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"No body could have done a better job than Obama, with the economy he was handed —including me!" —Bill Clinton—

Sunday, December 25, 2011

PART 4 Dear Mike, "A Series of Letters from the Left to the Right:

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Commentary: On December 2, 2011 I was excoriated by a young "conservative" named Mike, who wanted to give me a hiding for my communist views on "unregulated" capitalism. He called me or more precisely my views "ridiculous" I'll let you decide who is ridiculous.

His tirade was quite lengthy so Im going to publish my response in nine parts under my:

"A Series of Letters from the Left to the Right: Dear Mike part 1-9.

Since his attack was full of vitriol I have taken off the gloves as I see no point of entertaining his bombastic rhetoric.

He started with my "Thought for the Day" which are intended as a tongue in cheek rebuff of current obtuse conservative thinking. That will serve as Part 1-4 of my responses.

Parts 5-9 are in-response to the object of his real distain—my critique of Adam Smith Re-examined.

I have color coded my blog post that he critiqued in red—his critique in blue—and my response to his critique in black.

PART 4: Dear Mike, "A Series of Letters from the Left to the Right" is the last post defending against his attack on my "Thought for the Day"

They got “their NAFTA, CAFTA and SHAFTA” and “we” lost millions of manufacturing jobs to China. They got “their tax cuts” for “job creators” and “we” lost 9 million jobs. They got “their banking deregulation” and the banks collapsed. They got “their debt reduction” and the stock market tanked. Johnny B. and Tea Baggers got 98% of what they wanted and “we” got a credit down grade. What part of “they get what they want” and “we get the shaft” doesn’t America understand yet?

The goal of NAFTA, CAFTA and SHAFTA was to ship jobs overseas. Real conservatives (not neocons) were against them.

They were lobbied for by banks and passed by a majority Conservative Congress headed by the "Newtster" who is the current darling of the ultra conservatives. Newt was pre-neo-con. Get your history straight kid.

Banking deregulation & banking collapse is a case of Correlation Does Not Equal Causation. The banking industry actually constructed the current regulatory environment to allow banking collapse and to pass those losses on to the taxpayers.

As one of my old teachers would say: "I call Bullshit". You can spread manure but I won't eat it! Your ignorance or intellectual dishonesty is showing .

Wall Street and the Financial Crisis: Anatomy of a Financial Collapse, is a report issued on April 13, 2011 by the United States Senate Permanent Subcommittee on Investigations. The 639 page report was issued under the chairmanship of Senators Carl Levin and Tom Coburn, and is colloquially known as the Levin-Coburn Report.

It said: "After conducting “over 150 interviews and depositions, consulting with dozens of government, academic, and private sector experts” found that “the crisis was not a natural disaster, but the result of high risk, complex financial products, undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street.” [1]

In an interview, Senator Levin noted that “The overwhelming evidence is that those institutions deceived their clients and deceived the public, and they were aided and abetted by deferential regulators and credit ratings agencies who had conflicts of interest.”[2]

By the end of their two year investigation, the staff amassed 56 million pages of memos, documents, prospectuses and e-mails.[3]

The report, which contains 2,800 footnotes and references thousands of internal documents [4] focused on four major areas of concern regarding the failure of the financial system: 1. high risk mortgage lending, 2. failure of regulators to stop such practices, 3. inflated credit ratings, and 3. abuses of the system by investment banks.

The Report also said:

"Critics argued that credit rating agencies and investors failed to accurately price the risk involved with mortgage-related financial products, and that governments did not adjust their regulatory practices to address 21st-century financial markets. The 1999 repeal of the Glass-Steagall Act of 1933 effectively removed the separation that previously existed between Wall Street investment banks and depository banks."

"Both government failed regulation and deregulation contributed to the crisis. In testimony before Congress both the Securities and Exchange Commission (SEC) and Alan Greenspan conceded failure in allowing the self-regulation of investment banks."

"In 1982, Congress passed the Alternative Mortgage Transactions Parity Act (AMTPA), which allowed non-federally chartered housing creditors to write adjustable-rate mortgages. Among the new mortgage loan types created and gaining in popularity in the early 1980s were adjustable-rate, option adjustable-rate, balloon-payment and interest-only mortgages. These new loan types are credited with replacing the long standing practice of banks making conventional fixed-rate, amortizing mortgages.

"Among the criticisms of banking industry deregulation that contributed to the savings and loan crisis was that Congress failed to enact regulations that would have prevented exploitations by these loan types. Subsequent widespread abuses of predatory lending occurred with the use of adjustable-rate mortgages. Approximately 90% of subprime mortgages issued in 2006 were adjustable-rate mortgages." source Wikipedia

Republicans on the committee that signed the report are
Tom Coburn, Oklahoma, Ranking Member
Susan Collins, Maine
Scott Brown, Massachusetts
John McCain, Arizona
Rand Paul, Kentucky

Furthermore the claim that CRA, Freddie and Fannie were the primary source and cause of the failure—was fabricated by Peter Wallison an advisor to Ronald Reagan and a "scholar" for the right wing think tank American Enterprise Institute—where Dick Cheney is on the board of Directors along with a pantheon of Financial CEO's—and Wallison who has written a book called "Privatizing Fannie Mae, Freddie Mac, and the Federal Home Loan Banks" is hardly an honest broker for that point of view. AEI is littered with conservative capitalist and yet it claims to be unbiased, if you believe that—I have beach front property in Arizona I"ll sell you for a thousand dollars a front foot.

In a rebuttal to that big lie, Mike Simkovic, wrote a well researched paper called


"This article provides original evidence that when competition was less intense and securitizers had more market power, securitizers acted to monitor mortgage originators and to maintain prudent underwriting. However, securitizers’ ability to monitor originators and maintain high standards was undermined as competition shifted market power away from securitizers and toward originators. Although standards declined across the market, the largest and most powerful of the mortgage securitizers, the Government Sponsored Enterprises (“GSEs—Freddie and Fannie), remained more successful than other mortgage securitizers at maintaining prudent underwriting."

"Although a number of politicians, pundits, and financial industry-funded think tanks have claimed that government policies designed to promote affordable housing were an important cause of the financial crisis, detailed analyses of mortgage data by the Financial Crisis Inquiry Commission, Federal Reserve Economists, and independent academic researchers suggest that this claim is incorrect.

Community Reinvestment Act loans outperformed other "subprime" mortgages, and GSE mortgages performed better than private label securitizations."

"U.S. policymakers often treat market competition as a panacea. However, in the case of mortgage securitization, policymakers’ faith in competition is misplaced. Competitive mortgage securitization has been tried three times in U.S. history - during the 1880s, the 1920s, and the 2000s - and every time it has failed. Most recently, competition between mortgage securitizers led to a race to the bottom on mortgage underwriting standards that ended in the late 2000s financial crisis."

Simkovic also states in a section titled:

D. Mortgage lenders lobbied against safe-lending regulations

"Additional evidence that market forces pushed toward greater risktaking

comes from lobbying activity of mortgage lenders."

"If government pressure were forcing lenders to lend imprudently against their wishes, one would expect the lenders who lobbied most aggressively on issues related to underwriting regulation to receive dispensation that would enable them to have more conservative underwriting practices. However, the opposite

appears to be true—the lenders who lobbied most aggressively had the

riskiest underwriting practices, and generally lobbied against substantive

limits on their ability to take risk."

"This suggests that government regulation was for the most part a restraining force that pushed toward more conservative underwriting." Source COMPETITION AND CRISIS IN MORTGAGE SECURITIZATION Michael Simkovic

Plus, there are plenty of extremely qualified economist who DO SEE—a direct cause and effect between deregulation and the bank failures.

The fact that these failures were aided by a bunch of spineless Democrats who were trying pander to the right for votes shows me how pervasive the effects of "unregulated" crony capitalism are.

Your claim of Correlation Does Not Equal Causation is absolute bullshit.

Finally—there is no law on the books that forces any bank to make bad loans, none. To argue otherwise is asinine.

Who knows what this guy means with the rest of the rant – it’s a bunch of unrelated events, and besides, the Tea Party has failed to deliver on any small-government promises. Heck the Tea Party candidates even helped renew the Patriot Act!

"The RANT" was in response to John Boners (misspelling intended) expressed delight over nearly bringing the country to a halt when he refused to pay the bills he and his CONservative crony capitalists ran up under GWB. HE said—"I got 98% of what I wanted" Shortly after that "victory"—US credit was downgraded which ironically raised the interest rate America has to pay which adds billions to the debt which he is so concerned about—did I mention—a debt he helped incur under Bush.

Regarding NAFTA, CAFTA and (SHAFTA—which is made up to drive home the point of their intended purpose)— the only person I remember who spoke out, clearly against those trade deals at the time was labeled a looney tune—Ross Perot—the fact that I supported his candidacy and was also against the trade deals and the undue influences of "special interests" (lobbyists) must make me a looney tune and "real" conservative. Whatever the hell that means.

I was outraged by the implementation of Patriot Act and the fact that it was not repealed. I was against gutting Glass-Steagall.

This is the end of PART 4

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