Deleted member 1487
If Gore became president in 2000 would we still get the financial crash of 2008 and if so how would he have handled it differently than Bush?
The Housing Bubble was on plenty of radars as early as 2005; now if you're talking about the vulnerability of the financial sector as a whole, that might be another matter...Yes, it still would have happened. This was on basically nobody's radar.
The Housing Bubble was on plenty of radars as early as 2005; now if you're talking about the vulnerability of the financial sector as a whole, that might be another matter...
The Housing Bubble was on plenty of radars as early as 2005; now if you're talking about the vulnerability of the financial sector as a whole, that might be another matter...
Yes, it still would have happened. This was on basically nobody's radar.
Then again, I'm not sure that Gore survives the '04 elections, as 9/11 would also probably happen and his reaction to it might be pretty damn underwhelming from what people who were in the inner circle of Clinton had to say about him (see David Rothkopf's Running the World: The Inside Story of the National Security Council for a fascinating look at every single NSC since Truman).
But as for his reaction, I'd imagine that he would do what Bush did and bail out the banks because the alternative was disaster. He might have put more money into it, also.
Arguably it led to more money entering the stock market and other investment markets seeking a return, as the wealthiest got the biggest cuts and invested it. Arguably though much of that just went into government debt. I have yet to see a good analysis either way.Does anyone know what relationship the bush tax cuts had with the financial crisis?
Does anyone know what relationship the bush tax cuts had with the financial crisis?
It might have been on some radars, but no one was really pushing to do anything about it. That certainly wouldn't have changed with Gore. So, the crash is the same, though the response may be different. Gore would likely just pour more money in, save all of the companies, etc and make the debt considerably worse.
Federal Reserve Chairmen had been warning congress about some of the problems with Fannie Mae/Freddy Mac for DECADES and neither congress, the president, nor agency directors did ANYTHING to reduce risk or increase oversight. Basically, a lot of congressmen (primarily Democrats) prevented any oversight and ENCOURAGED the extension of loans or sizes and to people that any sane banker would consider a terrible risk.
It still probably happens. While I think a Gore administration would've been less reckless with the economy than Bush (a smaller tax cut in 2001, no tax cut in 2003, a funded Medicare prescription drug plan, no Iraq war)
Fannie/Freddie had little to do with the financial crisis, which was rooted in the repackaging of subprime loans into investment grade securities by investment banks, aided by the ratings agencies. They took big piles of poo and magically made them into AAA grade debt. Fannie/Freddie had nothing to do with liar loans and all other forms of lax lending that went into feeding the gaping maw of the MBS market, which allowed banks to make bad loans, securitize them and sell them off to investors so that there was no risk for the lending institution. They also had nothing to do with the defective math and modeling that turned bad loans into good debt. The crisis came about when banks and insurance companies started trading in the CDS market and the black swan events that would have led to trouble actually came to pass.
The housing bubble was on the radar of some in the finance/economics community as early as 2003/4 when prices began to get badly out of line compared to incomes. By 2006, you had to be blind to the fact that a potential problem existed.
None of this means that Gore would have solved the problem; I tend to think he wouldn't have, but the possibility of intervention to ameliorate the problem exists, which is about as close to a definitive answer you're going to get to the question anyway.
I still espouse the scenario in the book "President Gore and other things that never happened" where after a narrow, court-ruled decision that large numbers of Floridans had been denied the vote, Tom de Lay and the other prominent Republicans at the time use their majority in the House to derail most of Gore's propsals including increasing funding to domestic security. 9/11 still happens, de Lay is effectively blamed and the Republicans spend the next few years getting utterly hammered as they are hit heavily in the mid-terms giving the Democrats control of the House and Gore reintroduces all his original proposals with increased support.
Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers' ability to repay, making loans with deceptive "teaser" rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.
Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.
Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.
What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.
Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.
Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.
In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.
But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.
Throughout our battles with the OCC and the banks, the mantra of the banks and their defenders was that efforts to curb predatory lending would deny access to credit to the very consumers the states were trying to protect. But the curbs we sought on predatory and unfair lending would have in no way jeopardized access to the legitimate credit market for appropriately priced loans. Instead, they would have stopped the scourge of predatory lending practices that have resulted in countless thousands of consumers losing their homes and put our economy in a precarious position.
When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.
The writer is governor of New York.
Many events in Washington, on Wall Street and elsewhere around the country have led to what has been called the most serious financial crisis since the 1930s. But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency’s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.
On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.
They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.
Perhaps we could at least expect the Gore administration to create a different sort of regulatory environment than the Bush administration. Here is the open letter by Eliot Spitzer to the Washington Post from early 2008 on the regulation of predatory lending:
http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html
That's simple 20/20 hindsight. He wasn't exactly pushing this agenda before the meltdown and neither was Gore.
Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.
In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.
What do you mean 20/20 hindsight? Spitzer was doing this back when he was Attorney General, but it was the Bush administration belief in deregulation that lead to them overruling the States attempting to curb these bad practices.