, 01/04/2013 - 11:43am

    Thanks. I really hope Obama calls their bluff this time round. This won't stop until Wall Street finally stands up and tells the Republicans to go f... themselves, if I may quote the eloquent Mr. Boehner.


    by Michael Wolraich on Fri, 01/04/2013 - 12:09pm

    Do you believe that there is significant sentiment on Wall Street favoring privatization of Social Security?


    by AmericanDreamer on Fri, 01/04/2013 - 2:29pm

    No idea, though I imagine that it is high among all conservatives, including those on Wall Street.

    But my point is not that Wall Street conservatives oppose the Republicans' ends. It is that many of them oppose the means. They may want privatized SS, but they absolutely do not want the GOP to force the government into default in a futile attempt to achieve privatized SS. In other words, if the Dems do not blink, Wall Street Republicans certainly will.


    by Michael Wolraich on Fri, 01/04/2013 - 3:13pm

    I do.  But they're in no good political position to come out and say it.  After the Financial Crisis, theyhave to act like it's been thrust upon them, as if they're serving some national good and not just skimming fees.


    by Michael Maiello on Fri, 01/04/2013 - 4:33pm

    Nate Silver explains why this situation is not going away soon. (Teaser: it's not gerrymandering alone.)


    by artappraiser on Fri, 01/04/2013 - 7:29pm

    You are as bad as the people you are critical.  If we cut spending, grandma loses her social security check?  Seriously?  This is the problem, everyone is on the extremes.  I am a republican and I am open to meaningful discussion about raising taxes, but we are not having it.  What I want, is some assurance there is a fiscal plan, and there isn't one.  When I send my daughters off to college, I don't give them a suitcase full of cash and say, "make good choices," I want a plan and budget and I provide money as they live within their means and show responsibility.  Medicare and Social Security are not sustainable.  Either are government pensions that are way out of line with the private sector.  Why should people retire at 65 when life expectancy of 83?  That wasn't the concept behind Medicare and SS when they were started (life expectancy was 64).

    We need reform, fix SS, fix Medicare, show me the long term future of both, fix the government pensions and balance the budget (which neither party has done).  Then, and only then, raise my taxes and put all of the increased revenue to debt reduction.  The future savings on interest expense will quickly provide surplus money and we can reform taxes that encourage working people to work hard and be successful.  What is wrong with that?

     


    by Anonymous (not verified) on Sat, 01/05/2013 - 1:28pm

    Why should people retire at 65 when life expectancy of 83?

    Work till you drop?

    The future savings on interest expense will quickly provide surplus money and we can reform taxes that encourage working people to work hard and be successful

    Future savings?

    Whose going to hire a person approaching 60 years of age, let alone provide a decent livable wage with medical care.

    It wouldn't be too long, before your bank account or  your retirement account would be drained. Only to be told, your life expectancy is 83  

    Keep working you wage slaves 


    by Resistance on Sat, 01/05/2013 - 1:40pm

    Do you really think people are incapable of working and adding value at the age of 65?  My father is 72, still works and is extremely active (water skied this past summer).  It is simple math, if people live to be 83, and they retire at 65, there is almost 20 years of the government paying their living expense and medical expense.  These get more expensive with time, and people will live even longer which is compounded by people entering the workforce later.  There will be people taking more out of the system then they put in, how is that sustainable?  What if people live to be 100 in 10 years, should they still retire at 65? 

    If you work longer, how is your bank account or retirement account being drained?  Extending the retirement age would have to be phased in, could not affect people over the age of 60, but if you added 3 months per year to the retirement age and linked it to life expectance minus 10, the system would slowly correct itself and be sustainable.

    And for everyone who does not believe in "death panels" you need to study socialized medicine a little more closely.  In the UK for example, elderly people are often denied lifesaving care because they system cannot afford it and they are told it is not cost effective.  There are also long waiting lists for some cardiac procedures and many of the people die on the waiting lists.  This is why it is so important to fix out system and make it sustainable

    There is no long term solution for those who do not believe they have to work for anything so perhaps "wage slave" is a synonym for someone with a work ethic and a belief they have a responsibility to create their own success with their own efforts and hard work instead of waiting for a handout.


    by Anonymous (not verified) on Sat, 01/05/2013 - 2:15pm

    Someone who worked an assembly line much of their life will have trouble making it to 83. A woman who's raised kids while working under tough conditions, scraping by, will have trouble making it to 83.

    Whether people should retire at 65, that was part of the bargain in setting up a retirement program that they paid into. When I can tell Sam Walton's kids that they have to welcome guests at the front door until they're 75, I'll worry about it - until then, people paid in their money, pay out their benefits.This isn't French retirement at 55 - there's nothing obscene about kicking back at 65, even if that means 20 years (if lucky). If you need to fund it, tax the rich - God knows they've gotten a lot of kickbacks that last decade. In the 60's tax rate was over 70%. Now with capital gains at 15% and estate tax way down, they're barely paying anything, while companies like GE, Apple, Google, Goldman Sachs and Amazon make tax avoidance an art. An exec can screw up and receive a golden parachute of $40 million, but a senior who's earned low wages is supposed to pay back because she lived too long for the actuaries. Brilliant.


    by PeraclesPlease on Sat, 01/05/2013 - 3:05pm

    Life expectancy isn't 83 for poor people. Those who have to keep working typically live to 70 or so. Those who have the means will live to 83 with our without Social Security.

    If we'd quit spending $800 billion a year on stupid wars and our security state, we'd have plenty to keep Social Security fully funded. As it is, Social Security is in little danger for decades, whatever the freaks who've hated it from inception say.

    It's not enough that bankers can rig the system steal trillions and companies can game tax laws to pay next to nothing - we have to make sure poor people grow old painfully and die in a degrading way. 

    You're a Republican, but Republicans came into power in 2001 and rammed through irresponsible tax cuts when the budget had been balanced. War & Homeland Security expenses changed nothing in their "plan" that added $3 trillion to the deficit. 12 years later, we've got a Democratic president who goes along with Republican ideals - cut taxes, ignore revenues, pretend there's a plan, bob from excruciating budget crisis to another, tell poor people they have to share the pain of corporate largesse - somehow corporate America has recovered post-2008, but everyone else has to keep paying.

    It's ridiculous to pretend to balance the budget when serious defense cuts are off the table, and we only talk about programs that are funded by user contributions. Nobody says "make the drone program sustainable"- they just budget in the fucking money and we get to shut up and like it. So much that they're being used domestically. Homeland Security payouts are just a grease to keep defense money spread around, keep all the representatives Democrat or Republican voting for more cashcow defense spending because of little dollops in their district. What a scam. What a shame.


    by PeraclesPlease on Sat, 01/05/2013 - 2:56pm

    Why should people retire at 65 when life expectancy of 83?  That wasn't the concept behind Medicare and SS when they were started (life expectancy was 64).

    This is a simplistic analysis. Most of the gains in life expectancy come from less child mortality, vaccines, sewage treatment, and garbage removal. For those who survive childhood the gain in life expectancy has been small and mostly among the top half of the economic strata.

    http://digbysblog.blogspot.com/2013/01/lets-hope-ed-rendell-doesnt-see-d...

    General life expectancy, or life expectancy at birth, is mostly affected by early death. Whenever a child dies, it skews life expectancy from birth way down. Anything that increases infant mortality, or care that ends a potentially devastating childhood illness (think vaccines), will increase general life expectancy a lot. Therefore, many of the gains in overall life expectancy have nothing to do with how long an elderly person lives, but how well we do in treating childhood illnesses...

    While earners in the top half have seen an increase of their life expectancy at 65 rise about five years over these three decades, the bottom half saw their life expectancy at 65 rise barely a year.


    by ocean-kat on Sat, 01/05/2013 - 3:40pm

    A fair point, certainly life expectancy has been affected by a number of factors.  However, no one can argue that 8,000 people in America per day turn 65. 

    http://www.aarp.org/personal-growth/transitions/boomers_65/

    Freeze defense spending, I'm all for it.  But project out 20 years with the boomers all hitting 65 and living to over 80 and the expense of Medicare and Social Security is not viable.  We just raised taxes, and it is no where near enough. 

    So, the premise of this is the republicans will not compromise.....but what I am hearing is that there is zero interest in meaningful spending cuts.  I am all for putting defense on the table.  For all the fiscal cliff attacks, the fact is republicans AND democrats put that measure in place to make SURE there was fiscal responsibility.  In the end, only taxes went up and there were no spending cuts. 

    Both parties are the problem.  There needs to be compromise, we have more revenue, now we need spending cuts and entitlement reforms that do not affect our seniors but make a viable system morning forward.


    by Anonymous (not verified) on Sat, 01/05/2013 - 11:54pm

    Don't freeze defense spending. Cut it. The U.S. spends more on making war and preparing for war than the rest of the world combined. Why do you need 11 aircraft carrier groups when every other world power has at most one? Whom do you expect to fight?

    During the election campaign, while berating Obama for not paying off the debt that his own warmongering party ran up, Romney actually declared he wanted to build four new carriers. I think it was four; it doesn't really matter because even one more is an idea as divorced from logic as Newt's moon colony.

    Look, the country has families who have lost their homes to greedy banks and are living out of their cars. And the 1% want to slash "entitlements" so they can build more deadly toys and (they imagine) feel more secure from the marauding hordes inside their gated communities and on their private islands.

    That is what is unsustainable.


    by acanuck on Sun, 01/06/2013 - 11:18pm

    I see a problem and a symptom that problem causes. You see the symptom as the problem. The problem is unemployment and the hollowing out of the middle class. The symptom is massive budget deficits.

    I don't know the answer to the problem, but we will never cure budget deficits until we find that answer. Our nation can't survive without a robust middle class and near full employment most of the time. Every economist I respect tells me that tax increases and spending cuts will further depress the economy. All spending is someone's income. If people have less money to spend there will be less jobs, less income, less spending, in the end less tax income to the government and even higher deficits in spite of the spending cuts and revenue increases.

    Everyone says we don't want to go down the road of Greece. But the crisis in Greece wasn't the deficits that were admittedly way too high. It was the austerity. Each tax increase and spending cut further depressed the economy, drove up unemployment leaving less tax revenue and an even higher budget deficit.

    The vast majority of our current deficit would disappear if we had close to full employment instead of what some economists claim is more than 14% unemployment. The 7.8% figure doesn't count those who are so discouraged they've stopped looking for work.

    I'm not happy with our high deficits but spending cuts and revenue increase that makes a serious dent in them in this slack economy will likely push us into another recession. What to do?

    I guess we're just waiting for Adam Smith's invisible hand of the marketplace to save us.


    by ocean-kat on Mon, 01/07/2013 - 12:24am

    You raise great points.  So much of the issues are self created and government caused.  None of this is what Adam Smith envisioned.  The reason for the housing bubble was largely the government getting involving basically acting like co-signers.  People bought homes with zero down and interest only loans.  Of course they had no equity.  Further, if they did get equity, they took out a second because the tax code encourages it with the mortgage interest write off.  This was taken to a whole new level with the packaging of high risk loans into a package, but that could have not happened if we would have stuck to the traditional 20% down, 30 year conventional loan model as there would have been no demand bubble and thus no crash.  No one actually lost THEIR home, they lost the bank's home that they were living in when they could not longer make the payments on the house they couldn't afford in the first place.

    Every time we raise the minimum wage, we make unskilled US workers less economically viable compared to the rest of the world.  The people that keep their jobs make a little more, but more companies move these jobs offshore so they can compete in the global economy.  People will call this corporate greed but for many it is survival; they simply cannot stay in business if their labor costs are double that of their competitor.  The tax code has gone from a way to generate revenue to social engineering.  Why should the government care if you buy a home or rent?  Why should the government encourage people to have children through more deductions and so on.

    A simple predictable tax code which is lower but without all the loopholes and deductions will be better for business as they will not be wondering every year if the R&D tax credit will be extended.  Closing these loopholes will generate more revenue.

    Get more people working is for sure the right answer. I disagree somewhat about Greece; early retirement and free healthcare starting are young as 50 caused much of their problems.  But you are exactly right, once the deficits were created, taxes and spending cuts made things worse. The idea that any job is below someone needs to go away.  I would rather someone make $4 an hour than nothing.  We can still provide a welfare safety net but do it in a way that having any job is better than not having one. 


    by Anonymous (not verified) on Mon, 01/07/2013 - 1:59pm

    In Germany they're somehow able to pay decent wages without losing all jobs to East Europe. Perhaps offshoring is more than rushing to the cheapest day-worker, that quality and dependability and innovation are involved? 

    And you miss out that US companies are happy to pay workers less, even if they're not going to outsource those jobs. Why don't we just have everyone work for $4/hour and get over it? Why shouldn't companies keep all the profit? They take all the tax subsidies risk (expect the risk of being thrown out on the street with your pension fund stolen - thanks Mitt).


    by PeraclesPlease on Mon, 01/07/2013 - 2:24pm

    You should read the below link about the TARP program,, before assuming the poor banks got robbed on home mortgages.

    Twofer - insurance & Wall Street theft

    http://dagblog.com/reader-blogs/twofer-insurance-wall-street-theft-15956


    by Resistance on Mon, 01/07/2013 - 2:29pm

    I never said the banks got ripped off (they worked the system the government put in place).  What I said was that if every borrower was required to show income, put 20% down, and got a conventional 15 or 30 year loan, we would have never had the housing crisis.  Do you disagree?


    by Anonymous (not verified) on Mon, 01/07/2013 - 2:50pm

    Yes, disagree - there would have been lost jobs with defaulted homes from non-payment when the economy crashed; there still would have been illegally repossessed homes through robosignings (remember, there were people who had paid up completely who still lost their homes), and most of the housing speculators were institutions - not poor people.

    Once again they made a "welfare queen" poster child that demonized poor people and hid the greed of banks with their worthless toxic assets and all sorts of subterfuge. And then when with TARP bailout the banks were supposed to use free loans to loan out to people, and use HAMP to help homeowners - it turned out to be a Potemkin Village - the banks just kept the money. MERRY CHRISTMAS!!! And the average joe/jane that lost a house had typically saved for decades to afford it. Too small to succeed vs. too big to fail. I guess if they'd been working for $4/hour they would never have hit this predicament of investing their savings into their home.

    Frankly, I didn't want to own a home, but I almost had to buy one simply because the housing bubble had pushed rents up so high that it was extortion - so buying a home provided a tiny bit of a paycheck to be "saved" - presuming "saved" lasts past the next financial crash/trillion dollar theft.

    "When I was younger I spent half my money on women and booze - the other half I wasted. I said after my 3rd divorce that next time I was just going to go buy a house and give it to a complete stranger. Little did I know it'd be a bank."


    by PeraclesPlease on Mon, 01/07/2013 - 3:19pm

    Then we will have to agree to disagree.  Why was the a housing bubble in the first place?  The government co-signed on loans for people who would not otherwise qualify.  This created thousands of new home buyers lured in with no income verification and zero down.  This artificially drove up home prices (and as you correctly point out rents as well).  If everyone would have had to qualify and put 20% down, there is no bubble because there is no spike in demand driving prices up.  The bubble can't burst if it never starts.  Yes, in a good economy prices go up, in a poor economy they go down, but the 20% equity usually prevents people from being underwater. 

    I am sure that there were some home illegally repossessed, but this has to be a tiny fraction of the mortgage defaults. 

    TARP is a joke, the controls are absurd, and none of this money should have been authorized the way it was nor spend the way it was spent.  I am not demonizing the poor.  But I am demonizing the people who I know who purchased a home they could not afford, took out the equity to buy new cars and other things they could not afford, and they cried foul when the economy turned and they "lost" their home.  They were irresponsible, isn't there some point in time where the individual is responsible for their own situation?


    by Anonymous (not verified) on Mon, 01/07/2013 - 6:58pm

    I always thought the idea of letting people own houses, was a heck of a lot better than constructing public housing; where they eventually ended up being a blight and crime ridden.

    I still believe it would have been better, but the greedy bastards, ruined that ideal.

    Now they don't care what happens to the poor.

    Now those who benefited most, by the bailout can prove Government doesn't work for the people; but it sure does work for the well connected.

    The government of, by,  and for the people had a choice to make

    "To small to succeed"  or "Too big to fail" and the rest is history, if you can dig deep enough; it turned into, "Too big to pass up" .

    Why weren't the homeowners offered interest rates as low as 1/2 percent ?

    But I do understand the concept of hard work and reward, if the bankers and our government wouldn't have picked the winners.

    Winners who "will gladly donate to your reelection, since you were so helpful"   


    by Resistance on Mon, 01/07/2013 - 10:04pm

    The point wasn't thata they didn't co-sign unsecured mortgages. It's that these were a small part of the problem - institutional defaults were much greater. But it's easy to talk about poor people in ghettoes defaulting than speculators and banks defaulting and government bailing out banks that were trading in worthless assets. I'm not saying you blame them, but you're quick to talk about "those who didn't work", whether for mortgages or social security.

    Some used their mortgages as an easy bank loan - stupid - and others thought refinancing with variable rates was risk-free - also stupid. But people who were keeping up on their mortgages until the huge economic crash hit aren't terribly guilty, whether they put down a down-payment or not. They didn't push the fed to print low-interest money, they didn't ask for an unfunded war in Iraq to spike oil prices and kill auto sales & jobs, they didn't tell the administration not to monitor banks & insurance companies and the stock exchange as all sorts of malfeasance was going on, they didn't tell Congress to check out and stop doing their job. If you'd had a job for 15 years and suddenly the worst crisis since 1929 hits because of assholes in Washington, how much are you to blame for lack of foresightedness? If the housing bubble popped and you didn't have a variable interest mortgage, it didn't matter. If you lost your job along with 20 million others, it doesn't much matter what kind of mortgage you had.

    Illegally repossessed homes sadly were not a small percentage of the total. And while the individual is responsible, so are banks - why so much money went to Goldman Sachs and Citibank and GMAC/Cerberus, but the HAMP program for homeowners was such crap that almost no one used it? If we're all going to suffer, then let's all suffer. Instead we have simple class warfare, and the bankers had an open door to the White House and Congress. We bailed out Fannie Mae, who'd been ruthlessly lobbying Congress since the 90's, but we leave individuals who were blind-sided on the hook.

    It's also worth noting that homeowners are paying banks almost pure interest the 1st 10 years. Even an unsecured mortgage - what does it matter? There's almost no risk to the bank - they just take the property on default. The homeowner's paid her mortgage for how many years, so the bank's made a profit. The only problem is that the banks and the Fed had built up the housing bubble over a decade, so houses really weren't worth that much. But consumers paid excess mortgage payments on that inflated property - excess profit to banks - but when the great shithouse as Atrius calls it came tumbling down, houses reverted to real value and mortgage companies then had to write down that inflated price. Like musical chairs, some got left without a seat, but they'd already ripped off their profits in the preceding decade. But in any Ponzi scheme, someone held the bag - the taxpayer.


    by PeraclesPlease on Tue, 01/08/2013 - 9:22am

    No, they didn't "work the system the government put in place"- they wrote the system the government put in place. Heads of Citigroup & Goldman Sachs & JP Morgan were sitting in the White House and Congress putting pen to paper. They paid for the representatives, they paid for the executive branch, they paid for access, they got their heads like Paulson and Summers and Geithner - all industry men - lining it right up for them, whether under Bush or Obama. Along comes Steve Rattner - financial, not auto go - not just to bankrupt & restructure GM & Chrysler, but to fully prop up their financial arms, including Cerberus/Chrysler Financial that had gutted Chrysler to walk away with 100 cents on the dollar. What a sweetheart deal, $22billion payday. Yikes.

    And then Rattner fired the guys who knew about how to make cars. All the tough restructuring over 10 years trumped by a quick bankruptcy execution. With the mistakes not to appear for another 4 years.That's one reason it's hard to fight this stuff - the effects get too detached from the acts, no one really sees it.


    by PeraclesPlease on Mon, 01/07/2013 - 4:11pm

    That link is so enlightening.

    I hope others appreciate the work you do, when finding these gems.

    I've already emailed the previous link, discussing the Tarp Program to many of my email friends and look forward to passing this particular link on, also.

    Thanks again.


    by Resistance on Mon, 01/07/2013 - 10:27pm

    Well anonymous, you're obviously right when you say we would not have had a housing bubble and crash if hadn't changed our conventional loan model. And you are right as well to say that the government was "cosigning" loans, mostly by Freddie and Fannie.buying subprime loans. That was certainly part of the problem and democratic politicians have to take some blame for that. It was mostly a democratic program. Though Bush was just as aggressive in pushing Freddie to buy up those subprime loans as democrats in the name of his compassionate conservative message. But I don't think it was the largest part of the problem.

    From my reading only about 20% of the subprime loans were held by Freddie and Fannie. So while part of the problem it wasn't the largest part of the problem. 80% were on the private market and not insured by the government, So why were private banks, investment firms, and private investors buying these toxic assets?

    Imo the main cause of the housing bubble and crash was the repeal of Glass Steagle. Over about a dozen years with a few bills congress gutted most of it. We passed legislation allowing bank mergers and started the process of too big to fail. We stopped regulating loans and the banks created adjustable rate mortgages and other risky mortgages. Then we allowed banks and investment firms to merge.

    Banks didn't care about the solvency of the borrower when they were going to sell them to and investment firm, make a profit, and no longer carry them on their books. Investment firms bundled subprime loans with higher rated loans, got rating agencies to rate these mixed bundle of loans triple A, and sold them to investors.

    I could go on about how this scam spiraled out of control but the fundamental issue was not the problem caused by the small amount of subprime loans insured by the government but the 80% of subprime loans on the private market brought about by  deregulation, specifically the end of Glass Steagle.

     


    by ocean-kat on Tue, 01/08/2013 - 3:41am

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