In 1977, Congress passed the Consumer Reinvestment Act, basically mandating that lending institutions come up with ways to lend money to people who could not buy homes using conventional methods.
The problem with this law is that people who can’t really afford a home now had the opportunity to buy one. But they were leveraging EVERYTHING toward the loan. Any financial hickup…and they were doomed to fail. For what it’s worth…One study was done about 10 years by the Boston Globe. There were many people who had the same problem Rich and poor. The poor were buying the cheapest homes on the market…but they were at the very high end of what they could afford. Even some people of the upper middle class bought homes that were at the far end of what they could afford. And that income of people had a higher rate of foreclosures then the poor did. The people in the middle-class and upper middle class who had the lowest foreclosure rate were the ones who bought homes that were less then the max amount they could afford.
In 1979 Congress passed the Gramm-Leach-Bliley Act, which basically repealed the key provisions of the Glass-Steagall Act.
Wasn’t that 1999.
The passing of that law was heavily lobbied by the Banks.
Directly from the WikiPedia Article
During debate in the House of Representatives, Rep. John Dingell (Democrat of Michigan) argued that the bill would result in banks becoming “too big to fail.” Dingell further argued that this would necessarily result in a bailout by the Federal Government. The guy has ESP.
Many of the largest banks, brokerages, and insurance companies desired the Act at the time. The justification was that individuals usually put more money into investments when the economy is doing well, but they put most of their money into savings accounts when the economy turns bad. With the new Act, they would be able to do both ‘savings’ and ‘investment’ at the same financial institution, which would be able to do well in both good and bad economic times.
if we eliminated non-safety-net subsides to special interest groups, pork barrel projects approved to get political votes, the use of tax dollars to bailout favored blocks of voters, and givaways to unfriendly countries, I've no doubt the budget could be balanced. The pres doesn't need an unlimited credit card. The problem isn't lack of revenue, it's far too great a level of unnecessary spending.
Agree 100%…Been waiting for that to happen for decades. I seriously doubt I’ll see it in my lifetime.
You’re right, Mike, it was '99. Mea Culpa. The rest of the model, the buildup of demand due to the double digit rates and the loosening of home loan regulations caused by the Consumer Reinvestment Act still work as a cause for the housing bubble in the '80s, the surge in prices, the ultrahigh leveraging, and the resulting highly leveraged unsqalable housing inventory. The repeal of Glass Steagall was a disaster all its own.
It still boils down to all levels of government wasting money hand over fist and with fraud piled on top of that.
One of the major headaches that hasn’t hit the fan yet are retirement and benefit packages for public employees which are often far better than private citizens and subsidized by the private citizens.
A story on TV a couple of years ago was an example of this. A cop in the northeast retired while in his late 40s with a very healthy pension and health plan after 20 years on the job.
The cop worked a lot of overtime his last 2 years and they had a pet name for this procedure and this allowed them to draw a much larger pension than normal.
The cop said there was nothing wrong with this because “he has a right to see his daughter grow up”.
Maybe a lot of people who don’t get this benefit feel the same way about their kids.
I personally know someone who works for a taxpayer funded agency and has worked for this agency about a year. They have no college degree. Last summer they were told they were going to be getting a raise and a few months ago they did get it. A whopping 5 grand a year and that’s huge in OK where average wages and cost of living is lower than other areas.
The reason for the raise? The agency had to deplete the budget before making a request for future funds.
@ok4450 " a whooping 5 grand per year"
I understand your frustration. But, to put things in perspective, spending time complaining about what a person in the the bottom 80% bilks our economy out of when the total amount controlled by all those in the bottom 80% is much less then 25% of our total wealth, shifts the blame game from where complaint time is better spent. We find it easy to blame those we see then those we don’t. This is a conservative ploy to keep the masses blaming each other and taking their eye off the ball.
The ball is, there has been a massive shift of wealth from the middle to the top 5%. Instead of envying and holding massive cheaters in high esteem, these super rich should be held accountable. The are not being held accountable when we spend our time blaming a legal retirement scheme that nets a neighbor more money that at least, goes back into our economy.
We retirees have actually done quite well and yet, we continue voting for people who want their retirement funds from social security shifted to the super rich. SS works, Medicare works, Medicaid works. And yet, we bit… and moan about others in the middle class on one hand and continue to hand over our wealth through our own (don’t have a word that is gentile) to the super rich with the other. This so called entitlement readjustment is another huge potential wealth shift.
Retirees are suffering from advanced senility if we buy into it. So one of mine gets $5k more, legitimately…more power to him !
So little facts and so much rhetoric. Every state, county, and city has a separate pension fund. Some are funded at near 100% after recovering from the great market collapse, and some irresponible governments are funded at less than 50% and are in great peril. So looking at New Jersey and comparing that to Minnesota just makes no sense. Also most but not all put in their own money and matched by employers over 30-40 years. Its not your money, or taxpayer money, but the employee’s money. Like I said, California is in trouble because the people refuse to pay for the services they get, so the result is administrations trying to find any way they can to patch the holes. Some of this has resulted in under-funding pension funds because its easy. So who’s at fault really? Isn’t it the taxpayers that want free services and don’t want to pay for it?
Now to look at where all this pension hype comes from, its really a marketing campaign. There’s a good book out their by a WSJ reporter called “The Great Pension Heist”. Talks about how private company after private company set about to raid the pension funds for their own benefit from the ordinary employees and leave them penneyless. Of course under the guise of going bankrupt covering pensions and medical benefits. Yeah right, and people buy it hook line and sinker.
Its very sad Bing,I would never consider bilking someone of thier rightfully earned compensation,like I said before,someone decided to put us back in our “place” we were doing too well.
This type of greed foments thoughts of revolution-Kevin
Over the past 30 +/- years the economy has squeezed the wages and benefits of working America while channeling a watershed of “liquidity” to those who found themselves among the few at the top. And as the spread widens we are told that the wealthy are being robbed to support the lazy. Funny thing is a great many hard working people who are on the back side of that watershed feel they owe their allegiance to the fabulously wealthy and not to those who have preceded them in the decline to poverty. If the minimum wage were increased to match the COLA the stockers at Wal-Mart would be earning $12.50/hour and all other wages would be appropriately increased as well. We are in decline and on our way to 3d world status. Those with a few thousand in retirement funds need to take a long hard look at where they will be in a few years and join those who are already at the bottom to unite and fight for some equity. Jim Cramer won’t save you. The Wall St bankers won’t save you. They will make money off you as your portfolio shrinks to ZERO.
Consider this; the biggest calamities that I can recall we’re the result of too little and not too much govt. So, if we want to revolt against anything, it should be those who want the average citizen to remain helpless against Corporate greed.
OK4450 has raised some excellent points that bloat the state general funds and significantly raise the need for state revenues.
The first is the pension issue. Here in NH, as in many states, state employees are allowed to take on additional work in their field and their additional income is calculated into their pensions. The pension check is based on the highest three years’ income. In the case of cops, the Department of Safety has (long ago) enacted legislation that requires cops to be at every worksite that affects traffic flow. The cops take these “details” their last three years before retirement and many retire at higher incomes than their cops pay. I’ve long felt this was wrong. I’m not against having them at the sites, but these added wages should not be a part of the pension calculation.
In the case of budget management, far more money gets spent in order to prevent a reduction in budget appropriation than people realize. You have money? You’d better spend it. If you don’t, your budget appropriation next year will be lower, and then if you DO need it, you’ll be unable to get it back. Been there, done that.
Massachusetts is trying to close a loophole in their retirement system because of two high profile cases.
One Sheriff retired. But he’s still working. So he’s collecting his retirement pay AND AT THE SAME TIME he’s working the exact same job and is getting paid for it. This is costing MA MILLIONS every year.
Gov Weld did a lot of cleanup of the transportation mess. The transportation department became a place to reward political active retirees a good place to work after they left office. There were HUNDREDS of jobs where the person did NOTHING.
The LARGER the government the more the corruption.
And I agree that while corruption is a lot less in smaller towns…it can exist. Here in NH in Salem…there was an inspector who was getting kickbacks from companies. He’d pass them if they gave him some money. The one nice thing about smaller towns it’s easier to spot and fix.
Agree with OP.
Jan-March 2013 will be downers but after we make adjustments, I think we be on the gradual upside. The R’s had boxed themselves in, way back in 2011. PBO just had to hammer them on “fairshare” notion. PBO is out to change the Republican Party.
I’m starting to think that going over the cliff will provide the shock therapy to these jokers on both sides. Those that think there is a limitless supply of money for any crazed idea that can be thought of and those that think that government can do no good not realizing how many jobs are provided to their states. Happy medium folks but the debt is a long term issue that should not be attempted to be fixed in the short term, but a balanced budget is a necessary first step. It starts with simple math so just crunch some numbers on the revenue side and the spending side.
If our elected representatives are not told what we think, they will listen to those that actually talk to them. These people may not give the advise that you like, so you’d better send them emails to tell them what you think. I would like to address my concerns to fellow republicans, but they almost never win elections in MD. I am solidly represented by 2 Democrat senators and 1 Democrat congressman. Maybe I should just address my concerns to Speaker Boehner. And, of course, the 3 Democrats that represent my geographic area.
If you think we actually control what these people do in congress, just look at who pays these guys and where they end up working after they get out. Their govt. pay is peanuts to the millions they will make from special interest. I used to think there was an advantage to electing an official who was already wealthy to insulate them from bribery. No such luck. These people just want more.
It Seems That The Republicans Can’t Work With The Current President.
It Seems That The Current President Can’t Work With The Republicans.
The Government Has Become Locked Up.
Is This Correct ?
This is very frustrating to many people and they feel our government is broken. I am a little frustrated, too. However, I don’t think it’s broken. I think it’s working just the way our founding fathers intended it to work.
Look at the track record of the way our current president “compromised” with Republicans near the beginning of his first 4 years. Now, many voters decided that they liked this type of leadership enough to reelect the president for 4 more years of this and that’s what we’ll have.
What’s that called when you keep doing the same thing over and over, but keep expecting a different result ?
From where I sit, government’s not broken. It’s working as designed. Gridlock can be very frustrating to some, but still be a beautiful thing. America, what a country !
I agree that the government is not broken. But our legislators have rarely been less able to do anything meaningful. I know it’s supposed to be hard to pass legislation, and that’s a good thing. But these folks had better start working more together. I think that moderate republicans, Boehner and other pragmatists are willing to work with democrats that are willing to be flexible, too. The problem on the republican side is that too many conservative and Tea Party members are unwilling to be flexible. It’s not clear how willing the democrats are to compromise, but it appears that they are inflexible on entitlements. IMO, Boehner is actively promoting the conservative line to show the conservatives that they aren’t going anywhere with their severe spending cuts and no new taxes for anyone. The democrats are in some ways pleased that the republicans are doing this. It makes many more Americans see republicans as obstructionist, and could lead to significant losses in the next election cycle. I think that many individual legislators are willing to be flexible, but when the pack gets together, they all howl the same tune.
Amazing how some conservatives want to change social security because it does work and has nothing to do with the deficit, has generated security for the elderly, all while also generating a surplus. They want to tinker with it till it doesn’t. Pretty consistent with most of their other proposals.
Right on Dag,think where a lot of the elderly would be right now ,if it werent for social security.
Things are much better now in many ways-but with the attitude and mores of the country now,I’m afraid the elderly would be out on the street or living with thier children.-Kevin