2008 financial crash: would it happen if Gore elected in 2000?

  • Thread starter Deleted member 1487
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The problem here is you dont need to make predatory loans to get the financial crisis. A lot of people took mortgages full well knowing what they were getting into. It wasnt as much that people were getting fooled but rather there was a pile of money up for grabs and nobody paid much thought about the consequences while they were grabbing it.

And Spitzer has been known to spin things in a way favorable to his own best interest. That doesnt mean he's fully wrong. But it's almost certainly a incomplete picture. Further, he was still governor of New York at this point so a lot of this is politcal posturing. So, I dont dont put a whole lot of stock into his oped etc.

Look, aside from the conservatives who want to protect Bush at all costs, can you guys at least admit this part is true:

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.

and this:

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.
 
In case you don't believe Spitzer, this article is from 2004:

http://www.nationalmortgagenews.com/nmn_issues/28_29/-432094-1.html

Comptroller John Hawke is coming under increasing congressional pressure to modify his agency's pre-emption rules so that the states can enforce their predatory lending laws against national banks and their mortgage subsidiaries.

Last week, Sen. John Edwards, D-N.C., introduced joint resolutions to overturn the Office of the Comptroller of the Currency's pre-emption rules. Rep. Luis Gutierrez, D-Ill., is expected to introduce similar resolutions in the House.

Sen. Edwards, who ran unsuccessfully for the Democratic presidential nomination, said he introduced the legislation to stop the Bush administration from gutting the North Carolina predatory lending law.

While he supports enactment of a strong national law to fight predatory lending, the North Carolina senator said he is opposed to OCC's efforts to block enforcement of strong state laws currently on the books.

"These new regulations protect big banks that mislead regular Americans," Sen. Edwards said.

Meanwhile, comptroller Hawke appeared before a hostile Senate Banking Committee to defend the pre-emption regulations that went into effect Feb. 12.

"The OCC's actions have led to such a unanimous and strong outcry from state officials as to suggest that fundamental damage has been done to the federal-state relationship," Sen. Paul Sarbanes, D-Md., said.

Comptroller Hawke stressed the regulations simply reaffirm that the states cannot infringe on the powers of national banks to make real estate loans and that only OCC - due to its exclusive visitorial powers - can bring enforcements against national banks.

He stressed the legal underpinning of the pre-emption regulations is sound and he is confident that OCC will win any legal challenge by the states.

However, state attorneys general are complaining that OCC's actions have blocked their ability to investigate consumer complaints and take enforcement actions against national banks.

"We are going to fight this in court," North Carolina AG Roy Cooper testified. But he appealed to the senators to take corrective action. "Clearly there is disagreement on what the law is. You guys can decide what the law ought to be," he said.

Senate Banking Committee chairman Richard Shelby, R-Ala., questioned the source of the comptroller's authority to sweep aside state consumer protection laws. But he did not take the comptroller to task like Sen. Charles Schumer, D-N.Y.

"I think the OCC has hurt itself by doing this," Sen. Schumer said. And he suggested that the comptroller "reconsider" the regulations or work with the Congress on a compromise.

The states' efforts to protect consumers and to prevent predatory lending "don't interfere with the national banking system at all," Sen. Schumer said. "You should be leaving it up to the states."
 
Look, aside from the conservatives who want to protect Bush at all costs, can you guys at least admit this part is true:



and this:

Oh, I fully subscribe to the notion that allowing the banks to increase their leverage ratio was a problem. So that is one area where things might have differed.

But I dont think the lending practices that led to the collapse were predatory. So, I am skeptical that the OCC's decision had a major impact in the bigger picture. Perhaps a Gore Administration might have regulated things differently but I think you need to find a different way.
 
Yes and no.

I agree with what the posters have said that it is unlikely Gore would have survived in 2004 particularly since John McCain would have been his rival and McCain would have been closer to his peak. I love McCain but he would have had the same dumb advisors as Bush and a similar FED policy so a crash in 2008 but the U.S. would have more resources because of no Iraq War and a much more limited war in Sudan (where McCain wanted to invade to fight AQIS)

But even if Gore had not survived his alternate decisions after 2000 would be key. Without Bush we don't have an Iraq War or the Bush Tax Cuts. Gore would have had a better Economic Policy and a recovery plan in 2002 that wasn't based solely on low interest rates, this would have lowered the bubble. However the Financial Markets would continue to be de-regulated due to that interest groups lobbying power and as other have said the fact that no one understood what was going on.

2008 to me was the culmination of all of the stupidity in the U.S. since 1976 and 2008 was almost pre-destined. It was a turning point that did not see us turn, which is why everything is so messed up and confusing right now.
 
Why is it assumed that Al Gore loses in 2004. Its been explained as not being hawkish enough in the wake of 9/11. I have seen other posters provide evidence to support Gore invading Iraq in the wake of 9/11.
 
Since my adult life & business experience goes all the way back to the 1970s my take on the crash of 08 is slightly different. While the Freddies, predatory lending, deregulation, & the other items mentioned all were part of the problem they were not at the core of it. They were symptomatic of a general and deeply ingrained shortsightedness in US business practice. Today I routinely run across investors and business managers who somehow still think the housing economy & practice of the 2000 - 2007 period is the ideal model & an thing less is some how failure. They cant grasp that without value added, and sellable product creation investment won't provide sustained return. In real estate terms they still talk about 'flipping' houses at a profit without actually adding any value to them. Whats worse these people are still attempting this investment model having learned nothing from the past two decades, or the examples from the 1970s & 1980s.

I'm fairly certain there are far to many managers & investors in all sectors of the US and globally who are over focused of high return 'easy' investment vehicles and have zero comprehension of value added, longer term strategies, real worth or price in terms of actual buyer demand vs marketing bs about value.
 
Why is it assumed that Al Gore loses in 2004. Its been explained as not being hawkish enough in the wake of 9/11. I have seen other posters provide evidence to support Gore invading Iraq in the wake of 9/11.

If Gore had won in 2000, we would have invaded Afghanistan in early 2001. The Clinton team had the plans drawn up and ready to go but they didnt want the next admin to inherit a war. But there would have been enough continuity from Clinton to Gore that I suspect it would have gone ahead. So there likely would not have been a 9/11, at least not as we know it.
 
As long as the Fed keeps its foot on the gas for too long in the early 2000's, there will be some kind of bubble blown. As long as the Fed fails to meet the dramatic increase in demand for liquidity when that bubble bursts, there will be a financial crisis of one sort or another.

Gore doesn't seem, to me, to be likely to change this.
 
FWIW, there is a theory that the war in Iraq helped to create the financial crisis, https://www.washingtonpost.com/blog...may-have-helped-trigger-the-financial-crisis/ *If* that is true, and *if* Gore would have avoided the war in Iraq (and that last is an issue we have debated here, e.g., https://www.alternatehistory.com/discussion/showthread.php?t=306846) then Gore could have made some difference in that respect. (For a skeptical view, see http://www.thedailybeast.com/articl...-caused-many-bad-things-but-not-this-one.html I'm not a great fan of Megan McArdle, but not *everything* she says is wrong...)
 
FWIW, there is a theory that the war in Iraq helped to create the financial crisis, https://www.washingtonpost.com/blog...may-have-helped-trigger-the-financial-crisis/ *If* that is true, and *if* Gore would have avoided the war in Iraq (and that last is an issue we have debated here, e.g., https://www.alternatehistory.com/discussion/showthread.php?t=306846) then Gore could have made some difference in that respect. (For a skeptical view, see http://www.thedailybeast.com/articl...-caused-many-bad-things-but-not-this-one.html I'm not a great fan of Megan McArdle, but not *everything* she says is wrong...)

There is a theory to explain everything, but no the Iraq War didn't cause the financial crisis neither did Bush's tax cuts, rampant deregulation from the 80s thru to 2000 did.

Bankers forgot their last screw up in 1929 and it will happen again because it's human nature to create ponzi schemes and financial houses of cards when you forget the costs involved when they invariably fail.
 
FWIW, there is a theory that the war in Iraq helped to create the financial crisis, https://www.washingtonpost.com/blog...may-have-helped-trigger-the-financial-crisis/
Now that is interesting. Basically what Oatley is saying is that the US ran huge deficits in the aughts (due to the wars), which simultaneously stimulated the economy while hurting the manufacturing sector (by strengthening the dollar), and this what made the housing bubble possible.

I do absolutely think that a Gore presidency would mean much lower fiscal deficits than OTL; for the rest, not sure.
 

Deleted member 1487

Since my adult life & business experience goes all the way back to the 1970s my take on the crash of 08 is slightly different. While the Freddies, predatory lending, deregulation, & the other items mentioned all were part of the problem they were not at the core of it. They were symptomatic of a general and deeply ingrained shortsightedness in US business practice. Today I routinely run across investors and business managers who somehow still think the housing economy & practice of the 2000 - 2007 period is the ideal model & an thing less is some how failure. They cant grasp that without value added, and sellable product creation investment won't provide sustained return. In real estate terms they still talk about 'flipping' houses at a profit without actually adding any value to them. Whats worse these people are still attempting this investment model having learned nothing from the past two decades, or the examples from the 1970s & 1980s.

I'm fairly certain there are far to many managers & investors in all sectors of the US and globally who are over focused of high return 'easy' investment vehicles and have zero comprehension of value added, longer term strategies, real worth or price in terms of actual buyer demand vs marketing bs about value.

That's frightening
 
Isn't it.

I don't have any clear idea if the number of investors/managers who think high speed high return investment is a great idea are larger in numbers than usual. History is filled with insane business or investment strategies. The South Seas Bubble of the 18th Century is still infamous. The Savings & Loan meltdown of the 1980s had a lot of strong parallels to the larger banking crisis of 2008.

I do know I routinely run into people who think the residential housing market is "bad" because they can't make the same high risk investments they could 2001 - 2008. I'm certain all of them lost money, tho some of them won't admit it. From my personal experience I made the best money on my real-estate investments in the 1990s, & as the next decade played out real returns shrank, tho paper returns & salesmans claims ballooned.

I'd add a technical detail to the precious posts of the other obviously knowledgable people. Within the housing industry costs exploded during the high risk years. After 2001 my insurance costs as a general contractor and risk premiums on the properties about tripled. A variety of reasons for this, but there was and is still chatter among the experts about changes in insurance regulation in that era. Materials costs skyrockets as well. The cost of low budget electrical wire at one retailer went from $80 for a 330 meter roll to over $300 in three years. A lot of complex reasons for lumber, steel, plastics, act.. to inflate in those years. The end result was it stepped up real costs on all those high risk real-estate investments, either residential or commercial. A fact the salesmen, investors, and too many managers ignored.
 

Deleted member 1487

Isn't it.

I don't have any clear idea if the number of investors/managers who think high speed high return investment is a great idea are larger in numbers than usual. History is filled with insane business or investment strategies. The South Seas Bubble of the 18th Century is still infamous. The Savings & Loan meltdown of the 1980s had a lot of strong parallels to the larger banking crisis of 2008.

I do know I routinely run into people who think the residential housing market is "bad" because they can't make the same high risk investments they could 2001 - 2008. I'm certain all of them lost money, tho some of them won't admit it. From my personal experience I made the best money on my real-estate investments in the 1990s, & as the next decade played out real returns shrank, tho paper returns & salesmans claims ballooned.

I'd add a technical detail to the precious posts of the other obviously knowledgable people. Within the housing industry costs exploded during the high risk years. After 2001 my insurance costs as a general contractor and risk premiums on the properties about tripled. A variety of reasons for this, but there was and is still chatter among the experts about changes in insurance regulation in that era. Materials costs skyrockets as well. The cost of low budget electrical wire at one retailer went from $80 for a 330 meter roll to over $300 in three years. A lot of complex reasons for lumber, steel, plastics, act.. to inflate in those years. The end result was it stepped up real costs on all those high risk real-estate investments, either residential or commercial. A fact the salesmen, investors, and too many managers ignored.

I've heard and number of theories on why this is and it seems to come down to incentive structure; right now there is more financial incentives to maximize immediate return than wait and build value. The effect is the unraveling of the economy slowly as we stop building new things and try to extract value from the same or declining shares of assets.
 
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