The Financial Crisis and Future of America
09-29-2008, 07:16 AM
#1
Line Holder
Thread Starter
Joined APC: Aug 2008
Position: MD-80 FO
Posts: 91
The Financial Crisis and Future of America
I have been very bothered recently by the federal government $700 Billion bailout and even more bothered by why this happend. Perhaps I am a little more offended by this due to the fact that I am an adamant saver and invester. But everyone who gives a damn about future generations (and with a $10 trillion deficit....the future is now for baby boom and gen X'ers), should be very concerned as to both how we got into this financial mess and how we can possibly move forward with this staggaring debt.
So I have been asking anyone who will engage in a conversation "Why did this happen?" I have been given many explanations, the lamest of which is a dismissive accusation of corporate greed or Wall St. greed. This answer did not and will not satisfy me. It seemed like something that could only satisfy a middle school drop out or lemming (mental midget if you prefer).
In the airline industry, we have learned that an accident never occurs due to one thing. It is always a series of events that we call the error chain. The job of the flight crew is to identify the chain and break it. This identification and intervention always prevents disaster. Typically, after a disaster the NTSB will write an accident investigation report for all pilots to read and do all things possible to ensure that it does not happen again.
Shortly after the attacks of 9/11 congress created the 9/11 commission to determine the error chain that led to the terrorist attacks. This commission did an effective job of pointing out the governments own shortcomings for nearly a decade that lead to the breakdowns that muslim extemests capitalized on.
I believe that a new commission report must be written on the financial demise of our country, but that it must be written by US citizens who work everyday and pay far too much in taxes to simply watch politicians in congress destroy the very country that we all used to love.
The biggest link in our current Economic Error Chain that I can find is something called the Community Reinvestment Act. Although its origins are back in 1977 when signed into law by President Jimmy Carter, this legislation did not grow fangs until it was changed in the mid 1990's.
Clinton Administration Changes of 1995
In early 1993 PresidentBill Clinton ordered new regulations for the CRA which would increase access to mortgage credit for inner city and distressed rural communities.[7] The new rules went into effect on January 31, 1995 and featured: requiring strictly numerical assessments to get a satisfactory CRA rating; using federal home-loan data broken down by neighborhood, income group, and race; encouraging community groups to complain when banks were not loaning enough to specified neighborhood, income group, and race; allowing community groups that marketed loans to target to groups to collect a fee from the banks.[4][6]
The new rules, during a time when many banks were merging and needed to pass the CRA review process to do so, substantially increased the number and aggregate amount of loans to low- and moderate-income borrowers for home loans, some of which were "risky mortgages." Banks set up CRA departments, a CRA consultant industry was created and new financial-services firms helped banks invest in packaged portfolios of CRA loans to ensure compliance. Established and new community groups began marketing such mortgages. The Senate Banking Committee estimated that as of 2000, as a result of CRA, such groups had received $9.5 billion in services and salaries. As of that time such groups also had received tens of billions of dollars in multi-year commitments from banks, including ACORN Housing $760 million; Boston-based Neighborhood Assistance Corporation of America $3 billion; a New Jersey Citizen Action-led coalition $13 billion; the Massachusetts Affordable Housing Alliance $220 million.[4] The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent.[8][9]
Related rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. 10% for banks, encouraging banks to make even more loans to low income communities, often with no down payment and little documentation. By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market.[5] Due to massive financial losses, on September 7, 2008 the Federal Housing Finance Agency (FHFA) put Fannie Mae and Freddie Mac under the conservatorship of the FHFA.[10]
Here is the link if you require your own research.
http://en.wikipedia.org/wiki/Community_Reinvestment_Act
How does the USA avoid a financial meltdown? How do we not condemn our children and grandchildren to a form of National Debt Slavery? How do we meet even a fraction of our future obligations for Social Security and Medicare?
I believe that we all know the answer. America will simultaneusly lose its standing in the world as "the land of opportunity", the place where all people accross the globe desire to live and work, as well as become a much less charitable country.
I believe that our abandonment of charitable zeal will be felt around the world in the absense of U.S. Federal Dollars for assistance to developing countries as well as at home in a new era where our government divorces itself from all social programs simply to pay the interest on the national debt.
The simple survival of Freedom and the survival of the constitution will require the individual citizens to either coerce or replace memebers of the Senate and House of Representatives to de-fund not only the Community Reinvestment Act, but all acts of Government that blurr the lines between charity and government duty. I believe that every portion of government dedicated to Wellfare programs or programs that promote the public good will be left to Churches and private organizations and individuals.
I thank you for reading and wish for all constructive input.
So I have been asking anyone who will engage in a conversation "Why did this happen?" I have been given many explanations, the lamest of which is a dismissive accusation of corporate greed or Wall St. greed. This answer did not and will not satisfy me. It seemed like something that could only satisfy a middle school drop out or lemming (mental midget if you prefer).
In the airline industry, we have learned that an accident never occurs due to one thing. It is always a series of events that we call the error chain. The job of the flight crew is to identify the chain and break it. This identification and intervention always prevents disaster. Typically, after a disaster the NTSB will write an accident investigation report for all pilots to read and do all things possible to ensure that it does not happen again.
Shortly after the attacks of 9/11 congress created the 9/11 commission to determine the error chain that led to the terrorist attacks. This commission did an effective job of pointing out the governments own shortcomings for nearly a decade that lead to the breakdowns that muslim extemests capitalized on.
I believe that a new commission report must be written on the financial demise of our country, but that it must be written by US citizens who work everyday and pay far too much in taxes to simply watch politicians in congress destroy the very country that we all used to love.
The biggest link in our current Economic Error Chain that I can find is something called the Community Reinvestment Act. Although its origins are back in 1977 when signed into law by President Jimmy Carter, this legislation did not grow fangs until it was changed in the mid 1990's.
Clinton Administration Changes of 1995
In early 1993 PresidentBill Clinton ordered new regulations for the CRA which would increase access to mortgage credit for inner city and distressed rural communities.[7] The new rules went into effect on January 31, 1995 and featured: requiring strictly numerical assessments to get a satisfactory CRA rating; using federal home-loan data broken down by neighborhood, income group, and race; encouraging community groups to complain when banks were not loaning enough to specified neighborhood, income group, and race; allowing community groups that marketed loans to target to groups to collect a fee from the banks.[4][6]
The new rules, during a time when many banks were merging and needed to pass the CRA review process to do so, substantially increased the number and aggregate amount of loans to low- and moderate-income borrowers for home loans, some of which were "risky mortgages." Banks set up CRA departments, a CRA consultant industry was created and new financial-services firms helped banks invest in packaged portfolios of CRA loans to ensure compliance. Established and new community groups began marketing such mortgages. The Senate Banking Committee estimated that as of 2000, as a result of CRA, such groups had received $9.5 billion in services and salaries. As of that time such groups also had received tens of billions of dollars in multi-year commitments from banks, including ACORN Housing $760 million; Boston-based Neighborhood Assistance Corporation of America $3 billion; a New Jersey Citizen Action-led coalition $13 billion; the Massachusetts Affordable Housing Alliance $220 million.[4] The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent.[8][9]
Related rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. 10% for banks, encouraging banks to make even more loans to low income communities, often with no down payment and little documentation. By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market.[5] Due to massive financial losses, on September 7, 2008 the Federal Housing Finance Agency (FHFA) put Fannie Mae and Freddie Mac under the conservatorship of the FHFA.[10]
Here is the link if you require your own research.
http://en.wikipedia.org/wiki/Community_Reinvestment_Act
How does the USA avoid a financial meltdown? How do we not condemn our children and grandchildren to a form of National Debt Slavery? How do we meet even a fraction of our future obligations for Social Security and Medicare?
I believe that we all know the answer. America will simultaneusly lose its standing in the world as "the land of opportunity", the place where all people accross the globe desire to live and work, as well as become a much less charitable country.
I believe that our abandonment of charitable zeal will be felt around the world in the absense of U.S. Federal Dollars for assistance to developing countries as well as at home in a new era where our government divorces itself from all social programs simply to pay the interest on the national debt.
The simple survival of Freedom and the survival of the constitution will require the individual citizens to either coerce or replace memebers of the Senate and House of Representatives to de-fund not only the Community Reinvestment Act, but all acts of Government that blurr the lines between charity and government duty. I believe that every portion of government dedicated to Wellfare programs or programs that promote the public good will be left to Churches and private organizations and individuals.
I thank you for reading and wish for all constructive input.
09-29-2008, 07:29 AM
#2
With The Resistance
Joined APC: Jan 2006
Position: Burning the Agitprop of the Apparat
Posts: 6,191
Greed is one thing, but we must ask what allowed greed to take hold and wreck the market. The CRA, Freddie and Fannie were the prime players.
Further reading: Subprime mortgage crisis - Wikipedia, the free encyclopedia
In a perfect world, heads would roll and ropes would stretch. Poor regulation is in fact worse than no regulation.
I doubt that the people involved will order their own investigation.
Further reading: Subprime mortgage crisis - Wikipedia, the free encyclopedia
In a perfect world, heads would roll and ropes would stretch. Poor regulation is in fact worse than no regulation.
I doubt that the people involved will order their own investigation.
09-29-2008, 09:14 AM
#3
Line Holder
Joined APC: Sep 2006
Posts: 36
You are correct about the CRA.
For some good reads on the current situation check out The Bailout Reader. The Bailout Reader - Mises.org - Mises Institute
Ron Paul explains it well: LewRockwell.com Blog: Ron Paul: Corporatist Bailout Will Destroy the Dollar
Where is the money for this bailout going to come from? Understanding the money creation process is important to understanding how our country is going to collapse.
For some good reads on the current situation check out The Bailout Reader. The Bailout Reader - Mises.org - Mises Institute
Ron Paul explains it well: LewRockwell.com Blog: Ron Paul: Corporatist Bailout Will Destroy the Dollar
Where is the money for this bailout going to come from? Understanding the money creation process is important to understanding how our country is going to collapse.
09-29-2008, 11:41 AM
#4
Gets Weekends Off
Joined APC: Jun 2008
Posts: 357
I'm not too worried about the debt of Social Security and here's why. This system was built on the plan that the population of the country would continue to increase and thus those paying into it would continue to rise. The solution is very simple; increase the population of the US and simultaneously increase the age that one receives the benefits. The easy way to increase the population is allow more LEGAL IMMIGRATION. There are lots of well educated and hardworking people around the world who would love to move to the US.
As for the national debt, here's the answer. As long as the economy grows at a rate faster than the deficit and the debt, it will all work out in the end. The solution to this is get congress to stop spending, and then we will grow out of the problem. However, the problem with this is; 50% of the US population does not pay taxes and has no incentive to get the current congress to stop spending. The solution to that, is put in place a system where every citizen pays taxes and has a vested interest in where the taxes go.
As for the national debt, here's the answer. As long as the economy grows at a rate faster than the deficit and the debt, it will all work out in the end. The solution to this is get congress to stop spending, and then we will grow out of the problem. However, the problem with this is; 50% of the US population does not pay taxes and has no incentive to get the current congress to stop spending. The solution to that, is put in place a system where every citizen pays taxes and has a vested interest in where the taxes go.
09-29-2008, 11:52 AM
#5
With The Resistance
Joined APC: Jan 2006
Position: Burning the Agitprop of the Apparat
Posts: 6,191
Originally Posted by MD10PLT
I'm not too worried about the debt of Social Security and here's why. This system was built on the plan that the population of the country would continue to increase and thus those paying into it would continue to rise. The solution is very simple; increase the population of the US and simultaneously increase the age that one receives the benefits. The easy way to increase the population is allow more LEGAL IMMIGRATION. There are lots of well educated and hardworking people around the world who would love to move to the US.
As for the national debt, here's the answer. As long as the economy grows at a rate faster than the deficit and the debt, it will all work out in the end. The solution to this is get congress to stop spending, and then we will grow out of the problem. However, the problem with this is; 50% of the US population does not pay taxes and has no incentive to get the current congress to stop spending. The solution to that, is put in place a system where every citizen pays taxes and has a vested interest in where the taxes go.
As for the national debt, here's the answer. As long as the economy grows at a rate faster than the deficit and the debt, it will all work out in the end. The solution to this is get congress to stop spending, and then we will grow out of the problem. However, the problem with this is; 50% of the US population does not pay taxes and has no incentive to get the current congress to stop spending. The solution to that, is put in place a system where every citizen pays taxes and has a vested interest in where the taxes go.
Excerpt from recent Federal Reserve speech
--------------------------------------------------------------------------------
Richard W. Fisher, May 2008 see entire speech here:Storms on the Horizon - Richard Fisher Speeches - News & Events - FRB Dallas
"I want to remind you that I am only talking about the unfunded portions of Social Security and Medicare. It is what the current payment scheme of Social Security payroll taxes, Medicare payroll taxes, membership fees for Medicare B, copays, deductibles and all other revenue currently channeled to our entitlement system will not cover under current rules. These existing revenue streams must remain in place in perpetuity to handle the “funded” entitlement liabilities. Reduce or eliminate this income and the unfunded liability grows. Increase benefits and the liability grows as well.
Let’s say you and I and Bruce Ericson and every U.S. citizen who is alive today decided to fully address this unfunded liability through lump-sum payments from our own pocketbooks, so that all of us and all future generations could be secure in the knowledge that we and they would receive promised benefits in perpetuity. How much would we have to pay if we split the tab? Again, the math is painful. With a total population of 304 million, from infants to the elderly, the per-person payment to the federal treasury would come to $330,000. This comes to $1.3 million per family of four—over 25 times the average household’s income.
Clearly, once-and-for-all contributions would be an unbearable burden. Alternatively, we could address the entitlement shortfall through policy changes that would affect ourselves and future generations. For example, a permanent 68 percent increase in federal income tax revenue—from individual and corporate taxpayers—would suffice to fully fund our entitlement programs. Or we could instead divert 68 percent of current income-tax revenues from their intended uses to the entitlement system, which would accomplish the same thing.
Suppose we decided to tackle the issue solely on the spending side. It turns out that total discretionary spending in the federal budget, if maintained at its current share of GDP in perpetuity, is 3 percent larger than the entitlement shortfall. So all we would have to do to fully fund our nation’s entitlement programs would be to cut discretionary spending by 97 percent. But hold on. That discretionary spending includes defense and national security, education, the environment and many other areas, not just those controversial earmarks that make the evening news. All of them would have to be cut—almost eliminated, really—to tackle this problem through discretionary spending.
I hope that gives you some idea of just how large the problem is. And just to drive an important point home, these spending cuts or tax increases would need to be made immediately and maintained in perpetuity to solve the entitlement deficit problem. Discretionary spending would have to be reduced by 97 percent not only for our generation, but for our children and their children and every generation of children to come. And similarly on the taxation side, income tax revenue would have to rise 68 percent and remain that high forever. Remember, though, I said tax revenue, not tax rates. Who knows how much individual and corporate tax rates would have to change to increase revenue by 68 percent?
If these possible solutions to the unfunded-liability problem seem draconian, it’s because they are draconian. But they do serve to give you a sense of the severity of the problem. To be sure, there are ways to lessen the reliance on any single policy and the burden borne by any particular set of citizens. Most proposals to address long-term entitlement debt, for example, rely on a combination of tax increases, benefit reductions and eligibility changes to find the trillions necessary to safeguard the system over the long term.
No combination of tax hikes and spending cuts, though, will change the total burden borne by current and future generations. For the existing unfunded liabilities to be covered in the end, someone must pay $99.2 trillion more or receive $99.2 trillion less than they have been currently promised. This is a cold, hard fact. The decision we must make is whether to shoulder a substantial portion of that burden today or compel future generations to bear its full weight."
__________________
09-29-2008, 12:48 PM
#6
Line Holder
Joined APC: Aug 2008
Posts: 31
I would like to chip in from an outsider's perspective. I am not from the U.S., yet I have had the privilege to live there and in many other countries. I am currently based in Canada.
I am stunned that the bill did not pass in Congress. Yes, there is much to blame in Wall Street, and hindsight is always 20/20. However, when it comes to a crisis (which this clearly is, and not just a domestic crisis for you, but a worldwide one for all of us), it does become imperative to solve it as quickly as possible first and foremost. As pilots, when you find yourselves in an emergency and one of your engines catches fire, you turn it off, correct? First things first.
Yes, taxpayers' money will be used. I live in Canada and believe me, taxes here are way, way higher than in the U.S. However, if this country happened to drive itself into a financial mess, even though it would make me angry, very angry, that my tax money would be used to bail out the mess, I would still understand that doing it is better than not. I am not thinking politics here, I am simply thinking of everyone's collective financial well being. Forget about politics; it is time to do the best that can be done given the situation. There will be plenty of time to figure out who did what and to assign responsibility and enforce regulations.
For now though, I am completely stunned at what is happening in the U.S. I, (we, I should say, as in the rest of the world) cannot believe that personal/political interests may be taking over a decision that clearly needs to be taken in order to avoid the collapse of the global economic foundations. Yes, what happened is wrong, for sure. Wall Street was out of control for years. But gentlemen, this is a crisis. It's not time to point fingers and lay blame. It's time to get together and act quickly before it's too late.
I do hope for everyone's sake that your country will find the strength to pull together and keep forging forward. You have done it many times before, of course you can do it again. We (the rest of the world) are cheering for you and depending on the wisdom of your decisions.
I am stunned that the bill did not pass in Congress. Yes, there is much to blame in Wall Street, and hindsight is always 20/20. However, when it comes to a crisis (which this clearly is, and not just a domestic crisis for you, but a worldwide one for all of us), it does become imperative to solve it as quickly as possible first and foremost. As pilots, when you find yourselves in an emergency and one of your engines catches fire, you turn it off, correct? First things first.
Yes, taxpayers' money will be used. I live in Canada and believe me, taxes here are way, way higher than in the U.S. However, if this country happened to drive itself into a financial mess, even though it would make me angry, very angry, that my tax money would be used to bail out the mess, I would still understand that doing it is better than not. I am not thinking politics here, I am simply thinking of everyone's collective financial well being. Forget about politics; it is time to do the best that can be done given the situation. There will be plenty of time to figure out who did what and to assign responsibility and enforce regulations.
For now though, I am completely stunned at what is happening in the U.S. I, (we, I should say, as in the rest of the world) cannot believe that personal/political interests may be taking over a decision that clearly needs to be taken in order to avoid the collapse of the global economic foundations. Yes, what happened is wrong, for sure. Wall Street was out of control for years. But gentlemen, this is a crisis. It's not time to point fingers and lay blame. It's time to get together and act quickly before it's too late.
I do hope for everyone's sake that your country will find the strength to pull together and keep forging forward. You have done it many times before, of course you can do it again. We (the rest of the world) are cheering for you and depending on the wisdom of your decisions.
09-29-2008, 02:48 PM
#7
Working Class Dog
Joined APC: Jan 2007
Position: Spares Pusher
Posts: 1,668
Kind words
Originally Posted by Tinkerbell
I do hope for everyone's sake that your country will find the strength to pull together and keep forging forward. You have done it many times before, of course you can do it again. We (the rest of the world) are cheering for you and depending on the wisdom of your decisions.
.
