Comments on Liberty Watchman: Blaming the Banks

The phrase, "can't find credit worthy peo...

2009-12-29T15:12:53.502-06:00

The phrase, "can't find credit worthy people to make loans to." certainly encompasses both sides of the supply/demand equation. You know that. You're just nit picking as usual.

Congress most certainly was one of the biggest reasons for the financial meltdown. The Community Reinvestment Act of 1977 began the game which was accelerated when Congress pressured the GSEs (Fannie and Freddie) to buy more and riskier subprime loans. Yes, Wall Street was already buying some risky MSBs, but the GSE's accelerated that whole market and gave it legitimacy.

Even your beloved NYT wrote in Oct 2008, "The ripple effect of Fannie’s plunge into riskier lending was profound. Fannie’s stamp of approval made shunned borrowers and complex loans more acceptable to other lenders, particularly small and less sophisticated banks."

While you are technically correct that Congress did not pressure the *banks* to make loans, their pressure on the GSEs was intended to and achieved the very same purpose. So once again you excel at nit picking the syntax in spite of the overall truth of the post.

Reasoned comments are welcome on this blog, but take your ad hominem remarks (drinking, lunacy, etc.) elsewhere.

Just one other sane point to add here. The banks ...

2009-12-29T06:12:23.803-06:00

Just one other sane point to add here.

The banks loaned for the oldest reason in the capitalist playbook: They had buyers for the loans, removing all risk from their own books.

Don't you have any understanding of what happened, or do you watch too much Fox?

The banks loaned money because it was a no-brainer to do so when the loan could immediately be sold to Wall Street. Congress forced them to loan, or pushed them? Do you drink when you write?

What nonsense ... "The reason the financial ...

2009-12-29T06:06:00.594-06:00

What nonsense ...

"The reason the financial system almost crashed around our shoulders last year is that congress thought the banks weren't 'loaning enough money' so they pressured the banks to make unwise loans which then, en masse, blew up."

Congress had absolutely no role in the financial crisis -- other than turning a blind eye toward the financial industry due to a belief that the market was a virtually perfect self-regulating mechanism that would auto-correct any imbalances before they threatened the system.

How did that belief work out, by the way?

What you wrote above defies even aggressively vivid imagination. It's twisted and unreal enough to border on lunacy.

You wrote: "If bankers aren't making loa...

2009-12-29T05:16:46.332-06:00

You wrote:

"If bankers aren't making loans it is for one of the two reasons above. They either have insufficient reserves or can't find credit worthy people to make loans to."

Sorry, but insufficiently reasoned.

They also don't make loans when borrowers don't want to borrow, presumably because they don't think they can generate enough return on the capital borrowed to justify paying the interest on the loan.

Duh!

Did you forget about demand, and what happens when it evaporates? When loan demand evaporates, banks don't loan -- at least they don't loan as much.

Economics 101