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International News Title: Myth -- "The failed policies of George W. Bush and Dick Cheney left the economy in a mess" It seems there is no one defending the policies of the Bush Administration. Even Republicans are distancing themselves from this administration, complaining of a spending binge and growth of the federal government. The Democrats have worked diligently to make us feel sorry for President Obama because he inherited a terrible fiscal mess. Well, yes, we have gone through a fiscal mess and he took office shortly after the financial panic started. But was it Democrat policies, not Republican ones that created the crisis. What caused the financial crisis? A housing/real estate bubble burst. The bubble was caused by making money easily available for home loans. Easy money caused buyers to bid up the prices of homes. Congress encouraged the growth of this bubble by pushing Fannie Mae and Freddie Mac (federal government holders of home mortgages) to reduce their loan standards and to increase their portfolio of loans; Congress thought these policies would be helping poor and disadvantaged families. The standard practice of asking for 20% down payments was abandoned and lending institutions gravitated to the point where 100% loans were being made (basically no down payment). The government, through Fannie and Freddie was buying loans of any type and didn’t seem to care about lending standards. Lenders were not even required to verify the income of borrowers and many people speculated by purchasing real estate at more than they could afford because they believed that the value of the property would continue to increase. The easy money policies of the Federal Reserve (operates independent of the White House) contributed to real estate speculation by keeping interest rates low. Because mortgages are usually backed by solid collateral value (this was true when loan values were 80%) loans were bundled into investment packages and sold as low-risk investments around the world. These loan packages were rated as top quality investments by the rating agencies (problem area). Banks, looking for low-risk ways to invest short-term cash began to trade these securities. So far, all this seems reasonable. But these bundled loans were improperly valued because the collateral value was overstated. Banks were not making risky bets because these investments were rated as AAA. Perhaps banks knew that the underlying assets here were a bit shaky, but by the book, these were not considered risky investments. What event(s) started to shake the house of cards? Some evidence traces back to an effort by a large institutional investor (a major college endowment fund) to cash-out of some investments to meet a margin call - this is from memory, but can be checked). Their package of investments had to be sold at a large loss to get the cash they needed and this tremor triggered the earthquake. Now, in my opinion, things would have worked themselves out without our notice except for "mark-to-market" accounting rules that were instituted by congress as part of the over-reaction to the Enron collapse. Mark-to-market caused major investment organizations to value their securities based on the most recent "market" valuation of their assets. If your stuff was sold by a competitor for $1 per unit, then yours was now valued at $1 even though you paid $20. Yesterday your stuff was worth a lot. Today, based on mark-to-market it is worth near nothing. Therefore the assets you held on your balance sheet as security for some other investment were worth less and you were obligated to come up with cash NOW to cover the difference. So banks and other financial institutions were obligated to sell securities at fire-sale rates to get the cash needed to meet their obligations. If sanity had prevailed - pretty much impossible with Washington involved - the banks would have said "balderdash"; we plan to hold our assets (mortgage securities) until maturity and we will value them at the maturity rate. But the laws were different at the time and the banks (read Wall Street) have always been obliged to comply. All this triggered a mess. Congress has since quietly addressed the "mark-to-market" issue and, of all fixes thrown at the problem, this is probably the most significant. It is true that both Democrats and Republicans liked and encouraged expanded home ownership. President Bush expressed pride that were moving toward an “ownership society" where a greater portion of the population owned and cared for physical assets. However, the Bush administration saw that Fannie and Freddie were stretching too far and early in their administration (2003) started making a series of proposals to establish tighter regulations. Democrat, Barney Frank, took the lead in resisting tighter regulations and even worked to expand risky lending. Excerpts on the subject from the New York Times of September 11, 2003 notes: “The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.” and “…Among the groups denouncing the (Bush) proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.” Bush tried to prevent the bubble, but he failed...so it's his fault. But if truth were important, the bubble did not burst because of failed policies of the Bush administration. The failures resulted from Democrat policies. This topic is too big to be properly addressed in a single blog item, but here are some other things to think about: · The Clinton Recession - George Bush inherited a pretty significant recession from the Clinton administration when he took office. In this case, it was the bursting of the bubble caused by over speculation in internet stocks – the “tech wreck”. One of the main reasons why federal tax revenue grew so fast during the Clinton years was the fact that he presided at the time the internet blossomed. Our entire country began to profit from the fabulous productivity benefits of the internet (think email or e-commerce). We hardly remember this recession because it was handled fairly deftly by the Bushies. Initially, Bush proposed and Congress enacted a modest stimulation package and phased-in tax cuts. These actions gave consumers and businesses greater control of their own money and confidence in the future. In 2003, congress accelerated the phase-in of tax cuts and the economy grew, unemployment improved and revenues to the government increased. · Bush inherited 911 – During the Clinton years, US interests were attacked several times. The Clintons basically treated these attacks as law enforcement issues and maintained a very low sense of urgency about the terrorist threats. We knew that Usama Bin Laden had declared war against the United States and we considered him our enemy. Even so, President Clinton declined opportunities to kill Bin Laden because the CIA had been instructed to capture him alive. Clinton and his National Security Adviser, Sandy Berger, also declined the chance to capture Usama Bin Laden, telling Sudan's President, who offered to provide him to us, that we did not have a legal basis to take control of him. The planning for 911 started well before the Bush administration took office. When the attacks of 911 took place, our world changed…talk about an inheritance! One of the main intents of the Bin Laden attacks was to disrupt our financial system. While it is obvious that the recent banking panic and “bail-outs” represented a serious problem, it was solvable by government providing back-up funding to the various banks and financial institutions. The main corrective support was provided by the Bush administration. Whether you do or don’t agree that the government should have provided this support, Barack Obama did think it was necessary and voted for it while in his Senate seat. Most of the banking back-up loans have now been paid back with significant interest. However, when compared to the financial crisis that took place during 911, the 911 disasters were potentially much more severe and more difficult to manage. I remember being amazed and thanked God that the Bush administration was in charge at that time of 911. The Trade Centers were a hub of our financial system. Key people were killed, systems, records and infrastructure were destroyed in an instant. Yet we came back in a very short time. Hundreds and thousands of people worked in the background to repair our financial system and today, very few remember the wonderful work they did. · Bush was a big spender? – Remember, while the Bush administration had a modest majority in Congress, it had a sharply divided Senate (50-50) and Tom Dashle (D–SD) became majority leader just four months after Bush was inaugurated. Without going through the votes, I think I can state that Democrats opposed very little of the spending bills and proposed budgets that always exceeded the spending that Bush proposed. We need to remember that all spending bills originate in the House of Representatives. Bush may be faulted for being too willing to compromise with Congress. Today, Republicans chide him for failing to veto bills that were presented to him by Congress. However, Bush was in a difficult spot and every big spender (both Democrat and Republican) took advantage of the 911 environment to splurge on their favorite projects. On 911, President Bush turned his focus to keeping our country safe. He initiated military operations in Afghanistan, Iraq and many other areas around the world. Remember also that Bush had strong bi-partisan support for both of these actions. Later, after we had chased out the bad guys and each country was freed to democratically elect a government of its choice, the Democrats lost interest and started to accuse the Bush administration of tricking them into supporting the actions in Afghanistan and Iraq (although the leadership of both parties had complete access to the same intelligence as the President). Thereafter, Bush had to fight a congress that threatened to withhold funds for these military operations unless they got what they wanted. It is true that Bush contributed to spending initiatives with his proposal to expand prescription drug entitlements, but he had Democrat support for this initiative and some economic justification. Bush can take full credit for pushing the No Child Left Behind initiative and this did add modestly to the federal education budget. But much of the increased spending during the Bush administration was a result of 911. Huge expenses resulted from implementing the recommendations of the 911 Commission. These included, for example, the creation of the Department of Homeland Security. In a compromise with Democrats (union gift), Bush capitulated and all those security people at the airport and elsewhere around the country, became government employees. After 911, it is not surprising that federal spending grew more than revenues. However, the Bush administration did maintain some discipline in spite of congressional headwinds and was maintaining a path to get spending in line with revenues. · Bush Tax Cuts took revenue away from the government? – Democrats choose to think simply about taxes. They think that increasing tax rates will result in greater revenues for the government and decreasing tax rates will reduce revenue. They point to the fact that government revenues increased significantly during the Clinton administration and relate that increase to increased tax rates during that time. They cite the budgetary surplus that briefly occurred during the Clinton years, but they fail to acknowledge the spending restraints that a Republican Congress imposed on Clinton and the fact that our economy was benefiting from the expansive internet/tech economy. The greatest way to increase revenues is to increase economic activity. The government gets a cut of all the money we make, so the more people are fully employed, the more revenues come in to the government. Allowing the “people” to keep more of their own money is a way to expand economic activity overall. The tax cuts of 2001 and 2003 resulted in increasing revenues for the government. Revenue in Bush’s first year was $1.99 trillion. In his last year (2008) revenue was $2.52 trillion. Federal revenue increased by 28% in the environment of the Bush tax cuts. By looking at revenue and spending graphs, it can be seen that dips in revenue coincide with economic recessions (dips in economic activity – negative growth). The tax cuts that were implemented have been purposely misrepresented as “tax cuts for the rich”. However, those with lower incomes were the most positively affected by the tax cuts. To help us remember, here is a very quick summary of the tax cuts as gleaned from Wikipedia: Many of the tax reductions in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) were designed to be phased in over a period of up to 9 years. Many of these slow phase-ins were accelerated by the Jobs and Growth Tax Relief Reconciliation Act of 2003(JGTRRA), which removed the waiting periods for many of EGTRRA's changes. EGTRRA generally reduced the rates of individual income taxes: · a new 10% bracket was created for single filers with taxable income up to $6,000, joint filers up to $12,000, and heads of households up to $10,000. · the 15% bracket's lower threshold was indexed to the new 10% bracket · the 28% bracket would be lowered to 25% by 2006. · the 31% bracket would be lowered to 28% by 2006 · the 36% bracket would be lowered to 33% by 2006 · the 39.6% bracket would be lowered to 35% by 2006 The EGTRRA in many cases lowered the taxes on married couples filing jointly by increasing the standard deduction for joint filers to between 174% and 200% of the deduction for single filers. Additionally, it changed the rate of tax on dividend income starting in 2003 to 5% for those in the 0% or 15% brackets, falling to 0% in 2008. It was lowered to 15% for all other brackets. Today, Bush detractors claim that these tax cuts unfairly benefited the rich and have reduced federal tax revenue. The tax cuts are subject to a sunset clause and will expire on January 1, 2011 (two years) if congress fails to act. The truth is that these tax cuts have benefited the poor and the middle class much more than the rich (watch out for that term). According to a 2007 study, of the Congressional Budget Office (CBO) if the current benefits to the poor and middle class were to expire it would have a combined budgetary effect of $114 billion. By comparison, if the more maligned capital gains, dividends and estate tax provisions were to expire, this would only contribute $36 billion to the budget. Further, the individual income tax rate reductions come to $59 billion (2007 study) and are not really a tax cut for the rich. All families with taxable income over $62,000 (and single filers over $31,000) currently benefit and will be affected when taxes increase to previous levels. You can review federal revenue and spending from several sources, but the Interactive Charts at the Heritage Foundation are easy to view. Had enough?? Whew!! Whether or not this was useful or interesting to you, this was a bit cathartic and a positive exercise for me. Let’s stop blaming Bush and start looking forward. Tune in tomorrow (lets say soon) for the solution.
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#1. To: dont eat that (#0)
GW Bush Executive Summary of "A Home of Your Own". From the WhiteHouse website Buying a home is the biggest single investment most people will make in their lives. Homeownership is a cornerstone of America’s healthy, vibrant communities, and benefits individual families by helping them build stability and long term financial security. But sadly, homeownership is out of reach for many Americans - especially for minority families. For millions of these families, homeownership is a distant, unreachable dream. President Bush has a comprehensive agenda to help increase the number of minority homeowners by at least 5.5 million before the end of the decade. While the overall homeownership rate has reached an all time high of nearly 68 percent, the statistics show a clear and persistent homeownership gap: Despite increases in minority homeownership during the decade of the 1990s, large persistent gaps between non-Hispanic whites and minorities remain and have narrowed only slightly; According to HUD, in 1994 the minority homeownership rate was 26.8 percent below the rate for white households; The African-American homeownership rate was 27.5 percentage points below the white rate, and the Hispanic rate was 28.8 percentage points below the white rate; The second quarter Census data for 2002 shows that non-Hispanic whites have a 74.3% homeownership rate, while African-Americans have a 48% rate and Hispanics a 47.6% rate; and Asian-Americans and other races have a 53.7% homeownership rate. A new report from the Department of Housing and Urban Development (HUD) - which analyzed the most recent homeownership data from the U.S. Census Bureau - highlights the many barriers that prevent minority families from owning their own home. The barriers include: A lack of inventory of affordable single-family housing available for sale in many areas where a majority of residents are minority families; A need for downpayment assistance, which affects minority families to a greater extent than non-Hispanic whites because they have less accumulated wealth that can be used to help children with downpayments; A lack of access to affordable mortgage credit; A lack of understanding of the homebuying process; Weak credit histories, often arising from a poor understanding of financial matters and where financial counseling is required; A lack of information about available homeownership programs in the community; and Language difficulties or cultural differences. It doesn’t have to be this way. The President’s agenda will help tear down the barriers to homeownership that stand in the way of our nation’s African- American, Hispanic and other minority families by: Providing Downpayment Assistance. The single biggest barrier to homeownership is accumulating funds for a downpayment. The President has proposed $200 million annually for the American Dream Downpayment Fund to help roughly 40,000 families a year with their downpayment and closing costs. Increasing the Supply of Affordable Homes. The President wants to dramatically increase the supply of homes available to low and moderate income families. The President has proposed the Single-Family Affordable Housing Tax Credit, which will provide approximately $2.4 billion to encourage the production of 200,000 affordable homes for sale to low and moderate income families. Increasing Support for Self-Help Homeownership Programs. The President’s budget triples funding for organizations, such as Habitat for Humanity, that help families help themselves become homeowners through sweat equity and volunteerism in their communities. Simplifying the Home Buying Process & Increasing Education. When buying a home today a buyer faces a confusing and complicated process. The President and HUD want to empower homebuyers by simplifying the home buying process so consumers can better understand and benefit from cost savings. The President also wants to expand financial education efforts so that families can understand what they need to do to become homeowners. The President also believes that government alone can’t close America’s homeownership gap. It is critical that our government challenge the private sector to take concrete steps to tear down the barriers to homeownership that face minority families. The President is issuing "America’s Homeownership Challenge" to the real estate and mortgage finance industries to join in his effort to increase the number of minority homeowners by 5.5 million families by the end of the decade. Many organizations have already responded to the President’s challenge by committing to: Substantially increase by at least $440 billion, the financial commitment made by the government sponsored enterprises involved in the secondary mortgage market, specifically targeted toward the minority market; Launching twenty-five different local initiatives across the nation, geared toward eliminating the specific homeownership barriers faced by minority families in those communities; Raising $750 million in below-market-rate investments by 2007, which will work in collaboration with local homeownership initiatives and be targeted to heavily minority program areas; Pursuing strategic partnerships in 20 top housing markets between homebuilders, lenders, local officials, and community leaders to develop approaches that address the local challenges to building homes for minority families living in urban centers; Establishing faith-based housing partnerships between the participants and at least 100 churches, mosques, synagogues, and other faith-based institutions; Aggressively developing new mortgage products so that conventional market alternatives are available to combat the predatory loan products that are disproportionately targeted to minorities; Creating new mortgage products to meet the unique needs of recent immigrants; Dramatically expanding financial education efforts for minorities, providing financial counseling to at least 380,000 minority families, and taking measures at the local level to reduce predatory lending; and Establishing multilingual, consumer-oriented internet Web sites designed to help minorities overcome barriers to homeownership, including creation of a central data bank of affordable housing programs made available to real estate agents when working with clients.
Bush never advocated irresponsible lending practices and called for FNMAFMAC reform continuously.
Read the executive summary.
His entire program involved providing a total of 200 million dollars of assistance to help provide down payments to homeowners. The program did not absolve buyers to prove to lenders they could afford a mortgage. Many buyers can afford mortgage payments, but don't have the cash on hand to pay closing costs. It was down payment assistance and only 200 million total dollars. It is absurdly stupid to think this caused the problem. Your using a tired well worn bullshit left wing talking point and you are a moron for doing it.
You still haven't read the summary have you?
#15. To: mininggold (#14)
Here's the damn program http://www.hud.gov/offices/cpd/affordablehousing/programs/home/addi/ $200 million dollars a year for 4 years for closing cost assistance. That's it. No pressure on banks to make loans to people who can't afford payments. Bullshit anti-Bush propagandizing.
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