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Tiggs

The President and the Subprime

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From the Wikipedia article on the Subprime Mortgage Crisis:

The subprime mortgage crisis is an ongoing financial crisis characterized by contracted liquidity in global credit markets and banking systems. A downturn in the housing market of the United States, risky practices in lending and borrowing, and excessive individual and corporate debt levels have caused multiple adverse effects on the world economy. The crisis, which has roots in the closing years of the 20th century but has become more apparent throughout 2007 and 2008, has passed through various stages exposing pervasive weaknesses in the global financial system and regulatory framework.

...

President George W. Bush stated in September 2008: "Once this crisis is resolved, there will be time to update our financial regulatory structures. Our 21st century global economy remains regulated largely by outdated 20th century laws. Recently, we've seen how one company can grow so large that its failure jeopardizes the entire financial system." The Securities and Exchange Commission (SEC) has conceded that self-regulation of investment banks contributed to the crisis.

Which of the Presidential candidates do you think is best positioned to ensure that this never happens again?

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The short answer? Neither.

As long as mediocre minds are attracted to political office in the same relationship as better minds to industrial leadership, lobbyists will always disturb the balance of a free market by convincing the politicians to create or remove legislation that is in the way of their mutual enrichment.

The real power here does not lay with the Prez but with the legislative.

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Obama's plan from SIX MONTHS before the current crisis.

• Giving the Federal Reserve system more oversight authority over institutions to which it provides credit as a "lender of last resort." Although Obama did not outline specifics, saying those would depend on the level of the Fed's assistance, "but at the very least, these new regulations should include liquidity and capital requirements."

• Strengthening capital, liquidity and financial disclosure regulations for financial institutions. "Transparency requirements must demand full disclosure by financial institutions to shareholders and counterparties," Obama said.

• Creating a financial oversight panel that could monitor and report to the president about such rapid financial developments as the growth of bond-backed subprime mortgages.

• Providing an additional $30 billion in economic stimulus spending, including $10 billion in a foreclosure prevention fund for homeowners. Obama said the fund was designed to help homeowners "sell a home that is beyond their means, or modify their loan to avoid foreclosure or bankruptcy." He also called for overhauling bankruptcy laws, "so families aren't forced to stick to the terms of a home loan that was predatory or unfair."

• Strengthening investigations into trading activity that appears to involve market manipulation. "Reports have circulated in recent days that some traders may have intentionally spread rumors that (investment banker) Bear Stearns was in financial distress while making market bets against the company. The SEC should investigate and punish this kind of market manipulation and report its conclusions to Congress," Obama said.

• Creating a 10% mortgage interest tax credit for homeowners who do not itemize their taxes, cutting income taxes by up to $1,000 a year for "working families" and eliminating income taxes for retirees making less than $50,000 per yea

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Certainly someone with a more conservative view for the reason that while encouraging home ownership I believe is a valid social policy, home ownership to anyone anywhere no matter what it takes is what "subprime" (meaning below the best) is all about!

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Obama's plan from SIX MONTHS before the current crisis.

Does his plan also include requiring the people getting these mortgages to put down any money out of their own pocket?

Does his plan also include requiring a job history or proof they have realistic potential to pay it back on schedule?

That's the stuff that got this whole thing going sour!

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