Mark Hunter (ozma914) wrote,
Mark Hunter
ozma914

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next week's column: Brother, Could You Spare a Loan?

SLIGHTLY OFF THE MARK


I’m really tired of talking about, or thinking about, the bad things in life like politics, the weather, or my attempts at home repair. However, when I made the decision to run for President I knew I’d have to cover the unpleasant stuff, and there’s not much more unpleasant right now than economic news. So, here’s what I have to say about the economy:

It’s bad.

No doubt you’ll want me to expand that, maybe with my prediction of where the economy is going. Okay:

It’s really bad.

I’d like to take credit for predicting it would get really bad, and I did predict that. Unfortunately, I’ve been predicting it since 2001. If you make the same prediction about something that goes in natural cycles long enough, you’re bound to be right, sooner or later.

So, who’s to blame? A President? Congress, past or present? Banks? Wall Street? The Rich? The poor?

The short answer is: Yes.

That’s part of the problem, you see: There’s just no simple answer. Most people can come up with something black and white to say about gun control, oil drilling, Iraq, American Idol, or almost any other divisive issue. The cause and effect behind what will become the greatest economic downturn since the Great Depression can be uncovered, with a great deal of digging, but what to do about it is not so easy.

What about that big honkin’ bailout? The majority of Congress didn’t pass that the first time around for the same reason most of their constituents were against it: Their money is being used for something that may or may not work, and nobody knows what will happen if it does. As I write this, Congress is sending it through a second time, after its leaders apparently used the tried and true method of buying votes with bunches of added spending. Shocker.

But it’s just a bailout for Wall Street big wigs, right? It won’t affect the regular guy one way or another.

Nope, sorry. I’ve been doing a lot of research on this, which is another way of saying I sought out experts on the economy who aren’t firmly under the thumb of one or another political party – no easy task, that. Assuming I understand the information that’s been flying at me from all directions, I still don’t have room to explain it all in one column. Or two. Or ten.

Basically, this is affecting credit in a big way, and a lot of companies rely on revolving lines of credit to buy supplies and turn out payrolls. If Ford can’t get credit, they lay people off and cancel supply orders. If that happens, all the companies that supply Ford lay people off and cancel their supply orders. Multiply that by all the companies in every area. Multiply that by the fact that if the horrible rich people and the evil corporations suddenly lose all their stock valuation, they can’t afford to build new plants to make new products.

Suddenly you’ve got a lot of people who don’t have jobs anymore, and maybe they’ll be forced to sell off property, or vehicles, or children. But nobody’s buying, because buyers can’t get credit for the same reason corporations can’t get credit.

Basically this stems from the government pressuring banks into handing out credit to people who couldn’t really afford what they were using the credit for. The theory was that everyone, even poor people, deserved the right to own a home. And while they were at it, why not a new car, and a few credit cards?

Established, rational guidelines for spending were tossed out the window, in favor of passing out loans to people who were unlikely to be able to pay the loans back. The bad loans became the bad credit that, to a large degree, caused our current crisis. It started long before G.W. Bush took office, and long before John McCain caught on and issued dire warnings a few years ago. (He wasn’t the first, by the way.)

So, the poor are to blame?

No, of course not. Doesn’t everyone want a home? Wouldn’t you leap at the chance? Very few people buy a new house expecting they’ll lose their job, or get sick, or that their home will be devalued and they’ll lose the equity they counted on.

The banks are partially to blame – they had to know the danger -- but most of the blame rests with the politicians who turned secondary market enterprises like Fannie Mae and Freddie Mac into political tools, to buy the votes of people who thought the economy would steam uphill forever.

Some believe deregulation is at fault for this: Why wasn’t the government watching these lenders more closely? Congress (including Joe Biden) voted to deregulate the industry in 1999 with the encouragement of President Bill Clinton, who argues that the 1999 bill stopped today’s crisis from being worse. It turns out the idea of deregulation is just as complicated as everything else in this mess.

Since the savings and loan collapse in the 80’s, several new laws have tightened the regulation of banks considerably. Clinton – and I’m not a Clinton fan – claims correctly that the 1999 bill actually helped in this case: It allowing banks to acquire the assets of other, failing banks, instead of forcing the government to come to their rescue. In other words, thanks to one moment of deregulation, it’s not as bad as it could be.

Okay, go take a handful of ibuprofen, and maybe a glass of your favorite spirits, then we’ll get one with it.

Both politicians and executives have made out like bandits. Fannie Mae/Freddie Mac financial contributions to Congressmen, funneled through PACs and “employee contributions”, were in the millions. From 1989-2008, the three top recipients were Christopher J. Dodd (Chairman of the Senate Banking Committee), Barack Obama, and John Kerry, each receiving money in the six figures. (Source: Federal Election Commission, Sept 2.) Earlier in the year Hillary Clinton was in fourth place, but dropped down after losing the Democratic nomination.

However, there’s no reason to think any politician expected these top lending institutions to fail; in fact, 28 lawmakers had invested their own money into the companies, and so lost their own money. John McCain had $10,000 invested there, himself – and he was one of the first to call attention to their shaky accounting. A Republican from California, Mary Bono (you might know her late husband, of “Sonny and Cher” fame), had the most invested.

We now know the Clinton administration was pressuring banks to present those questionable loans that eventually started failing. But were they trying to buy the votes of poor people? Or did they simply believe that owning property would help lift those people out of poverty?

Next week: What the heck do we do about it?
Tags: column, new era, politics, slightly off the mark
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