“yes, that really is a health warning..”

In today’s Newsnight email Gavin Esler sounds a timely note of caution, on two points.

“If the polls in America are correct – and yes, that really is a health warning because I don’t trust them very much – then Barack Obama will be the next president of the United States and the Democrats will run Congress. A triumph? Again – it’s a personal view – but I don’t think so. I remember that the worst years of Bill Clinton’s presidency were not the Lewinsky affair but 1993 and 1994 when the Democrats held on to every lever of power in Washington – and made a mess of it.”

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  • Steve

    Worse mess then Bush? not possible!

  • jone

    RealClearPolitics have some reservations about the polls too:

    http://www.realclearpolitics.com/horseraceblog/2008/10/more_on_the_polls_1.html

  • Comrade Stalin

    Past performance is no guide to the future, and the two large political parties in the USA are less like parties and more like very large, ill-defined groups of people who are like-minded in only the vaguest possible sense.

  • Dave

    As Rush Limbaugh said on FOX News last night, these polls are designed to shape public opinion rather than to reflect it. The media is using the bandwagon effect to push Obama over the finishing line. They know that a certain percentage of undecided voters will be influenced by whatever the majority opinion is deemed to be, so they will jump on the Obama bandwagon if that is presented in the media as the winner in advance of actually being the winner.

    As Bill Clinton candidly admitted to ABC’s “Good Morning America” on September 25th, Democrats are responsible for the mess created by the GSEs in the financial markets: “I think the responsibility that the Democrats have may rest more in resisting any efforts by Republicans in the Congress, or by me when I was President, to put some standards and tighten up a little on Fannie Mae and Freddie Mac.”

    However, while he is correct to blame the Democratic party, he is not correct to try to distance himself from the financial disaster created by his policies and his party. As this link states: “A recently re-exposed document shows that his administration went to ridiculous lengths to increase the national homeownership rate. It promoted paper-thin down payments and pushed for ways to get lenders to give mortgage loans to first-time buyers with shaky financing and incomes. It’s clear now that the erosion of lending standards pushed prices up by increasing demand, and later led to waves of defaults by people who never should have bought a home in the first place. President Bush continued the practices because they dovetailed with his Ownership Society goals, and of course Congress was strongly behind the push. But Clinton and his administration must shoulder some of the blame.”

    The Democrats Barney Frank is the main culprit. He stated that it a person’s right to own a home, and he acted accordingly to promote home ownership among low income groups as if this ‘right’ was a positive right in the US constitution that imposed an obligation to facilitate such ownership. It is, however, a negative right in the Constitution: it is a person’s right to own private property if that person has the means to afford it. This is socialist dogma wherein the State has obligations as a consequence of positive rights to promote socialist policies. Because ‘socialist’ is still a dirty word in the US, they rebranded this policy as non-socialist by using the State to compel private businesses to provide the means to low income groups to acquire a home rather than the traditional socialist route of the State providing the home.

    Many of these people that Barney Frank and the democrats thought had a right to own a home, were living on food stamps and Section 8 rent subsidies and it is the Democrats who passed the legislation that compelled the lenders to count such Welfare as earned income. Now if you pass legislation that compels lenders loan trillions to low income groups, then it doesn’t take a financial wizard to work out that you will have a serious debt toxic problem once your economy stops growing, as these people will be the first to default in a slowdown as they lose their low income jobs. As long as the economy kept growing and as long as home prices kept rising, then Democrats wouldn’t get caught meddling with the loan industry. Alas, no economy keeps growing without a correction (and certainly not an economy that is artificially stimulated by low interest rates to promote credit-fuelled consumer spending) and home prices to not keep rising without market correction of value, so the Democrats built this house of cards and now it is crashing down around them.

    The Clinton administration and the Democrats in Congress put massive pressure on banks to grant mortgages to low income groups and other minorities. For example, Clinton’s secretary of Housing and Urban Development, Andrew Cuomo, investigated the GSE Fannie Mae for racial discrimination and also demanded that the two principles GSEs should earmark 50% of their loan facilities for low to moderate income borrowers by 2001. Lenders were told to stop using “outdated criteria” such as credit history, down payment, ability to demonstrate sufficient income to repay the loan, etc. The US Federal Reserve demanded that banks treat welfare payments as valid income when securing a mortgage. The Clinton administration also threatened banks with lawsuits to force them to make these toxic subprime loans.

  • Dave

    [b]Continued[/b]

    This is the kind of demented recklessness that Democratic government actually engaged in. If you think that is incredible, then it’s probably even more incredible that the US media would seek to cover all of this up and engineer the election of the neo-socialists whose misguided policies got America into this mess. Even leaving aside the complex economics of this, they should ask themselves one easy question: was the policy of the Democrats of promoting affordable housing among low income groups a success or a failure? Well, given that it had the outcome of inflating house prices and thereby making housing unaffordable to the poor, in addition to exposing vulnerable groups to foreclosure, and making it harder for these groups to get loans in the future, it is fairly obvious that the policy of the Democrats was an unmitigated disaster for the poor, leaving them in a far worse condition that ever before.

  • Dewi

    “As Rush Limbaugh said on FOX News last night” – ignore the rest of the post.

  • Steve

    yeah like you can buy a $ 400,000.00 house on foodstamps

  • Jimmy Sands

    It’s an article of faith with the right that low income housing is the cause of the crisis. I’ve not seen a shred of evidence to support the thesis. Cheap credit encouraged people to buy investment properties to let or to flip, often based on the assumption that they would resell into an ever-rising market before ever having to pay for them. Common sense will tell you that the people who will hand over the keys and walk rather than fight to stay will be those who have somewhere else to sleep. For some with an axe to grind though common sense is less attractive than the fiction that Freddie Mac and Fannie Mae were involved in sub-prime lending.

  • latcheeco

    Gavin Esler probably isn’t too far out on the polls. It’s too close to call and will be till Tuesday evening. As regards the triple threat, any government is better than no government; at least somebody might be able to get something consequential passed on domestic policy. Checks and balances have tended to halt progress over the past forty years (which is, of course, a result for conservatives).

  • Dave

    “…the fiction that Freddie Mac and Fannie Mae were involved in sub-prime lending.”

    That’s quite funny – and you haven’t a clue why, have you? 😉

    Try learning basic facts before you comment. Both Fannie Mae and Freddie Mac are GSEs (government-sponsored entities) who were required by HUD to provide 56% of all their loans for the specific purpose of absorbing subprime mortgages from lenders. Fully 25% of those outstanding loans are now in default.

    At the core of this crisis is massive state intervention in the economy. Let’s hear what Alan Greenspan has to say about what happens in markets when government intervenes to absorb risks via implicit state guarantees, leaving private business with virtually risk-free models of acquiring wealth:

    “Typically in a market system, lenders and investors monitor and discipline the activities, including leverage, of their counterparties to assure themselves of the financial strength of those to whom they lend. However, market discipline with respect to the GSEs has been weak to nonexistent. Because the many counterparties in GSE transactions assess risk based almost wholly on the GSE’s perceived special relationship to the government rather than on the underlying soundness of the institutions, regulators cannot rely on market discipline to contain systemic risk.”

    Now he ties this to Fannie Mae and Freddie Mac:

    “When these institutions were small, the potential for such risk, if any, was small. Regrettably, that is no longer the case. From now on, limiting the potential for systemic risk will require the significant strengthening of GSE regulation and the GSE regulator. Determining the suitable amount of capital for Fannie and Freddie is a difficult and technical process, and in the Federal Reserve’s judgment, a GSE regulator must have as free a hand as a bank regulator in determining the minimum and risk-based capital standards for these institutions.

    Beyond strengthening GSE regulation, the Congress will need to clarify the circumstances under which a GSE can become insolvent and, in particular, the resultant position–both during and after insolvency–of the investors that hold GSE debt, as well as other creditors and shareholders. This process must be unambiguous before it is needed. Current law, which contemplates conservatorship and not receivership for a troubled GSE, requires the federal government to maintain GSEs as ongoing enterprises, but other than the symbolic line of credit at the U.S. Treasury, provides no means of financing to do so. Left unresolved, such uncertainties could threaten the stability of financial markets.”

    Notice his last sentence from 2005? “Left unresolved, such uncertainties could threaten the stability of financial markets.” And that is what came to pass: they were left unresolved and the stability of financial markets was threatened.

    He also warned that government the dismal situatiom may now be beyond control:

    “World class regulation, by itself, may not be sufficient and, indeed, might even worsen the potential for systemic risk if market participants inferred from such regulation that the government would be more likely to back GSE debt in the event of financial stress. This is the heart of a dilemma in designing regulation for GSEs.”

    In other words, the markets would force the implict state guarantee to become explicit. Again, this came to pass – the taxpapyer is now left with massive debts that were created by reckless government intervention in the free market system.

    http://www.federalreserve.gov/boarddocs/testimony/2005/20050406/default.htm

    As Bill Clinton said: “I think the responsibility that the Democrats have may rest more in resisting any efforts by Republicans in the Congress, or by me when I was President, to put some standards and tighten up a little on Fannie Mae and Freddie Mac.” Likewise, Democratic Congressman Artur Davis said: “Like a lot of my Democrat colleagues I was too slow to appreciate the recklessness of Fannie and Freddie when in retrospect I should have heeded the concerns raised. I wish my Democrat colleagues would admit that we were wrong.”

    On the other hand, Barney Frank, Democratic chairman of House Financial Services Committee said in 2005: “The more people exaggerate a threat of safety and soundness at Freddie Mac and Fannie Mae, the more people conjure up the possibility of serious financial losses to the Treasury which I do not see. I think we see entities that are fundamentally sound financially.” His Democrat colleague on the committee, Maxine Walters, said: “There were nearly a dozen hearings where we were trying to fix something that wasn’t broke. Mr Chairman, we do not have a crisis at Freddie Mac and particularly at Fannie Mae under the outstanding leadership of Mr Franklin Raines.”

    Heads in sand. 😉

  • Dave

    Latch, the last time that Democrats had a so-called supermajority was under FDR, and the result was that, as Daniel Hannan tells it, “..such a configuration led to an abuse of power not seen in the US before or since: in the name of addressing a financial crisis, FDR disregarded the constitutional constraints on his authority, ruled through executive decree, ignored the two-term convention and sought to pack the Supreme Court. He also engorged the federal government and, through a combination of domestic dirigisme and external tariffs, prolonged the recession. He got away with it, all except the court packing, because many Congressmen felt they owed their election to him, and were unwilling to assert their constitutional prerogatives against their own party leader.”

    This time around you will real trouble on your hands. Obama will be in a position to appoint three Supreme Court Justices; turn a recession into a depression by raising taxes, and force through a liberal left agenda that will have conservative Americans up in arms, et al. On the plus side, this clown will make such a mess of the economy that not even his sycophants in the US media will be able to spin it for him, so he’ll be back out after four years – one term failure.

  • Dave

    Dewi, that’s a bit unfair. I don’t refuse to read your posts just because you’re overly affectionate to sheep. 😉

  • colm

    Dave, what “liberal left agenda ” are you talking about besides whatever it is, can’t be any worse than 8 years of a ‘right wing conservative nut job agenda’.

  • Dave: one of Shakespeare’s characters observes that brevity is the soul of wit. Hint hint, like.

  • runciter

    This is socialist dogma wherein the State has obligations as a consequence of positive rights to promote socialist policies. Because ‘socialist’ is still a dirty word in the US, they rebranded this policy as non-socialist by using the State to compel private businesses to provide the means to low income groups to acquire a home rather than the traditional socialist route of the State providing the home.

    Tell us again how promoting home ownership among the poor is ‘socialist dogma’.

    It gets funnier every time!

  • Comrade Stalin

    As Rush Limbaugh said on FOX News last night

    Ah. Now your contributions suddenly make sense.

  • kensei

    Dave
    It wasn’t Fannie and Freddie:

    Now, pay attention, and put your tin foil hat on and try to block out that chip in your head. Look at this graph:

    http://economistsview.typepad.com/.shared/image.html?/photos/uncategorized/2008/09/24/gse.gif

    Note the pink line, which corresponds to the GSEs. At 2002, it starts going down, with a corresponding increase in asset based securities. By 2003 the GSEs are where they are in the mid 80’s.

    Now you might argue that the long run increase in holdings by the GSEs was a bad thing, and it had some input into the crisis. And you might well be right about that because there are complex interactions and no one has figured them all out yet. But runnign with the “It was fannie and freedie lending to low income families” is just ignorant.

  • autocue

    Al Beeb expressing concern about the material needs of the Democratic Party once Obama wins (not a foregone conclusion by any means) – what a shock. Pity Esler and the rest of the mainstream sycophantic hacks covering the US election aren’t asking questions like that of the Democrats.

  • Dave

    Look Kids, I know it’s hard for lefties to accept that government and not business is responsible for the crisis, but stick with the narrative that Nanny doesn’t know best and you might actually progress to an unwanted understanding of the underlyning dynamics here which doesn’t tell you to rely on Nanny to look after you – courtesy of your friend Dave, of course.

    Now here’s the lesson for today:

    As Bill Clinton said: “I think the responsibility that the Democrats have may rest more in resisting any efforts by Republicans in the Congress, or by me when I was President, to put some standards and tighten up a little on Fannie Mae and Freddie Mac.” Likewise, Democratic Congressman Artur Davis said: “Like a lot of my Democrat colleagues I was too slow to appreciate the recklessness of Fannie and Freddie when in retrospect I should have heeded the concerns raised. I wish my Democrat colleagues would admit that we were wrong.”

    Now notice how both of those Democrats shift responsibility for the financial crisis onto the GSEs while carefully positioning themselves in the role of passive overseers whose only sin is that they failed to properly regulate the GSEs and thereby prevent the crisis? They almost have it right except for one slight detail: they compelled the GSEs by legislation and policy to act recklessly. So they are not passive player but active protagonists.

    So that’s spin lesson No 1 for today. Here’s spin lesson No 2:

    “Former Federal Reserve chairman Alan Greenspan defended the U.S. subprime mortgage market, arguing that the securitization of home loans for people with poor credit — not the loans themselves — were to blame for the current global credit crisis.”

    Now for your homework, kids, I want you to study details of the financial crisis that you didn’t find in Obama’s press releases. Notice the root cause of the financial crisis is the subprime lending and also note how this toxic debt infected the banking system beyond the collapsed GSEs, Fannie Mae and Freddie Mac (now adding 5 trillion dollars to the US national debt), such as Wall Street Bankers Lehman Brothers.

    Don’t be afraid to grasp such salient details that rich folks don’t borrow at subprime rates. 😉

  • Alan

    “Notice his last sentence from 2005? “Left unresolved, such uncertainties could threaten the stability of financial markets.” And that is what came to pass: they were left unresolved and the stability of financial markets was threatened. ”

    2005, and you somehow blame the Democrats for not acting on this warning.

    Clinton did lobby the GSE’s in order to provide loans to low income families, but so did the primary lenders. The difference being that the primary lenders wanted to exploit the high risk market for profit, not to build homes. In the long run it was their high interest, high risk loans to sub prime borrowers that became the market norm. There was also pressure on GSE’s from their shareholders in all this.

    If anything, it was a governance deficit that produced what we’re going through now. It is strong regulation, and regulation on a global scale that we need.

    Obama is in the fortuitous position to be able achieve this – if he can win and take the two houses as well. Any reasonable person can see that it is in the interests of the US and the world economy for americans to vote for Obama – and for Obama to take this opportunity to seek international partners who can facilitate an international system of regulation.

  • Greenflag

    Dave ,

    ‘Now for your homework, kids, I want you to study details of the financial crisis that you didn’t find in Obama’s press releases.’

    Or you won’t find in McCain press releases . At least Obama realised that the ‘Economy was NOT basically sound ‘ . Senator McCain avowed up to the day of the Lehman collapse that the economy was sound ?.

    ‘ Notice the root cause of the financial crisis is the subprime lending and also note how this toxic debt infected the banking system beyond the collapsed GSEs, Fannie Mae and Freddie Mac (now adding 5 trillion dollars to the US national debt), such as Wall Street Bankers Lehman Brothers. ‘

    An oversimplification kiddo . Sub prime lending was the proximate cause not the root cause . The root cause goes back to the rapid build up of debt within the American economy from the 1980’s i.e when Reagan started practicing his ‘voodoo’ economics which has led to a quadrupling of overall debt as a percentage of USA GDP . He gave the USA it’s first example since the 1929 crash of how ‘deregulation’ worked with the 1988 /89 Savings & Loan crisis which put the USA into an economic recession and destroyed Bush Sr’s chance of a second term in 1992 . It’s deja vu time again with Bush Jr -the only exception being that junior has had two terms to compound the financial mess by adding in a ruinous war as well.

    Dave’s ‘argument ‘while lengthily expounded basically comes down to .

    A) Government is bad unless it’s to the right of Attila the Hen (Margaret Thatcher) .

    B) Financial institutions and large business corporations and the extremely wealthy know best and that unless Government does what the above tell them to do, all the time then the consequences will be ruinous . A corrollary of this simplistic belief is that the above interests will always be mindful of the wider public interest, and will not allow thoughts of excess profits and personal gain overide their concern for the public good . This can be seen by anybody who takes even a cursory glance at Wall St ‘activities ‘ in recent weeks 🙁

    c) The poor and financially none skilled are always to blame . They’re the gobshites who allow themselves to be suckered in by those financial institutions who know best .

  • Greenflag

    Alan ,

    ‘if he can win and take the two houses as well. Any reasonable person can see that it is in the interests of the US and the world economy for americans to vote for Obama – and for Obama to take this opportunity to seek international partners who can facilitate an international system of regulation.’

    No if’s -He will win. With the Senior Republican Senator from Alaska being found guilty of corruption a week before the election- his name is still on the ballot – the Democrats will win the Alaska Senate seat which should help push the Dems total to or over the 60 figure .

    As for an international system of regulation ? Long overdue .

    Republicans are throwing in the towel . As Colin Powell has said the Republicans have moved too far to the right. The party is now hostage to forces which were formerly ‘repressed’ within the party i.e anti immigrant , isolationist , neo conservatives-fundamentalist Christian extremists and wackos etc etc .

    For political ‘junkies’ it will be interesting to see how and if the Republican party ‘reforms ‘ itself that is assuming it can be even held together. The scale of coming defeat will help to concentrate ‘republican’ minds much like a ‘hanging ‘ does for a condemned prisoner .

    I said about three months ago that this election will be a paradigm event and would be based on the economy .

    The fact that the financial crisis has come at this time is testimony to the fact that the ‘political’ gods are moving to the left or should I say back to the centre or a little left of centre .

  • Jimmy Sands

    That’s quite funny – and you haven’t a clue why, have you? 😉

    On the contrary, I find your insistence that it’s the public sector’s fault for bailing out the private sector an excellent use of irony. I have a great appreciation for parody.

  • susan

    A couple of weeks ago Daniel Gross of Slate and Newsweek did a nicely succinct skewering of the contorted, rather piteous “arguments” “Dave” parrots on this thread.

    http://www.slate.com/id/2201641

    One almost longs for the old days, when our in-house hero merely channeled the spirit of Ed Moloney with the cranked up authority of a television psychic advisor. Almost.

  • ggn

    McCain < Mac Catháin 'son of the little battler'Now you know.

  • susan

    Actually, the version of the Daniel Gross column which ran in Newsweek is easier to scan. I’ll post that link as well; it’s a small triumph of common sense and reason over ideology.

    http://www.newsweek.com/id/162789

  • The Watchman

    Did anyone else know that the wonderful Sarah Palin was born a Roman Catholic before converting to biblical Christianity?

    Was recently talking to a senior DUP figure who would just love her to be a candidate for his party.

  • Greenflag

    watchman ,

    ‘Was recently talking to a senior DUP figure who would just love her to be a candidate for his party. ‘

    I would’nt doubt . As she’s able to see the coast of Russia from Alaska -she’ll have no difficulty on seeing the ‘new border ‘ from Ballymena after repartition . Speed the day .

    Another gobshite added to a party with a surfeit of gobshites would make little difference anyway.

    As for her new found ‘tongue babbling and end of days ‘religion ‘ ? Well NI has already had a clerical First Minister who had his own particular brand of ‘babble ‘ so nothing new there either .

    Meanwhile Northern Ireland and Zimbabwe share a unique distinction at this time, in being the two countries in the world in which the ‘power sharing’ government cannot agree on who is to be the Minister of Justice with responsibility for policing . (in Zimbabwe it’s the Minister fro Home Affairs ).

    ‘Did anyone else know that the wonderful Sarah Palin was born a Roman Catholic ‘

    Who cares ? A gobshite is a gobshite no matter what their religion or change of religion . It’s also been noted that she has partaken in ‘de witching ‘ ceremonies overseen by a African ‘witch finder ‘ general /pastor .

    All in all she sounds as if she could well and truly fit in in NI and in particular after repartition .

  • The Watchman

    If we all want change we can believe in, perhaps it could be Green Flag writing a post without mentioning repartition.

  • latcheeco

    Dave,
    I am sure you appreciate your nightmare scenarios of both future (Obama) and past (FDR) are not far off how many felt about life in at least the first six years of DeLay/Bush/Cheney and their skewed interpretation of the Constitution giving them unbridled power. Under Republicans the kids had control of the candy store on Wall St. and they stuffed themselves and now they’re sick. Fannie and Freddie are red herrings for the general economy imitating Bush/Cheney (not textbook republican)government borrowing and fiscal strategies. You reep what you sow and there could be a whirlwind coming for Republicans.

  • latcheeco

    Watchman is that all you’ve got? To paraphrase.. “Sure didn’t Sarah Palin used to be a taig.” Does that mean you now trust her or you don’t? Are you touting her as a catch for prods or pointing out there’s an underlying reason she’s a retard? Which is it?
    Brian Walker,
    How can you, with a straight face and in good conscience, post about dumb Americans with the hilarity that the natives produce on Slugger?