February 17, 2009

Why not put people to work by paying them to water their own lawns?

The government could do that. And how different from that is the stimulus?

Watch this clip. Megan McArdle is on a rampage in this one. The other head is Dean Baker of Beat the Press.

92 comments:

AlphaLiberal said...

It's a ridiculous idea. All the water would freeze into sheets of ice.

Besides, the stimulus isn't about just spending money, as some uninformed ignoramus might argue. It's about spending money to get things we need anyway, after decades of low public investment.

AlphaLiberal said...

So she compares the WPA to telling people to go out and water their lawns. This after a long stream of naysaying.

Idiotic.

The WPA built useful things - post offices, parks, bridges, schools, roads, theaters, etc. Useful things that continue in service to this day.

This idiot McArdle compares that to watering your lawn.

Pfft.

HelenParr said...

She reminds me of Ally Sheedy.

jayne_cobb said...
This comment has been removed by the author.
HelenParr said...

He reminds me of the dad on "Family Ties" ... Michael Gross.

Michael H said...

@AlphaLiberal - Where to start?

First, sheets of ice are highly prized during hockey season. It's a good way to get the childrens outside for some great exercise.

Second, if the stimulus isn't just about 'just spending money', please point out the sections where the gummint is encouraging thrift.

Third, things we need? You cannot be serious. Have you developed a sense of irony? If you have, it's wicked good.

Fourth, the WPA, for all the good it did, was to a degree, a gummint-run slave labor program. Very low pay, harsh conditions, hard labor, bad food, lousy accommodations. The bridges might be useful, but you'd scream loudly if you were forced into a WPA-like organization today.

Fifth, watering a lawn is a very useful program. It is the taking of water from aquifers, lakes and streams, accumulating and distributing it, allocating it on some basis of 'need' as determined by political bodies, spreading it around, and watching a large percentage evaporate before some of it finds its way back to the aquifers, lakes and streams from which it was appropriated.

An excellent metaphor for the 'stimulus' metaphor, and as American an activity as can be.

John said...

Megan voted for BO because she is weak minded and more concerned about fitting in with her lefty friends than she is about doing the right thing.

In the end, she is right. We would be better off building paramids or watering our lawns than what we are doing. It would be one thing if we took all this money and debt and did something useful or at least half way cool like going to Mars. But that is not what the government did. What they did was steal it and give it to their supporters.

But people like Megan voted for it for the most superficial of reasons. So, honestly, I really don't care what Megan has to say or what kind of rampage she is on. She showed her colors in November. I have no doubt come 2012, she will be voting for BO again because for her fitting in is more important than being right.

Jason (the commenter) said...

Dean Baker keeps saying "I don't understand" but at one point he admits that he personally sees her point. He has an obsession with relativism that obscures his common sense.

Michael H said...

Doh. Should read: An excellent metaphor for the 'stimulus' plan, and as American an activity as can be.

AlphaLiberal said...

Morning, Michael H,

I won't be here for long. Just one cup o' Joe. To your numbered points:


1. Yeah, hey dere, good for the kids to get out and play in the snow and ice.
2. Uh, "encouraging thrift" was not in my post and is not exactly a pressing national need (people are doing it, see economic data).

3. Things we need? Yes. Public buildings, like schools, that waste less energy. Fast trains.

4. WPA as slave labor. My uncle never implied as much as was in one of the work camps out in the country. That's a new take. He didn't mention the forced labor. :^)
5. Sounds repetitive.

I wonder if you, or most people on the right throwing stones, have actually read the bill.

peter hoh said...

Federal agricultural subsidies already pay people to water their lawns, provided they grow corn and their "lawns" are really big.

John said...

"He has an obsession with relativism that obscures his common sense."

It is called being "nuanced". It is how liberals turn the vice of being indecisive into a virtue. It allows them to both avoid making hard decisions and also look down their noses at those who do. It is a win win for them.

John said...

"4. WPA as slave labor. My uncle never implied as much as was in one of the work camps out in the country. That's a new take. He didn't mention the forced labor. :^) "

Read the history of it. They basically rounded poor people up and sent them to camps in the country to do meanial labor of dubious value. It wasn't quite slave labor, but it also wasn't anything that any of FDR's defenders today would want to be a part of.

Bissage said...

To the Nipper go the spoils of war.

That's a good boy!

AlphaLiberal said...

Meanwhile, in California, Republicans are holding up the state budget. They got corporate tax breaks,they got spending on many infrastructure programs stalled. But they didn't get their way 100% so no budget.

Republicans. holding. breath. and turning. blue? Never!

But it's not enough so they continue to obstruct. After all, they must defend their mortally wounded economic dogma that ran our nation into the ditch.

traditionalguy said...

Does anyone know how many dollars out of the $787,000,000,000. are going towards building useful things? We have too many buildings now. The last 10 years the false economy, financed by the Toxic debt, built the heck out of way too many of every type of building. The only thing left to build is the Highway-bridges-rapidrail. That would be enough to spend those dollars.But why do I have the feeling that 90% of the Porkulus Bill just keeps on keeping on the usual vote buying spree for Democrats. SHOW ME THE MONEY SPENT ON ANY INFRASTRUCTURE. Smiling faces on Obama and Pelosi and Reid do not give me any comfort. Those are the guys who like to show off by every deceptive and destructive act they trick the American government into pursuing.

EDH said...

AL,

I think by the time the "lawn watering" example came up the argument had shifted from output multipliers to a sub-point about how unemployment statistics should be used as a measure of the underlying health of the economy. Not the efficacy or output of various spending options.

As a liberal, you should know that income assistance programs are not counted as income to the poor in the poverty statistics. The idea is you want to produce a statistic that measures underlying poverty, not after the fact amelioration.

I think that was the point Megan was making about unemployment statistics.

Maguro said...

I wonder if you, or most people on the right throwing stones, have actually read the bill.

*No one* has read the damn bill, including the congressmen who voted for it. 1000 pages long and out for review for what, 24 hours or so? I wonder why they were in such a hurry to pass a bill full of projects that won't get built for 2 or 3 years.

Lem said...

I'm with Megan... and not just because she's hot.

The black market creates "jobs", if you want to call someone receiveing payment, a worker.

What is the difference?

The stimulus is a transfer of wealth and nothing else!

John said...

"Meanwhile, in California, Republicans are holding up the state budget. They got corporate tax breaks,they got spending on many infrastructure programs stalled. But they didn't get their way 100% so no budget."

And Democrats would rather shut down police and fire and essential services rather than do something about the welfare state or the teachers unions or any other entrenched interests to keep the state from going bankrupt. Democrats have run California for nearly 20 years. During that time, revenues have soared but they still can't keep the budget balanced and resort to old time shake down rackets of the public to keep going. As a liberal, why don't you just go out and rob people at gunpoint. It would at least be more of an honest living than supporting a government that does the same thing. Is liberalism about anything more than theft for the political class anymore?

Thomas said...

The best is when Dean admits that he can identify a non-job in the private sector, but can't do the same in the public sector.

I have lost what little respect I had for Dean.

Leland said...

It's about spending money to get things we need anyway, after decades of low public investment.

We had grass on the National Mall before, and within the last decade. Indeed, the government will be paying people to water that lawn, as if it hasn't previously been watered. There's been no neglect for decades, that's just something you are making up.

John said...

What liberals refuse to understand is that you can't get around the basic micro economic fact that wages have to equal productivity. If you put someone to work and you are paying them more than they are producing, they might as well be on welfare for the difference between their wages and productivity.

Liberals used to tour the old Soviet Union and rave about how unlike the evil west everyone there had a job. Of course, what they missed was that those jobs weren't really producing much of value. Yeah, people showed up and got paid but they didn't produce equal to their pay so they were not real jobs. They were an illusions.

The same is true of government jobs here. If the government spending goes to say building a needed bridge that saves more money in transportation costs, then the jobs are real. But if the government job is watering lawns or building bridges to nowhere, the jobs are just welfare and the "stimulus" is nothing but a wealth transfer.

The other thing liberals refuse to understand is the hard reality that the government really doesn't print its own money. It either borrows it, which has to be paid back with interest and takes the money away from investment in the private sector or it prints it which devalues the currency. There is no way around that. So, all of the "free money" liberals love to pass around, is not free at all. Basically liberals think government money is free and that government work doesn't have to produce anything of value to be worth it. It is a recipe for disaster and stagnation.

AlphaLiberal said...

Traditional guy, you can answer your own questions on the "web." There are millions of web pages available from your computer.

Within 2 clicks I found the answers to your questions. But I don't want to be a crutch for you.

I did find this funny selection of pictures from the White House showing Obama soliciting input from Republicans.

Michael H said...

Alph - "We Won" is not a solicitation for ideas from the minority party.

AlphaLiberal said...

What liberals refuse to understand is that you can't get around the basic micro economic fact that wages have to equal productivity.

Oh, for Pete's sake. Productivity has been climbing far faster than wages for nearly 3 decades now.

And, John, liberals have been pointing to this broken linkage for decades.

Why you think you have the first clue what liberals think is the only mystery. Where do you get your insights into the liberal mind? From Lush Windbag? No wonder you're soo badly infomred.

John said...

"Why you think you have the first clue what liberals think is the only mystery. Where do you get your insights into the liberal mind? From Lush Windbag? No wonder you're soo badly infomred."

If liberals understand the link between productivity and wages, why are they convinced like Dean is in this clip, that government funded jobs are "real jobs"?

If liberals understood the link, they would not be convinced the stimulus can create real jobs.

For the record, I do not listen to Rush Limbaugh. I am sorry you are so stupid and uniformed that you can't come up with anything of substance to say beyond screaming Rush.

Part of me thought that winning an election might get people like you beyond politics and argument by temper tantrum and emotion. Clearly, that was a false hope. Do yourself, your cause and the country a favor and start making arguments and thinking rather than throwing your rattle and screaming "Rush Limbaugh" everytime someone says something you disagree with it. Thinking, it can be a really neat activity. You should try it sometime.

AlphaLiberal said...

"We Won" is not a solicitation for ideas from the minority party.

Funny. It was when Republicans were in power (but then you drove Jeffords out of your party). Republicans just look childish demanding to write the bill after having their asses handed to them by the voters.

The voters ran over your dogma. R.I.P.

Besides, you guys got a lot of your demands met!

- 1/3 of the package given to tax cuts, even though these have little stimulative value - specifically to address Republican concerns.
- Funding for venereal disease prevention - OUT.
- Funding for the arts - out.
- Various other things.

Republicans got all this and then ratcheted up the rhetoric. Really, you can't deal with people of bad faith and Dems should stop trying. Nothing will make them happy except for complete surrender.

John Burgess said...

Oh, Noes!

My county in FL is about to impose strick water regulations permitting lawns to be watered only for a few hours, once per week.

Why does Washington hate the South so much? No stimulus for us, just a dry hosepipe instead of a dry corncob!

John said...

"Republicans got all this and then ratcheted up the rhetoric. Really, you can't deal with people of bad faith and Dems should stop trying. Nothing will make them happy except for complete surrender."

Yes and the Dems showed so much good faith in dealing with Bush. Why do the Republicans owe Mr. I Won and your ilk anything? The fact is that this bill is entirely the Dems creation. Thanks to this bill, BO and his ilk now own the economy. If it works and the economy turns around good for them. They can win in 2010. But if it doesn't, we know who to blame.

All Republicans voting for this national theft act would have done was prevent anyone from being held responsible for it. That is why BO and company wanted some Republican support so badly. They didn't need it outside of one or two sell outs in the Senate to get the thing passed. They wanted more because they know it isn't going to work and is nothing but a sellout to special interests but they don't want to be blamed for it. Well too bad. The Dems are going to get the blame for it and have to answer to the fact that BO has obligated more debt and spending in a month than Bush did in eight years.

AlphaLiberal said...

John, so.... you don't seem to understand the linkage between productivity and wages - NONE.

More productivity means more executive bonuses and higher shareholder returns while workers get the shaft. That's the record of the past 30 years.

...why are they convinced like Dean is in this clip, that government funded jobs are "real jobs"?

Do you even understand that this is a statement of belief, of economic dogma? Of doctrine?

Government-funded jobs ARE "real jobs". Try to make a coherent argument that they are not.

Better yet, make that argument to a firefighter, a cop, a school teacher, a road designer, a...

Oh, fuck it. Really,it's like trying trying to reason with someone from the Red Guard.

All you have is blind and unthinking doctrine.

AlphaLiberal said...

Yes and the Dems showed so much good faith in dealing with Bush.

Too much. Like when they voted for his Patriot Act, his invasion and occupation of Iraq, his retroactive immunity for telecoms taking part in wireless wiretapping, allowing his torture regimen to go unchecked, etc, etc.

Why do the Republicans owe Mr.I Won and your ilk anything?

Who said they do? Your personal strawman? They owe the country. Remember, country first?How soon they forget.

The fact is that this bill is entirely the Dems creation.
I just listed things changed in the bill to accommodate Republican demands. Therefore, it is clearly not entirely a Dem creation.

And, tell us, was it "generational theft" when Republicans passed trillions of dollars in tax breaks for the rich and well off over the past 8 years? (and shouldn't we be in Nirvana after all your promises about your economic doctrine that we've been following?)

Henry said...

Is there such as thing as nihilistic progressivism? If not, Dean Baker seems to have invented it. You could defend any government action you want by his standards of measurement.

John said...

"Do you even understand that this is a statement of belief, of economic dogma? Of doctrine?

Government-funded jobs ARE "real jobs". Try to make a coherent argument that they are not."

A government funded job that produces less value than the wages paid to the worker is not a real job. Period. There is no way around that. Are some government jobs real? Of course. But to be real they have to create something that is needed and valued equal to their wages. There is no way around that.

Perhaps some of the "jobs" created by this bill do that. But there is no gaurentee of that. Further, building "infrastructure" is no gaurentee of the jobs being real. If the infrastructure is bridges to nowhere and things that are not needed or don't produce much value to society, they are not real jobs.

This is why communism failed. The central planners could not figure out which jobs really created value so the jobs ended up being less productive than the wages. So everyone had a job but the standard of living went down every year.

You can scream "red gaurds" fuck it all you want. It doesn't change the hard reality of productivity and wages. It is pathetic or funny depending on how you look at it that you in one post scream that of course liberals understand the link between productivity and wages and then in the next two proceed to ignore that link and claim that every government job is a real job.

Like I said above. Stop and think. There are principled liberal arguments and argumetns for government jobs and stimulus. But a good principled liberal would never support this piece of crap of a bill. What are you more interested in, advancing liberal ideas or just defending everything BO and the Dems do? Right now it looks like the latter.

Henry said...

Alpha -- might it be wise that we look at the Bush administration and not repeat its fiscal blunders?

Too late.

John said...

Henry,

Yes Bush was wrong to spend a trillion or so of our children's money. Therefore, it is ok for the Democrats to spend trillions of it. So what if the Republicans ran deficits? How does that mean that the Democrats are right to run up even higher deficits? If OJ Simpson called and said it was a really bad idea to murder his wife, I guess Alpha Liberal would tell him to shut up that he had no right to say anything since he already killed his wife and then go ahead and kill his wife, his girlfriend and his kids.

Bart DePalma said...

I would suggest that the difference in productive and make work jobs can be determined by whether consumers are willing to pay for the goods or services provided by the worker.

AlphaLiberal said...

By the way, here are more Republican "ideas" that were incorporated into the stimulus bill that almost all Republicans still voted against:

- 1/3 of the package given to tax cuts,
- Funding for venereal disease prevention - OUT.
- Funding for the arts - out.
- A housing credit for buying news home ("Reinflate the bubble").
- School construction fund - ELIMINATED.
- funding to give unemployed medical coverage - ELIMINATED.
- billions in aid to states - ELIMINATED.

There's more. See the Nelson-Snowe deal.Fact is, the GOP got a LOT - far more than in any bill coming out of the Republican majorities.

AlphaLiberal said...

...whether consumers are willing to pay for the goods or services provided by the worker.

Sigh.

So if consumers don't line up to pay for schools or fire stations we don't need them?

Come on, this is just getting to be a sophomoric and ideological line.

aberman said...

Dean Baker doesn't understand how to value a job?

He should try to get a job as a professional essayist at an auto-repair company. When they don't hire him, he can ask why.

And yes, you can distinguish between teachers and self-lawn waterers as well.

Henry said...

John -- My point exactly. Over and over again, the defense of the plan appears to boil down to "Bush screwed up, now its our turn." And, like Bush, we have a deficit-spending "stimulus" program that is neither targeted nor immediate. The only difference is that this one has a few extra zeros at the end. The left needs to decide. Either Bush screwed up and Obama shouldn't repeat his mistakes, or he didn't screw up and Obama is right to embrace his example.

Alpha -- You may have convinced yourself by your repeated begging of the question, but no one else. Obama explicitely made the promise that in his administration good programs would be prioritized and bad programs cut. Are there any such programs?

As you note the Senate's cuts to the bill were hamfisted and ideological. But if you stick funding for venereal disease protection back into the "stimulus" bill, should anything go? Anything? You've reduced Obama's promise of good governance to Dean Baker's Tautology: A Good Program is a Program the Government Funds.

John said...

"Sigh.

So if consumers don't line up to pay for schools or fire stations we don't need them?"

That is only half the question. Of course schools and fire stations are needed and can create value. But the question is do we need this school or this fire station. There is a point of diminishing returns. Does the new "gold plated" fire station or school work any better than the old one? Does it work so much better so as to justify the cost? Those are the questions that have to be answered but that advocates of government spending refuse to answer.

Yes, the person above is wrong to assume that no government job is a real job. But you are equally wrong to assume that every government job, even one building a school or a fire station, is a real job.

AlphaLiberal said...

Henry, I'd engage your invitation to argue further but a) have to earn a living and b) no amount of facts or reason will do anything to sway the indoctrinated. So it would not be time well-spent.

But, from memory, the energy programs are good, smart grid is overdue, public building energy efficiency, weatherization, fire station upgrades and construction, rural broadband, nuclear contamination cleanup, transmission lines, advanced biofuels, rural community wastewater system upgrades, overall fed facilities upgrades and improvements, port security, etc, etc.

There is a partial answer to your question.I'm sure you will conclude these are all ridiculous things to spend money on.

Here's another reality-deprived wanker, this time saying Republican economic policies have nothing to do with our crisis, but that it's George Soros and Chcuk Schumer (you know, the Jews).

class-factotum said...

They basically rounded poor people up and sent them to camps in the country to do menial labor of dubious value.

I dunno. Based on my one data point, my grandfather, who left N. WI. to spend a couple of years in CA with the WPA, I'd say that a lot of guys were really happy not to have to milk someone else's cows twice a day, bale hay, and clean the manure out of the barn and do menial labor of dubious value instead.

John said...

"I'd say that a lot of guys were really happy not to have to milk someone else's cows twice a day, bale hay, and clean the manure out of the barn and do menial labor of dubious value instead."

No doubt many slaves were happy to have a roof over their head and three meals a day. So what?

John said...

Alpha Liberal,

Stop accusing people of being ideologues. It is really unflattering when you do so while being an ideologue yourself.

Is there anything about the bill you don't like? Is there anything the Dems could do that you wouldn't support? Until you can come up with a thoughtful position that doesn't involve shilling for one party or another, then you really don't have much to say.


What is appalling about this bill is not that it is a stimulus but the amount of money involved and how it raises spending baselines perminently. This is not a one shot deal. It is a perminent rise in the size of government.

The bills infrastructure plans won't take effect for years to come and won't help the economy now. Moreover, there is no evidence that the energy provisions are anything but a boondoggle. You just assume they are so great and needed because Dear Leader told you they were. If a "smart grid" or green projects really were that great, the private sector would already be doing them. The only reason they need government support is because they are expensive and don't make any money, which is another way of saying they are a boondoggle.

Also, the bill effectively repeals welfare reform. Welfare reform is the most popular and successful accomplishment of the your own Clinton Administration. People certainly did not vote Democratic in 2008 to repeal wefare reform. Yet, less than a month into office, that is exactly what BO is going to do. How is that anything but just lying and paying off leftwing interest groups?

Obama ran as someone who would put old politics behind him. Yet, in office he has never once stood up to the left wing of his party. He left the drafting of this bill entirely to the House liberals. He had no ideas to offer and no plans beyond paying off Democratic interests. This bill proves what fraud and an empty suit he really is.

AlphaLiberal said...

"John:"
They basically rounded poor people up and sent them to camps in the country to do menial labor of dubious value.

Really? Wow. New history rewritten before our eyes.

Were they "rounded up" at gunpoint? Do you have a link to this secret chapter of American history? How did you learn of this explosive news?

Two people here have passed along personal stories from people working on these programs that do not reflect your claims of slavery.

Or, maybe you're just confused by the WPA narratives recorded from those who lived through actual slavery?

AlphaLiberal said...

"John:"
Stop accusing people of being ideologues

When people stop being ideologues, sure. When people just recite dogma as an argument, they've got it coming.

I don't like most of the tax cut provisions nor the home-swap tax credit that will reinflate the speculator bubble. There's a lot I don't like about it, actually. Mostly the dreck Republicans demanded and the many jettisoned programs.

Also, given that the drop in private sector spending is at least 3-4x (plus) the size of the stimulus bill, I think the size is way too small.

...and how it raises spending baselines perminently
The provisions I've read have timelines in them for a 2-2.5 year horizon. i.e., not permanent.

You can find the bill here.

John said...

Yes Alpha Liberal, you just hate the Republican parts of the bill. Nothing thought up by a Democrat could ever be wrong. Good thing you are not an ideologue or anything.

Seriously, are you a parody? Are you some smart assed conservative on here posting to make liberals look foolish? If you are, you are doing a pretty good job.

m00se said...

The WPA was primairly a psychological program that also gave people money - it derived value from aid paid to people.

However the government needs to be the employer of last resort, not the first. The only government programs that ever spun off an industry or private sector job base was the military and the space programs.

What Megan is getting at her is the principal difference between the left and right on an economy and industry in general. Dean sees the job market as an monolithic entity, and seems to see this purely as value derived from work - which is on the surface correct.

Megan seems to see the economy and jobs as an ecosystem, where they need to be self sustaining and derive from businesses perception of value and opportunity.

The issue with Dean's view is that while it will pay people in the short run, it will not contribute to reinvigorating the economy, it just pays people for work and pushes that debt into the future. There is no net value being pushed into the economy, just money.

Henry said...

Alpha, my point is not to get your version of the bill. My point is the same as Megan's to Deans: How do you qualify success? By what standard should something go into the "stimulus" bill? By what standard should something be exempted.

It's hard to take you seriously when your standard for what goes into a "stimulus" bill is venereal disease funding and your standard for what doesn't belong is nothing.

If you wish to defend this bill as a stimulus bill, you have to have a standard for what a stimulus means (timeliness, for starters).

If it's just an omnibus spending bill submitted by a big Democratic majority, then you have to defend the programs in the bill. But, if it's not a stimulus bill, there was no reason for the rush through congress.

Obama's invitation to moderates was that while he was a liberal, he was a smart liberal -- a technocrat who was principled enough to focus spending on programs that worked.

On this bill he failed completely. He didn't drive the bill he shilled for it. He didn't ask for a more careful and deliberative process, he undermined it.

Those things are far more important than his meeting with Republicans, or the party conference concession sideshow. The process by which the bill was created was a betrayal of principle from the start.

Salamandyr said...

Perhaps the government could get everyone a prescription for Enzyte. It is also a purported "stimulus package", that in reality does nothing.

Dust Bunny Queen said...

Megan is correct. The difference between make-work jobs created by the government and private sector jobs is significant.

Make work, creates jobs and often produces valuable things: like bridges, dams, murals, oral history collections. But when the job is done, then what? What does the worker do next? Stay permanently on the government dime?

Private sector jobs tend to create longer term and on-going jobs. Private sector jobs also tend to multiply. When the business does better it can hire more people.

This so called stimulus plan of Obama, may create some jobs, but will they be permanent jobs? Long term jobs that create ancillary business opportunities. No it does not.

MayBee said...

I like it when Baker keeps repeating "If the American people decide watering lawns is a good way to employ people..."

It isn't in the hands of the American people. We are spectators for at least the next two years.

paul a'barge said...

Megan is looking particularly hot ...

1jpb said...

Seems like these two wasted a lot of time trying to determine if government workers count.

I believe that for many decades (but not during the thirties) they (except the military) have been included in employment statistics. And, they should be. When they are hired or terminated (like 20,000 in CA reported today) they do affect the labor market.

And, there is the additional complication of contractor employees where the government farms out government work to the private sector. For example, Does Megan want asphalt employees or building contractors to sometimes count their employees as employed and sometimes unemployed based on whether their daily work is on a private sector or government funded, respectively, project?

P.S.

DBQ,

I hope you can see that the private sector is able to screw up just like the public sector. Hopefully, as you witness failing financial (and other) corporations, you can see that the private sector is capable of widespread, more-or-less systematic failures that effect most of the population.

Of course, unlike the situation with wasteful government we (the tax payers as a whole) don't usually feel the the cost of failing corporations so there's less reason to disapprove of and worry about corporate screw ups.

Most of the time this is a good thing because it motivates folks to watch were their money is spent in government. But, it seems that folks should have been more concerned about corporations run amok, because it turns out that they can destroy stuff for normal folks pretty good too.

I'd be shocked if the trickle down economic fans who love the freeing of corporate wisdom/decisions in the market didn't, at least a little bit, incorporate more skepticism into their thinking based on recent events. If they can't make this sort of adjustment something must be wrong w/ them.

[And, hopefully folks have finally realized that Fannie/Freddie and CRA were NOT the driving forces behind the mortgage meltdown, even though the professional conservatives (contrary to the data) say otherwise. If folks refuse to base their opinions on data something must be wrong w/ them.]

PJ said...

That was as pathetic a job of pretending not to grasp someone's point as I've seen in a long time. I don't know that I'd call McArdle's performance a rampage, exactly, but she sure did a good job of spooling out hanging rope.

AlphaLiberal said...

From John the clueless wonder:
Nothing thought up by a Democrat could ever be wrong.

Uh, many Democrats were in support of some of the provisions Republicans supported. Obama backed 1/3 going to ineffective tax cuts.

Up the page here I criticized Democrats for backing Bush, with several examples.

At any rate, "ideological" doesn't mean "party line backer." It means adherence to an ideology. You might want to look it up.

Joe said...

AlphaLiberal, you completely miss the point. Fiscal conservatives and federalists aren't against funding schools, fire stations, theaters and many other things; they are against the federal government doing so. Many of us are also wary of state governments funding many of these types of things.

(Why the federal government should pay a dime for our local light rail system is a mystery to me. Why the rest of the state should fork over money for the damn thing is also a mystery. Well, until you realize that if the people actually affected by the light rail had to pay full cost, they'd shut the damn thing down tomorrow.)

Bart DePalma said...

AlphaLiberal said...

BD: I would suggest that the difference in productive and make work jobs can be determined by whether consumers are willing to pay for the goods or services provided by the worker.

Sigh. So if consumers don't line up to pay for schools or fire stations we don't need them?


What makes you think that consumers would be unwilling to pay for necessary services like firefighting and education? Indeed, many of our citizens pay twice for education - once to the government and again to a private school.

Joe said...

Given that lawns that need watering are one of the biggest waste of resources ever invented, if anything the government should be paying people NOT to water their own lawns. (The better alternative, of course, is to raise rates beyond normal household usage.)

Bart DePalma said...

The signing ceremony for the Porkulus bill had an introductory speech by the owner of a solar panel installation company who claims that 69,000 new jobs in his industry will be created where no demand existed before.

This is the epitome of a make work job.

For those who may think superficially that this is a good idea, my question is how much of our kids money is being spent to create each of these make work jobs?

In general we are spending $1.2 Trillion (interest included) to supposedly create 4 million new jobs. Using the Administration's own wild claim of 4 million new jobs, our kids will be paying $300,000 for each job.

The most optimistic private economist claims maybe $2.5 million new jobs, which would be $480,000 per new job.

If we look at the history of failure of fiscal stimulus in the US and Japan, the reality is that we will probably create far fewer make work jobs, which means we are likely spending over a million dollars per job.

And these jobs will disappear when the Porkulus disappears in two years because they are creating goods and services no one would otherwise buy.

Bart DePalma said...

AlphaLiberal said...

Besides, the stimulus isn't about just spending money, as some uninformed ignoramus might argue. It's about spending money to get things we need anyway, after decades of low public investment.

Not according to The One: ""[Y]ou get the argument, 'Well, this is not a stimulus bill, this is a spending bill.' What do you think a stimulus is? That's the whole point. No, seriously. That's the point."

Dust Bunny Queen said...

I hope you can see that the private sector is able to screw up just like the public sector. Hopefully, as you witness failing financial (and other) corporations, you can see that the private sector is capable of widespread, more-or-less systematic failures that effect most of the population.

Absolutely. However, my argument against this pork laden bill is that it might create government (make work) jobs that the Dems can then use to point to lowered unemployment rates....that is an artificial condition.

Once the government job (building the bridge, paving the highway)is over.....the job is not continued on. These are one time deals.

In addition to being a one shot deal, the "jobs creation" is not nationwide or symptomatic of an actual economic recovery, since most jobs will be geographically localized and MOST will require skilled UNION labor.

The "creation" of these jobs does NOT help the mythical main street that Obama and the Democrats seem to be so concerned with. What will help the main street would be to lower the cost of business. Lower payroll taxes, less government meddling in the day to day operation of businesses. The ability for the mid to small sized business to expand and hire more employees. Building a freeway does nothing for the small town, Mom and Pop type of hardware store, grocery store, restaurant, flower shop etc.

Make work /= real long term jobs. It is all smoke and mirrors.

Dust Bunny Queen said...

[And, hopefully folks have finally realized that Fannie/Freddie and CRA were NOT the driving forces behind the mortgage meltdown, even though the professional conservatives (contrary to the data) say otherwise.

You are wrong. If there were no government created mandates for inclusion of these types of loans in the Freddie and Fannie portfolio, there would be no market to sell the loans off. Banks and mortgage lending companies would have HAD to stick to their conservative, tried and true lending principles.

"Fannie, the Federal National Mortgage Association, and Freddie, the Federal Home Loan Mortgage Corp., don't lend money, to minorities or anyone else, however. They purchase loans from the private lenders who actually underwrite the loans."

However, since the banks and mortgage institutions COULD sell this shit and recapitalize and make more loans....they did.

Without the incentives provided by Congress, and the artifically depressed interest rates providee by Greenspan....this would not have happened.

CRA and government intervention in the free market place. PERIOD.

Bruce Hayden said...

I think that pretty much anyone who had any questions about whether the "stimulus" bill bad anything to do with stimulating the economy would have had their answer with one of AL's earliest posts here. He gave away the game. The reason that something did or did not make it into the bill apparently revolved around whether it was a long term liberal priority, and had almost nothing to do with whether or not it would stimulate the economy.

A lot of us already believed that, but AL gave away the game.

1jpb said...

DBQ,

I hope that, at least, you use data when you advise your customers. Seems like you'd be a bad adviser if your stubborn attachment to talking points (that have been proven wrong by data) dominated all aspects of your life.

LOOK at the data in my link. The GSE and CRA products weren't the driving force of the problem. That's a fact. The numbers are the numbers. It was ultra scary unCRA/GSE Wall Street mortgage inventions that resulted in the really nasty stuff. Look at the data.

You come across as more than a bit dull when you deny facts.

BTW, since you weren't able to grasp this initially coming from me as an industry insider. And, you couldn't grasp the data, when I came across the link above which completely corroborates what I had already been expressing, perhaps you should watch CNBC's program called House of Cards. Why do you have a mental block that refuses to acknowledge the indisputable fact that Wall Street and un(or little)regulated (nonGSE/CRE) products are at the core of this mess?

Weird and unwise.

1jpb said...

CRA not CRE

bearbee said...

Dean Baker was being intentionally thick.

And these jobs will disappear when the Porkulus disappears in two years because they are creating goods and services no one would otherwise buy.

No, no, you are wrong. Congress critters are already working on Son of Porkulus or Porkosaurus to keep those jobs from disappearing.

Kids in the 22nd Century will be looking forward to paying off the national debt.

Joe said...

Actually, 1jpb, it's you who has become tedious. You find a few articles written by people with an obvious bias supporting your position and shout down everyone who disagrees with your pet theory. Yet the reality is that without the massive distortions in the housing market made by Fannie Mae and Freddie Mac and various government encouraging under capitalized loans, we would not be having this problem today.

PJ said...

you couldn't grasp the data, when I came across the link above which completely corroborates what I had already been expressing

Isn't it great how "the data" always "corroborate[ ] what I had already been expressing," while the morons who disagree with me have to rely on mere "talking points"? I love that.

1jpb said...

Joe and PJ,

It's data. Data is not opinion.

Quiz time! Identify data and opinion below.

--A belief or conclusion held with confidence but not substantiated by positive knowledge or proof

--Factual information, especially information organized for analysis or used to reason or make decisions

Sheesh.

P.S.

PJ, thanks for the grammar edit--my bad. [See, it's easy to admit errors. It is advantageous to do so. Some day this may occur to y'all.]

jr565 said...

alpha liberal wrote:
The WPA built useful things - post offices, parks, bridges, schools, roads, theaters, etc. Useful things that continue in service to this day.
Please differentiate for us, useful things from say a bridge to nowhere? Is there any cost benefit analysis done, or is it simply that Obama wants to spend money on something, therefore its a useful project?
Also, money doesn't grow on trees, and us spending money on something doesn't mean that later on we wont have to pay interest on what we've spent money on as well as pay back the debt. So you have to weight the proposed value of what you're spending and its supposed value versus what you could otherwise spend money on if you weren't wasting it on something else. There is an opportunity cost to building schools or funding democratic interest groups at the expense of using the same money for, I don't know, actually stimulating the economy.

jr565 said...

Also Alpha Liberal says:

Here's another reality-deprived wanker, this time saying Republican economic policies have nothing to do with our crisis, but that it's George Soros and Chcuk Schumer (you know, the Jews).

Right, because that would be the only reason someone could fault Shumer or Soros. There actual policies would have nothing to do with it and the only reason the wanker even brought up these two is because he's antisemitic.
Also happened to be perusing another site and heard this same talking point almost verbatim, including the "you know, the jews" part. Is that the latest left wing talking point going around or are you simply visiting a lot of sites and passing around dubious talking points as a complete partisan.

I'm not sure about Soros, but Shumer is DIRECTLY implicated in multiple aspects of the predicament we're in, from support of Fannie Mae even when people were trying to regulate it, to whole hearted support of the deregulation of banks which he then demagogically pinned on republicans even though it was passed by Clinton and he (Shumer) spoke gloriously of its passage.That Shumer is also jewish is trivial and incidiental. And the "reality deprived wanker" was not targeting him becuase of his jewishness, hence your post was pure demagogic partisanship.

RHSwan said...

Alpha,
You do understand the Japanese tried something similar to Obama's program in the 90's. You might ask them how it worked.

Bruce Hayden said...

Please differentiate for us, useful things from say a bridge to nowhere? Is there any cost benefit analysis done, or is it simply that Obama wants to spend money on something, therefore its a useful project?

That is precisely what is going on here. The theory is that government spending returns somewhere around 1.5 times its cost in increased GDP. This is the infamous Keynesian multiplier that many of us believed had been empirically determined to be less than 1. But now the 1.5 multiplier is gospel, at least according to many of the Democratic leaders. (Actually, when I first took macroeconomics around 1970, before it had been debunked, the expectation was that it was approximately 1.2 - the 1.5 is a brand new figure as far as I can figure out).

The next part of the theory seems to be that it doesn't really matter what the money is being spent on, but that the government will get that 1.5 rate of return regardless.

And, hence the suggestion here of paying people to water their own lawns.

The reality, of course, is that even if there were a 1.5 Keynesian multiplier for some government expenditures, there is no reason to believe that it would apply to ALL such government expenditures. Nevertheless, the operational assumption of the "Stimulus" bill signed into law today is that it applies, regardless of how the money is spent.

So, getting back to your original question about cost/effectiveness - it makes no sense to even pretend to do so, since almost all of the spending in the bill is based on this much disputed multiplier. It makes no sense to waste time on computing the cost effectiveness of any of the expenditures in the bill, since one of the biggest factors in the calculation could be off by a factor of at least 2/1 (i.e. some of the expenditures could return less than half the claimed 1.5 return).

Bruce Hayden said...

Besides, the stimulus isn't about just spending money, as some uninformed ignoramus might argue. It's about spending money to get things we need anyway, after decades of low public investment.

And this is supposed to get us out of the current recession how?

Bruce Hayden said...

So she compares the WPA to telling people to go out and water their lawns. This after a long stream of naysaying.

Idiotic.

The WPA built useful things - post offices, parks, bridges, schools, roads, theaters, etc. Useful things that continue in service to this day.

This idiot McArdle compares that to watering your lawn.


AL is not known for his logic, and this is evidence of that. He is looking at this precisely backwards. Sure, there may be some expenditures that benefit us the same way that the WPA projects did and do. But there are plenty in the "Stimulus" bill signed into law today that have as little merit as watering lawns.

I think that part of AL's logic problem here is that he is arguing from the specific to the general, when there is no reason to believe that the conclusion for the specific would apply to the general.

Virginia said...

I agree with traditionalguy's assessment of the last 10 years of over everything. How cool would it be to spend all the stimulus on mass transit?

Bruce Hayden said...

Another problem with AL's WPA suggestion is that funding most of those projects will be counter-cyclical. Pretty much anything useful there is not "shovel ready".

This is part of the shell game being played here. Part of the justification for the package is that needed infrastructure, etc. can be built or repaired. But almost all of that is not "shovel ready", but is rather counter-cyclical.

In response to that, mention is made of all the immediate stuff that is in the bill. But those immediate expenditures do nothing for the infrastructure, etc.

And then you get into the question of why anything that isn't immediate, or won't be completed within the next year to year and a half is in the bill in the first place. But you can't cut that stuff out, because that is the infrastructure cover for the entire stimulus package. AND most of the Keynesian multiplier work presupposes useful projects, and not spending money just to spend it.

blake said...

Yeah, people showed up and got paid but they didn't produce equal to their pay so they were not real jobs. They were an illusions.

The saying in the USSR is "They pretend to pay us and we pretend to work."

Poor Megan. She missed the critical point between a real job and a makework job. It's exchange.

If workers do something that creates a product, and others are willing to exchange (money, etc.) for that product in excess of its expense, then it's a real job. You could even set a level based on what people will pay for it.

Like, if you send 100 people to landscape my home, I'll give you a couple of bucks for that. But nothing like what it will cost you send those guys out there. Not a real job.

Note that, if I were willing to pay the 100 people what they were worth, or if the 100 people were cost-efficient, there'd be no need to send them to me in most cases. This is really just a fact of the command economy the statists are so hungry for.

Dean Baker is an idiot.

PJ said...

1jbp --

Here's what is not data: your assertions that the data set forth in the McClatchy article prove the authors' stated conclusions. (I'm talking about that October 12, 2008 McClatchy article, where the authors plainly took all the time they needed to be sure they had all the relevant data).

That article has all the signs of being a virtual reprint of a press release issued by someone with an interest in shaping opinion in a particular direction. Look at how the stated "data" are timed, shaped and qualified.

But go ahead, prove me wrong. Identify the "data" in that article upon which you wish to stake your claim, verify their accuracy, and show us how they establish that Fan and Fred and CRA aren't driving forces in the mortgage crisis. Aren't there a few data points that are stated sort of vaguely? "Federal housing data" issued by which federal housing agency? Did Fan and Fred and CRA have anything to do with all that private lending? Who exactly weakened those standards in 2004? The Bush Admin didn't criticize the lending in 2005-06? How about before then? After then? Does Ed Gramlich still think CRA lending is good business?

Do the work the authors didn't do. Connect the dots. How do the data establish the conclusions? Or is that link all the heavy lifting you propose to do here?

1jpb said...

Bruce,

Where are you regarding "nationalization" of (extremely complicated, w/ lots of nontraditional, separated sub/sister/branch businesses, unlike the olden days) institutions that could be justifiably defined as insolvent w/o government money?

I thought Mankiw was interesting (especially as a conservative) on this, though he didn't really address how tangled these modern companies are.

But, I almost never see that folks acknowledge this complexity. For example, most folks probably don't realize that it's perfectly acceptable and routine for the regulate "bank" part of one of these companies to put together a deal where part of the customer's financing comes from another less/not regulated sister company of the "bank." This is just one particular senario, but there are almost limitless ways that financial institutions have created less/not regulated sub/branch/sister companies to take on risk (in intra and inter deals) that the regulated parts could not.

Then, there was the regulator shopping that went on w/ the regulated parts too. For example Countrywide switched to OTS (regulator of IndyMac and WaMu). Don't think I need to elaborate on problems w/ OTS. But, I'm a bit off topic now.

I hope that conservatives don't feel the knee jerk need to fight BHO if he decides to temporarily shake up the insolvent institutions if it is necessary to reorganize them. Of course, all the side businesses sure would make that tricky, which is why the BHO folks would prefer to avoid it if avoiding it doesn't leave half dead institutions hobbling along for a decade, or forever.

Anyway, I like Mankiw because the one time I felt like emailing him, he, to my surprise, sent back a response--which my original email wasn't even fishing for.


Blake,

Do you feel compelled to test your theory of what is real work against the private sector of our economy's recent addiction to paper shuffling work that took us over the cliff?

If public sector paper shufflers are inefficient bureaucrats: unrestrained private sector paper shufflers are extremely well compensated geniuses. And, the less public sector bureaucrats w/ their rules, the more room for the private sector geniuses to maximize the profitability of their paper shuffling, hence further increasing their compensation.

What if I get you to pay me a couple bucks for 100 gardeners, but then they never come? And, what if I did this w/o breaking any laws. That's what Wall Street did--they wrapped up junk and sold as if it gold because it was labeled as gold (AAA), a model said so. And, there was also outright fraud. But don't be surprised if we don't see a lot of law breakers prosecuted; folks in each link of the chain were able to push plenty far w/o breaking laws.

Turns out that the honor system and faith in free (from gov paper pushers) market may need a bit more oversight, and a bit less blind faith.

PJ,

* More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

* Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

Fannie and Freddie, however, didn't pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market.

* Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

What's more, only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.

These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.

The piece clearly says Ed is dead, so it's odd for you to ask me if he's had a change of heart.

I don't have a problem connecting the dots. Why are you having trouble? It does sound like you don't fully understand how wild the Wall Street and un/little regulated products were much worse when compared to the GSE stuff and the CRA related products.

But, even w/o first hand experience you should be able to read this piece to see that the GSEs and the CRA monitored stuff was regulated at the same time there were private products (that may have even been provided by un(less) sister/sub/affiliated companies to the regulated branches--see my comment to Bruce) that were not.

This is why the non GSE/CRA stuff went nuts. No regulation.

And, it's so funny to hear conservatives rail against the GSEs (which did have real problems but were still regulated) at the same time you won't acknowledge the perfectly logical (and data supported) concept that the un( or little) regulated products were the real problem.

In other words, you say the GSEs, which did have gov oversight and rules, caused the meltdown because they weren't restrained enough, but you have no problem w/ the un(or little) regulated products that have been shown (w/ data) were the biggest problem.

And, don't forget that the Ds did crack down on the GSEs as soon as they took over congress. And, don't forget that when Rs where arguing against the GSEs they were doing so because their constituents (the private companies that eventually lead to this disaster) told the Rs that they were better at minimizing risk and gov exposure. It's so funny that folks don't remember what was the Rs were suggesting should should fill in for the GSEs if they were more restrained in the market place.

Odd.

BTW, ever since I first (many, many months ago) tried to set the GSE record straight here I have stated that the GSEs had problems and they were too close to politicians on both sides. But, they weren't the core of the problem, as the data shows.

AlphaLiberal said...

... "you know, the jews" part. Is that the latest left wing talking point going around

Rats! Foiled again! you're just too smart for us and caught our vast left wing conspiracy at work.

Yes, we commonly use common figures of speech of speech when referring to efforts to finger Jews as behind financial problems.

That's awesome, dude. You should be a detective.

/sarcasm

jr565 said...

Alpha Liberal wrote:
... "you know, the jews" part. Is that the latest left wing talking point going around

Rats! Foiled again! you're just too smart for us and caught our vast left wing conspiracy at work.

Yes, we commonly use common figures of speech of speech when referring to efforts to finger Jews as behind financial problems.

That's awesome, dude. You should be a detective.


Clearly you were inferring that the only reason that someone would mention Shumer was because he was a jew, else why mention that fact at all? Then when going to another website unrelated to this one a near identical talk point with almost the same insinuation. Sounds like the development of a talking point to me.

Synova said...

I suppose I'll go back and read the comments... I just watched the first 10 minutes. And I know exactly what she's on about and it's not even confusing.

She's saying that there needs to be a way to evaluate the state of the labor market that isn't obscured by what we try to do to fix it.

The other guy seems to have a religious objection to labeling people as employed or not employed.

Joe said...

1jpb,

You are an idiot. Most mortgages--in excess of 90%--are not in trouble. Second, the effects of Freddie Mac and Fannie Mae are on the secondary mortgage markets. Originators figured out really damn quickly that they could give someone a crappy mortgage and dump it into the secondary market. This is exactly what Countrywide and Washington Mutual had perfected.

The point is that Congressional action caused serious distortions to the the housing market. As for the claim the secondary markets were unregulated: bullshit--you are mixing up your markets. The secondary market got away with what they were doing BECAUSE THAT WAS WASHINGTON'S INTENT. I'll repeat this since you don't understand: the markets were doing exactly what the politicians wanted them to do and still want them to do.

jr565 said...

Alpha Liberal wrote:
Meanwhile, in California, Republicans are holding up the state budget. They got corporate tax breaks,they got spending on many infrastructure programs stalled. But they didn't get their way 100% so no budget.

Republicans. holding. breath. and turning. blue? Never!

But it's not enough so they continue to obstruct. After all, they must defend their mortally wounded economic dogma that ran our nation into the ditch.
If taxing and spending were sound fiscal policy you'd think it would work out for places like California which already has one of the highest tax rates in the US. Yet they can't seem to stop spending, while listening ever more to special interest groups that stifle industry to the point of absurdity. And you want to blame republicans for California?!? Pot meet kettle. You want to talk about failed economic policies, california is the microcosm of liberal governance.

blake said...

Do you feel compelled to test your theory of what is real work against the private sector of our economy's recent addiction to paper shuffling work that took us over the cliff?

Don't need to: It's already been done and--hey, what a surprise, the government's greasy fingerprints are all over it.

Even with that, it's criminal. It's fraud. Some people will even be prosecuted for it. Some non-government people, that is.

There's an exchange: If fraud is used to make the exchange seem good, that's a criminal act. (Except, as I said, unless the government does it.)

1jpb said...

Joe,

If I'm so foolish why can't you figure out that your statistic showing that the vast majority of mortgages are still paying only proves that the core of the housing problem is a case of the tail (the wild un(or little)regulated Wall Street products) wagging the dog (the majority of the products e.g. most of the GSE stuff.)

That's always been MY point, as the data shows, the really nasty loans were invented outside of the GSEs and CRA monitored banks. These nasty products were precisely invented to go where the GSEs wouldn't go, as the data shows.

And, regarding the secondary market, what's your point? The GSE products were under the supervision of OFHEO, they couldn't buy and securitize anything they wanted, unlike the Wall Street folks.

And, you should know that WaMu and Countrywide had completely walled off operations for their true subprime stuff. Everything was different; capital structures, underwriting, internal systems, staff, requirements. They could run those operations w/ more allowable risk because they were walled off from the main business. And, of course their main business operations were bad enough because of their regulator, OTS. Recall that Countrywide even had it's regulator changed to OTS so they could continue/expand their loose lending.

BTW, why don't Rs fuss about OTS? Seems like they (or, more precisely, the companies they supposedly regulate) are a lot more responsible for this mess than the GSEs. AIG and IndyMac (and GE) were theirs too. Why don't we find out why the Bush Treasury Department had this regulator that seems to have been a lot more central to a lot of problems than the GSEs? Do you care?

But, regarding securitizaion specifically, I'm for it. We clearly need more regulation at the point of origination, especially for the companies (and affiliates of companies) that didn't even need to worry about the feckless OTS.

But, I'm not convinced that securitization should be more strictly regulated especially if the risk assessments are reformed so that they're more accurate--easier said than done. It's probably more workable to focus on the origination point. Ideally, in one way, it'd be nice to somewhat tie the originator to the long term feasibility of the product, but that also diminishes the desired advantages of spreading risk, and it would require the maintenance of capital reserves, which diminish future lending capacity.

But, as we've seen, some limitations somewhere in the chain would be prudent. That's why I think (w/o really having thought about it) I'd focus on the origination, if you start out w/ a somewhat reasonable product you should be OK through the rest of the chain.

And, if there were situations where Wall Street wanted more and more product, but the if originations were still restricted to "good" borrowers, the borrowing rates for these qualified folks would go down as investors outbid each other for the limited supply of credit worthy borrowers.

But, we do need some room for things that are a little out of the box. For example, stated income loans are appropriate for some self employed folks who legally "bury" income on their tax returns, hence documentation can be difficult, even though they're rich and they have good credit.

And, even neg-am loans, which I despise, could arguably make sense for a very, very tiny number of folks with wildly fluctuating but consistent incomes (but really, adding an untapped HELOC to a 30y fixed can get the advantages of going neg-am w/o the costs and risk of an overpriced and variable option ARM--yes, this is a clever way that I invented (though I'm sure others figured it out too) to do a neg-am, but it's still terrible: these loans all suck, people should have cash reserves if they're incomes fluctuate, and if they can't afford a house w/o neg-am, they shouldn't buy it.)

Blake,

Which mortgage folks do you think will be or should be prosecuted? We've had a lot of high profile blowups, which folks in leadership do you think will be found guilty of breaking laws?

PJ said...

(sigh)

OK, I'll play by 1jbp's rules for just a moment:

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/09/AR2008060902626.html

Look! This news article is just chock full of data! And the data show that HUD/Fanny/Freddie, by acts of omission and comission, fueled the mortgage crisis! Although some morons don't get it (odd, that), the data show that GSE involvement in subprime mortgages actually created a market for more such lending by private firms. Not the other way around!

(/1jbp)

Look, 1jbp, if your point is that lots of private sector people made idiotic decisions concerning subprime morrtgages, I agree. I might even agree that the dollar value of the private sector's idiotic decisions is higher than the dollar value of the government's idiotic direct holdings. I'm not ideologically opposed to that conclusion if I can see some unfiltered data to support it. I'll throw in my agreement that, under the circumstances, there was insufficient regulation of the private markets by the Fed and the SEC.

My contention is simply that public policy, as driven by HUD/Fannie/Freddie over two administrations, was the sine qua non of the market failure. Public policy was the circumstance that made the additional regulation of the private markets necessary. Public policy was the reason that markets that formerly worked when regulated only at level A developed into markets that needed to be regulated at level B, and when Alan Greenspan and Chris Cox, et al., continued to regulate them at level A they went haywire.

The numbers quoted in the McClatchy piece about the dollar values of subprimes held by different institutions at different times don't tell that story.

Oh, and I was just making a point about the unreliability of the McClatchy piece when I asked whether the dead Fed still thought CRA lending was good business. For all the authors knew, the guy they quoted would have said he had been mistaken if he were still alive at the time of publication.

1jpb said...

The WaPo piece doesn't contradict the piece I linked to.

I would pick out a few conceptual weaknesses w/ the WaPo piece:

I think readers of the WaPo piece would have been better served if it had noted that Fannie and Freddie had two regulators. That piece clearly (and wrongly) implies that the GSEs have one regulator. HUD was the "mission regulator." And, OFHEO was the safety and soundness regulator, i.e. the actual regulator of banking stuff. It seems relevant for folks to know that there was a whole other organization tasked w/ evaluating the safety and soundness of the actions of Fannie and Freddie.

And, the piece could lead a reader to conflate Fannie and Freddie w/ all subprime. At the same time it repeatedly lumps the GSEs in w/ all subprime it does also, in multiple ways, make an effort to show that the GSEs were not as loose as the non-GSEs regarding underwriting and minimal standards for securities. But, it seems like some readers could miss that very important aspect. It is important to not forget, as the WaPo acknowledges, that the GSEs and the non-GSEs were in the subprime market, but that doesn't conflict w/ the fact that the non-GSEs were much looser w/ their requirements. Many of the non-GSEs had no requirements, if they could sell directly to Wall Street they would, that was the only safety and soundness consideration.

I think this fundamental difference would have been better understood if the WaPo writer had talked w/ and understood the GSE's safety and soundness regulator. And, the WaPo could have talked to some subprime securitizers that had to go directly to Wall Street, because they couldn't satisfy the requirements to go through the GSEs. Seems relevant, don't ya think?

OFHEO was flawed, but at least there was someone charged w/ looking out for safety and soundness. This is a meaningful and influential distinction between the GSEs and the nastiest subprime folks who completely bypassed the GSEs to find looser money on Wall Street.

BTW, speaking of data, look at the richest cache relating to the relative influences of GSE and non-GSE stuff that is provided in your WaPo link: the individual yearly summaries for 2004, 2005, and 2006. You can do some simple math to see that the dollar amount of non-GSE stuff is going through the roof during these years.

This was the packing of the powder keg while two and three year fuses (ARMs) were simultaneously being lit starting in 2004. Do you wonder how the safety/soundness/underwriting of the (increasing in numbers) non-GSE products differed from the (decreasing) GSE stuff during this time that was the most critical period for starting the mortgage mess (recall that the nasty subprime stuff blows up after two or three years--if not sooner--because of the ARMs)? How does this time period and the influence/timing of ARMs coincide w/ the mortgage blowup time line? You think that you're good at using data and connecting the dots, right?

In other words, as the GSEs were losing market share (i.e. having a decelerating impact in subprime) when compared to the non-GSEs (who obviously had zero problems placing more and more of their non-GSE junk directly w/ Wall Street, as the data from the 2004 to 2006 period in YOUR link clearly demonstrates), the mortgage mess was born. Seems like the differences between the looser non-GSE (direct to Wall Street) subprime products and the not as loose GSE stuff did matter (not that the really terrible is a justification for the simply bad, but worse is worse, and the distinction was meaningful and influential as we ask who did what).

According to the only actual data in your link that can be used to directly compare the market influences of GSEs and non-GSEs it was the non-GSE stuff that grew as the GSE stuff recessed at the same time the mortgage business went off the rails. Like I've been saying, the data does tell the story.