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Posted at 2:33 AM ET, 12/20/2010

Wonkbook: The do-something Congress keeps doing things

By Ezra Klein

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The 111th Congress refuses to go quietly into that sweet night. Friday, of course, saw the $850 billion tax deal sent to President Obama. On Saturday, the Senate broke the filibuster protecting the Don't Ask, Don't Tell rules. On Sunday, it passed the food safety bill. Those three accomplishments -- all of them significant in their own right -- now join the 111th's other achievements: Health-care reform, the financial-regulation bill, the stimulus, Ted Kennedy's national-service bill, the Lily Ledbetter Fair Pay Act, the expansion of the Children's Health Insurance Program and student-loan reform, just to name a few. And the 111th may not be done: Chuck Schumer wants them to stick around to pass a bill giving health benefits to the Ground Zero responders.

That is not to say it hasn't failed on at least some of what it promised to do. We still don't have a national energy strategy, of course. The House passed a cap-and-trade bill, but it languished in the Senate. Immigration reform has been ignored, and the DREAM Act -- a consolation prize at best -- was choked off by a filibuster. There are dozens of nominees sitting on their hands, and the collapse of the omnibus spending bill means the federal government will only be funded until March -- at which point you can expect a Republican House to use the leverage of a possible government shutdown and a vote on the debt limit to play some serious hardball.

But for now, spare a thought for the 111th, the most productive Congress we've had in decades. The common complaint with politicians is that they make all these promises and then head to Washington and do nothing. Whatever you can say about the 111th, you can't say that. Love their record or hate it, they headed to Washington and did exactly what they said they were going to do.

Top Stories

The Senate will punt on the federal budget until March, report Jessica Holzer and Patrick O'Connor: "The Senate moved ahead Sunday night on a deal to fund the federal government through March 4, setting the stage for a budget fight early next year, when Republicans will wield more power. Congress has failed to pass legislation to fund the government for the full fiscal year that began Oct. 1, relying instead on several short-term measures. The most recent one expires on Tuesday, and a failure by Congress to approve new funding by then could lead to a government shut-down. On Sunday, Senate Majority Leader Harry Reid (D., Nev.) arranged for a Tuesday vote on a plan to fund the government through early March."

The food safety bill will pass after all, reports Lyndsey Layton: "A bill that would overhaul the nation's food-safety laws for the first time since the Great Depression came roaring back to life Sunday as Senate Democrats struck a deal with Republicans that helped overcome a technical mistake made three weeks ago and a filibuster threat that seemed likely to scuttle the legislation. After a weekend of negotiations, tense strategy sessions and several premature predictions about the bill's demise, Senate Majority Leader Harry M. Reid (D-Nev.) reached a deal with Minority Leader Mitch McConnell (R-Ky.) that the GOP would not filibuster. Without notice and in a matter of minutes Sunday evening, the Senate approved the bill by unanimous consent, sending it to the House, where passage is expected."

The DREAM Act failed to break a filibuster Saturday, reports Shankar Vendatam: "Deporting almost 800,000 illegal immigrants might antagonize some Democrats and Latino voters, Obama's skeptical supporters said the president told them, but stepped-up enforcement was the only way to buy credibility with Republicans and generate bipartisan support for an overhaul of the nation's immigration laws. On Saturday, that strategy was in ruins after Senate Democrats could muster only 55 votes in support of the Development, Relief and Education for Alien Minors (DREAM) Act, a measure that would have created a pathway to citizenship for undocumented immigrants who were brought to the United States as children. Under Senate rules, Democrats needed 60 votes to overcome Republican opposition to the bill. The House of Representatives had passed the measure this month, 216 to 198."

Sen. Chuck Schumer wants to keep Congress in session to pass health aid for 9/11 first responders, reports Manu Raju: "New York Sen. Chuck Schumer said Sunday that the House should stay in session until the Senate passes a new version of a bill aimed at giving health benefits to Ground Zero workers. Setting up a clash in the final days of the congressional session, Schumer - along with fellow New York Democrat Kirsten Gillibrand - offered a modified version of a bill Sunday giving compensation to rescue workers who fell ill from the toxic dust stemming from the collapse of the twin towers of the World Trade Center after the terrorist attacks on Sept. 11, 2001."

Massachusetts shows what a world with an individual mandate can look like, reports, well, me: "It's time to check in on how Massachusetts is doing. And the answer, basically, is pretty well. This week, the state's health and human services agency released the results of a new, independent survey examining coverage in Massachusetts. More than 98 percent - 98 percent! - of the state's residents now have health insurance, as do more than 99 percent of the state's children."

Got tips, additions, or comments? E-mail me.

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Self-released rock interlude: Keepaway's "Yellow Wings".

Still to come: EJ Dionne argues that liberals should make peace with big business; states suing Bank of America for foreclosure fraud; a plan to save Medicaid; a plan to save the Post Office; and a baby panda tries and fails to climb up a slide.

Economy

Two states are suing Bank of America for fraud, report Andrew Martin and Michael Powell: "In withering complaints filed in state courts in both states, the attorneys general accused Bank of America of assuring customers that they would not be foreclosed upon while they were seeking loan modifications, only to proceed with foreclosures anyway; of falsely telling customers that they must be in default to obtain a modification; of promising that the modifications would be made permanent if they completed a trial period, only to renege on the deal; and of conjuring up bogus reasons for denying modifications."

The charitable deduction should be reformed, writes Richard Thaler: http://nyti.ms/hiS6uq

Obama's housing regulator nominee faces a Senate fight, reports Nick Timiraos: "The White House's pick to head the agency that oversees Fannie Mae and Freddie Mac appears unlikely to win Senate confirmation before Congress adjourns due to a sharp policy disagreement between the White House and Senate Republicans over how to regulate the mortgage-finance giants. Senate Republicans are pressing to delay the confirmation of Joseph A. Smith, the North Carolina banking commissioner, to head the Federal Housing Finance Agency. They are concerned he might allow Fannie and Freddie to participate in an Obama administration initiative to write down loan balances, say people familiar with the matter."

Free market fundamentalism is on the rise despite being wrong about everything, writes Paul Krugman: "The free-market fundamentalists have been as wrong about events abroad as they have about events in America -- and suffered equally few consequences. 'Ireland,' declared George Osborne in 2006, 'stands as a shining example of the art of the possible in long-term economic policymaking.' Whoops. But Mr. Osborne is now Britain’s top economic official. And in his new position, he’s setting out to emulate the austerity policies Ireland implemented after its bubble burst. After all, conservatives on both sides of the Atlantic spent much of the past year hailing Irish austerity as a resounding success. 'The Irish approach worked in 1987-89 -- and it’s working now,' declared Alan Reynolds of the Cato Institute last June. Whoops, again."

Cash should be abandoned in favor of electronic money storage, writes Jonathan Liptow: http://nyti.ms/eynAML

Progressives should make peace with Big Business, writes E.J. Dionne: "There have been moments in our history when important elements of business were 'progressive' in the sense of recognizing that social reform was in capitalism's long-term interest. In a seminal 1995 article in the American Prospect about business opposition to President Bill Clinton's health-care reform, the political writer John Judis recalled that during the Progressive Era, 'business leaders and organizations played an indispensable role in developing and promoting the social legislation that first blunted the sharp edges of laissez-faire capitalism.' Judis's conclusion still rings true: that 'without a business community moderately supportive of social reform, little is possible in the present era.'"

Adorable animals on playgrounds interlude: A baby panda fails to climb on a slide.

Health Care

Medical suppliers are beginning to pay surgeons directly, report John Carreyrou and Tom McGinty: "Medtronic and the surgeons say the payments are mostly royalties they earned for helping the company design one of its best-selling spine products. Corporate whistleblowers and congressional critics contend such arrangements--which are common in orthopedic surgery--amount to kickbacks to stoke sales of medical devices. They argue that the overuse of surgical hardware ranging from heart stents to artificial hips is a big factor behind the soaring costs of Medicare, the government medical-insurance system for the elderly and disabled."

Virginia Gov. Bob McDonnell insists his state's health care lawsuit is "not political": http://politi.co/f17z7X

The way to improve Medicaid is to increase funding, not slash it, writes Jonathan Cohn: "By far, the best way to improve Medicaid would be to give it more money per beneficiary -- so that it pays providers something closer to what Medicare and private insurance pay. Do that and those Medicaid patients in Baton Rouge would get care that looks more like the treatment people with good insurance receive...In general, the people attacking Medicaid want to spend less on the program. And while critics sometimes argue private insurance could deliver coverage more cost effectively, the claim is hard to fathom. According to the Kaiser Family Foundation, Medicaid spends on average $2,500 per year for non-elderly adults -- roughly half what a single person pays today for a private health insurance premium."

Liberals can't protect the individual mandate if they can't limit the Commerce Clause, writes Adam Serwer: http://bit.ly/h4nIsX

Domestic Policy

The budget compromise will save food stamps, reports David Rogers: "Democrats predicted final approval this week of a year-end budget compromise ceding major leverage to Republicans in future battles but also giving the White House added protection for Pell Grants for low-income college students...After a late-breaking drive, the White House won an exception for the Pell program to avert what could be a one-third cut from the maximum per-student grant authorized for the 2011-12 college year. Those receiving such aid are overwhelmingly students from families earning under $40,000 annually, and as demand has grown with the recession, Pell faces an estimated $5.7 billion shortfall."

Jamelle Bouie interviews an academic defender of earmarks: http://bit.ly/gx4Tvx

We should be using the Postal Service to collect data, writes Michael Ravnitzky: "The service’s thousands of delivery vehicles have only one purpose now: to transport mail. But what if they were fitted with sensors to collect and transmit information about weather or air pollutants? The trucks would go from being bulky tools of industrial-age communication to being on the cutting edge of 21st-century information-gathering and forecasting. After all, the delivery fleet already goes to almost every home and business in America nearly every day, and it travels fixed routes along a majority of the country’s roads to get there. Data collection wouldn’t require much additional staff or resources; all it would take would be a small, cheap and unobtrusive sensor package mounted on each truck."

Great moments in university bands interlude: The University of Hawaii band forms into a person walking.

Energy

Renewable energy groups are getting a frosty reception from Republicans, reports Darren Samuelsohn: "Groups like the American Wind Energy Association and Solar Energy Industries Association must deal with the awkwardness of trying to work with the same Republicans who opposed their efforts to put a lid on greenhouse gases...Republican leaders are critical of giving long-term life to the renewable sector, which is expected to get a short-term boost via the tax-extender package. Michigan Rep. Fred Upton, incoming chairman of the Energy and Commerce Committee, said he’s skeptical of the rationale behind spending $10 billion a year over the past decade on subsidies for wind and solar power."

Sen. Jay Rockefeller is conceding defeat on blocking EPA climate rules: http://bit.ly/eRyQGp

An omnibus lands bill likely will not pass the Senate: http://bit.ly/g82Ydo

A renewable energy standard has a chance of gaining Republican support, reports Ben Geman: "Sen. Lisa Murkowski (R-Alaska) said Saturday that a 'clean' energy standard for electric utilities could gain traction among Republicans in the next Congress even though it would create a new federal mandate. Murkowski, the top GOP member of the Energy and Natural Resources Committee, said the standard should allow wide discretion for states and regions, which would help build support. 'I think there is a level of flexibility that allows you to achieve the goal of reduced [greenhouse gas] emissions, but gives you the ability to determine what it is you are going to do and how you are going to do it. I don’t think that is a mandate that scares people away,' she told The Hill in the Capitol."

The Navy and Marines are going green, writes Tom Friedman: "Their efforts are based in part on a recent study from 2007 data that found that the U.S. military loses one person, killed or wounded, for every 24 fuel convoys it runs in Afghanistan. Today, there are hundreds and hundreds of these convoys needed to truck fuel -- to run air-conditioners and power diesel generators -- to remote bases all over Afghanistan. Mabus’s argument is that if the U.S. Navy and Marines could replace those generators with renewable power and more energy efficient buildings, and run its ships on nuclear energy, biofuels and hybrid engines, and fly its jets with bio-fuels, then it could out-green the Taliban -- the best way to avoid a roadside bomb is to not have vehicles on the roads."

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: Bill O'leary - The Washington Post.

By Ezra Klein  | December 20, 2010; 2:33 AM ET
Categories:  Wonkbook  
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Next: Chris Christie's Pepsi problem

Comments

It is fantastic time to refinance home mortgage. As Clark Howard says it is very tough to find these low rates for long time. Search online for "123 Mortgage Refinance" they found me THE lowest possible rate.

Posted by: trinatate | December 20, 2010 3:08 AM | Report abuse


Looking for samples? I received the sample quickly. Thanks to "123 Get Samples" for the samples. I can't wait to get another in the mail!

Posted by: gloriariley20 | December 20, 2010 3:22 AM | Report abuse

Tom Friedman <> Wonk

Posted by: bmull | December 20, 2010 7:25 AM | Report abuse

"Deporting almost 800,000 illegal immigrants might antagonize some Democrats and Latino voters, Obama's skeptical supporters said the president told them, but stepped-up enforcement was the only way to buy credibility with Republicans and generate bipartisan support for an overhaul of the nation's immigration laws.

I never did understand this reasoning. Its as if I burglarized a house and stole 20 individual items and went back the next day and returned 5 of the items and asked for a reward or at least to not be punished for the crime.

Oh and AGAIN Ezra the issue with the mandate in MA is not accessability (anybody can hand out free healthcare). The issue is affordability at which MA is an EPIC FAILURE and you know it yet choose not to address it.

Here's another example of an EPIC fail on liberal healthcare that even some (not labor btw) realize is absolutely unsustainable. A city with $4.37 billion healthcare obligations currently and growing with little awareness of the problem they're developing is staggering. The best line from the editorial. "Without a city employee contribution, the system will go bankrupt," he said. "It's the equivalent of owing billions in credit card debt and not making any payments."

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/12/20/ED3F1GS8FR.DTL

Posted by: visionbrkr | December 20, 2010 7:50 AM | Report abuse

in spite of obama's give away to the gop , the congress and senate managed to do some good things.. a re-vote onDADT, a re- vote on 911 funding,

Posted by: newagent99 | December 20, 2010 8:07 AM | Report abuse

--*Massachusetts shows ...*--

Once again, Klein goes to Gruber without disclosing Gruber's government connections.

And once again, Klein can point to only the "coverage" aspects of RomneyCare as doing "pretty well", proving once again that a collectivist's main measure of success is compliance. Costs in Massachusetts continue to rise out of all proportions, access is worse, but by golly, the pistol pointed at people's heads got real results!

Posted by: msoja | December 20, 2010 8:19 AM | Report abuse

Your admiration is true to form. History tells us, Ezra, that you would sing the praises of this congress no matter what the outcome. Their bad behavior since losing the House is a good argument for eliminating lame-duck power. Obama is operating on survival instincts. He has an opportunity to regain some of the voters that he lost during his arrogant progressive push. Many in the House had nothing to lose because they were removed by the voters.

I can't wait to see how charitable you will be when the House is no longer controlled by the Democrats.

Posted by: bethg1841 | December 20, 2010 8:44 AM | Report abuse

vision

MA's expressly stated initial goal of health reform was to achieve near universal coverage. Their later intent was to then address cost.

So it is worth noting, as Ezra has done, to hilite the accomplishment of MA to get most of its people on health care as per their goal.

It's also worth nothing that MA health reform polls extremely favorable among MA residents.

It may be that costs will never be contained. But that won't be because some people tried. It will be because some people sabotaged the effort.

And to give Ezra credit, he has indeed written about MA costs on this blog many times.

I applaud efforts to extend health care access to as many people as possible, regardless of the costs. Saving lives is more important than saving money. The money will be taken by someone anyway, either the bankers, the wall streeters, the bomb builders, the insurance companies, or the house developers.

As access rises, costs will rise. This is a no brainer. Also a no brainer is what happens afterward: namely, either the aforementioned rich-cats will successfully kill or weaken health care reform so they can get at that wealth, or we as a society will embrace the nobility of ensuring all people have access to quality care and will work together to start finding ways to afford such access.

We can afford it if we choose to afford it. And that is the question. Voices such as yours where you continually equate ordinary growing pains to abject failure helps only the saboteurs. If they get their way, access will be limited only to healthy people and costs will never come down because that is the golden road to vast profits.

With recent reforms, I see a glass half full. You see it half empty. You need to decide who you will array yourself with: those who want the glass empty or those who want it full. So far, I get the impression from your constant declarations of doom and failure that you want it empty.

Posted by: lauren2010 | December 20, 2010 8:54 AM | Report abuse

On the earmark issue, the idea that taking power away from washington bureaucrats should be favored by conservatives misses the point that current conservatism seeks to operate government as incompetently and ineffectively as possible, supporting conservative arguments that government is wasteful. Responsive government spending that directly targets the needs of individual districts has been predictably popular, and popular government spending is evil.

"Realistically, the Supreme Court is a fairly partisan institution, and an ideological case like constitutionality of the individual mandate will ultimately be decided based on the policy preferences and personal foibles of the sitting justices, not on the more persuasive or well-grounded constitutional argument. But liberals should still be prepared to counter conservatives' selective libertarianism not merely on practical or policy grounds but within the context of constitutional first principles."

Why? So we can win arguments in online debates? If the whole process is a farce, which seems to be indicated here, isn't the fact that we are flushing tens of millions of taxpayer dollars down the toilet to carry on a charade more worthy of an article than another writeup on constitutionality issues?

Posted by: eggnogfool | December 20, 2010 9:02 AM | Report abuse

Yeah, they passed a healthcare the majority of americans didn't want. They past a nutrituion agreement that we can't afford. Why is the government in our business anyway. Shouldn't parents be responsible for their children? Lets just see what he is going to do about these illegals. His only option is to send them all back where they came from. Now that they came here illegally, they can't enter again for 5 years. Then we do an extensive back round check. There will be no free housing, healthcare, food, etc. As a matter of fact you will have to show proof of income. Langugage is English, learn it. One flag, the American flag, don't like some of that, tough, don't come here! We don't want you anyway!

Posted by: bailey50 | December 20, 2010 9:05 AM | Report abuse

@visionbrkr:
"Here's another example of an EPIC fail on liberal healthcare that even some (not labor btw) realize is absolutely unsustainable. A city with $4.37 billion healthcare obligations currently and growing with little awareness of the problem they're developing is staggering."

I agree that our country needs more federal regulations.

Posted by: eggnogfool | December 20, 2010 9:05 AM | Report abuse

bailey

1. There are people on the left extreme who see businesses as pure evil.

2. There are people on the right extreme who see gvmt as pure evil.

3. Then there is everyone else who sort of gets it that business and gvmt must co-exist in some balanced fashion and that an economy can not exist without a regulatory framework and that abuses and inefficiencies exists in either camp which must at times be identified and fixed.

You are clearly in group 2.

Posted by: lauren2010 | December 20, 2010 9:14 AM | Report abuse

DADT and Credit Card reform are things to applaud, but otherwise, the Dem's have gone against the public will and steered us towards socialism and near-economic bankruptcy.

I just hope the Republicans can repair the economic damage that has been done these past couple of years.

Posted by: RealTexan1 | December 20, 2010 9:33 AM | Report abuse

lauren said:

"I applaud efforts to extend health care access to as many people as possible, regardless of the costs. Saving lives is more important than saving money. "


You see I agree with you that saving lives is more important than saving money but we're not talking about saving money. We're talking about a system that is sustainable and the current one is not. At some point (and we certainly haven't reached that yet but many in Europe and parts of Canada have) that you can't tax anymore than you already do. So while a liberal's answer is mainly to tax more (mainly who they consider rich) that in itself does not make systems sustainable. You need to address the root cause of the cost problem as well as the per unit costs. Again wake me when someone takes on the doctor lobby. A good start would be actually addressing the SGR of medicare instead of continually punting it.

And I don't need to array myself with one group or the other. I'm my own independent person with my own independent beliefs. As i've said before on here I've got many pro left beliefs like the right to gay marriage and I'm very glad that DADT is repealed. If you're willing to die for your country who cares what your sexual orientation is. Those people who serve in the army should be honored for their service whether they are gay, straight, whatever.

You're need to paint people in convenient boxes is IMO wrong.

Posted by: visionbrkr | December 20, 2010 9:36 AM | Report abuse

Tom Friedman must not know much about biofuels, which are about as "green" as coal.

Also the 800,000 deprtation figure is simply a bold-faced lie on the part of the administration. That doesn't refer to people who were already living here, caught, and then deported. Most of that number is people who were turned away at the border, and people who were in jails nationwide on other charges and were subsequently sent back.

Just think of how amazingly ridiculous that number is. You would have to deport about than 1,100 aliens every single day of the year including weekends and holidays for two straight years for this to have occurred!!!!

Posted by: 54465446 | December 20, 2010 9:45 AM | Report abuse

lauren2010:
"It may be that costs will never be contained....I applaud efforts to extend health care access to as many people as possible, regardless of the costs. Saving lives is more important than saving money."

Perhaps you missed the 'bending-the-cost-curve' memo from Obama, or maybe you are just admitting that the whole rationale leftists give for health care reform ('controlling spiraling costs of greedy insurance companies') is simply a ruse. The fact is, the more government has gotten involved in something, the HIGHER the costs go. Health care, education, housing...take your pick. The more government tries to meddle in the market to 'ensure fairness', the more the natural forces in the market are ignored or perverted, and costs run amok.

I do sort of agree with you on one point...some people can afford it, but choose not to (I know that's not what you meant by "we can afford it", but you are half-right). It doesn't bother me to provide tax credits or subsidized insurance for a person making $20,000/year. It does bother me to provide subsidies to a person making $60,000/yr, under the pretense that "they can't afford it". No, some people simply don't prioritize it. They buy a bigger house, a third car, everybody in the house has cell phones with max data plans, full cable with premium channels...then they decide they don't have enough money to 'afford' health insurance.

The problem is, as usual, progressive/leftist philosophy simply makes it even easier for people to prioritize all the wrong things. Liberal-progressives are intent on making everyone dependent on the state, under the false-promise of achieving universal fairness (which will never happen).

Posted by: dbw1 | December 20, 2010 9:47 AM | Report abuse

"How did that happen? How, after runaway banks brought the economy to its knees, did we end up with Ron Paul, who says “I don’t think we need regulators,” about to take over a key House panel overseeing the Fed?"

Ah, I keep forgetting that we abolished all the regulators and went laiseez faire for the last several decades. Oh, and we didn't generate a track record of bailing out large private firms when they failed. Only the free market regulators of profit and loss, right?

If only we had a regulator in place - perhaps we could call it a Securities and Exchange Commission - that way, smart people in charge could have prevented Bernie Madoff and Enron from defrauding billions of dollars from investors.

The banks, well, those guys can cause real trouble. So let's have an alphabet soup of regulators and supporting institutions to make sure they stay in line, stay healthy and support the common good - OTS, OCC, the Federal Reserve, the FDIC, FNMA, FHLMC - if only we had these various regulators and institutions, the great recession might not have ever happened.

There's no way that federal regulations on rating agencies could have created a cartel of regulators and the bad incentives everyone is now pointing to as a key problem with the MBS market, is there?

There's no way that the GSEs - by launching home prices skyward in low income areas, by buying millions of loans with loan to value above 95%, by making the 30 year fixed loan with no prepayment penalties possible and thus creating so much interest rate sensitivity in the mortgage market - could have possibly contributed to the housing bubble in general and the subprime problem in particular?

http://cafehayek.com/2010/05/two-mysteries.html

Might central banks be a primary cause, rather than a cure, of financial instability?

http://www.independent.org/pdf/tir/tir_14_04_01_selgin.pdf

Is it possible that a central bank's mismanagement of monetary policy was the primary reason the recent downturn was so severe?

http://www.themoneyillusion.com/?page_id=3447

Posted by: justin84 | December 20, 2010 9:49 AM | Report abuse

Yeah.

I remember them saying something about "transparency" and then later telling us "we have to pass it to find out what's in it".

I remember them saying something about "draining the swamp" and yet the Capitol is as malarial as ever.

It's a real stretch to say that this Congress has done what they said they would. When it comes to ethics and transparency, they didn't even try to deliver on their promises.

Posted by: andrew23boyle | December 20, 2010 9:56 AM | Report abuse

--*It's also worth nothing that MA health reform polls extremely favorable among MA residents.*--

Slavery polled pretty well, once upon a time, too, among certain people.

Posted by: msoja | December 20, 2010 10:03 AM | Report abuse

msoja

slavery didnt poll well among slaves

Posted by: lauren2010 | December 20, 2010 10:10 AM | Report abuse

justin wrote:

"Is it possible that a central bank's mismanagement of monetary policy was the primary reason the recent downturn was so severe?"

That certainly was a factor, but it was mostly about fraud. Massive criminal fraud that was committed on an unprecedented scale by tens to hundreds of thousands of people nationwide, not one of which has ever been sent to jail.

From the buyers who falsified their incomes, to the loan officers who showed them how to do it, to the appraisers who gave false numbers for fear of losing business, to the realtors who knowingly colluded in the sales, to the loan companies who encouraged their people to make these mortgages because they were passing them to the secondary market, to the financial houses who knowingly mislabelled securities of one type as being securities of another and bundled them together for sale, to the ratings services who colluded in false ratings in order to keep business.


Massive, massive criminal fraud!

Posted by: 54465446 | December 20, 2010 10:12 AM | Report abuse

54465446:
"..to the loan companies who encouraged their people to make these mortgages because they were passing them to the secondary market"

Bingo, we have a winner...sort of. This isn't to pass off the illegal shannanigans of some in the private arena, but whenever we look at the housing crisis that started the Great Recession, you have to start at square 1: Fannie/Freddie, and the governments meddling in the mortgage market.

See, before F/F most banks and mortgage companies tended to hold most of the loans they made....meaning they took extra care to ensure that income was verified, financial histories of applicants were reviewed, substantial downpayments were required....i.e., banks/mortgage companies had high incentive to mitigate their risk because they would be left holding the bag in the event of default.

Then big-government honks came along with Fannie/Freddie, and those like Barney Frank and Chris Dodd started meddling with mortgage industry laws to encourage/threaten banks to ignore traditional risk-mitigation policies and loan money, with little or no downpayment, to people to buy houses that they really weren't able to afford.

That was step 1. That was the crux of the problem. True, private companies and individuals ended up taking advantage of the new policies that redirected mortgage loans to secondary markets, far away from those who actually made the loans. But the government backhandely enabled this behavior when they - once again - created unintended negative consequences with their do-gooder meddling efforts to achieve 'fairness'.

Posted by: dbw1 | December 20, 2010 10:22 AM | Report abuse

O.K. The right wingers who have drunk the Koolade tried to explain his opinion away. How are you explaining away Charles Krauthammer's glowing praise? Think he has been a closet liberal?

Posted by: withersb | December 20, 2010 10:30 AM | Report abuse

--*slavery didnt poll well among slaves*--

So, has anyone broken out the polling on just the slaves paying for the Massachusetts miracle? Or are propaganda's needs met by offsetting their views with those reaping the benefits?

Posted by: msoja | December 20, 2010 10:38 AM | Report abuse

dbw:

I feel really bad disagreeing with you after you agreed with me, but it's just not the the case.

Fannie Mae has been around since the Depression and Freddie Mac has been around since 1970. Their creation had nothing to do with the damage caused by Wall Street's invention of the CDO. That is mainly as a result of the the two pieces of legislation from the Clinton administration era, Gramm-Leach and CFMA. These really created the market.

It's never the sale of risky assets that causes a problem. There is a trillion dollar market for risk assets everyday in such things as junk bonds (renamed high-yield bonds) and bankruptcy sales etc. The problem occurs when risky assets are fraudulently disguised as AAA rated investments, and sold around the world to things like pension funds and sovreign wealth funds who don't understand what they have purchased.

Anyway, I hope I wasn't rude with my answer.

Posted by: 54465446 | December 20, 2010 10:45 AM | Report abuse

Sometimes it's better to have a do-nothing Congress; doing things for the sake of doing things isn't always a wise path. All you need to do is look at the debt and destruction left in the wake of this "so-something" Congress!

Posted by: Lilycat11 | December 20, 2010 11:02 AM | Report abuse

Whatever the Democrats did, they sure didn't do what America wanted. They acted like tin-pot dictators and persued their own agendas, despite Americans.

Thus, the crushing defeat of 2010 with more to come in 2012.

Democrats act as if they want to be defeated. The goofballs spent all their remaining, political capital trying to please homosexuals. All the while they hung Hispanics out, to flap in the wind, letting the DREAM ACT die.

I guess Hispanics now know where they are on the Democrat, most favored list.

Right under the homosexuals.

Not a comfortable place to be. Maybe they will think twice before trusting the Democrat homophiles again.

Posted by: battleground51 | December 20, 2010 11:26 AM | Report abuse

"The problem occurs when risky assets are fraudulently disguised as AAA rated investments, and sold around the world to things like pension funds and sovreign wealth funds who don't understand what they have purchased."

54465446,

But the key problem is that no one knows what the risky assets should be rated. Not the securitizer, nor the rating agency.

However, by law these these securities are required were to have a rating, a rating paid for by the issuer of the securities.

So consider a subprime pool, and you're trying to get a rating for the least risky tranche (say the tranche represents 70% of the pool). The securitizer is saying that you'd have to have losses worth 30% of the pool to even begin to eat into this most secure tranche - that's like 60% of the pool defaults with a 50% recovery. Back in 2006, I think it's difficult to justify putting anything less than AAA on that security, if you have to put a rating on it. At most, you request for perhaps another 5% of collateral to go into the next lowest pool, providing a little more security from defaults, but much of the pool will be labeled AAA.

Now clearly, we saw enough defaults on some of these pools to cause substantial losses for those holding AAA CMO securities.

Without these requirements (ratings for all securities, paid for by issuers) it is entirely possible that a prospective buyer of a CMO security would have gone to Moody's, asked for a rating, and have come back with Moody's saying "Hey, this is a really complex security. While we can you give you a detailed anaylsis of the collateral, we don't want to risk putting our reputation on the line by calling this type of security AAA until at least a few cycles have come and gone".

Or maybe Moody's would have done so anyway, and there would be no more Moody's today because no one would trust its judgment any longer and Moody's wouldn't be part of a government-backed cartel getting only a slap on the wrist for its misdeeds.

"[Fannie/Freddie's] creation had nothing to do with the damage caused by Wall Street's invention of the CDO."

Well, other than that they were huge participants in the securitization markets.

In addition, the GSEs allow for things like 30 year fixed mortages with no prepayment penalties. In a free market, these instruments probably wouldn't exist. Because of these long term mortgages that you can prepay, the mortgage/housing market becomes incredibly interest-sensitive, particuarly when rates get low because of the impact of duration at low rates. The GSEs also started buying lots of mortgages with less than 5% down (~1.5 million by my count over 1998-2005).

I'm certainly not going to deny that the banks screwed up or that fraud (by both borrowers and mortgage originators) was a huge problem, but the institutional framework was fuel for the fire.

Posted by: justin84 | December 20, 2010 1:03 PM | Report abuse

544.... "That is mainly as a result of the the two pieces of legislation from the Clinton administration era, Gramm-Leach and CFMA. These really created the market."

The CFMA argument has been totally obliterated by most reputable economists (i.e. any economist without an overt political goal).

Also, whatever mistakes Clinton made (and he made plenty) were mostly made because of his compromises with the GOP, and were then made worse by the GWBush admin when they increased permitted leverage ratios. Under Clinton, ratios were like 10:1, and many argue that ratio is not destructive, whereas under Bush the ratios were permitted to go to like 30:1.

Interestingly, Clinton has said publicly he made certain mistakes and would like to fix them. And the Republicans who do blame Clinton for these mistakes do not want to reform these mistakes and instead prefer to remove even more regulations.

In sum, don't pretend all the mistakes were made during the Clinton era, and don't presume that those levying charges today actually believe the BS they dish out.

Posted by: lauren2010 | December 20, 2010 1:13 PM | Report abuse

vision

"We're talking about a system that is sustainable and the current one is not."

Obamacare points us to a path more sustainable to the one that preceded it. To argue otherwise would be in direct opposition to the CBO, and frankly, you and I are not smart enough to make such arguments.

"So while a liberal's answer is mainly to tax more (mainly who they consider rich) that in itself does not make systems sustainable."

That's pure ideological escapism from the debate. The fact is, liberals did far more than "tax more". In fact, they lowered taxes and they created private exchanges, they gutted some aspects of medicare that were inefficient and designed more to win Bush votes and help his insurance buddies than anything else, and enacted some basic common-sense things like banned pre-ex.

"You need to address the root cause of the cost problem as well as the per unit costs."

And you need to recognize that, first, true reform involves at least two things: improving access and reducing costs. Obamacare (and MA) will drastically improve access, and will pave the way for future efforts to bending costs.


"Again wake me when someone takes on the doctor lobby. A good start would be actually addressing the SGR of medicare instead of continually punting it."

I, and most liberals, agree we need to fix costs and taking on the dr lobby. But rarely is reform done by any means other than incremental, and the Obamacare is indeed incremental but is in the right direction. We are better off now than before, though by no means will this improvement remain if the repealers and saboteurs get their way.

"You're need to paint people in convenient boxes is IMO wrong."

You are doing all the painting. I'm just informing you that your constant griping of what's wrong despite notable, recent improvements makes it look like you are part of the glass half empty, repeal Obamacare crowd.

Posted by: lauren2010 | December 20, 2010 1:27 PM | Report abuse

dbw: "The fact is, the more government has gotten involved in something, the HIGHER the costs go. Health care, education, housing...take your pick. The more government tries to meddle in the market to 'ensure fairness', the more the natural forces in the market are ignored or perverted, and costs run amok."

That is so incorrect and naive I can barely stop laughing at the absurdity of it.

Can the gvmt make things worse? Yes.

Has the gvmt made some things worse in the past? Yes.

But can the gvmt make things better? Yes.

And HAS the gvmt ever made things better? Another clear yes.

Your unambiguous declaration that gvmt always makes things more expensive for consumers is in direct contradiction of historical facts to the contrary.

The following are a partial list where properly run gvmt HAS had a moderating affect on costs/prices, either in the US or elsewhere:

- gas prices
- health care costs
- utility costs
- phone bills
- insurance premiums
- grocery prices (do research how Nixon restructured American agribusiness and reduced prices of food).
- airline tickets

If something today is artificially highly priced, it is more likely because corporate interests are somehow blocking gvmt from interfering in certain laissez faire business practices, or it's because corporate interests have corrupted gvmt to the extent to make conditions more favorable for businesses to artificially raise prices.

As an example, US health care costs are IMO artificially high today. Most other civilized countries provide better care at lower cost. The US gvmt is indeed complicit in helping to increase costs, but not because there is some implicit design flaw in gvnmt that guarantees anything it touches will cause costs to increase. Rather, it's because of undue influence into US elections and regulatory frameworks by health providers and insurance companies. The answer is not to eliminate gvmt, but to reform it and cleanse it of corrupt people and people taking orders from special interests. If we eliminated gvmt entirely in these matters, health costs would get even worse. Just ask any person on gvmt-run medicare if they save money by having medicare.

Posted by: lauren2010 | December 20, 2010 1:46 PM | Report abuse

lauren:

I'm sorry to be so direct, but you clearly don't know anything about the CFMA, and the securities market in general. No one has refuted that the CFMA was one of the primary problems, except Phil Gramm, who wrote it, Larry Summers, Republican double agent who convinced Clinton to pass it, and Bill Clinton whose understaning of finance and securities was childlike at best.

So I'm not blaming Clinton directly for signing it, or the Gramm-Leach. He was sold a bill of goods by people who he trusted, mistakenly.

Phil Gramm has done his odd little disapperance into history, having played a huge hand in the two worst financial problems of the 21st century so far, Enron, for which he sepcifically wrote language to exempt them from regulation, and the CFMA which prevented any effective regulation of the derivatives market. Leave us not forget his wife Wendy who just happened to be Chairwoman of the CFTC while this was going on and who prevented any enforcemnt actions from taking place in the derivatives market.

Of course most people would say Wendy Who? if her name came up in conversation!

Posted by: 54465446 | December 20, 2010 1:55 PM | Report abuse

msoja

I am surprised you would welcome me to point out yet again how embarrassing it was for you to make that comment about slavery polls in response to my point about how Mass health reform is extremely popular among its residents.

I figured you'd just shirk away and hope no one but me noticed your gaffe.

I suppose you are a glutton for punishment and are obstinate even if not exactly logical.

Do you want me to explain why your slavery poll comment was ridiculous or can we go ahead and just leave it alone now? I only ask out of my concern that maybe I overestimated your ability to understand how pathetic and illogical your initial rejoinder was.

Posted by: lauren2010 | December 20, 2010 1:55 PM | Report abuse

544

You would be right about me not knowing much about CFMA and the securities market. I know about as much as the average American.

But I do know I've read MANY articles by people lots smarter and more objective than you or I that have in great detail debunked your claim that CFMA was a prime cause of the Great Recession.

I will simply encourage honest readers to google for such professional debunkings instead of listening to partisan armchair quarterbacks like you.

BTW, your rejoinder that I know "nothing" is not really touche moment for you nor is proof that you were right all along. It was just an easy way for you to assuage hurt feelings that someone here might disagree with you.

Posted by: lauren2010 | December 20, 2010 2:04 PM | Report abuse

"All you need to do is look at the debt and destruction left in the wake of this "so-something" Congress!"

You are apparently unaware that the last three Republican presidents were responsible for over 82% of the entire national debt as of Jan 2009 (before Obama became president)?

Also, did you know the national debt doubled under George W. Bush, and that the current deficits are due to almost entirely to decisions and policies (rightly or wrongly) started by his administration?

Posted by: lauren2010 | December 20, 2010 2:07 PM | Report abuse

justin:

As always I have a great respect for your work with numbers but we are coming from a fundamentally different place.

Both agencies were created with an idea to expand the home ownership market by creating a secondary market for guaranteed mortgages, as you know. (I'm dealing in big generalities here because of the format problem) You either view that as good or bad philsophically and take your medicine from what comes.

If neither agency had ever existed, or ceased to exist tomorrow, the 30 year fixed would probably run around 8-9% minimum, and there would be effectively speaking only a small secondary market for mortgages at all.

Like my discussions with rcaruth over hard currency vs fiat it's a philosophical stance where each of us has to accept that the world looks very different under our respective systems.

I would agree that guarantee of mortgages is ripe for the abuse, just as many other governmental agencies can be"taken" by those who are ingenious.

Somewhere between no governmnetal inclusion in the marketplace, and smarter inclusion is probably where the answer lies.

Posted by: 54465446 | December 20, 2010 2:08 PM | Report abuse

lauren:

You write some very good posts and I enjoy reading your stuff. You consider my statements about the CFMA to be an indictment of the Clinton Administration which you want to defend.

However this is really arcane stuff. You have to have really delved into it and understand the vocabulary before you can go beyond the average newspaper columnist understanding.

The actual cause of the economic crisis was a big housing buble in CA, AZ, FL and NV. That was the match. The reason it became a national and then international crisis was primarily because of the deregulation involved in the CFMA, and Gramm Leach. You see their never would have been a TARP, if Gramm Leach had not allowed the banks to use FDIC guaranteed deposits to speculate on wild returns from the unregulated derivatives market.

To cause the crisis we had, you needed all three things bubble, banks and derivatives. (Now some, like Justin I believe, throw in a Greenspan expansionary monetary policy which fueled the bubble in the first place, but we can get way beyond posting limits here)

You are in the same position as me with HCR. I used to try to post with an intelligent thought or two, because I am philosophically on the other side of Ezra. However I realized that Ezra simply outwonked me out in this area. So even if I was philosophically right, I didn't have the expertise necessary to prove it, and if I was wrong, I didn't have the background to know it. So you don't see me injecting on HCR anymore because so many know the numbers better than me.

Posted by: 54465446 | December 20, 2010 2:23 PM | Report abuse

"But I do know I've read MANY articles by people lots smarter and more objective than you or I that have in great detail debunked your claim that CFMA was a prime cause of the Great Recession."

Lauren,

I'm not sure CFMA means what you think it means.

http://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000

Posted by: justin84 | December 20, 2010 2:44 PM | Report abuse

544

I owe you an apology

I just realized I had doggedly and mistakenly substituted CFMA for CRA.

Doh!

I admit when I am wrong and this instance I am wrong.

It was the CRA that has been thoroughly debunked.

Please forgive me.

Posted by: lauren2010 | December 20, 2010 2:53 PM | Report abuse

lauren:

NP, Justin's eye was sharper than my own, as is so often the case!

Posted by: 54465446 | December 20, 2010 3:11 PM | Report abuse

Actually, I realized my mistake before I saw Justin's post. I was playing a video game when it suddenly dawned on me I had gotten the two acronyms confused. Still, Justin's post probably would have made me realize the mistake had I not figured it out myself, so he obviously could tell I something basic was wrong.

Posted by: lauren2010 | December 20, 2010 3:53 PM | Report abuse

"If neither agency had ever existed, or ceased to exist tomorrow, the 30 year fixed would probably run around 8-9% minimum, and there would be effectively speaking only a small secondary market for mortgages at all."

54465446,

Wouldn't it be awful hard to get a housing bubble going under such conditions?

I don't think we'd have 30 year mortgages with no prepayment penalties without the GSEs. In the 1920s, there were 5 year interest only balloons which needed to be refinanced every 5 years. I'm not sure what would replace it, but long duration interest rate exposure with no prepayment means that a relatively small jump in rates can launch prices skyward.

A decline in rates on a 30 year mortgage from 7.5% to 5.5% means that for a given monthly payment, the mortgage value can rise by 23.14% (e.g. $200,000 to $246,300). Throw in a few years of inflation, and a $200,000 home becomes a $260,000 home due to fundamentals alone.

Given that a house is not only a consumption good but an asset, price appreciation generates a greater willingness to pay for housing, and also speculative investment. As the bubble rolls on, this leads to lower downpayments, lax lending standards (especially given the strong secondary market, in which originators can resell).

That all said, I don't think we can be sure of what would happen if the market were left to its own devices. I do think that the order which emerges out of the market, in which some strategies and innovations are successful and thrive, and others fail, creates a more robust system than one created largely via top-down regualtion, with regulators fighting the last war, and with even the effective regulations put under pressure during long booms.

"Somewhere between no governmnetal inclusion in the marketplace, and smarter inclusion is probably where the answer lies."

Probably true. My sense is that the government should stick to narrowly defined basic functions (such as prosecuting fraud) and otherwise leave the market to function on its own.

Recall your comment that "[m]assive criminal fraud that was committed on an unprecedented scale by tens to hundreds of thousands of people nationwide, not one of which has ever been sent to jail." When the government tries to do too many things, it often screws up its most basic functions. Like any other organization, it is best to stick to core compentencies. Even minarchist libertarians are okay with the government prosecuting people for fraud.

Posted by: justin84 | December 20, 2010 5:43 PM | Report abuse

justin wrote:

" don't think we'd have 30 year mortgages with no prepayment penalties without the GSEs. In the 1920s, there were 5 year interest only balloons which needed to be refinanced every 5 years. I'm not sure what would replace it, but long duration interest rate exposure with no prepayment means that a relatively small jump in rates can launch prices skyward."

Exactly, but that is what I meant by different systems would produce different results. Yours would be a much more sound financial one, however it would serve many fewer people.

My 90 year old father always laughs at the term "the American Dream" because he tells me he never knew anyone growing up who DIDN'T rent their house.

I favor more home ownership in general, although of course not fueled by Fed expansionary monetary policy. It's actually one of the few industries left that is purely American in it's ability to generate large numbers of jobs (when healthy).

It's a similar argument to the hard currency one. Those who have money already are greatly favored by a metal backed currency. those without are hurt by it.

As always, thanks for the reply.

Posted by: 54465446 | December 20, 2010 6:02 PM | Report abuse

--*Do you want me to explain why your slavery poll comment was ridiculous or can we go ahead and just leave it alone now? I only ask out of my concern that maybe I overestimated your ability to understand how pathetic and illogical your initial rejoinder was.*--

You're going to defend the popularity of slavery in the 19th century?

Go for it.

Posted by: msoja | December 20, 2010 8:04 PM | Report abuse

I dont feel like i should be forced to have health insurance, I think everyone would like to have health insurance if they could afford it. If you need affordable health insurance search online "Wise Health Insurance" you dont want to be with out insurance any time.

Posted by: williamstaerk | December 21, 2010 2:42 AM | Report abuse

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