Hillary Clinton proposes Alan Greenspan for mortgage bailout committee

Irony of Ironies.  I would imagine that actually Greenspan would be a good selection to this committee, which would include other...

distinguished, non-partisan group of economic leaders like Alan Greenspan, Paul Volcker and Robert Rubin." (from politico.com)

Who more than Alan Greenspan, the prime architect of the current disaster would have a greater interest in providing a soft landing.  And who more than Alan Greenspan, based on his own words would care less about the ultimate long range consequences of such a bailout.

I must admit I have not read Greenspan's apologia "The Age of Turbulence" but I have followed his career as the head of the Federal Research. I remember very clearly the 60 minutes interview when he denied that he was aware of the corruption and excesses of the sub prime mortgages that were creating the bubble.

He looked at the interviewer, Katie Couric, and said, with the quiet authority that made him an icon of an adoring congress, that he was unaware that the mortgage markets were spiraling out of control.  Couric came back to him with a quote form another Federal Reserve board member, whom the record showed gave him an explicit detailed warning of exactly what was happening and the inevitable consequences.

His response,with a hint of a smile was: "I didn't get it." It was the exact inflection that makes the term so appropriate for the slacker who didn't understand that it was wrong to copy his term paper from the internet, or to have an extra drink before driving home on a rainy night.  "I didn't get it," a phrase that could only be improved upon by Steve Martin's classic, "Well, Excuse Me"

Later in the same interview when Couric asked if he had protected his own wealth from the precipitous loss of the value of the American dollar, with that impish smile, he responded, "let's say I'm diversified." Yes, I'm sure he, and his financial elite colleagues are well diversified, in currencies not affected by the American dollar, the economy that he was charged with protecting.

Now Clinton has decided that she will take up the cause of the American Homeowner. Of course she is hoping that taxing every American to bailout those who willfully bought into this corruption will not incur the outrage of the voters. Hillary is hoping that the American people will not realize that those people who took these mortgages are the ones who have the new houses with the granite tops in spanking new neighborhoods, while those who she will tax, are struggling to pay for upkeep on their older homes, or are now paying more for rent based on a burgeoning inflation that is party caused by this mortgage disaster.  

There are no good guys in this mortgage debacle. Greenspan is on top of the list of malefactors, as he could have imposed regulations that would have cut out the worst of the excesses.  In a close second place is the Bush Administration, that actually prevented state attorneys General from cracking down on these excesses under the concept of Federal Premption.  And then after preventing these state regulations, his treasury department did absolutely nothing to control the excesses.

And the Democratic party is far from guiltless. There were demands that the poorest segment of our society have the right to home ownership.  Pressure was put on banks and mortgage brokers to provide loans to everyone, no matter what that ability to pay for it.

It was a silent conspiracy of both parties, each willfully closing their eyes to the inevitable consequences of artificially low interest rates and bogus mortgages. Everyone was in on the game:  The mortgage brokers who never pointed out the fine print that made refinance onerous, the investment banks who designed these instruments and winked at the absurd statements of income, the rating agencies, the peoples auditors such as S&P who slapped these aggregations of loans with triple A ratings. And the CEOs at the top of these companies, who raked in their mega fortunes long with the hedge fund operators who knew that the bubble had a way to go before exploding on the American people.

The Democrats, ostensibly the party of the people, actually are in bed with those at the top of the financial pyramid, perhaps as closely as the Republicans. Chairmanship of Goldman Sachs seems to be the stepping stone to Secretary of treasury for both parties. Their careers were made by  protecting investors, with the well being of the those whose struggle along at less than a seven figure salary rather remote from their thinking.  

But it will be those people with salaries less than seven figures, and a lot less than six, who will be the ones forced to pay for this debacle.  Hillary Clinton wants to protect the good "homeowners" but she is fostering a pernicious illusion.  Those people who decided to take a mortgage on the appreciated bubble value of their homes were not defrauded by the lender, they got the money.  They got that check for a hundred grand or several times that, and they got to spend it as they pleased.

The taxpayer next to to him didn't get that check.  They didn't remodel their home, or take that trip, or buy that new SUV.  Or maybe the money was used for more admirable purposes, sending a kid to college, or taking care of an elderly parent.  The point is that the person who signed a loan mortgage got to provide these service while their neighbor did not.

They recieved their money, or they got their dream home, and they agreed to pay it back at the terms defined by the loan agreement. Did they really believe that their home would continue to double in value every five years.  Did they not realize that if it did, anyone who worked for a living would be consigned to paying rent for the rest of their lives.

I would say their are a hierarchy of solutions to this mortgage debacle, except every solution is a bad solution.  Once the well has been poisoned, once the virus is unleashed on the population, once pandemic corruption has been embraced by both parties, all solutions are are contaminated by the original sin.

It looks like Senator Clinton's answer, being that she chooses to place her distressed mortagee homeowners in the role of the innocent victims may be one of the worst of the bad solutions to this problem. She treats them like the Katrina victims, rather than those who played an integral part in this corrupt bubble.  

This must be debated with honesty, with a view to learning a lesson that those in responsible positions must be charged with the long term sustainment of our economy. Blind trust in our political leadership has been betrayed, and I don't see any party, any individual leader, who is willing to accept their share of the blame.  

Ideologies from both sides hide reality. Senator Clinton's justification of her bailout of her "innocent" homeowners, is the bailout of financial entities such as Bear Stearn. She does not acknowledge her own ideoligaal biases that provided bi-partisan support for mortgages for those who could not sustain the inevitable bursting of the bubble.

If there is any one who happens to be running for President who is prepared to address this crisis of the credit markets in a way that will do more than set us up for a disaster in the future, one that will be too big for anyone to bailout, now is the time to speak up.  It just may be that such realism could resonate with a public that knows very deeply how much is wrong with our country, and would welcome a clearer explanation from a potential leader of a more sustainable economic-political system.

Tags: Alan Greenspan, Hillary Clinton, housing bubble (all tags)

Comments

9 Comments

thanks for pointing this out

I was going to write up a diary about this, but I already wrote one earlier. Sadly enough it doesn't stop there as she has also chosen Rubin to head this group. Rubin was Chairman of Citigroup (Tens of billions of subprime lending losses) up until last December.

by highgrade 2008-03-24 10:14AM | 0 recs
Re: Hillary Clinton proposes Alan Greenspan for mo

Paul Krugman has been one of the few sane voices on this issue.  So let us hear what he has to say

http://www.nytimes.com/2008/03/24/opinio n/24krugman.html?_r=1&ref=opinion&am p;oref=slogin

On the Democratic side, it's somewhat disappointing that Barack Obama, whose campaign has understandably made a point of contrasting his early opposition to the Iraq war with Hillary Clinton's initial support, has tried to score a twofer by suggesting that the war, in addition to all its other costs, is responsible for our economic troubles.

The war is indeed a grotesque waste of resources, which will place huge long-run burdens on the American public. But it's just wrong to blame the war for our current economic mess: in the short run, wartime spending actually stimulates the economy. Remember, the lowest unemployment rate America has experienced over the last half-century came at the height of the Vietnam War.

Hillary Clinton has not, as far as I can tell, made any comparably problematic economic claims. But she, like Mr. Obama, has been disappointingly quiet about the key issue: the need to reform our out-of-control financial system.

And, he had this to say about Robert Rubin

Given the risks to the economy if the financial system melts down, this rescue mission is justified. But you don't have to be an economic radical, or even a vocal reformer like Representative Barney Frank, the chairman of the House Financial Services Committee, to see that what's happening now is the quid without the quo.

Last week Robert Rubin, the former Treasury secretary, declared that Mr. Frank is right about the need for expanded regulation. Mr. Rubin put it clearly: If Wall Street companies can count on being rescued like banks, then they need to be regulated like banks.

by SevenStrings 2008-03-24 10:22AM | 0 recs
Diarist tries to have it both ways...and fails.

Sorry, but the homeowners are the victims. For them it is lose-lose while the current administration practices what he's been preaching the entire time he's been in office: Welfare for the Rich.

What else can you call it when hundreds of billions of dollars are thrown at our financial institutions, only for these behemoth banks and brokerage houses to sit on their asses and not loosen up credit now? (That is what is happening; and that is what happened over the past 12-16 weeks, by the way.)

The answer here and now is to throw even more money at one of the two groups of institutions that created the problem in the first place, the securities firms and investment banks that packaged these CDO's and SIV's, essentially putting a bow around a box of dogshit, or lipstick on their proverbial pigs (pick your analogy). These were the honchos that were vacationing and partying with the heads of the Countrywides and the Wells Fargos of this country, knowing full well that the only thing that mattered to them was beating the previous quarter's and year's revenues--year after year until it reached a point of sheer delirium.

As you'll note, I say "one of the two groups of institutions" above. Because the fact is the other folks at fault were our government; our elected officials...and, yes, to a slight extent, this traverses party lines; but, primarily, it was our elected Rethugs and their minions that knew of this problem--a problem they very much created--well in advance of the rest of us, too.

If you doubt me, think of this tiny little tidbit: Treasury Secretary Paulson was CEO of Goldman Sachs, when around the time he was appointed to Bush's cabinet, Goldman was the only major Wall Street house to divest themselves of most of their mortgage-backed paper, unloading a major portion of it on world markets.

Now, today, he's the lead apologist for us in the world community--the guy that, perhaps, made more money off of this advanced game of three-card-monty than anyone else!

But, alas, the Treasury Department wasn't the only arm of the Bush dragon that grossly screwed the pooch for their own benefit. In fact, rules have been in place, specifically, to prevent this very type of mortgage crisis from occurring in the first place. Regulators at the FTC and HUD were responsible for policing legislation such as the Real Estate Settlement and Procedures Act (everyone in the mortgage industry will tell you all about this baby, if you've never heard of it before; because it was precisely RESPA which was being circumvented when each and every homeowner bought into a second mortgage or a refi with hidden clauses in it that allowed firms like AmeriQuest and Countrywide to make a daily habit of pulling the wool over the poor public's eyes.

Yes, it was a failure of government--with proper regulatory guidelines in place but unenforced--along with a mentality of greed among our financial services sector that brought us to where we are today. And this has nothing to do with John Q. Homeowner, victimized by multi-billion-dollar mortgage bankers that did everything, up to and including circumventing the unwritten and prudent practice for homeowners to even have legal counsel review their "new" mortgages and refis during this period, too!

So, with the taxpayer footing this bill for decades to come, and with the financial services sector being bailed out to the tune of hundreds of billions of dollars in taxpayer payments--money which will still be due from them beyond 2020 or 2030--I'd really like someone to rationalize to me how it was the taxpayer's fault?

It wasn't. No matter how you slice and dice it. Sure, there may have been a few million astute homeowners that knew what they were doing, but the lion's share of these folks were taken by the hand and turned over to the devil, with no consumer protections, no governmental enforcement of laws already on the books to protect them; and now they will continue to pay, and pay, and pay, and pay. While the CEO's of these large excuses for criminal fraud--the mortgage and securities firms that colluded to put this all together--walk away with billions now, just like they have all along.

It is the folks that claim it is the small homeowner's fault who are among the greatest apologists for these felons now. They're nothing less irrational excuses for a corporate sector gone wild with greed, already with their hands in the pockets of the politicians that were supposed to oversee them.

Period. End of story.

by bobswern 2008-03-24 10:28AM | 0 recs
Re: Diarist tries to have it both ways...and fails

There is nothing in this comment that conflicts with my diary.  

I would be the first to say that those who designed and supported these corrupt mortgages deserve prosecution, not bailouts.  That is why on my hierarchy of blame, it is Greenspan and Bush, and we can add Paulson to the this group.

I make a distinction that the commenter chooses not to focus on, those who participated by taking these bogus teaser mortgages, and those who did not. He does not refute that the vast number of taxpayers who chose not to participate, will end up bailing out all that are responsible.

This was a pervasive and wide spread corruption of responsible prudent behavior.  However, I maintain that those who took these mortgages, who recieved the money or the up scale homes, do not deserve to be bailed up.  They may be less culpable than those, most republicans, who engineered this disaster, but they are not totally victims, and must share the pain more than those who did not participate.  

And as I said, HRCs solution is not a bad one among good possibilities, but seems to me to ignored one part of this complex breakdown.

by arodb 2008-03-24 11:27AM | 0 recs
Look it's easy to say you're for more regulation

After the shit has already hit the fan. If we had increased regulation 10, 9, 8, 7, 6 years ago we may not have gotten into this mess to begin with. It was in the mid 90s that we sat back and said it's ok for these companies to start acting like banks (repeal of the Glass-Steagall Act).  

by highgrade 2008-03-24 10:29AM | 0 recs
Wrong! This was created by Bush. Period.

The truth is, the mortgage markets didn't explode until the Internet bubble burst (2000-2002).

And, the two reasons the mortgage markets exploded were:

1.) a financial services sector allowed to run wild with greed; due to...

2.) a lack of oversight by the FTC and HUD which allowed the financial services sector to go off the deep-end due to a total disregard to mortgage regulations, further enhanced by a lack of oversight of the hedge funds and financial services firms that packaged the mortgage industry's dogshit and sold if off in the financial markets in to much more greatly exacerbate the problem. The financial services sector enabled all of this; if there was no market for these bundled pieces of crap, there would not have been a housing boom to begin with.

Or, have we all forgotten the crisis with regard to the lack of oversight of the hedge fund industry that--to a great extent--still exists to this very day; as has been the case since 2001/2002, too?

Don't blame the Clintons for this one; sorry, this is a pure Rethug issue, thankyouverymuch!

by bobswern 2008-03-24 10:52AM | 0 recs
Nice

Great diary.

by SocialDem 2008-03-24 10:29AM | 0 recs
Re: Hillary Clinton proposes Alan Greenspan for mo

Isn't he the guy who said ARMs would solve all the problems?

by ragekage 2008-03-24 10:48AM | 0 recs
Re: Hillary Clinton

Alan Greenspan was implicit in getting us into the mess that we have now.  Apparently there was more than just a bit of froth.

by shalca 2008-03-24 10:58AM | 0 recs

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