Chaos On Wall Street, Mayhem Coming To Main Street?

I wrote my first article on gameriot about the economy back in June. At the end, I mentioned all of the bad paper floating around, and it looks like it finally come back to bite us in the butt this week.

So what exactly motivated the large downturn earlier this week? A few things, in order by time frame.

1. The Community Reinvestment Act - Started by Carter, and expanded by Clinton this was designed to increase minority home ownership. You see back in the 70's and 80's banks wouldn't make loans to people who couldn't repay them. These banks were accused of racism because often the people they wouldn't make loans to were disproportionally minority groups. So the federal government got involved and forced banks some banks to make the loans, and let others know that 'Discriminatory practices in lending will be punished.'.

2. The natural outcome of the socialism in item 1 led to banks making loans to people who couldn't afford them. After all, it's better to have a bad loan on the books than having the federal government coming to audit you, and Reverend al coming to picket you. So companies went above and beyond to make loans to people who shouldn't get them. Some intelligent people in the banking business even reasoned that real estate "always goes up" so things should work out for the best.

3. Some smart people at the banks realized this whole idea probably sucks. They rolled up home mortgage loans, and resold them to other banks. The ratings agencies that should police this sort of thing, overvalued the mortgages that were sold. this led to investment banks buying up mortgages from traditional lending institutions with the impression they were solid investments.

4. In 1999 Clinton repealed the Glass-Stegal act, which contained important safeguards to keep banking institutions solvent. Replacing Glass-Stegal was a bill written by banking lobbyists, pushed through by Republicans in congress.

5. Interest rates were kept artificially low throughout the Clinton and Bush years by Alan Greenspan, which made lending easier for the banks.

6. President Bush tried to reform Fannie and Freddie a few years back, but was shot down by the democrats. In typical "What me worry?" fashion, he resumed paying attention to his crusades in the middle east rather than pushing the issue domestically.

7. Banks got very wacky in the past few years during the housing bubble. Since the CRA stuff went so well, they decided that housing would never ever go bad, and basically gave loans to anyone who could fog a mirror.

8. Housing prices declined, first hurting the Subprime market, and now the regular housing market. People are stuck in situations where they have no equity in their home, and have loans larger than the value of the house. This makes defaulting an attractive option.

9. Investment Banks started realizing all these bundled mortgages they have aren't worth what they should be. Some might be worth pennies on the dollar. Once that shit started hitting the fan a few months ago, people started selling the stocks of the investment banks, leading some of them to insolvency.

So those are the basic things that led to this mess. I probably missed a few details, but whatever. Both the Republicans and Democrats are blaming each other for this mess, but it's really the fault of both parties.

So why is the market rebounding? Well, the fed decided to ban short selling, and is considering the creation of a government trust to buy all the bad mortgages from the banks, to try to work out deals with the owners to keep them in their houses.

Put very simply, we had one socialist program designed to get poor people into housing. That program dragged the economy down, so now the government is going to socialize the losses onto the taxpayer, and replace the program with outright socialism. The government will basically become the mortgage lender for these people who shouldn't have had mortgages in the first place.

Since the government doesn't want to own a bunch of shitty real estate, odds are the people having problems will get sweetheart deals to keep them in their houses.

People who actually behaved responsibly will get stuck with the tax bill.

While many people are blaming capitalism for this debacle, it's clearly the results of government interference in private markets. The banking system should work pretty easily. Banks make loans. If said loans aren't paid back, then the consumer defaults and the bank gets whatever collateral there was. If the bank makes too many bad loans and goes under, then fuck it, it goes under. That is capitalism.

Telling banks they must lend to those that are unqualified, then bailing out certain banks while letting others fail is not capitalism. It is socialism mixed with a tinge of corporatism and a shitload of stupidity.

In the government's mad dash to fix these problems in an election year, they've socialize (ie taken over) the largest insurance company in America, along with the two biggest mortgage lenders. The government is now on the hook for these companies if they fail, possibly to the tune of trillions of dollars.

As our government falls further and further in debt, the US dollar looks less attractive to foreign countries. When it gets to the point that foreign countries will no longer invest here because the US government is basically insolvent, then the party ends.

At some point America has to wake up and realize that everyone can't have everything. As a society we can guarantee equality of opportunity, but not equality of result. At some point, we need our politicians to become serious people, rather than pie in the sky socialists trying to create utopia.

EDIT: A short addendum: If the actions taken today (the govt buying the bad paper from the banks and the ban on shorts) do not "work", you're likely seeing the start of another Great Depression.

This was running a bit long for a blog entry, and I didn't even get into the Credit Default swaps, who Hank Paulson worked for before, or all the sweet conspiracy theories about Hedge funds and SWF's killing companies on purpose. But considering you're all from gameriot, odds are you don't read past the first four paragraphs anyway. ;)

Biden To Step Down?

A few days ago, Joe Biden said that Hitlery Clinton would be a better pick for vice president than himself. While this could be the typical Joe Biden gaffe, perhaps old Joe was floating the idea out there to see what people think? After all, if Clinton were to replace Biden, that might eliminate the Republicans monopoly over the vagina card in this election.

Obama Calles Sarah Palin a Pig.

At a recent press conference, Barack Hussein Osama said:

the John McCain-Sarah Palin policies don’t represent change, they’re “just calling the same thing something different.”

“You can put lipstick on a pig, but it’s still a pig,”.

The first thing that jumps out at me is the sexism. The second thing that jumps out is that Barack must really hate Sarah Palin to call her a pig, since Muslims hate pigs.

One has to wonder about the left constantly saying Barack Obama is a great speaker. Maybe I've fallen into the trap of believing this too. He actually isn't all that good at speaking unless he's got a teleprompter and a captive audience. Any time he tries to make an "Off The Script" remark, it always starts with him saying 'UHHHHHH DUHHHHHHH" with a few "UHHHHHHHHHHHHHS" thrown inbetween, just so you know his teeny little brain is working on a response. Every so often he throws out something that is idiotic like calling Sarah Palin a pig, insulting small town folk, or praising terrorists.

So I think it's time we got rid of the 'common knowledge' assumption that Obama is a good speaker. He's good at reading a script. He's an excellent actor. He could probably earn a great deal of money with a sitcom based on his presidential campaign. I'm sure UPN is looking to add to their fall lineup.

The World Is Ending..Tomorrow!

For those of you that haven't heard the Large Hadron Collider will be starting up tomorrow. Here is a preview from MSNBC:

Will the Large Hadron Collider save the world, or destroy it?

As the atom-smasher at Europe's CERN research center is readied for its official startup near Geneva on Wednesday, researchers might wish that the general public was captivated by the quest for the Higgs boson, the search for supersymmetric particles and even the evidence for extra dimensions.

But if the feedback so far is any guide, the real headline-grabber is the claim that the world's most powerful particle-smasher could create microscopic black holes that some fear would gobble up the planet.

If your wondering what it would look like if a black hole gobbled up the earth, the BBC did a fun docu-drama on it:





Just make sure you come back to Hard Right tomorrow before we all die! I'll live blog the event!

Pulling Defeat From The Jaws Of Victory

A recent Gallop Poll shows John McCain leading Barack Obama by four points.

How can this be? With an incumbent Republican president that 70% of the people think is doing a bad job, how can someone from his party be ahead by four points in the polls?

Commentators attribute this to a post convention bounce. The addition of Sarah Palin is the cause of the McCain bounce some claim.

What I see is an election the democrats are botching badly. If any party can pull defeat from the jaws of electoral victory, it is the American Democratic Party.

Their first mistake was choosing Barack Obama. This was a mistake that democrats collectively made. While Obama is a great orator, he is lacking experience and his stances are far to the left of the general population..for example his support for the murder of children who survive a partial birth abortion. Obama would have made a great vice president, but at the top of the ticket he is a liability.

The Democrats second mistake was selecting Joe Biden as their vice president. This was Obama's mistake, as well as the party for not putting pressure on him to accept Hillary Clinton as his running mate. While I'm sure Obama had no desire to see Bill and Hill roaming the white house once again, ditching Hillary opened up the female flank on the Obama campaign.

The democrats third mistake is their savaging of Sarah Palin in the media. While Barack and Biden remain mostly above the fray, their surrogates in the media and the blogosphere have launched vicious attacks against the Palin family. Attacking a 17 year old girl, or saying Sarah Palin is a bad mother because her daughter got pregnant is simply not the best strategy for winning over independent voters.

So why are the democrats engaging in this failing strategy? It is because they're irate over the ideological divide between themselves and Palin. While McCain is a moderate Republican, Sarah Palin is everything liberals hate wrapped up in an attractive package. She's Pro-Life, Pro-Guns, Pro-Religion and from a small town.

You can almost feel the heat from the democrats hatred of her while they state the same talking points over and over

"She's just a Mayor from a small town!"

But this just reminds people of Obama's statement about small town people "Clinging to Guns and Religion".

"She doesn't have the experience to do the job! She's only been Governor for two years!"

But this just reminds people that Obama hasn't been in the Senate very long, let alone governor.

"She should stay home and take care of her special needs child!"

Of course, this sounds like sexism, which will not help the Democrats cause.

Sarah Palin has a 58% approval rating, which is the higher than Obama, McCain and Biden. The more the Democrats make this election about her, the higher the chance they will lose it. The way to the white house for the democrats is not bashing a 44 year old mother of five, the proper path is to simply point out how bad things have been under Bush.

All they have to do is trot out the headlines every week:

Instability in Russia/Georgia.

Fannie and Freddie Nationalized.

National Debt At Record Levels.

15 Dead From Carbomb in Iraq.

Instead of doing simple things like this, the democrats are preoccupied with Palin. As if they're going to suddenly convince the country the Republicans shouldn't win the white house because Sarah Palin's daughter got knocked up at 17.

As many of you know, I'm not a democrat. I don't like their party or their platform. However it is unhealthy for our country to have only one viable party in national politics. So kindly, if you're a democrat get your head in the game.

Welcome

Welcome to Hard Right!

You guys can use this as an open forum to chat while I work on my first post. Anonymous posting is on, go nuts.

-Vir