Financial Meltdown

Revisionist economic history

The Orwelllian regurtitation of talking points by the Democrats over the economy continue.  Tax cuts caused the Wall Street crisis (how, exactly?) and the other problem was "lack of regulation".

Once again, no one has identified a single regulation proposed by the Democrats during the Bush years that would have addressed the problem of excessive credit granted to poor risks.

As has been pointed out relentlessly to everyone who pays attention, the Democrats actively advocated for looser residential lending standards.

Now we have a new plan from MBNA Joe Biden, who poses this question to McCain.

 Why didn't he support the proposals that we have to allow in bankruptcy a federal bankruptcy judge to renegotiate the principal of your mortgage?

 Well, Joe, mind explaining who exactly made sure we have the present bankruptcy laws? 

He has actively supported the company's favorite federal legislation, the Bankruptcy Reform Act, which would make it more difficult for consumers to escape their credit card debt.

Senator Biden shepherded the bankruptcy legislation along by taking the unusual tack of inserting it into a foreign relations bill in 2000, said his spokesman, Norm Kurz. But Mr. Kurz added that Mr. Biden said he would have backed the bill whether or not he was from Delaware or had received MBNA donations (clearance sale on bridges, it seems)\s

(FYI, since credit cards are unsecured debt, the old pre-reform bankruptcy law caused much of this debt to be wiped out soon after a Chapter 7 filing; hence the interest by credit card companies to force more Chapter 13 repayment plans; which is the present law)

I would also point out that a U.S. Supreme Court decision Nobelman v. American Savings Bank made clear that even the pre-MBNA bankruptcy law prevented judges from modifiying the terms of first mortgages.

The rationale behind the law upheld in Nobelman was, guess encourage banks to make more home mortgages!

Presumably then Senator Biden believes that changing the law to discourage making home mortgages will rescue the troubled housing market? Or perhaps Barack Obama thinks that man most responsible for handing the working class over to plastic creditors can credibly stand up for them now (Right!)

Maybe Obama and Biden ought to stick to banal factless talking points.  When they propose some medicine, the result would only make the patient more sick.

The Regulation Myth (This dog didn't bark, Sherlock!)

This Obama byte was similar to the Democrat talking point I heard on the radio all day. That the Republicans had failed to properly regulate the financial markets, thereby causing the market turmoil that felled Lehman Brothers  

Obama said in a statement. "Eight years of policies that have shredded consumer protections, loosened oversight and regulation, and encouraged outsized bonuses to CEOs while ignoring middle-class Americans have brought us to the most serious financial crisis since the Great Depression."

Now this is a nice partisan talking point. There's only one problem.

The Democrats fail to offer a single data point supportive of this argument  

The Democrats could have proposed some financial regulations over the past eight years. True, they didn;t have the majority in the Senate for most of the first six, but surely a strong bill could have been brought to the floor for a vote.

I don't know of any such creature. Is there a Republican filibuster of a reform bill in the record?


A Bush veto standing in the way of progress? Nada!

Indeed, the record is that Democrats in Congress blocked financial reforms even when Bill Clinton was President!

For the past two years the Democrats have controlled Congress. They could have moved quickly to bring financial market reform to the President's desk. Guess what. No bill was generated in 2007.

Why, you ask? Well, the Washington Post might explain why  

The Banker's Candidate

Dodd Amasses Huge War Chest


Washington Post Staff Writers
Friday, February 16, 2007; Page D01


Connecticut Sen. Christopher J. Dodd has two big jobs. He is a candidate for the Democratic nomination for president, and he chairs the Senate Banking Committee.......

But it is Dodd's philosophy, not only his geography, that has made him a cash magnet. Each of these big-money interests applauds his light-handed approach to financial regulation and considers him a reliable friend -- a fact that raises questions about Dodd's viability in a Democratic field even as it bolsters his fundraising prowess.......

My record speaks for itself," the senator said. "I haven't changed my tune. I've been, I think, fairly consistent in my views on these issues."

So, the lead Democratic voice on financial market reform in recent years was "the Banker's candidate" with a "light handed approach "

Evidently there's a special tranche out there for bleeding heart liberals who "heart" reckless bankers and Chris Dodd is the lead institution in this market.

Now, a "reform" bill for mortgages was belatedly passed in the summer of 2008.  This bill of course, bailed out reckless lenders of home mortgages, set up a slush fund for ACORN and other liberal foot soldiers, and delegated the dirty job of cleaning the Augean GSE stable to Secretary Paulson.  Dodd promised his bill was the answer to the crisis 

    Today, Congress did more than send a bill to the President - we sent a message to American families that help is on the way.  In addition to providing urgently-needed relief to homeowners on the brink of losing their homes, this legislation will address our broader economic problems by helping to reform our housing sector and provide reassurances to our financial markets."

Yours truly knew better and said as much. Yep, the folks that thought bailing out the subprime bankers was the answer really do have a whole nest worth of crow to eat.

So here's the question for the Democrats?

When are you going to demand Chairman Dodd's resignation from the chairmanship of the Banking Committee, since he failed in his duty to bring an effective reform ball to the President  in a timely manner?

Sherlock Holmes wrote about the dog that did not bark. The Democrats in DC were lapdogs for the financial industry for years, and all their growling now can;t change that.

Perhaps a pit bull with lipstick can.    She is certaintly making the case on the stump.



Lehman Brothers and an opportunity for John McCain

Ben Smith is undoubtedly correct that the situation with Lehman Brothers (and to a lesser extent, Merrill Lynch) will suck up most of this week:

With the Wall Street Journal reporting that liquidation is the likeliest option for Lehman Brothers, it's going to make it hard for the candidates to talk about anything else this week.

Again, this is bad news for Barack Obama because his change argument is not at the top of the agenda. Instead of talking about change, he is going to need to address the substance this week.

John McCain also has an opportunity here. The Dems are sitting on (dishonest) ads with McCain's statement about not knowing much about the economy. If McCain actually talks sensibly about the economy this week, that will defuse the effect of those ads.

I would also point out that Barack Obama received $365,922 from employees of Lehman, while McCain received $115,800. Obama will not have that populist attack on McCain.

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