Deregulate This
I was sent an email that read:
This has to make you think a little bit; if not then keep your blinders on!
George Bush has been in office for 7 1/2 years. The first six the economy was fine.
A little over one year ago:
1) Consumer confidence stood at a 2 1/2 year high;
2) Regular gasoline sold for $2.19 a gallon;
3) the unemployment rate was 4.5%.
4) the DOW JONES hit a record high–14,000 +
5) American’s were buying new cars, taking cruises, vacations overseas, living large!…
But American’s wanted ‘CHANGE’! So, in 2006 they voted in a Democratic Congress & yep–we got ‘CHANGE’ all right.
In the PAST YEAR:
1) Consumer confidence has plummeted ;
2) Gasoline is now over $4 a gallon & climbing!;
3) Unemployment is up to 5% (a 10% increase);
4) Americans have seen their home equity drop by $12 TRILLION DOLLARS & prices still dropping;
5) 1% of American homes are in foreclosure.
6) as I write, THE DOW is probing another low
$2.5 TRILLION DOLLARS HAS EVAPORATED FROM THEIR STOCKS, BONDS & MUTUAL FUNDS INVESTMENT PORTFOLIOS!
YEP, IN 2006 AMERICA VOTED FOR CHANGE!… AND WE SURE GOT IT!!!…. NOW OBAMA, the DEM’S CANDIDATE FOR PRESIDENT–AND THE POLLS SAY HE’S GOING to BE ‘THE MAN’–CLAIMS HE’S GOING TO REALLY GIVE US CHANGE!!….JUST HOW MUCH MORE ‘CHANGE’ DO YA THINK YOU CAN STAND???…..
‘A taxpayer voting for BARACK HUSSEIN OBAMA is like a chicken voting for Colonel Sanders’
I would like to respond to this with actual research and factual backup.
When we talk about a market at a record high, it is most often what we call a bubble. That bubble has burst.
In all of the financial news, what is the one thing that people are saying has caused the current financial crisis? The answer that is universally given is that the financial system was deregulated. This deregulation hit a fast track under the Bush administration, but was a process started long ago in the Reagan era. You may remember the S&L failures, and John McCain’s role in the Keating Five. He was a key instigator in the deregulation that allowed that to happen, and then he tried to help his friends in banking get out of it with no scars. As a matter of fact, John McCain’s wife made a million dollars off Keating’s failed S&L.
The next round of deregulation began in 1999 when the Republicans took back control of both houses of Congress. Now as for who supported deregulation, John McCain’s chief financial adviser Phil Gramm led the legislative charge in 1999 to deregulate the banks, as well as lobbied Congress, The Federal Reserve and the Treasury Department in 2005 and 2006 on behalf of banking and mortgage companies. The 1999 law, the Gramm-Leach-Billey act is being cited as significant in the current crisis. I might add that in all of these years, the Republicans were in control of Congress. The 2005 and 2006 lobbying effort sought to fight against state rules that were designed to curtail predatory lending practices. And yes, McCain wants to deregulate health care in the same way.
Regarding the votes on bills related to this act in the Senate, on Bill S625, motion to dismiss a Christopher Dodd amendment to the truth in Lending act was voted down. Republicans voted 50-3, Democrats 9-35. Same bill, motion to table amendment by Dick Durbin with respect to claims or interests and predatory lending practices. Republicans voted 50-3. Democrats 1-43. As a matter of fact, the Gramm-Leach-Billey act was voted 53-0 by Republicans, 1-44 by Democrats.
This means that if you add up votes for these deregulations over three bills, Republicans cast 153 votes for, and Democrats cast 11 for it. If you add up votes against, you find 6 Republican votes against compared to 132 Democrat votes against. So who is responsible for this deregulation induced financial mess?
Meanwhile Obama pointed out the coming crisis as early as March, when he described how the deregulation failed to put in place 21st century oversight, it merely dismantled an outdated system.
We put new regulations into place after the S&L bailout, but let them drop again, under Bush and the Republican controlled Congress. Again, John McCain was behind much of the deregulation. The idea of this deregulation was that the industry knew what was best for it, and could regulate itself. This is a Libertarian ideal that the Republicans also embrace. It is also quite wrong in practicality. The reality is that the market unchecked will inevitably push itself too far.
I’ll give two examples of how this happens.
Example one is the story of two companies, A and B. They each make about 20% profit margin in a very competitive market. Company A is highly ethical and responsible in their business practices, company B, not so much. By being not so ethical, Company B expands its profit margin to 25%. The extra capital allows them to expand their market share, and company A is forced to either close up shop, become much smaller, or follow the unethical business practices of Company B. The ethics bar has just been moved.
Example two is what we are in now. It starts by letting a market go wild after deregulation.
Under this deregulation, the financial industries ran wild with new tools, the sub-prime loan. Initially these were put out tentatively to experienced buyers, and were a great tool for people who wanted to flip a house for profit, as their short-term interest payments would be lower. But predatory lenders played up the American ideal of owning a house and lent people hundreds of thousands of dollars without even a check of income. Some applications were one page that didn’t even ask for income figures. This is pure blind greed, blind because these loans were then bundled up and bought and sold as commodities without anyone being able to see if they were buying a good product based on people who were actually able to make payments. The run on housing caused properties to get overpriced, leading to a housing bubble. The bubble busted and many people wound up with houses that weren’t worth the dollar amount of their loans.
Other people try to blame Fannie and Freddie, but they weren’t mortgage lending leaders on the market until 2006, when many institutions were beginning to realize that they had some trouble in a shrinking market. Freddie and Fannie hadn’t made any subprime loans until this point, but they were forced into it to remain competitive, and since they were the only game in town, they gained market share.
As I’ve heard it, standard default ratios on loans was about 3%. With subprime loans, it was up more about 12-15%. The non-regulated banks weren’t even paying attention because they were blind to the loans they were trading, and riding a wave of perceived increasing profits, but when materialized, the money just wasn’t there.
Now there are people that recognized this was about to happen. Barack Obama years ago began saying that we needed more regulation. John McCain continued to push for more deregulation because in his view the economy was continuing to boom. He just wasn’t perceptive enough to see the warning signs, or had too many friends in the big finance lobbyist clubhouse. When we talk about this whole crisis, we should be asking who had the foresight? Not John McCain, not the Republicans. It was the Democrats, and Barack Obama.
Now they are getting attacked, with Republican followers saying “We were fine until the Democrats took control. They let this happen. They could have put in the regulations that would have stopped this.” If you’re standing on the side of the road watching a bus come down the hill with no breaks, and somebody pushes you in front of it, it’s not your fault that the bus hits you, and nobody but a Republican would blame you for not stopping it.
This was a time bomb that was in place when the Democrats took control of Congress two years ago. Some voters saw it coming and voted in Democrats who could change it, hopefully before it was too late. And then the Republicans whined about how the Democrats were ruining all of the fun.
So now we sit here in the spin zone, and the Republicans are unwilling to stand up and take responsibility for their own deregulatory actions. They’ll point the finger any way but in, and think that by sending emails talking about a coincidence of timing, as if that explains away the whole debacle and wins them brownie points in the political arena.
Let’s look at some of the spin. Most recently, they blamed the failure of the bailout bill on Nancy Pelosi’s speech, saying it was partisan, of course until they realized that they looked like fools saying they failed to bail out America because one person said something they didn’t like. Then they said that the Democrats didn’t bring enough votes, but the math says that almost twice the Republicans didn’t vote for it as compared to Democratic no votes.
Then there is the talk about McCain suspending his campaign to deal with this. Well, first, finance bills must start in the House. McCain couldn’t even vote. Second, many people from his own party recognized it as showboating and actually asked President Bush to tell him to go away, he was getting in the way. Folks out in voter dreamland interpreted it one way or another, but it hasn’t garnered many votes of confidence even out here in the great disconnect.
But let’s look at a couple other points of the email. First, the word for the market at a record high is a bubble. This one has broken. It was a bubble supported by a corrupt and greedy financial system.
Let’s turn to the price of gas. The petroleum commodity market is also a market that has seen deregulation under the Republicans. We have an oil man from Texas in the White House, and have had a Republican controlled congress for eight years (two were under Clinton, don’t forget). You’d think that with an oil man at the head of the nation, we’d have better oil prices, but I guess the prices are just better for the big oil companies, and we all get to suffer for their record profits. Let’s also mention that Bush mismanaged his own oil company into the ground. The market came to a bubble state last year, with barrels of oil peaking over $140. The rise in prices is due to two factors.
First, deregulation. If you want the best story about how the oil speculation market pushed gas up, it jumped nearly ten dollars on the day that gas first broke $100 a barrel. The reason the trader gave for paying that much, “I wanted to be able to say I was the first.” On that day, Peter Beutel of Cameron Hanover which tracks energy prices said, “It was kind of an aberration, but once a number has been printed, the resistance to it ceases to exist. There is nothing magical about $100 a barrel, nothing that will stop us from going higher.”
Oil speculation is also under the eyes of the Democrats now. There will be regulations put into a bill once the speculation market is investigated.
The other factor is the value of the U.S. Dollar. Oil is sold in U.S. dollars around the world. Not Euros, not in any other currency. The Fed has been seeing the coming economic worries for quite some time, and began lowering the interest rate. In doing so, they destabilized our currency, causing its value to fall. Because our interest rates were lowered, a loan based on Euros was worth more than a loan based on Dollars, and since the dollar got weaker, every commodity that is traded in dollars became more expensive. The decline in value of the dollar began just before the Democrats officially took control of Congress.
I think that having a major oil producer crippled by a war and occupation probably can’t help. We are occupying an Islamic country, and since we get most of our oil from other Muslim countries, we can’t rely on our good standing in that part of the world to get us any price breaks.
The email that I’m responding to was intended as a gotcha, like it was a brilliant idea that ended the debate and pinned the blame like a donkey’s tail at a birthday party. Don’t fall for the gotcha. It isn’t that easy. It’s just a propaganda tool to fool the people who don’t think for themselves.
As a further criticism of the email, just to talk over a couple stylistic points:
1)it’s “Americans”, not “American’s”. Improper grammar is always a giveaway of a substandard intelligence. -5 points for poor grammar. -5 more for lack of coherent sentence structure.
2)”keep your blinders on”. This email is a blinder. We have no sources quoted, no facts supporting the claims, just blind claims. If you believe it, you’ve just put on your blinders because you haven’t studied the veracity of it, you’ve just passed it on. It looks at coincidence as evidence, and the reality is much different.
3) The first six years under Bush, the economy was not fine. 9/11 was an attack on the financial industry of America, and in this respect it succeeded for only a short period. We did this one to ourselves, and Bush didn’t have the foresight to prevent it from happening, and neither did the Republican congress. There was a slow decline happening, and we fooled ourselves into thinking a high Dow Jones was prosperity. Real America has been hurting for quite some time under the Bush Administration, and the high tower has just come tumbling down.
4) “Col. Sanders.” This is your closing argument? Usually an argument will introduce discussion. This is designed to cut off discussion and further isolate the reader from any real exchange of thought. Again, this email is a blinder. The ignorance that it spreads makes most people who disagree with it want to just roll their eyes and go away rather than argue with a crazy coot.
This email is something that will keep you in the dark. I hope I have provided a light switch.
