It's interesting that people focus solely on the way the loans were securitized and not why the loans were made in the first place. If the loans were never made to people who could not afford them, this would not have happened. Why were the loans made? Because in the 90s the Clinton Administration raised the amount of sub-prime loans that Fanny and Freddy could buy to 50% of their capitalization--a trillion dollars. Banks knowing that Fanny and Freddie would buy these risky loans were free to make sub-prime loans with little risk. This was exactly the problem McCain tried to solve in 2005 which was defeated by a party line vote of democrats. So why did Clinton decide to make this change? It was mostly intense lobbying from community organization groups like ACORN (a group Obama worked closely with for many years and whose president he was very close to) who sued banks and called a racist anyone who wouldn't make sub-prime loans.
I will grant that ACORN and Obama had good motives in trying to make housing affordable to low income familes, but as

These gentlemen opine that the risk was not properly evaluated. Fair enough: that's become obvious to everyone. Eric asks for more "humility" among economists. That is rather silly; it doesn't solve anything. What's needed is a way to "make a market" in "the-chance-of-an-economic-meltdown". There are plenty of people who have been warning that real estate is overpriced, that savings rates are too low, that consumers are overextended on debt. How can these people trade on their insight? Every day millions of shares of stock are bought. And an identical number are sold. If you don't like a stock, it's possible to short it. Some of those trades are wise, and some are foolish. Wise trades are rewarded. The collective action keeps prices fairly stable and meaningful. The financial instruments were constructed in such a way that everyone was betting on rising real estate. There doesn't seem to be a way to bet on the other side.

This issue has been discussed at length in recent threads. In brief: there's a lot of fantasy mixed in with anecdotal stories about lending to "unqualified minorities" and also about customer in higher income brackets speculating with the expected "eternal" increase in real estate value and borrowing above their heads. Again, a lot of anecdotes and all kinds of agendas. But the bottom line and real issue to be addressed is that the banking industry and mortgage brokers engaged in all kinds of deceptive practices to obtain customers. The deceptive practices were in part due to extremely lax regulation and to plain fraudulent practices and unethical tactics. The burden of responsibility lies in the lending institutions and governmental lack of regulations. It's similar to the case of the "extremely" small print. The real deal is hidden from the average person's view. Everything else that followed in terms of transfer/ selling the loans, only made the problem more complicated. And more difficult to track by adding layers over layers of speculation.

Quoting gwlaw99: I will grant that ACORN and Obama had good motives in trying to make housing affordable to low income familes, but as we can obviously see now, that extremely poor judgement led to financial disaster.

Ha ha ha! Choice rhetoric there, falsely intimating that you sympathize with these do-gooder intentions as a means of implying that Obama--seriously?!? Obama?!?--shares blame for the financial meltdown. Fortunately, I am here to head your bullshit off at the pass. The influence of Fannie and Freddie simply isn't big enough to account for the scale of our current troubles. The same goes for the Community Reinvestment Act (c'm'on: you want to say it). Another way to think about it is that there aren't enough brown-skinned (but good-hearted and well-intentioned, I know you'd agree!) people holding bad mortgages to have caused the crisis. Bummer, dude! Ah well. There's no help for your kind, but here's a link to an argument and several more links that thoroughly debunk the "blame government coddling of minorities" routine.

Fortunately, I am here to head your bullshit off at the pass. The influence of Fannie and Freddie simply isn't big enough to account for the scale of our current troubles. The same goes for the Community Reinvestment Act (c'm'on: you want to say it). Another way to think about it is that there aren't enough brown-skinned (but good-hearted and well-intentioned, I know you'd agree!) people holding bad mortgages to have caused the crisis. Bummer, dude!

A common fallacy from those on the left. Simply because Fannie Mae is not the sole problem in this crisis, and simply because the CRA expansion under Clinton is not the sole cause, doesn't mean that they aren't contributory. Also, there's isn't really a need to insert the charge of racism into the mix. Brown skinned people are not the only ones who bought houses that they couldn't afford.One of the issues is that the housing market was a bubble with overvalued prices. Therefore, those taking out loans who couldn't pay for them may not have all been poor, as the loans in question were inflated as compared to the houses actual work. That doesn't mean though that

Very interesting discussion. I was especially intrigued by Eric's argument for progressive taxation as a psychological and macroeconomic regulatory mechanism.

Quoting Ray: Ha ha ha! ... a means of implying that Obama--seriously?!? Obama?!?--shares blame for the financial meltdown.

Indeed. I wish the Right would get their talking points straight. One moment, it's "Obama is inexperienced, naive, completely without any executive track record -- pffft, community organizer" and the next it's "Obama is the mastermind who engineered the global economic collapse."

Power is not the same thing as experience. Under your logic, George Bush, as president of the United States, is the most experienced man in the world. Obama made stupid mistakes funding ACORN when he was at the Chicago's Woods Fund. If anything the way Obama wielded power, by giving money to a group that had a major part in ruing the economy, shows he lacks the experience to make sound economic judgments. While McCain, recognizing that changes made due to ACORN's lobbying could lead to disaster, tried to reform Fanny and Freddie in 2005. His bill was defeated by a party line vote of Democrats (including Obama) who would rather pander to their constituents by making loans available to people who shouldn't get them, than make sound economic judgments.

Quoting gwlaw99: Power is not the same thing as experience. Under your logic, George Bush, as president of the United States, is the most experienced man in the world. Obama made stupid mistakes funding ACORN when he was at the Chicago's Woods Fund. If anything the way Obama wielded power, by giving money to a group that had a major part in ruing the economy, shows he lacks the experience to make sound economic judgments.

While McCain, recognizing that changes made due to ACORN's lobbying could lead to disaster, tried to reform Fanny and Freddie in 2005. His bill was defeated by a party line vote of Democrats (including Obama) who would rather pander to their constituents by making loans available to people who shouldn't get them, than make sound economic judgments.

Are you really saying that ACORN is responsible for the current mess? I'd love to see someone try to demonstrate the validity of that assertion.

Quoting AemJeff: Are you really saying that ACORN is responsible for the current mess? I'd love to see someone try to demonstrate the validity of that assertion.

Not the entire mess, but a large portion of it. http://article.nationalreview.com/?q...MxMmNhZWQ1MTA= By the way, ACORN does other great things like promote voter fraud. http://news.google.com/?ncl=1255205671&hl=en&topic=n

Quoting gwlaw99: Under your logic ...

Please. It was not "my logic." I was simply characterizing the noise I hear from the Obama-hating crowd.

... [Obama[ shows he lacks the experience to make sound economic judgments.

Yeah. He's making a real mess of his quarter-billion dollar campaign, isn't he?

How does spending money on political ads, stump speeches, etc.. have anything to do with sound judgment on the economy. You are grasping at straws now.

Quoting gwlaw99: Not the entire mess, but a large portion of it.

http://article.nationalreview.com/?q...MxMmNhZWQ1MTA=

Funny how most people never heard of ACORN two weeks ago but now are absolutely certain that it's the "large portion" of the reason for the collapse of the economy, because that's what they were told to believe at The Corner.

Why don't you read the article and try to refute the arguments in it instead of blustering.

Quoting gwlaw99: How does spending money on political ads, stump speeches, etc.. have anything to do with sound judgment on the economy. You are grasping at straws now.

You are trying to use distribution and management of funds by Obama at ACORN as "proof" that he has bad economic judgment. Why won't you accept the same tasks as displayed in running a campaign as countering your assertion? There are a million choices to be made in how and where to spend and budget the money. And really. Grasping at straws? You and your fellow travelers who can't stop squawking ACORN! ACORN! ACORN! have no leg to stand on.

I never said it was proof of BAD economic judgement. You said it was proof of GOOD economic judgement as a rebuttal to my ACORN argument. I argued that it is not proof of anything. "You and your fellow travelers who can't stop squawking ACORN! ACORN! ACORN! have no leg to stand on." Again, read the article I linked to and refute the arguments. Otherwise it is just bluster.

Quoting gwlaw99: Not the entire mess, but a large portion of it.

http://article.nationalreview.com/?q...MxMmNhZWQ1MTA=

By the way, ACORN does other great things like promote voter fraud.

http://news.google.com/?ncl=1255205671&hl=en&topic=n

Kurtz's case is political, most of his economic assertions are partisan. Example:

ACORN’s efforts to undermine credit standards in the late 1980s taught it a valuable lesson.

Undermine? I doubt they'd characterize it that way. How could he possibly understand what "lessons" they were learing, or even be so positive about what they consider to be strategically important? Random Cornerites, generally, are a bad source if you're looking to support a factual case.

Quoting AemJeff: Kurtz's case is political, most of his economic assertions are partisan.

Example:

Undermine? I doubt they'd characterize it that way. How could he possibly understand what "lessons" they were learing, or even be so positive about what they consider to be strategically important? Random Cornerites, generally, are a bad source if you're looking to support a factual case.

Again, you make absolutely no reutations to the points in the article. You just make ad hominem attacks on NRO. Is that really the best you can do?

Quoting gwlaw99: I never said it was proof of BAD economic judgement.

Give me a break.

Quoting gwlaw99: If anything the way Obama wielded power, by giving money to a group that had a major part in ruing the economy, shows he lacks the experience to make sound economic judgments.

Quoting gwlaw99: You just make ad hominem attacks on NRO. Is that really the best you can do?

Is that really the best you can do? To say "ad hominem" when you offer up a source that others don't consider reputable? These two words are becoming the most hackneyed phrase online.

Quoting gwlaw99: Again, you make absolutely no reutations to the points in the article. You just make ad hominem attacks on NRO. Is that really the best you can do?

Really? No refutation? I said that the partisan, political argument raised in the article you cited doesn't rise to the level of believability. That's not ad hominem.

Sorry, but whether you agree with their politics or not National Review is respected publication. If you cited the Nation or Mother Jones, I would not dismiss your argument simply because it was written in a far left publication. If you don't want to say anything substantive that's your prerogative. Given your normal thoughtful contributions to this board, I'm disappointed.

Quoting gwlaw99: Sorry, but whether you agree with their politics or not National Review is respected publication. If you cited the Nation or Mother Jones, I would not dismiss your argument simply because it was written in a far left publication.

If you don't want to say anything substantive that's your prerogative. Given your normal thoughtful contributions to this board, I'm disappointed.

Are you advancing an argument in your own words? No. Are you "saying anyting substantive"? No. You're merely linking to an argument made by someone at NRO, and then demanding that other people refute it. Dumb. Here's the bottom line for me: The economics of this crises are exceedling complex and there's no one in this forum (AFAIK) who is qualified to discuss it.

Quoting AemJeff: Really? No refutation? I said that the partisan, political argument raised in the article you cited doesn't rise to the level of believability. That's not ad hominem.

Refute the fact that Acorn sued banks to make them lower their credit standards. Refute the facts that: "Democratic Senator Allan Dixon convened a Senate subcommittee hearing at which an ACORN representative gave key testimony" "Dixon responded by pressing Fannie and Freddie to do more to relax those standards — and by promising to introduce legislation that would ensure it." "By July of 1991, ACORN’s legislative campaign began to bear fruit. As the Chicago Tribune put it, “Housing activists have been pushing hard to improve housing for the poor by extracting greater financial support from the country’s two highly profitable secondary mortgage-market companies. Thanks to the help of sympathetic lawmakers, it appeared...that they may succeed.” The Tribune went on to explain that House Democrat Henry Gonzales had announced that Fannie and Freddie had agreed to commit $3.5 billion to low-income housing in 1992 and 1993, in addition to a just-announced $10 billion “affordable housing loan program” by Fannie Mae." "Clinton Housing Secretary Henry Cisnersos pledged to meet

Quoting gwlaw99: Sorry, but whether you agree with their politics or not National Review is respected publication. If you cited the Nation or Mother Jones, I would not dismiss your argument simply because it was written in a far left publication.

If you don't want to say anything substantive that's your prerogative. Given your normal thoughtful contributions to this board, I'm disappointed.

I didn't say that my agreement (or lack thereof) with his politics had anything to do with my argument. What I said was that he was raising a political, not a factual case. He uses characterizations of his target's actions and beliefs that fly nicely as rhetoric, but are, at best, unsupported by his factual claims.

Quoting gwlaw99: Sorry, but whether you agree with their politics or not National Review is respected publication.

No it isn't. How's that for matching unsupported assertions?

If you don't want to say anything substantive that's your prerogative. Given your normal thoughtful contributions to this board, I'm disappointed.

Oh, stop feeling so sorry for yourself. Talk about something besides ACORN wingnuttery and you'll get some respect in return. You all have been shoveling that shit for half a year now. Give it a rest. There isn't anything there. This is as bad as the last time you showed up to insist that Obama wants to teach kindergartners to have sex.

Quoting TwinSwords: Are you advancing an argument in your own words? No. Are you "saying anyting substantive"? No. You're merely linking to an argument made by someone at NRO, and then demanding that other people refute it.

Dumb.

Here's the bottom line for me: The economics of this crises are exceedling complex and there's no one in this forum (AFAIK) who is qualified to discuss it.

Read the thread before posting. By amjeff "Are you really saying that ACORN is responsible for the current mess? I'd love to see someone try to demonstrate the validity of that assertion." amjeff asked me to post evidence by someone. I did. I didn't ask anyone to refute it factually until people tried to refute on their own with ad hominem attacks. I guess I should not have expected any actual argument despite being asked to find someone making the case against ACORN myself.

"You're all invited back again to this locality
To have a heapin' helpin' of some [psychology]" Is anyone here old enough to know the Beverly Hillbillies theme song? I agree with Eric that adding psychological principles to economic theories will make those theories far more useful and more predictive of what is going to happen and save us all from the kinds of financial and other crises we have been experiencing recently. The problem with this idea is that adding psychological principles to economic and other theories is going to render those theories far less palatable to many people, because these principles tend not to be very flattering ones. Historically, economic theories have been based on the assumption that people behave rationally – a flattering concept. Psychologically based economic theories will incorporate the growing base of evidence that people often do not behave rationally (just one item in a large repertoire of not so impressive behaviors). Most people, when confronted with these and other facts about human psychology, get very irritated and feel insulted (or assume they apply to everyone but themselves). People are not receptive

Quoting gwlaw99: Refute the fact that Acorn sued banks to make them lower their credit standards.

Refute the facts that:

"Democratic Senator Allan Dixon convened a Senate subcommittee hearing at which an ACORN representative gave key testimony"

"Dixon responded by pressing Fannie and Freddie to do more to relax those standards — and by promising to introduce legislation that would ensure it."

"By July of 1991, ACORN’s legislative campaign began to bear fruit. As the Chicago Tribune put it, “Housing activists have been pushing hard to improve housing for the poor by extracting greater financial support from the country’s two highly profitable secondary mortgage-market companies. Thanks to the help of sympathetic lawmakers, it appeared...that they may succeed.” The Tribune went on to explain that House Democrat Henry Gonzales had announced that Fannie and Freddie had agreed to commit $3.5 billion to low-income housing in 1992 and 1993, in addition to a just-announced $10 billion “affordable housing loan program” by Fannie Mae."

"Clinton Housing Secretary Henry Cisnersos pledged to meet monthly with ACORN representatives."

"In early 1994, the Clinton administration floated plans for committing $1 trillion in loans to low- and moderate-income home-buyers, which would amount to

Quoting AemJeff: ACORN's raison d'être was to make housing credit available to a wider group of applicants. The list you provided here isn't in dispute.

It's the establishing of a significant causal relationship between those relaxed standards, to the extent that ACORN was successful, and the current situation that needs to be proven.

Even granting that (I don't), I'd be slow to try and characterize ACORN as evil, or impugn the motives or the judgment of those who have supported it over the years.

You are right. I don't have data charts to prove that, but is seems a pretty obvious conclusion that if you make something much easier to obtain it will increase the number of people obtaining it. I think it is also pretty well accepted that the number of sub-prime loans has skyrocketed since the changes to Fanny And Freddie in the mid 90's "I'd be slow to try and characterize ACORN as evil, or impugn the motives or the judgment of those who have supported it over the years." I'd agree that their motives in making mortgages more affordable was not evil and their intentions were probably good. However, it

Quoting Me&theboys: But I'm pessimistic about this ever happening, because I find that most people don’t want to know the truth about themselves, and they don’t elect politicians who want them to understand the truth about themselves.

You present an interesting view of the topic. But, perhaps it's time to start operating in reality. I think that it can be extremely helpful in protecting the most vulnerable. Assuming that everyone is wise and rational in their decision making may lead to disasters, like our financial crisis. Adding the "less flattering side" of our humanity would allow to anticipate and prevent collective mistakes of this magnitude, at the least.

Quoting gwlaw99: However, it was clearly a horrible economic mistake to do so.

It's not so clear to me, of course - but at least now we agree on what we disagree about!

I don't want to put words in your mouth, but does that mean you think the ease in which people can get subprime loans was sound economic policy? Do you think the amount of subprime loans made available by relaxing credit standards had anything to do with the economic meltdown?

Quoting gwlaw99: I don't want to put words in your mouth, but does that mean you think the ease in which people can get subprime loans was sound economic policy? Do you think the amount of subprime loans made available by relaxing credit standards had anything to do with the economic meltdown?

I'm agnostic. I think what we're really talking about is matters of degree, with no clear boundary between right and wrong. My personal view is that the commoditisation (neologism alert!) of bundled mortgages as insured assets lead to a lack of moral hazard at the retail level. I blame that for allowing standards to be bent or broken, more than I blame what seems to have been an orderly modification of those standards for creating the current mess. But if I'm honest, I have to admit that that's basically an a priori judgment, based on my (liberal) political outlook. I don't know how we go about making a reliable empirical case - I'm sure there are important variables that we can't even name, let alone quantize.

Quoting AemJeff: I'm agnostic. I think what we're really talking about is matters of degree, with no clear boundary between right and wrong.

My personal view is that the commoditisation (neologism alert!) of bundled mortgages as insured assets lead to a lack of moral hazard at the retail level. I blame that for allowing standards to be bent or broken, more than I blame what seems to have been an orderly modification of those standards for creating the current mess.

But if I'm honest, I have to admit that that's basically an a priori judgment, based on my (liberal) political outlook. I don't know how we go about making a reliable empirical case - I'm sure there are important variables that we can't even name, let alone quantize.

I completely agree with you that the making loans into securities is a major cause of the problem. If you read my first post on the thread, I was wondering why the diavlog participants did not also talk about the relaxing of lending standards. After all you can't "securitize" bad loans if you can't make those loans in the first place. You can still "securitize" good loans, but they won't be made

Great. I wonder what the BHs would think of Daniel Gross' book: Pop! Why Bubbles are Great for the Economy by Daniel Gross, 2007

Quoting gwlaw99: I completely agree with you that the making loans into securities is a major cause of the problem. If you read my first post on the thread, I was wondering why the diavlog participants did not also talk about the relaxing of lending standards. After all you can't "securitize" bad loans if you can't make those loans in the first place. You can still "securitize" good loans, but they won't be made valueless by bad loans they are backed by (which should never have been made in the first place) defaulting.

The controversy seems to be whether to assign more blame on the demand side or the supply side. Ultimately I think you have to blame the side with more power, and in my view that's not the people buying the mortgages.

Quoting AemJeff: The controversy seems to be whether to assign more blame on the demand side or the supply side. Ultimately I think you have to blame the side with more power, and in my view that's not the people buying the mortgages.

It's very hard for people to understand that. Particularly when the alternative hypothesis serves other kinds of agendas.

Quoting Ocean: It's very hard for people to understand that. Particularly when the alternative hypothesis serves other kinds of agendas.

I'll stay away from the "agendas" part of this, but this is one of my pet ideas explaining the difference between conservatives and liberals - i.e. our attitudes toward power. Certainly my primary political motivations stem from the idea that the best approach is almost always to move in a balancing direction, rather than to let power accumulate by default. Strict Libertarians will argue that people like me are too tolerant of government power, but given the choice between public and private power in a constitutional state, I think public is often preferable. This is in danger of being completely off-topic, but you triggered a chain of thought. Closer to the point is that I believe that logically, it's hard to come to a different conclusion. Greater moral responsibility is a direct consequence of greater power.

Quoting AemJeff: I'll stay away from the "agendas" part of this, but this is one of my pet ideas explaining the difference between conservatives and liberals - i.e. our attitudes toward power. Certainly my primary political motivations stem from the idea that the best approach is almost always to move in a balancing direction, rather than to let power accumulate by default. Strict Libertarians will argue that people like me are too tolerant of government power, but given the choice between public and private power in a constitutional state, I think public is often preferable.

This is in danger of being completely off-topic, but you triggered a chain of thought. Closer to the point is that I believe that logically, it's hard to come to a different conclusion. Greater moral responsibility is a direct consequence of greater power.

Isn't it one of the principles of law to protect the most vulnerable? Greater power always entails greater responsibility in a rational society. And don't leave the agendas aside. It's part of the process to deflect blame away from the bearers of power, and then, additionally, place it on some conveniently hated group or a group that

You guys are both right.

Quoting Ocean: But the bottom line and real issue to be addressed is that the banking industry and mortgage brokers engaged in all kinds of deceptive practices to obtain customers. The deceptive practices were in part due to extremely lax regulation and to plain fraudulent practices and unethical tactics. The burden of responsibility lies in the lending institutions and governmental lack of regulations. It's similar to the case of the "extremely" small print. The real deal is hidden from the average person's view.
QUOTE]

There clearly was some fraudulent mortgage brokering going on. Thankfully there are fraud laws in all states that can be invoked to attempt to rectify these frauds. But I don't think true fraud was the biggest problem. Bigger was the speculative nature of too many mortgages. I know many folks have some ideas of who a speculator is and isn't, but I'd suggest simply that a speculator was anyone who engaged in a transaction where the presumed asset appreciation was critical to making it work. The guy with 7 condos in Naples, FL who wanted to flip 6 and payoff the last and put a boat in

Again, there are many cases of individual borrowers speculating. And there's probably many more borrowers that had very little understanding about what they were getting themselves into. Some people may have thought of this as a once in a time opportunity to buy a house and relied on increased income in the near future, or underestimated other expenses typical of home ownership, or they could have been people that lost jobs. There are many possibilities. But there is an inherent recognition that the borrower may not be the best assessor of his/her own borrowing power. That's why in traditional mortgage transactions there has to be a loan approval process that takes into account multiple factors. And that's the reason why this industry has to be regulated. When you put together deregulation, unethical deceiving brokerage practices and eager to buy borrowers in an overinflated real estate market, there's a recipe for disaster. You can't really identify one by one the speculators from the poorly informed borrowers. The brokers got rid of the loans as soon as they were established. Loans were passed on and speculated on

Quoting AemJeff: ....this is one of my pet ideas explaining the difference between conservatives and liberals - i.e. our attitudes toward power. Certainly my primary political motivations stem from the idea that the best approach is almost always to move in a balancing direction, rather than to let power accumulate by default. Strict Libertarians will argue that people like me are too tolerant of government power, but given the choice between public and private power in a constitutional state, I think public is often preferable.

I'd be interested to hear more about your ideas. Do they go beyond the points made above? My own opinion is that the primary difference between conservatives and liberals is their view of human nature (constrained versus unconstrained). I wonder if the differing attitudes about power ultimately stem from a more fundamental difference in views of how people end up USING power.

Quoting AemJeff: ....Closer to the point is that I believe that logically, it's hard to come to a different conclusion. Greater moral responsibility is a direct consequence of greater power.

This is a good example of differing views about the USE of power. Rather than the above, I would state

Quoting AemJeff: The controversy seems to be whether to assign more blame on the demand side or the supply side. Ultimately I think you have to blame the side with more power, and in my view that's not the people buying the mortgages.

That is the wrong dichotomy. It's not the people buying the mortages (although some were speculators) , but the lobyists like ACORN and it's supporters to make subprime mortages so easy to get the first place.

Quoting Me&theboys: I'd be interested to hear more about your ideas. Do they go beyond the points made above? My own opinion is that the primary difference between conservatives and liberals is their view of human nature (constrained versus unconstrained). I wonder if the differing attitudes about power ultimately stem from a more fundamental difference in views of how people end up USING power.

When I try to decode my own political instincts, that dichotomy is what seems to be the dominant theme. But that's really all I was expressing, sort of an exegesis of my own motivations and views, rather than some comprehensive psychology of political beliefs. You could, with about equal validity, I think, talk about e.g., relationships with authority or personal insecurity versus confidence, or any number of other metrics. I'm not sure that any of these views are completely distinct from one other. I'm am sure that the terms don't necessarily mean the same thing to me as they do to you, or someone else. I don't have a clue how to begin to analyze this stuff. But, for me, as a an organizing principle, the approach to the accumulation of power by various people, works pretty

Quoting gwlaw99: That is the wrong dichotomy. It's not the people buying the mortages (although some were speculators) , but the lobyists like ACORN and it's supporters to make subprime mortages so easy to get the first place.

If we could establish the causative relationship betweeen the lobbyists and the mess, I'd grant the argument (though not the conclusion.) ACORN could be characterized as an agency of the buyers, and they did bring some power to bear on the situation. But I think an analytical step is still necessary before that argument could be mounted seriously.

Quoting Ocean: Isn't it one of the principles of law to protect the most vulnerable?

Greater power always entails greater responsibility in a rational society.

And don't leave the agendas aside. It's part of the process to deflect blame away from the bearers of power, and then, additionally, place it on some conveniently hated group or a group that has no voice or on a political adversary. You kill two birds with one stone.

Talking about agendas makes me uncomfortable in this sort of discussion because I'm painting with a broad brush. There no doubt that among some Republicans side that blaming ACORN for the current mess, e.g., is a fairly transparent code. But not everybody thinks that way, and just because it can be misused doesn't mean an argument is invalid. In this case I think the important issue is that the causative relationship, and if that exists, its degree are unknown. Before that argument should be even considered somebody needs to crunch a lot of numbers - and that assumes that it's the sort of thing that could be demonstrated, and as I said, I'm far from convinced that even that is the case.

Quoting AemJeff: Talking about agendas makes me uncomfortable in this sort of discussion because I'm painting with a broad brush. There no doubt that among some Republicans side that blaming ACORN for the current mess, e.g., is a fairly transparent code. But not everybody thinks that way, and just because it can be misused doesn't mean an argument is invalid. In this case I think the important issue is that the causative relationship, and if that exists, its degree are unknown. Before that argument should be even considered somebody needs to crunch a lot of numbers - and that assumes that it's the sort of thing that could be demonstrated, and as I said, I'm far from convinced that even that is the case.

I think that there is general impression that it is impossible to backtrack the many layers of transaction that would allow the kind of analysis you suggest. My comments have focused more on the process of assigning blame. If the causality cannot be established, it will continue to be at best speculation about what factors have contributed. I suspect that the story will have to rely on individual reports about

Quoting AemJeff: As a practical matter, whether people take their responsibilities seriously is different from whether or not they' accrued those responsibilities. But I think that the moral responsibility that one bears in any given situation is directly proportional to how much power, relatively, you've brought to the situation.

I guess I still have trouble with this idea. Why should moral responsibility vary in relation to power? Moral responsibility accrues to everyone equally, regardless of their relative power. Thinking otherwise is what leads people to rationalize their behavior - they cast themselves as the underdog and their behavior is instantly justified. I don't think anyone is off the hook for moral responsibility in all aspects of life. No-one should be given a pass on that, not the weak and not the powerful. That said, it is clear that many people, those with power and those without, do not own their moral responsibilities. We just happen to notice this failing more readily in those with power. But it is the failing that is the problem, not the holding of power itself. One's view of how universal and prevalent this failing is will influence one's views on the allocation of

Quoting Me&theboys: I guess I still have trouble with this idea. Why should moral responsibility vary in relation to power? Moral responsibility accrues to everyone equally, regardless of their relative power. Thinking otherwise is what leads people to rationalize their behavior - they cast themselves as the underdog and their behavior is instantly justified. I don't think anyone is off the hook for moral responsibility in all aspects of life. No-one should be given a pass on that, not the weak and not the powerful. That said, it is clear that many people, those with power and those without, do not own their moral responsibilities. We just happen to notice this failing more readily in those with power. But it is the failing that is the problem, not the holding of power itself. One's view of how universal and prevalent this failing is will influence one's views on the allocation of power.

I get the feeling we might not be talking about exactly the same things. Capital is a limited resource. Generally home buyers are at a disadvantage relative to lenders in that regard - the lenders are gate keepers, regulating access to capital. The game gets played, largely, by

Quoting everlong205@rcn.com: ...
Also, there's isn't really a need to insert the charge of racism into the mix. Brown skinned people are not the only ones who bought houses that they couldn't afford....

Considering how many on the right believe African Americans are intellectually inferior I think it is a fair bet that racism is already injected in. Prediction: I see an ad quote coming that looks a lot like this "Obama he is Not quite Right" (see Corker vs Ford in Tenn. race for reference)

Quoting everlong205@rcn.com: Also, why do those opposing the suggestion that Fannie Mae has some responsibility always seem to link to that same website?

Because Barry Ritholtz is well respected and even by Larry Kudlow. But here is another link: http://www.slate.com/id/2201641/

Quoting AemJeff: I get the feeling we might not be talking about exactly the same things. Capital is a limited resource. Generally home buyers are at a disadvantage relative to lenders in that regard - the lenders are gate keepers, regulating access to capital. The game gets played, largely, by their rules. That's what I mean by power. If there are downstream effects caused a group of transactions, should we blame the folks who make and enforce the rules, or the folks who have little choice but to play by those rules?

I've been following this thread. I think it's wise to recap because it seemed like indeed you were talking about different things. I agree with Jeff about responsibility being directly proportional to the degree of power. There are no absolutes here. From a strict perspective, no one would have 0% or 100% responsibility. In any interaction between two parties, when the distribution of power is not equal, the party with the most power is expected to share a larger amount of responsibility in order to avoid abuse or if you want, to guarantee some protections to the party with less power. Power and responsibility are very general concepts, so

Quoting Ocean: I've been following this thread. I think it's wise to recap because it seemed like indeed you were talking about different things.

I agree with Jeff about responsibility being directly proportional to the degree of power. There are no absolutes here. From a strict perspective, no one would have 0% or 100% responsibility. In any interaction between two parties, when the distribution of power is not equal, the party with the most power is expected to share a larger amount of responsibility in order to avoid abuse or if you want, to guarantee some protections to the party with less power. Power and responsibility are very general concepts, so it's always helpful to use a concrete example to see how that applies.

I will add that one of the main aspects of this conundrum is that the rules were not being followed. There were flagrant violations of the regulations that were in place to protect the borrowers. Because the loans were passed on and sold, it was more difficult to verify the original direct transactions.

So there were many levels of problems: rules that may not have been adequate, and further violation of

Quoting AemJeff: I get the feeling we might not be talking about exactly the same things. Capital is a limited resource. Generally home buyers are at a disadvantage relative to lenders in that regard - the lenders are gate keepers, regulating access to capital. The game gets played, largely, by their rules. That's what I mean by power. If there are downstream effects caused a group of transactions, should we blame the folks who make and enforce the rules, or the folks who have little choice but to play by those rules?

Well, actually, my comments were directed to your more general statement about your method of differentiating between conservatives and liberals, which sounded as if it applied to circumstances beyond the current financial crisis. It is difficult to respond to a blanket statement like the one above. Sometimes blame belongs with those who make the rules, sometimes it belongs with those who play the game without understanding the rules. Usually, it belongs to both. If I establish a rule that states that swimming pools cannot be deeper than 12 feet and someone drowns in a 12 foot deep swim-at-your-own risk pool because he cannot touch the bottom, am

Quoting bjkeefe: You are trying to use distribution and management of funds by Obama at ACORN as "proof" that he has bad economic judgment. Why won't you accept the same tasks as displayed in running a campaign as countering your assertion? There are a million choices to be made in how and where to spend and budget the money.

And really. Grasping at straws? You and your fellow travelers who can't stop squawking ACORN! ACORN! ACORN! have no leg to stand on.

Well it turns out that Obama's current campaign has paid ACORN $800,000 to register voters. He even tried to hide it by giving the money to a group called "Citizens Services Inc" which happens to have the same exact address as ACORN. Acorn is already being investigated for voter fraud in at least seven states in this election. Missouri
http://news.yahoo.com/s/ap/20081009/...ge/voter_fraud Connecticut
http://www.connpost.com/ci_10661361?source=most_viewed Indiana
http://www.cnn.com/2008/POLITICS/10/...ims/index.html Nevada
http://voices.washingtonpost.com/the...es_raided.html Pennsylvania
http://kdka.com/kdkainvestigators/Vo....2.836775.html Ohio
http://www.nypost.com/seven/10102008...ons_132965.htm Michigan
http://www.freep.com/apps/pbcs.dll/a...WS03/809140383 Seems ACORN has a long history of voter fraud. In all fairness he probably had no idea about ACORNS fraudulent activities. I mean he didn't know anything about Reverend Wright, or Bill Ayers or Tony Rezko so it's probably just the same coincidental bad luck. * In Ohio in 2004, four ACORN employees were indicted by a federal grand

Quoting Me&theboys:
Again, I go back to my main point, that we are seeing the consequences of ignorance about human nature. I find it a useful exercise to run a thought experiment about what would have happened had the rules been different, had they taken human nature into consideration at every level. If you are honest with the experiment, I doubt you'll like the results. They rarely accord with most political views.

Sorry to just butt in here... while your analysis is fairly aligned with what little I understand about the situation, isn't the "ignorance about human nature" you site an example of ignorance of the lessons of history, since this isn't the first disaster of this nature? Wasn't Glass-Steagall designed to limit corporate and banking structures, and thereby the effect of this kind of collapse?
Just so you know I know, the the repeal was a fairly bipartisan blunder.

Outstanding, as far as it went. I wish Eric had given some concrete examples of the intricately interlocked derivatives market creating a crisis or making the crisis worse. Empirical evidence! Having just heard the Gross-Yves Smith diavlog, I was outraged/astounded to learn that Lehman's derivatives were apparently greatly overvalued by Bernanke/Paulson, or by others upon whom they relied. Please, please, please, BHTV, I made this plea in the forum regarding that diavlog, we need some real experts on the derivatives market to come on and explain to us the facts on the ground about the interlocking relationships and why this market should/should not have been allowed to grow into an unregulated behemoth. If the discussion gets too technical for some people, tough. Since you have had physicists talking about quantum theory, surely we can have experts talking about the derivatives market and the regulatory questions it poses. But generally, this was a model of clarity and contained more than a few interesting avenues for further reading and research. Thanks once again to BHTV.

Quoting Me&theboys: Again, I go back to my main point, that we are seeing the consequences of ignorance about human nature. I find it a useful exercise to run a thought experiment about what would have happened had the rules been different, had they taken human nature into consideration at every level. If you are honest with the experiment, I doubt you'll like the results. They rarely accord with most political views.

I've tried to say that I don't really want to claim a full theory distinguishing conservatives and liberals - just a rule of thumb that I find useful. Regard the above graf, I'm having a hard time grasping what you mean, except very generally. I'm skeptical that the sort of thought experiments you're suggesting are capable of shedding much light.

Quoting gwlaw99: Well it turns out that Obama's current campaign has paid ACORN $800,000 to register voters. He even tried to hide it by giving the money to a group called "Citizens Services Inc" which happens to have the same exact address as ACORN. Acorn is already being investigated for voter fraud in at least seven states in this election.”

I haven't researched this story very much because I basically think it's the sound of Republican hopes dying, and I have far better things to do that wallow in the dark fantasies of the Republican base. But I do have some questions for you. Do you have any actual evidence that Barack Obama "tried to hide" the money paid to ACORN? Correct me if I'm wrong, but "voter fraud" refers to fraud committed by voters, right? Submitting fraudulent registration forms isn't "voter fraud," is it? How do you respond to the arguments that low-paid workers trying to meet a quota or get paid more money for collecting more registrations occasionally fill out forms with made up names? Do you have any evidence that there is anything more serious than that going on here? Are you

Quoting TwinSwords: I haven't researched this story very much because I basically think it's the sound of Republican hopes dying, and I have far better things to do that wallow in the dark fantasies of the Republican base. But I do have some questions for you.

Do you have any actual evidence that Barack Obama "tried to hide" the money paid to ACORN?

Correct me if I'm wrong, but "voter fraud" refers to fraud committed by voters, right? Submitting fraudulent registration forms isn't "voter fraud," is it?

How do you respond to the arguments that low-paid workers trying to meet a quota or get paid more money for collecting more registrations occasionally fill out forms with made up names? Do you have any evidence that there is anything more serious than that going on here?

Are you aware that fake registrations by themselves will not be enough to commit voter fraud? Someone must still show up at the polls and attempt to vote in the names used on the false registrations. Those names must be listed on the voter rolls and the voters must have registration cards showing those names. Is there

Quoting gwlaw99: Obama hiding ties to ACORN. http://www.clevelandleader.com/node/7231

It doesn't really matter whether he hid them or not. The most egregious thing is that he had extensive ties to them and gave them over $800,000.

Registering the same person 70 times and giving them money to register is illegal no matter what you want to call it. He is a list of states in which ACORN is being investigated for fraud.
http://pajamasmedia.com/blog/the-com...n-voter-fraud/

In Ohio acorn turned in 5,000 voter registration cards. After counting the first 2,100, every single one was fradulent. This isn't the case of a few "Ronad McDonalds" this is a concerted effort to fraudulently register voters.

Let's not also forget that Obama was a big supporter of sub-prime loans through ACORn and in a 2007 speach said they "were originally a good idea."

Unfortunately, making this a political issue for one side or the other is going to be problematic.

Quoting AemJeff: Unfortunately, making this a political issue for one side or the other is going to be problematic.

I disagree. The problem is with ACORNS decade and a half long string of lawsuits against banks to give more subprime loans. One of which against Citi Bank was litigated by Barak Obama. And also it's successful lobbying of the Clinton Administration to change the rules for Fanny and Freddie to make sub-prime loans easier to get (something MCCain tried to undo in 2005 and which was blocked by Democrats). I don't think that giving 800,000 to a group who has a long history of voter fraud for the specific purpose signing up voters and for supporting them in their quest to make sub-prime loans easier to get (and then denying a connection with the group) in any way compares to ACORN sponsoring a rally for a bipartisan immigration plan developed by McCain and Kennedy. I would hope Obama would fire back on this issue as the press will only cover it if it has some bad connotation for McCain. It would just bring the ACORN issue to the front

Quoting gwlaw99: I disagree. The problem is with ACORNS radical education agenda and it decade long string of lawsuits against banks to give more subprime loans. One of which against Citi Bank was litigated by Barak Obama.

I don't think that giving 800,000 to a group who has a long history of voter fraud for the specific purpose signing up voters and for supporting them in their quest to make sub-prime loans easier to get (and then denying a connection with the group) in any way compares to ACORN sponsoring a rally for a bipartisan immigration plan developed by McCain and Kennedy.

I would hope Obama would fire back on this issue as the press will only cover it if it has some bad connotation for McCain. It would just bring the ACORN issue to the front as it deserves to be.

Let's not forget Obama giving money to ACORN and other radical groups through CAC to fund radical education policies developed by Bill Ayers.

We'll see. This is strictly a horserace argument: regardless of the merits, the inevitable noise created by McCain's past association with ACORN is going make it very difficult

Quoting AemJeff: We'll see. This is strictly a horserace argument: regardless of the merits, the inevitable noise created by McCain's past association with ACORN is going make it very difficult for the argument against Obama to stick. McCain committed a tactical error and he's going to pay a price for that.

Well, I disagree, but that's what discussion is for. I guess we will see.