Housing Market

Where In Mayor Bloomberg Says Stupid Things

I'm still trying to wrap my head around how a man, who is clearly not a dummy, could say something this, well, dumb.

“I hear your complaints,” Bloomberg said. “Some of them are totally unfounded. It was not the banks that created the mortgage crisis. It was, plain and simple, Congress, who forced everybody to go and give mortgages to people who were on the cusp. Now, I’m not so sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn’t have had them without that.

“But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody. And now we want to go vilify the banks because it’s one target, it’s easy to blame them and Congress certainly isn’t going to blame themselves.”

It's true that the Bush Administration encouraged the big banks to put more people in homes as part of the Bush "Ownership Society," but to go as far as to say congress forced them to give mortgages to people who were almost certainly going to default is a bit of a stretch.

It's not as if the government put a gun to the head of Wall Street and told them to defraud their employees, their customers, and some of their biggest investors. Some of those investers got rich during the financial crisis of 2008, but many of them lost a lot of money too. In total, some 20 percent of the nation's wealth vanished into thin air.

Congress and the Bush Administration made it easier for the big banks to do what they did, and they certainly looked the other direction while it happened, but they did not force Wall Street to commit one of the biggest frauds in history.

Why make excuses for them? What happened to business taking responsibility for its own actions and failures? Is blaming the government the new get out of jail free card?

  • Dan_in_DE

    The reality is people, that the Fannie and Freddie argument is complete and utter BS. Respectable economists are quick to admit that they were and are flawed institutions but, the fact of the matter is, some conservative a**hole had to make up new criteria for ‘subprime’ in order to make it look like Fannie and Freddie bore a large share of the responsibility for subprime lending. In reality, they were hardly above the national average for loan deliquincy. Whereas actual subprime loans carried triple the delinquincy rate.

    Bloomberg is a very intelligent man, I assume. So he must also be a cynical fuck! Because while he certainly understands articles like Responding to Wallison’s Latest Defense of His Flawed Financial Crisis Inquiry Commission Dissent, he knows that not only is his constituency incapable of comprehending a scientific article like Min’s, but that they will all be getting their facts on this from the right’s infallable authority in financial policy, Rush Limbaugh.

  • D_C_Wilson

    “Da gummit forced the banks to make bad loans” is one of the most cherished myths of the right. It’s great way for them to both blame the government for the housing bubble and exonerate their lords and masters on Wall Street. Never mind all the billions that were made selling bundled sub prime loans. It was all a government conspiracy to hurt the poor, defenseless banks.

  • joseph2004

    A financial newsletter I get lays it out this way:
    “”… many analysts, including the Wall Street Journal, had been warning the public about the problems at Fannie Mae and Freddie Mac, since 2003.
    “At every turn, two Democratic lawmakers – Barney Frank (Mass.) and then-senator Christopher Dodd (Conn.) – defended [Fannie and Freddie]. Make no mistake, the blame for the crisis lies squarely at their feet. Without the multi-trillion-dollar expansion of Fannie and Freddie’s balance sheets, the housing bubble would not have occurred.”

    I don’t lay it only at Frank’s and Dodd’s feet – many other players were involved as well – but the point is, Fannie and Freddie were encouraged in large part by our government “leaders” to back riskier and riskier loans. If you’re a mortgage lender, why would you not be willing to sell all sorts of mortgages, reducing your lending criteria in the process, if you know they’ll be backed not just by Fan and Fred, but essentially by the Federal Government.

    (I remember one of the stock pickers at Forbes magazine recommending Fannie and Freddie some months prior to the meltdown specifically because the two companies were “backed by the government.” Who could lose? )

    Clinton and Dodd and Frank and Bush to mention a few created the conditions that pricipitatated the mortgage crisis. Wondering aloud why lots of banks and the people running them didn’t act “morally” or “ethically” in this situation is the wrong angle. Expecting them to listen to the better angels of their nature didn’t then and won’t in the future prevent bad behavior if the incentives are in place that encourage it. It’s an unfortunate part of human nature and it is not going away any time soon. You can’t make policy hoping the opposite.

    In the end none of the people who really set in motion the events that created the sub-prime crisis that got this whole recession going will have to answer for their involvement because they did or still do sit in the top seats of government.

  • jimtowndem

    Paul Krugman has a good rant about how Bloomberg is full of shit with figures and further links to other papers on this subject. good reading


  • http://twitter.com/JimmyAbra Jimmy Abraham
  • GrafZeppelin127

    This is the thing that no one has been able to answer: How exactly does Congress (or, in the alternative one single member of the minority party in Congress) “force” any bank, let alone any and every bank, to give loans to people who would not otherwise qualify?

    No one has been able to point me to a federal statute that provides for penalties against banks that don’t make subprime or other risky home loans. No one has been able to explain exactly what Congress, or that one member of the minority party, could do or threaten to do to a bank that refused to lower its lending standards.

    To encourage or incentivize banks to make riskier loans is one thing; to force them to do it against their will is quite another. The latter implies that they would be punished if they refused, and so far I haven’t heard anyone explain or describe exactly how that was supposed to happen. And the idea that it was one single Congressperson in the minority party who singlehandedly “forced” the banks to do this, against their will, against the will of the Congressional majority and the President, all of whom were (apparently) powerless to prevent it, is even more ridiculous.

    • MrDHalen

      I would like to deepen the plot a little further if I may. What roll did financial lobbyist play in crafting these supposedly “forcing” policies? Everybody knows most of the laws that come out of congress are written by corporate lobbyist.

      Corporations complain that the government is ruining business for them while they simply use our government to jockey for position and resources against each other; and American citizens are an after- thought.

    • jmby

      I WISH Congress could, or would, force the banks into doing something they don’t want to do. Like making loans to TRUE small businesses so they can expand and hire, making home loans to folks who can afford homeownership but can’t get financing to buy a house, or restructuring existing home loans so folks with those predatory sub-prime mortgages can find a way to keep from going into foreclosure and having their home dumped onto an oversaturated market.