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An American monarchy

December 17, 2013

The Great Recession of 2008 reinforced the concept that the American economy is as fragile as a glass house....

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(25)

Capricorn1

Dec-17-13 3:15 AM

Excellent letter Mr. Erdman!

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ToTEXASfromPA

Dec-17-13 5:44 AM

Two thumbs up.

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MrShaman

Dec-17-13 6:08 AM

"Prior to the fiscal crisis, the Fed artificially inflated the dollar currency. The housing bubble was created because the Fed created money out of thin air, the credit would not have come from legitimate sources otherwise." - Christopher Erdman

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Yeah...sure...of course it "did".

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See:

American Casino - YouTube

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CarlHiller

Dec-17-13 6:49 AM

While I like the letter, the truth about the FED creating the housing bubble is different than what the letter writer states. The FED did not create it, the Congress did and specifically those Democrats who went after banks led by then community organizer Obama when they sued banks to ease lending practices. Adherence to 'Community Reinvestment Act' passed in a bi-partisan congress and signed into law by Clinton led to riskier lending by banks. When you loosen credit standards, package blocks of subprime housing loans for sale to Fannie and Freddie, there is only one practical outcome - defaults. While it is a bit more complex than this, that is the jist of it.

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CMReeder

Dec-17-13 8:11 AM

LOL

More spin. Especially from Carl.

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eriklatranyi

Dec-17-13 8:14 AM

Audit the Federal Reserve!!!!!

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enigma

Dec-17-13 8:22 AM

While I am no fan of the Fed, this letter is too full of errors to just agree. First is the point made by Carl about the housing bubble. Next, the Fed Chairman is not a dictator. The Fed is controlled by a board. The Chairman has a little more influence, but is not a dictator. Another problem with the letter is that the Fed does not bail out banks, the government does. Now admittedly, the Fed was complicit in that it printed much of the money used for this purpose, but it was government who approved the bailout. The Fed doesn't even have the authority to do that. Another thing is the claim that the Fed inflated the currency before the 'fiscal crisis'. Much more inflation has occurred in the attempt to recover than before. This will lead to what Jefferson warned of, but it didn't happen the way the writer says.

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spike2

Dec-17-13 8:31 AM

How about some intellectual honesty from everyone. Savings and loaning were better served within communities. The evolution of the banking system has both positives and many negatives. Loans had greater legitimacy when the lenders had an intimate knowledge of borrowers. Area money was used to service area people. Too many decisions are determined by cold numbers held in computer systems by mega-lenders. people are accepted and rejected with no actual knowledge of an individual, the real value of property being purchased or the viability of a business in a given area. Big allows more available assets but lowers the information regarding buyers and purchases.I believe we all are guilty of accurately assessing where problems begin. We seem to enjoy simplistic answers. While this is a good letter and I agree in part, we do tend to lean on a Cliff's Notes analysis.

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MrShaman

Dec-17-13 8:57 AM

"The Great Recession of 2008 reinforced the concept that the American economy is as fragile as a glass house. There were many excuses for the housing market collapse as well as the need for bailouts of financial institutions. Some place blame on banking institutions that intentionally misled clients and propagated suspect home mortgage loans." - Christopher Erdman

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...While, was it WAS (in fact), was....a bunch o' drunken 1%er/high-roller wannabes...sitting around a pool in Boca Raton...who'd (originally) cooked-up the whole scheme.

See:

Money, Power and Wall Street | FRONTLINE | PBS

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MrShaman

Dec-17-13 9:03 AM

"While I like the letter, the truth about the FED creating the housing bubble is different than what the letter writer states. The FED did not create it, the Congress did and specifically those Democrats who went after banks led by then community organizer Obama when they sued banks to ease lending practices." - CarlHiller

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No...no matter how much time goes by...it was (still) Phil Gramm.

*

See:

Q&A: Leslie & Andrew Cockburn - YouTube

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CarlHiller

Dec-17-13 9:14 AM

Sorry Charlie - But not posting facts to prove otherwise shows your unwillingness to disprove what I posted because you lack the facts. It is simply leftist attack and deflect. I am always open to reviewing facts and figures and will, when proven wrong admit to the error of my ways, but dear friend all I have are the facts and figures I can find not your oblique remarks.

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underwood

Dec-17-13 9:43 AM

The writer, Carl, Enigma and Spike are correct. Wall Street, government and the fed have been in bed together since long before the housing bubble burst, and both parties have been complicit in the game. We’ve been paying for it with higher taxes and a decreasing dollar value for a long time. While some believe money expansion will stimulate the economy, the long-term consequence is inflation and erosion of anything we’ve saved or invested.

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Fredzz

Dec-17-13 10:08 AM

spike2; I do agree with you....!

But, I believe it started awhile back When our politicians decided too [ SUSPEND ] financial Regulations allowing them to self - regulate the industry.

Other than that... You nailed it..!

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eriklatranyi

Dec-17-13 10:40 AM

Politicians see all that money and cannot resist playing with it.

It is a drug for them.

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enigma

Dec-17-13 11:52 AM

Why does the left defend the Fed? It is the worst of what they hate. It is a private institution that controls all of the money in the country. Wouldn't you think they would hate that? The right should hate it because it is a giant bureaucracy which performs a government function without any accountability. It's absolutely the worst of both worlds, so why would anyone defend it? It was a bad idea when it was created and it remains a bad idea.

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RealAmerican

Dec-17-13 2:18 PM

This is why we need to go back to the gold standard. No more fiat money

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RealAmerican

Dec-17-13 2:26 PM

Enigma is right. Most people don't know the fed is pretty much a private institution. It has amazing power that is unchecked by the political process and unaccountable at the ballot box. Spike is right in that loans have become very impersonal. I'm just surprised no one brought up Fanny Mae, Freddie Mack and the Right's favorite scapegoat Barbie Frank.

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leaningright

Dec-17-13 3:09 PM

What the Federal reserve is doing by printing cash to prop up the bond market is nothing but trouble waiting to happen. Watch out when the market crashes when the Fed stops doing this, the stock market is going to sink fast. I personally removed all of my investments from the stock market in 2009 and I am so glad that I did. Good luck with it and don't cry when you lose your money. The gov't needs to stay out of the way when it comes to propping up business's, the stock market, Housing, and other countries. When are we going to learn our lesson?

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Premier

Dec-17-13 8:02 PM

Ah yes Barney: From Frank's press release:

"The truth is when President Bush took office, and the Republicans controlled both houses of Congress, he did not make any progress on comprehensive legislation to reform the regulation of the Government Sponsored Enterprises. It was not until 2005, when the House, on a bipartisan basis, and over the President's objections finally passed a reform bill. It died in the Senate in part because the White House's failure to make it a priority."

But wait......

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Premier

Dec-17-13 8:03 PM

In fact, here's a New York Times story from September 2003, clearly showing that the first substantive Fannie and Freddie reform from inside government came from the Bush administration. Spurred by worries that Fannie and Freddie were cooking their books and taking too many risks, Treasury Secretary John Snow proposed placing the companies under Treasury oversight with strict controls over risk and capital reserves. The NYT labeled the proposal "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago" and noted:

Mr. Snow said that Congress should eliminate the power of the president to appoint directors to the companies, a sign that the administration is less concerned about the perks of patronage than it is about the potential political problems associated with any new difficulties arising at the companies.

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Premier

Dec-17-13 8:04 PM

cont. So five years ago, there was one of those rare moments in Washington when the branches and personalities of government—in this case, the Bush administration—are less interested in protecting or expanding their turf than in fixing a looming catastrophe. What was Frank's response to the proposal?

"These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

So who's to blame?

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RealAmerican

Dec-17-13 9:44 PM

I read in the Wall Street Journal that there were also a good deal of Republicans allied with Frank....

"a bipartisan phalanx of Members, and a core group of Republicans on the House Financial Services Committee were among the guardians. They include Gary Miller of California, Randy Neugebauer of Texas and Spencer Bachus of Alabama"

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RealAmerican

Dec-17-13 9:45 PM

The big trouble with our political system is that you can't even tell Republicans from Democrats half the time. They all flip flop

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RealAmerican

Dec-17-13 9:48 PM

Miller, Neubauer and Bachus were all Republicans who were on board with Barney Frank. It was both "market failure" and "government failure"

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rmiller

Dec-18-13 4:18 PM

I know nothing about economics, outside of the basic understanding of supply and demand. However, I'm curious...if we were to remove the Fed Reserve, wouldn't that also remove the protection it affords our bank accounts? Forgive my ignorance...

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