UMD Libertarians

Or so my wife’s company’s CEO thinks. The company had a meeting yesterday with the CEO, and apparently it turned into a rant on how the democrats "screwed up" in regards to the economy.

He stated that McCain, Bush and other republicans had pushed legislation to avoid the financial crisis, but was denied by the democratic congress or some crap (I’m paraphrasing as I wasn’t there).

Now my wife, a Republican by default (her parents are reps, but she has very little interest in politics and hasn’t been following ANYTHING that’s been going on), is using it as ammo to prove to me that the republicans are right and the democrats are wrong.

Now, I admit I have very little knowledge of how this economic situation happened. Is it true that the republicans were stymied by the democrats when trying to avert disaster? What the hell is this guy talking about?
He is kind of right.

He is kind of wrong.

In what ways?
The little republican proposal that usually gets talked about was pushed in 2005 when Congress was under Republican control.

details of proposal?

Yeah. And this is a big company. My wife mentioned that someone made the comment to her afterward "Is he allowed to talk about this like that?"
Two hours that will make you smarter than 99% of the people in the world:

1)
2)

Something about regulating Fannie Mae (which pretty much is the favorite red herring for conservative propagandists in regards to the economy); regulating Fannie wouldn’t have done jackshit to help the economy, especially since
A) Fannie wasn’t the problem,
B) by 2005, a lot of the damage had already been done.

The Republican-controlled Senate didn’t even bother to get it to a vote, so I don’t really know much of the detail behind it.

There is nothing that could have been done to keep this bubble from bursting. It is not Bush’s fault. Everything was hunky dory, and behind closed doors the ground began to crumble. Was too late to act by the time they found out.

However, I will blame democrats in the Clinton administration for their "everyone owns a home" policy. The housing administration decided that Banks should have to loan money to people that could normally not afford a mortgage, or the gubment was going to put the hurt on the banks. So what happened was, these banks were forced to take on loans with little or no down payment from borrowers that would not be able to make their mortgage payments. Very risky. banks were forced to assume this massive liability with no financial backing for them.

When people started to default on loans the banks had to eat a lot of the asset value on those mortgages and sell them at a loss. This took cash away from the banks and made it hard for them to pay back their own debts on high risk assets that were still profitable (CDO’s and credit default swaps).

And the rest is history that we are living

Democrats were at fault.

But so were Republicans.

.
Seriously, these guys do a great job:

1)
2)

But as a guy who works in finance, here’s my "fault" list:

- There was too much money in the world. I know that sounds crazy to believe, but there was just too much money.

- Greespan kept the us bond rate incredibly low, which is where most big bets go to. But keeping it low, people sititng on huge piles of dough needed other places to fill it.

- The ratings agencies (S&P and Moody’s, primarily) did a piss poor job. They marked crap loans as AAA, and AA, which is money-good. A triple-A rating (AAA) means money-good, and it’s supposed to be the equivelant of a government bond.

- The people that needed to put their money somewhere that couldn’t put it in the US government bond market looked around for other AAA bonds, found the mortgage-backed-securities (which also had AAA rating), and then they put trillions and trillions of dollars into it.

Blaming it on bad loans is rediculous. Bad loans have been around forever. Credit cards, high interest car loans, etc. They’re all risky, and they all have high default rates. But they also aren’t AAA rated, so chances are if you open up a mutual fund somewhere, your fund manager isn’t going to put any money in those crappy loans.

When the ratings got f’d up, it was like cops and innmates at a prison all wearing the same outfits: no one knew what the fuck was going on anymore and the whole system melted.
I know a real explanation involving financial instruments doesn’t roll off the tongue as easy as ZOMG ITS THE DEMOCRATS or ZOMG ITS THE REPUBLICANS, but that’s the real reason. Both parties had ample time to fix this is they wanted, but it was insanely complicated. The guys that set up the hedge funds to do the CDS balance on these were mathematicians and theoretical physicists. How in the hell are some old suits in Washington to going figure that out?

.

Was it blocked by the Dems ? Or just in general got voted down.

Republicans controlled the Senate and never bothered to schedule it for a vote, according to Factcheck.

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