Flint's Column

I've heard that figure and find it shocking. I would like to hear an explanation how the expenditures doubled. How much of it has to do with the war on drugs (i.e. locking up drug users) and three strikes?

Yesterday at 8:53am ·

Many politicians of the past, on both sides of the aisle have run on the platform that we can't saddle future generations with the debt of the present: Social Security, Medicare and now Public Pension Funds. Once elected, most of them forgot their words and simply went forward and voted for legislation that made it worse, breaking their promises ...See More

Yesterday at 8:59am ·

You should rephrase that, Flint: "Anyone else sick of the idea we're going to have to pay what things cost up front from now on instead of deferring costs to a later date in the hopes the money will appear from somewhere, and what things cost keeps going up while income's dropping so we're not going to be able to afford anything near what we used to claim we could?" California should just declare bankruptcy and get it over with. (Probably Nevada and a bunch of other states should too.)

Yesterday at 9:26am ·

Flint Dille

You're right, Steve and Rick. I think we are going to see the Age of Bankruptcy.

And, after the Goldman hearings (which may or may not have been a sham, some say yes, some say no, I don't know enough to know), i think it is time we investigate the investigators.

Curious that neither side of the aisle seems to be confronting their own ...See More

Yesterday at 9:51am ·

Investigate the investigators? Where have you been Flint? 30 years of deregulation and 'free market principles' have resulted in the dismantling of the investigators. Speaking of things that no one wants to pay for, the reality is that an unregulated market allows fraud and corruption to florish. This goes on and faith in the market is destroyed, ultimately driving collapse.

Yesterday at 9:57am ·

Ted Henning

This certainly isn't a new idea. We've been doing it for decades.

Yesterday at 10:02am ·

Flint Dille

C'mon Scott. Not even Barney Frank is claiming that Fannie May and Freddie Mac weren't government animals.

Yesterday at 10:04am ·

They weren't doing anything that Goldman Sucks and the rest of the Big Banks were doing....lending to anybody who breathed and hoping the housing market wouldn't crash.....bunch of f'ng idiots.

Yesterday at 10:15am ·

Terrence C Briggs

Inflaaaaaaaaaation. The only cure: buying a flat-screen TV, a fuel-efficient car, a new cell phone, and a faster computer with the latest version of Windows!

Yesterday at 10:38am ·

Now that you mention it, I do need a faster computer with the latest version of Windows...

Even Adam Smith, the father of free trade economics, believed the natural role of government was to regulate the markets to promote competition, stem abuses and prevent monopolies that exerted de facto tyrannies over markets and were the natural enemies of competition. But for some reason those who cite Adam Smith never cite that volume of his theories...

Yesterday at 11:18am ·

@Flint, you're blaming all of our problems on Fannie and Freddie? Really? You can't be serious.

Yesterday at 11:21am ·

Goldman Sachs is being investigated right now because they put together packages of worthless mortgages, the ones they were almost certain would fail, and sold the packages to other investors as "high risk" funds, without bothering to tell them just how high (~99%) was...

Hell, even now Goldman Sachs is involved with a number of brokers, banks and...See More

Yesterday at 11:24am ·

I say we sell Texas & Arizona to the Mexican Drug Cartels to pay off the national debt. I hear they're the only ones with any cash.

And let's be frank...is anybody really going to miss Texas & Arizona?

We keep New Mexico...Taos is so pretty in the winter time.

Yesterday at 11:28am ·

Flint, about Fannie Mae & Freddy Mac: no one's doubting the abuses, but the abuses didn't just spontaneously erupt. They erupted because banks saw a way to profit by putting the taxpayers and not themselves at risk, and used the FMs in ways they were never really intended. That officials running the FMs went along with this is hardly surprising, given how willing most in Washington are to do anything to make the banks happy, as long as the public doesn't hear about it.

Yesterday at 11:29am ·

Flint Dille

We can't sell Texas they're one of the only solvent states in the country.

Yesterday at 11:29am ·

I'm on board with Rick's proposal. As for jail time for Goldman, Alan Greenspan and Robert Rubin specifically exempted derivities from the gambling laws under the guise of free market reforms, so I don't see any jail in their future. I think its called the perfect crime.

Yesterday at 11:31am ·

BTW, I forgot to mention that Senator Phil Gramm from Texas drafted the Commodities Future Modernization Act. Since we’re considering a sale, we can’t deny the Texans credit where credit is due.

Yesterday at 11:35am ·

Flint, I think you are confusing Fannie Mae for Ginnie Mae.

Ginnie Mae is federally owned but only sells conforming loans.

Fannie Mae has been a publicly held corporation since 1968. It is no different than Lehman Bros. or IBM in that regard. It's the same with Freddie Mac. Fannie and Freddie got screwed by guarnteeing all the non-conforming...See More

Yesterday at 11:49am ·

In 2004, a mortgage broker told me: "If they can fog a mirror, I can get them a loan." Loan originators got big bonuses for signed pieces of paper. It did not matter who signed them. There was been massive fraud in the mortgage market at the moment the loans were originated. Those loans were packaged in large packages (presumably to reduce risk...See More

Yesterday at 2:29pm ·

Fannie Mae and Freddie Mac began as public institutions with a public purpose. The purpose was to create liquidity in the mortgage market by buying mortgage loans to create cash flow. Those institutions were privatized in the '60's to get them off the books. But they continued to be limited by the public purpose for which they were created. This arrangement was doomed to fail. You had a private entity with a profit motive but also bound to provide a public function with a tacit government guarantee. As long as the mortgage market was stable, the unsustainable condition rested precariously on sand. But when the bottom fell out, the government had to step in. Now the government controls both Fannie and Freddie but those institutions are still "off the books." In other words, not in the budget. This is a trap. If they put Fannie and Freddie in the budget, the deficit will rise and interest rates will go up. You can't do that in a recession. Because those institutions are needed to provide the liquidity they were created to provide, the only way to solve the Fannie/Freddie problem is to keep them back under government control where they belong. Otherwise, you are back on the same roller coaster as before. But that cannot happen until the economy recovers.

Yesterday at 2:40pm ·

"Derivatives" were not exempted from the gambling laws. There are a lot of different kinds of derivatives. Options and futures contracts are derivatives and they are useful hedging instruments used to balance risk. The only derivatives that were exempted were CDS's (credit default swaps). A CDS is an "insurance policy" that insures a loan against default. That is what AIG was selling - insurance against loan defaults. The problem was twofold: those loans were doomed to default because they were fraudulent in the first place. And because there was no regulation whatsoever, AIG was grossly undercapitalized. In other words, they took the risk of the defaults, but they didn't have the money to pay off the loans when the inevitable defaults occurred. Like if you had auto insurance, but the insurance company turns out to be insolvent when somebody totals your car. No money there to pay.

Yesterday at 2:48pm ·

Hope that helps.

Yesterday at 2:49pm ·

Agreed that I was overbroad in my description of derivatives. Greenspan, Rubin and Gramm all thought these were sophisticated folks who didn't need protection. Whoops. And we got to pay the bill.

Yesterday at 3:08pm ·

Credit default swaps were deregulated by the SEC under the Commodity Futures Modernization Act enacted by Congress in 2000. These derivatives were originally exempted from gambling laws because they were treated as "insurance" instruments used by sophisticated parties. This in and of itself should not be a problem if the the parties areadequately capitalized. In other words, if they have enough cash reserves to back the debt obligation. That is why the current financial reform bill under consideration is going to contain rules requiring these derivatives to be traded through an exchange instead of just between parties and will have stiff capitalization requirements. The reason the republicans have been preventing the bill from coming to the floor is because they want all of their special interests to be exempted from the capitalization requirements. That is what the whole secret dispute is about. They are stallling the bill because they won't go to the floor and offer those amendments in public.

Yesterday at 3:38pm ·

In other words, they don't want YOU to know that is what they are doing!

Yesterday at 3:39pm ·

That's all folks!

Yesterday at 3:39pm ·

Good stuff Harriet; I give you credit (but not a CDS) as one of the best informed FBer I've encountered in months.

Yesterday at 4:05pm ·