Causes of Current U.S. Financial Crisis - And Why You Should Vote Democrat
What are the causes of the current financial crisis in the U.S., and what can we do to ensure it doesn't happen again in our lifetime? These are the questions we will address in this entry.
It's election time again, and this time around we have a chance to save our devastated economy. Scratch that ... to save our entire country from further devastation. In less than a month, you will be able to cast your ballot for the next president. So as somebody who watches the housing and mortgage markets very closely, let me offer this advice:
I you want to see an end to the current financial crisis ... if you want to see our government shift course and policy to ensure we don't have another financial crisis anytime soon ... if you think a reasonable amount of regulation on the lawless pirates of Wall Street is a good thing ... if you would like housing prices to rebound sometime in our lifetime ...
If you want all of these things, you should vote Democrat on November 4th.
Republican leadership (or, more accurately, a lack of leadership) is one of the primary causes of the current financial crisis we are dealing with in this country. I'll come right out and say it. The mortgage and financial giants helped pay for George Bush's past presidential campaigns so that he could essentially do their bidding once elected. They got their wish. And boy are we paying for it now!
But let's go back a few years to see what caused this current financial crisis and what we might have done to avoid it. In doing so, we can better avoid a future crisis of similar proportions.
During most of the 1990s, a trend emerged in the mortgage industry. It was the rise of the subprime mortgage loan, a term we are all painfully familiar with right now. While subprime loans have been around for much longer, they became extremely popular during the aforementioned time frame. Popular in a bad way, mind you.
Basically, a subprime mortgage is one given to a borrower with a low credit score -- a borrower who wouldn't normally qualify for a traditional loan (and with good reason). But their are plenty of negatives associated with these loans, and those negatives are largely what caused the current financial crisis we are dealing with.
Most of these loans were adjustable rate mortgages with low "teaser" rates for the first few years, and then a ridiculously high interest rate later on at the "reset" point. But many of the big subprime lenders had a habit of downplaying the risks when dishing out record numbers of these loans to Americans.
For a long time, economists in this country warned that the out-of-control subprime market would lead to serious financial problems in the near future. Many of them even predicted a financial crisis would occur within the next decade or less. When you consider that their warnings began about a decade ago, you can see that they were right on the money!
Later, in 2004, we had additional warning bells. During the annual housing policy meeting, Edward Gramlich (a member of the Board of Governors of the Federal Reserve at that time) stated that: "the relatively high delinquency rates in the subprime market do raise issues ... For mortgage lenders the real challenge is to figure out how far to go. ... If lenders do make new loans, can conditions be designed to prevent new delinquencies and foreclosures?"
How far to go, indeed! Everyone knew that subprime lending had gotten out of control, and that it would fuel foreclosure rates like nothing we have ever experienced before. Red flags and warning signs were plentiful along the way. So why didn't somebody do something? Why did the federal government turn a blind eye for years, up until recently?
Ah, now we get to the heart of the matter. And this is why I warn you against voting republican on November 4th. Here's the big "secret" that many Americans don't seem to realize...
Make no mistake about it, folks. George Bush is on the side of the lending industry and financial giants whose greed is a primary cause of our financial crisis. They helped him get elected, because they knew they would need an advocate to ward off regulation. That way, they could continue the very practices the economists were warning us about.
But it's hard to crack down on somebody who gave millions of dollars to your campaign. For example, during his 2004 presidential campaign, Bush received $7.8 million from Ameriquest (a giant of the subprime mortgage industry). They also helped pay for his inauguration.
Ameriquest's financial "love" didn't stop with the president. They contributed money and gifts to many legislators at the federal and state level. According to the Wall Street Journal, "[Governor] Arnold Schwarzenegger's campaigns received at least $1.4 million, along with stacks of tickets to a Rolling Stones concert that were used to lure big donors."
Due to the financial contributions outlined above (among others), there was very little regulation of the subprime industry during George Bush's fist and second terms. Some people will beat their fist on their chest and say, "Government should never regulate business. It's Un-American!"
To these people I say: Wake up and smell the reality all around you. This whole argument is equally simple-minded and dangerous. Let me ask you this. Why is it okay to regulate the actions of people (with laws), but not the actions of corporations? What's the difference?
In fact, I would argue that it's even more important to regulate financial entities that have the power to bankrupt millions of Americans and wreck the U.S. economy. If ever a set of rules was called for ... it's with Wall Street.
And that brings us back to the present. In about a month, we will go to the polls and choose one of two men to be our next president.
On the one hand, John McCain is vehemently opposed to government regulation of big business. In other words, he wants to continue most of the policies that caused our current financial crisis. But then, why should McCain be concerned about the current crisis? It doesn't affect ultra-rich Americans like him. While millions of Americans are losing their homes, John McCain can't remember how many houses he has. Talk about being out of touch with economic reality!
On the other hand you have Barack Obama, who is an advocate of sensible regulation -- the kind of regulation that could have prevented the financial mess we are in now. Obama, who only recently paid off his student loans, is very much rooted in the reality of the current financial crisis in this country.
So my question to you is this:
Who do you think will be better equipped (and motivated) to get us out of this financial crisis? An ultra-rich de-regulator like McCain, whose staff is largely made up of lobbyists? Or Barack Obama?
Seems like a no-brainer to me. And on November 4th, we will find out how many voters are using their brains as well.
It's election time again, and this time around we have a chance to save our devastated economy. Scratch that ... to save our entire country from further devastation. In less than a month, you will be able to cast your ballot for the next president. So as somebody who watches the housing and mortgage markets very closely, let me offer this advice:
I you want to see an end to the current financial crisis ... if you want to see our government shift course and policy to ensure we don't have another financial crisis anytime soon ... if you think a reasonable amount of regulation on the lawless pirates of Wall Street is a good thing ... if you would like housing prices to rebound sometime in our lifetime ...
If you want all of these things, you should vote Democrat on November 4th.
Republican leadership (or, more accurately, a lack of leadership) is one of the primary causes of the current financial crisis we are dealing with in this country. I'll come right out and say it. The mortgage and financial giants helped pay for George Bush's past presidential campaigns so that he could essentially do their bidding once elected. They got their wish. And boy are we paying for it now!
But let's go back a few years to see what caused this current financial crisis and what we might have done to avoid it. In doing so, we can better avoid a future crisis of similar proportions.
A Brief History of Crisis and Crime
During most of the 1990s, a trend emerged in the mortgage industry. It was the rise of the subprime mortgage loan, a term we are all painfully familiar with right now. While subprime loans have been around for much longer, they became extremely popular during the aforementioned time frame. Popular in a bad way, mind you.
Basically, a subprime mortgage is one given to a borrower with a low credit score -- a borrower who wouldn't normally qualify for a traditional loan (and with good reason). But their are plenty of negatives associated with these loans, and those negatives are largely what caused the current financial crisis we are dealing with.
Most of these loans were adjustable rate mortgages with low "teaser" rates for the first few years, and then a ridiculously high interest rate later on at the "reset" point. But many of the big subprime lenders had a habit of downplaying the risks when dishing out record numbers of these loans to Americans.
For a long time, economists in this country warned that the out-of-control subprime market would lead to serious financial problems in the near future. Many of them even predicted a financial crisis would occur within the next decade or less. When you consider that their warnings began about a decade ago, you can see that they were right on the money!
Later, in 2004, we had additional warning bells. During the annual housing policy meeting, Edward Gramlich (a member of the Board of Governors of the Federal Reserve at that time) stated that: "the relatively high delinquency rates in the subprime market do raise issues ... For mortgage lenders the real challenge is to figure out how far to go. ... If lenders do make new loans, can conditions be designed to prevent new delinquencies and foreclosures?"
How far to go, indeed! Everyone knew that subprime lending had gotten out of control, and that it would fuel foreclosure rates like nothing we have ever experienced before. Red flags and warning signs were plentiful along the way. So why didn't somebody do something? Why did the federal government turn a blind eye for years, up until recently?
Ah, now we get to the heart of the matter. And this is why I warn you against voting republican on November 4th. Here's the big "secret" that many Americans don't seem to realize...
The Subprime Lenders Helped Bush Get Elected
Make no mistake about it, folks. George Bush is on the side of the lending industry and financial giants whose greed is a primary cause of our financial crisis. They helped him get elected, because they knew they would need an advocate to ward off regulation. That way, they could continue the very practices the economists were warning us about.
But it's hard to crack down on somebody who gave millions of dollars to your campaign. For example, during his 2004 presidential campaign, Bush received $7.8 million from Ameriquest (a giant of the subprime mortgage industry). They also helped pay for his inauguration.
Ameriquest's financial "love" didn't stop with the president. They contributed money and gifts to many legislators at the federal and state level. According to the Wall Street Journal, "[Governor] Arnold Schwarzenegger's campaigns received at least $1.4 million, along with stacks of tickets to a Rolling Stones concert that were used to lure big donors."
Sensible Regulation Can Prevent a Financial Crisis
Due to the financial contributions outlined above (among others), there was very little regulation of the subprime industry during George Bush's fist and second terms. Some people will beat their fist on their chest and say, "Government should never regulate business. It's Un-American!"
To these people I say: Wake up and smell the reality all around you. This whole argument is equally simple-minded and dangerous. Let me ask you this. Why is it okay to regulate the actions of people (with laws), but not the actions of corporations? What's the difference?
In fact, I would argue that it's even more important to regulate financial entities that have the power to bankrupt millions of Americans and wreck the U.S. economy. If ever a set of rules was called for ... it's with Wall Street.
November 4th = A Chance to Get it Right
And that brings us back to the present. In about a month, we will go to the polls and choose one of two men to be our next president.
On the one hand, John McCain is vehemently opposed to government regulation of big business. In other words, he wants to continue most of the policies that caused our current financial crisis. But then, why should McCain be concerned about the current crisis? It doesn't affect ultra-rich Americans like him. While millions of Americans are losing their homes, John McCain can't remember how many houses he has. Talk about being out of touch with economic reality!
On the other hand you have Barack Obama, who is an advocate of sensible regulation -- the kind of regulation that could have prevented the financial mess we are in now. Obama, who only recently paid off his student loans, is very much rooted in the reality of the current financial crisis in this country.
So my question to you is this:
Who do you think will be better equipped (and motivated) to get us out of this financial crisis? An ultra-rich de-regulator like McCain, whose staff is largely made up of lobbyists? Or Barack Obama?
Seems like a no-brainer to me. And on November 4th, we will find out how many voters are using their brains as well.
Labels: Economy
posted by Brandon at
7:42 AM
