The Sources of the Meltdown

Simplex, Complex, Multiplex

Few things are simplex, most are complex – and when it comes to the current financial meltdown, the failures go beyond complex to multiplex. No depression coming, but a serious recession – here’s a lecture that enumerates the multiple sources of the multiplex stall we are in.

H/T LittleOldLady at Little Green Footballs

* My wife has a quibble with the statement on underwriting standards – she says in the bigger institutions the underwriting standards were there, but were too often over-ridden by Regional Managers to hit volumes. If regulators don’t pay attention to who can over ride an Underwriter’s “NO way in Hell!” as well as the securities risk managers, then we will just be back here in a few decades.

Thanks for the Warning Joe

In this clip you see what Joe Biden actually said in that meeting with donors where he warned about a Barack Obama presidency. Obama explained it as a “rhetorical flourish”, and the media’s not playing it so this is a must watch clip:

Do you really want a president that will invite such testing? Will your children be more secure, or less? Joe said he could name five possibilities, will the press ask him what he meant or which five? Don’t hold your breath.

Senator Obama is Part of the Problem

Here’s a devastating video from the group “Let Freedom Ring”:

John McCain Suggests Some Measures to Ensure Calm

John McCain suggested some measures this morning that the executive branch could take on their own to calm markets:

McCain: I wasn’t going to Phone it In

George Stephanopoulos interviews John McCain on the bailout plan:

The 2004 Hearings on Fannie and Freddy

In these hearings you see congressional Republicans calling for better oversight and regulation of the two GSE’s, and you see Democrats beating back any regulation.

Mum

McCain has spoken about the financial crisis at length, in a couple of places I do disagree with him. Much of the fault here does lie with Congress, and John seems unwilling to assign their portion of blame. Perhaps he’s saving that for the debates however, you’ve seen plenty of material here. One thing I do know: Capitalism works best with less regulations. This whole mess is because of a crazy quilt of financial regs including CRA that work at counter purposes and which result in two socialist government backed housing lending agencies both ripe for corruption and abuse.

Friends of Fannie and Freddy

The friends of Fannie Mae and Freddy Mac in government turn out to be the usual cast of culprits. We have Obama, Gorelick, Johnson, Raines, Dodd, Frank, and the Congressional Black Caucus who all fought reforms even though this speech in 2005 clearly indicated they were needed. McCain was campaigning for reforms (see enough is enough) but they were beat down.

The real impact of all of this will be felt by the taxpayers, the thrifty, those who have thought of their future and saved. This will impact your pension, your 401K, your life savings. Meantime Jamie Gorelick, Democrat operative, is waltzing away with 26 Million. Special shame should also be attached to the Republicans who assisted the lobbyists and Democrats who fought these needed reforms, and we will be hunting those names down in the future as well.

Meantime this is definitely not leadership, this is definitely not change, it’s despair:

Lawmakers say they are unlikely to take action before, or to delay, their planned adjournments — Sept. 26 for the House of Representatives, a week later for the Senate. While they haven’t ruled out returning after the Nov. 4 elections, they would rather wait until next year unless Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke, who are leading efforts to contain the crisis, call for help.

One reason, Senate Majority Leader Harry Reid said yesterday, is that “no one knows what to do” at the moment.

At a campaign rally in Elko Obama had this to say:

“I will crack down on predatory lenders — who all too often target the African-American community, target the Hispanic community — with tough new penalties that treat mortgage fraud like the crime that it is,” he said.

Obama and his compadres in the Democrat caucus have been “cracking down on predatory lending” since 2000 1990’s, and that’s exactly what has led to this mess. They systematically took away the profit from high risk loans, making it a losing, giveaway business backed by your tax dollars. They cut options to have high risk loans credit insured and rolled into loan cost, which led directly to increased foreclosures.

More on this from IBD Editorials:

A visibly annoyed House Speaker Nancy Pelosi rejected suggestions that Democrats share blame for the meltdown. “No,” she snapped at reporters who dared ask.

Stick to our narrative, she scolded: The bursting of the housing bubble was another story of market failure and deregulation.

“The American people are not protected from the risk-taking and the greed of these financial institutions,” she said, while calling for investigations of the industry.

Only, the risk-taking was her idea — and the idea of all the other Democrats, along with a handful of Republicans, who over the past 30 years have demonized lenders as racist and passed regulation after regulation pressuring them to make more loans to unqualified borrowers in the name of diversity.

They were the ones who screamed — “REDLINING!” — and sent banks scurrying for cover in low-income neighborhoods, where they have been forced to lower long-held industry standards for judging creditworthiness to make the subprime loans.

If they don’t comply, they are threatened with stiff penalties under the Community Reinvestment Act, or CRA, a law that forces banks to make home loans to people with poor credit risks.

Here’s an example of one of these shakedown programs that started way back, under guise of fighting predatory lending Chuck Schumer and Jesse Jackson fight to have Freddy and Fannie lower standards:

Also from IBD :

The [CRA] revisions also allowed for the first time the securitization of CRA-regulated loans containing subprime mortgages. The changes came as radical “housing rights” groups led by ACORN lobbied for such loans. ACORN at the time was represented by a young public-interest lawyer in Chicago by the name of Barack Obama.

Previously:
Enough is Enough
Obama 2nd Biggest Recipient of Fannie Mae and Freddie Mac Money in Last Ten Years

More at Big Lizards

Obama Number Two on the Fannie Mae Contributions List

Will team Obama be chanting “We’re number 2! We’re Number 2! ?” somehow I doubt it.

** Video removed due to slow loading from Fox news
Previously:
Enough is Enough
Obama 2nd Biggest Recipient of Fannie Mae and Freddie Mac Money in Last Ten Years

Our Bright Future

It’s easy to accept convential wisdom that we are someway doomed to energy poverty, and in the current environment of over-regulated energy and the impacts to food production I can see why some folks go there. I refuse to because history demonstrates that humanity almost always figures a way to muddle through — that “almost” deserves some consideration, but I won’t dwell on it.

Jerry Pournelle is waxing a bit apocalyptic which is fair given current energy situation, political environment, and the wave of populist pseudo-science sweeping the nation. However as the survivalists of the ’80’s discovered scarcity only gets to pinch middle america so long before there’s a response. Jerry has re-opened discussion on burning food here, and here, both are worth reading.

Jerry’s making a lot of sense in his stance – e.g. if we can’t develop our own sources of energy due to political ennui, then ethanol in all of its ugliness is preferrable to sending our billions to tyrants. Even then Ethanol’s not enough, and we must continue to investigate Hydrogen and other means.

Worst come to worst, we do have energy solutions – if the situation gets to the point where it starts affecting Little League and soccer, then it will get taken care of. We have plenty of inelegant, ugly sources of energy if we choose to use them. Coal use could be ramped up, coal gas could be ramped up, we could drill offshore. We could drill ANWR, we can go after oil shale, we can damn more rivers and creeks – the energy is available given the will and the want.

On the other hand we could remove some prohibitive regulation to build 80-100 new generation Nuclear reactors and plug this gap quickly, cheaply, and cleanly.

Whether it’s food to fuel our bodies or fuel to move our cars, everything comes back to energy availability — and given sufficient cheap energy all things become possible. Whether it’s cleaning our environment or saving the rainforest energy abundance is the key.

The conventional concern over liquid or gaseous fuels is habitual thinking – burning hydrocarbons is how we move our vehicles now but it doesn’t have to be. We really don’t need to burn anything to get our cars to move – we could electrify the major roadways and our cars if we had sufficient energy and zero gas or liquid fuel to burn.

Before you say that’s crazy, electrifying roadways and putting whips and electric meters on cars requires a lot less labor, capital, and infrastructure than paving the roads did during the 1940’s-1980’s, prior to that most roads were unpaved. If we implemented electric roadways on a large scale backed by next generation reactors, then efficient ways to do it would be discovered because that’s just human nature. Our freight could transport on mag-lev rail, and our ships would move with the proven technology of naval nuclear reactors.

The real challenge given zero combustable gases would clearly be aerospace, not ground or sea transport.

Meanwhile there is hope for improved cheap nuclear and enough to satisfy our needs. Huffpo gets math and assumptions egregiously wrong here, but please note that McCain is the only candidate fully backing nuclear energy.

The challenge this year and next is to get congress off their duff – they need to make it less prohibitive to build nuclear energy plants, they need to allow some more drilling as a stop-gap, they need to create a transcontinental high speed rail right-of-way with a power intertie and OC128 Fiber routes in it for kicks.

Solar and wind need more maturing before they replace the proven technologies, and we are about to hit the wall where fuel scarcity starts affecting middle class lifestyle in America in a big way.

Meanwhile the strange bedfellows alliance of global warming activists, greenpeace anti-nuclear groups, ethanol lobbies, and coal lobbies continue to really drive energy policy in this country. You’ve seen the results of that dark cabal of collective political interests over the past 30 years, and you see it echoed in Obama’s speeches on how we have to give up some things. Obama is the candidate of of entropy, ennui, and a low-energy future. It’s time to drive these energy stasists out of politics, it’s time to take your children’s future back from them.