Actually, I should have named this thread "Atlas Shrugged" or, even better, "Atlas Punted," considering Greenspan's associations as a disciple of Ayn Rand.
(No, I am not a Randian. I find it ironic that a devotee of such a radical atheist "free market" libertarian became the most powerful government regulator in the Known Universe, and did everything he could to dump the failures of his interventionist policies in the lap of his successor. He's married to Andrea Mitchell, by the way, a shrill Democrat and Obama supporter in the media.) - Bob > -----Original Message----- > From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On > Behalf Of Bob Calco > Sent: Friday, September 26, 2008 4:35 PM > To: 'ProFox Email List' > Subject: [OT] Wow, someone in Congress gets it... > > In this case, Jim Bunning of Kentucky: > > http://tinyurl.com/4rwnns > > A long read but well worth the time. I post it here in its entirety for > posterity's sake. > > - - - > Thank you, Mr. President. I rise to speak about the current economic > situation and the bailout bill that will soon be coming to the Senate > floor. > > Let me start by saying that I am just as concerned about what is going > on in > the financial markets and the economy as everyone else. I know there > are > extreme tensions in the credit markets and those problems could soon > have an > impact on businesses and individuals who had nothing to do with the > mortgage > mess. However, I do not agree that the bill coming to the Senate will > fix > those problems. > > I also strongly disagree with the Senators who have come to the floor > and > declared that this crisis is a failure of the free markets. No, the > root of > this crisis is a failure of government. It comes from a failure of > regulation and, most importantly, monetary policy. In the long term we > certainly need to update our financial regulation to reflect the > realities > of our modern economy, but it is just plain wrong to blame failures of > our > regulations and regulators on the markets. > > A little history is in order here. Our financial regulations are based > on > structures put in place during the Great Depression. Our laws simply do > not > reflect the current landscape of the financial markets. Once upon a > time, > banks may have been the only institutions that were a danger to the > entire > financial system, but it is clear that other institutions are now so > big and > connected that we cannot ignore them in the future. Also, many of > today's > common financial instruments did not exist twenty years ago, much less > when > our laws were written. > > But our regulatory structure is not the only problem. The real fuel for > the > fire of this crisis has been the monetary policy of the Federal > Reserve. I > have been a vocal critic of the Fed for many years, and have been > warning > that their policies would hurt Americans in the short and long term. > For > most of those years I did not have much company, but I am glad that > many > economists and commentators have recently joined me in criticizing the > Fed. > > During the second half of his time at the Fed, former Chairman Alan > Greenspan tried to micro-manage the economy with monetary policy. Any > economy is going to have its ups and downs, and it was foolish to try > to > stop that. But Chairman Greenspan did it anyway. By trying to smooth > out > those bumps, he over-shot to the high and low side, creating bubbles > and > then recessions. > > I have spoken many times on the floor about the Fed's policies that led > to > the housing bubble, but a few parts are worth repeating. Everyone > remembers > the dot-com bubble, which was itself partly a result of easy money > pumped > into the system by the Fed in the late 1990's. Well, Chairman Greenspan > set > out to pop that bubble and kept raising interest rates in the face of a > slowdown, driving the economy into recession. > > In order to undo the problems created by his tight money, he then > overshot, > taking rates to as low as one percent for a year, and below two percent > for > nearly three years. In turn, that easy money ignited the housing market > by > bringing mortgage interest rates to all time lows. Low-cost borrowing > encouraged excessive risk-taking in the financial markets, and led > investors > to pump borrowed funds into all kinds of investments, including the > various > mortgage lending vehicles. > > In 2004, he encouraged borrowers to get adjustable rate mortgages > because of > all the money they would save. Four months later, he started a series > of 17 > interest rate increases that helped make those mortgages unaffordable > for > the hundreds of thousands of borrowers who listened to his advice. I > warned > him about this advice the day following his speech, but that warning > fell on > deaf ears. > > Then in 2005, rising interest rates and house price appreciation > overcame > the ability of borrowers to afford the house they wanted. To keep the > party > going, borrowers, lenders, investors, rating agencies, and everyone > else > involved lowered their standards, and kept mortgages flowing to less > creditworthy borrowers, who were buying ever more expensive houses. > > Chairman Greenspan also let investors and homeowners down by failing to > police the banks and other lenders as they wrote ever more risky loans. > Regulated banks were allowed to keep their most risky assets off the > balance > sheet. Even worse, he refused to use the powers Congress gave the Fed > in the > Home Ownership and Equity Protection Act in 1994 to oversee all > lenders, > even those not affiliated with banks. His refusal to reign in the worst > lending practices allowed banks and others, including Fannie Mae and > Freddie > Mac, to write the loans that are now at the center of the mortgage > crisis. > Chairman Ben Bernanke finally issued rules under that law in July, but > that > was far too late to solve the problems. > > Before turning to the coming legislation, I want to mention a few more > failures of government that directly contributed to this mess. Federal > regulations require the use of ratings from rating agencies that have > proven > to be wrong on the biggest financial failures of the last decade. The > Community Reinvestment Act forces banks to make loans they would not > otherwise make based on the credit history of the borrower. The > Securities > and Exchange Commission under former Chairman Donaldson failed to > establish > meaningful oversight and leverage restrictions for investment banks. > > Fannie Mae and Freddie Mac used the implied backing of the government > to > grow so large that their takeover by the government effectively doubled > the > national debt. And they were pushed by their executives and the Clinton > Administration to loosen their lending standards and write the loans > that > drove the companies to the point of being bailed out by the taxpayers. > > Finally, the same individuals who have come to this building to ask for > the > latest bailout set the stage for the very panic they are using to > justify > the bailout. The Secretary of the Treasury and the Fed Chairman set > expectations for government intervention when they bailed out Bear > Stearns > in March. The markets operated all summer with the belief that the > government would step in and rescue failing firms. Then they let Lehman > Brothers fail, and the markets had to adjust to the idea that Wall > Street > would have to take the losses for Wall Street's bad decisions, not the > taxpayers. That new uncertainty could be the most significant > contributing > factor to why the markets panicked last week. What is more, the panic > today > is a result of the high expectations set last week when the Secretary > and > Chairman announced their plan. When resistance in Congress and the > public > outrage over the plan became clear, the markets walked back to the edge > of > panic. > > Now I want to talk about the bailout bill that we expect to have on the > Senate floor soon. The Paulson proposal is an attempt to do what we so > often > do in Washington - throw money at a problem. We cannot make bad > mortgages go > away. We cannot make the losses that our financial institutions are > facing > go away. Someone must take those losses. We can either let the people > who > made bad decisions bear the consequences of their actions, or we can > spread > that pain to others. And that is exactly what Secretary Paulson > proposes to > do - take Wall Street's pain and spread it to the taxpayers. > > We all know it is not fair to ask the taxpayers to pick up Wall > Street's > tab. But what we do not know is if this plan can even work. All we have > is > the word of the Treasury Secretary and the Fed Chairman. But they have > been > wrong throughout this whole housing mess. They have previously told us > that > the subprime problems would not spread and that the economy was strong. > Now > they say we are on the edge of a severe recession if we do not pass > this > bill. > > Well, I am not buying it, and neither are many of the nation's leading > economists. If some sort of government intervention is needed to fix > the > mess created by the government failures I talked about earlier, we need > to > get it right. Congress owes it to the American people to slow down and > think > this through. We need to know that whatever we do is going to fix the > problem, protect the taxpayers, not reward those who made bad > decisions, and > make sure this does not happen again. But we can not do that in one > week as > we are all trying to rush home. Congress needs to take this seriously > and > stay here until we find the right solution, not just throw 700 billion > dollars at Wall Street as we walk out the door. > > Now, Mr. President, before I yield the floor, I ask unanimous consent > that > the two letters I mentioned from economists opposing the bill, along > with an > article from the New York Times from 1999 about the Clinton > Administration > pushing Fannie Mae and Freddie Mac into risky loans, be printed in the > record following my remarks. > > I yield the floor. > - - - > > What he said. > > - Bob > > > [excessive quoting removed by server] _______________________________________________ Post Messages to: [email protected] Subscription Maintenance: http://leafe.com/mailman/listinfo/profox OT-free version of this list: http://leafe.com/mailman/listinfo/profoxtech Searchable Archive: http://leafe.com/archives/search/profox This message: http://leafe.com/archives/byMID/profox/[EMAIL PROTECTED] ** All postings, unless explicitly stated otherwise, are the opinions of the author, and do not constitute legal or medical advice. 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