Our Confusing Economy, Explained

Interesting Podcast, Professor highlights part of the financial mess brought on by deregulation and off book deals.

"Perplexed by the U.S. economy? You're not alone. Law professor Michael Greenberger joins Fresh Air to explain the sub-prime mortgage crisis, credit defaults, the shaky future of other types of loans and what we can expect from the U.S. financial markets.

Greenberger is a professor at the University of Maryland School of Law and the director of the University's Center for Health and Homeland Security. "


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And now,

"McCain guru linked to subprime crisis"

"The general co-chairman of John McCain’s presidential campaign, former Sen. Phil Gramm (R-Texas), led the charge in 1999 to repeal a Depression-era banking regulation law that Democrat Barack Obama claimed on Thursday contributed significantly to today’s economic turmoil.

“A regulatory structure set up for banks in the 1930s needed to change because the nature of business had changed,” the Illinois senator running for president said in a New York economic speech. “But by the time [it] was repealed in 1999, the $300 million lobbying effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework.”

Gramm’s role in the swift and dramatic recent restructuring of the nation’s investment houses and practices didn’t stop there. "

"During those years, the mortgage industry pressed Congress to roll back strong state rules that sought to stem the rise of predatory tactics used by lenders and brokers to place homeowners in high-cost mortgages.

For his work, Gramm and two other lobbyists collected $750,000 in fees from UBS’s American subsidiary. In the past year, UBS has written down more than $18 billion in exposure to subprime loans and other risky securities and is considering cutting as many as 8,000 jobs."


In 1998, the Congress passed a law that exempted capital gains tax on the sale of a home. There were many steps taken to ensure that the Great American Housing Bubble would become possible. Both parties were involved in the planning.

And now the Congress is gearing up to bail it all out. However, in an era of unlimited war costs, bailing out such a monster is impossible. The Bear Sterns issue alone illustrated that the finance industry is sitting on hedge fund losses that are nearly inconceivably large. Remember, hedge funds use arcane financial methods to greatly multiply gains, which only means they have the same huge multiplier when facing losses. Bear Sterns was swallowed up in huge losses by the mortgage weaknesses creeping back in.

In other words, the party ran for years and there was too much drinking and carousing. Now the morning has come, and the ambulances are appearing one by one, to deal with the instances of alcohol poisoning that have only logically taken place from such a display of excess. The ambulances are a signal to the neighbors that it wasn't just a party ... it was more like a ritualized suicide pact taken amongst some very foolish youngsters, who wanted to feel rich and trendy and connected for as long as the drugs would let them.

In even shorter words, we were never really that wealthy, and it was all a huge scam ... yet those responsible for the scam are still walking around not only FREE, but are still consulted on how to continue running the scam now that it's crashed.

In defense of our government, local, state and federal, I don't believe that either political party employed anyone who:
1. Had enough intelligence, education and wisdom to accurately predict and explain to a knot head the ramifications of their incredibly stupid, greedy actions.


2. Had any significant influence with any government official who would listen, believe and could prevent the crisis or minimize the loss.

The most fantastic part about this entire interview are the numbers. Think: an eleven thousand page bill - eleven thousand pages! I'm not even sure that History Mike could plow through something that size and comprehend it. Then there's the big question - so what happened to all that money? Well, one gambler took home ten billion that night... I have a vivid imagination, but I can't even imagine one billion, let alone ten.

The part I enjoyed most was the recurrent emphasis that this is all a gamble. They bet, we lose. I don't see Hitlery, Oh Bama Rama Ding Dong or what's his name from the stupid party as being any better or any different than King George the DoubleYou.

Mad Jack
Mad Jack's Shack

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