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Sunday, May 16, 2010

"High levels of public indebtedness could weigh on economic growth for years"

Portlanders who want to be like Europe are going to get their wish.

Comments (12)

I love the Federal Reserve guy's line: "“We’re American policy makers, and we make decisions to keep the American economy strong."

If I could write comedy that strong I'd be rich.

One difference between Europe and Portland: Greece is considering going after the US banks that helped create their crisis by selling them a bunch of exotic financial instruments with fraudulent ratings.
Here we welcome the people that helped take America to the economic brink by setting their kids up with a soccer team.

Even as people with mental problems can't get help and are shot to death by the Portland Police.

Personally, I see a closer comparison between Portland and Ireland, and that shouldn't make anyone feel any better. Ireland went through a gigantic boom during the late Nineties and early Aughts, and people talked of "the Celtic Tiger" and how Ireland was, for the first time in centuries, an economic power to contend with. As you can figure out, it was all a bookkeeping scam: lots of insane real estate speculation scams, businesses and manufacturers who were kept afloat by these scams, and lots of everyday folks who started to relax and figure that things had changed when everything started to crumble. Greece is getting all of the news coverage because of its government programs, but Ireland is in at least as much trouble.

The real parallel to Portland? When the speculation money first started coming in, the big push was to encourage young professionals to stay in the country. This was perfectly laudable and understandable, as young Irish had been leaving the country for centuries in search of a better life. However, the biggest speculation scams all involved luxury residences and accommodations for the creative class: admittedly, Ireland is much more sympathetic to its artists than the US, but the numbers simply couldn't add up. The big push was to stay quiet, though, because nobody wanted the good times to end, and now the entire country is as bad off as it was before.

"Greece is considering going after the US banks"

Hey, I understand the animus against, banks, but Greece blaming the banks is a smokescreen. Greece got themselves in trouble, just like CoP will, by over-spending revenues and making promises they can't keep without large tax increases.

This is where we get stuff like 30% water increases in two years and now PERS (which I thought everybody said was fixed two years ago) needs to bump employer (read taxpayer) contributions 25%.

You don't need to look to Greece, just go south of Ashland about 40 miles.

When local politicians say they're pursuing a vague goal of being an "international city", what they're really saying is "tourism is the trendy way to attract money to the economy". All this despite stunning evidence that it's one ofthe worst ways to build a local economy.

Which begs a much larger, more serious question: how can relying on tourism be considered in any way "sustainable", "local", or otherwise focused on building communities?

Pause for a moment, readers, and consider: the best idea that Portland politicians have for helping the city thrive--the *very best*--is to make Portland a tourist mecca. That's it. The thrust of Adams' efforts--boutique streetcars, a Tram, a soccer stadium--are all promoted for one reason: tourism.

Is that what Portland should be? Is anybody paying attention to the fact that Adams' claims of "green" for the city compared to being "international" are profoundly cognitively dissonant?

Your comment reminds me of blaming the subprime crisis on people who bought homes they couldn't afford.
The problem lies in these exotic security swaps - over 600 trillion worth of financial exposure should they start to unravel...which they have.
The main reason these things were sold appears to be the simple sales commission - a bunch of Wall Street brokers who used fraudulently rated security swaps just to generate some income for themselves.

Greece is to blame for not keeping their economic house in order and triggering these swaps to go off, but how does that explode into a problem this big? A problem that could destroy the euro and the EU? A problem that has led to our Federal Reserve once again bailing out banks abroad?

That part is Wall Street's contribution.

"Your comment reminds me of blaming the subprime crisis on people who bought homes they couldn't afford."

Believe me, I am not calling the banks innocent in this at all and I think Paulson pulled off one of the greatest heists ever for G-S.

The reason these got so large is the demand for borrowing money got so large. For example, it seems we've gone from Clinton's surplus to Obama being $1T a year in debt fairly rapidly (I am not mentioning Bush because he was just as bad with $100B's of debts.)

Once these numbers get this large and no one person can take all the debt, pretty soon everyone has a finger in the pie.

However, it all starts with politicians who find it increasingly easy to keep office by spending and borrowing more. Banks are enablers getting their slice.


I understand you argument as it applies to first time buyers who have no family members who are homeowners. Other than that, allow me to disagree.

First, when signing that 0% down, rate adusted to the market mortgage, no one was sticking a gun to your head telling you to sign it. You could have gone with the traditional 15 to 30 year mortgage, but lets face it, you wanted to spend that money on another car or some useless toy such as new boat or quad.

Second, everyone from the banks on down to my family members speculated based on the false notion the housing market was an eternal boom. We all learned that lesson including those in my immediate family. In other words, people bought houses their monthly income could not support under a traditional mortgage with the specific intent to "flip it" in a few years for up to twice or thrice what they bought it for.

Third, were you buying that home to flip it in one to two years? If so, like a bad gamble, you deserve every penny of that loss. I had peers in college whose parents would buy homes, they would reside it in sparsely for the minimal amount of time to flip it, often sleeping in a sleeping bag, for two to three times what they originally bought it for.

Finally, neither Republicans nor Democrats have clean hands in the popped housing bubble of the 2000s. Clinton signed the Gramm Leach Bliley Act of 1999 into law allowing CDOs to flourish unregulated by the SEC and Bush 2 did what Republicans learned from Reagan and the EPA in putting in regulators who were antithetical to the concept of regulation to their very core.

Regulation under Republicans is equivalent to me taking a job with a regulatory agency, stopping by for an "audit" at my friend's place of business, and spending the "audit" time in his office bullshitting with him over the old days simultaneously signing everything off as if his business was in compliance.

What we need is for each regulator to sign a waiver barring them from taking a job in the industry they are regulating for 5 years after their resign or fire date, have the Federal Government invest in regulatory schools and contract law schools equivalent to the amount private sector puts into business schools at universities, and up the fines drastically for noncompliance so that all business, big or small, is scared to death with being out of compliance with any State or Federal regulation.

You could have gone with the traditional 15 to 30 year mortgage, but lets face it, you wanted to spend that money on another car or some useless toy such as new boat or quad.

That's where you're wrong, and it's a key point to understand. In fact, the majority of the people who signed 100% financing (according to the banks themselves, and many stories) couldn't afford a home under normal circumstances. Many (ifnot most) were first-time home buyers.

In other words--they didn't have cash to "spend on another car or some useless toy". Across the board (and the country, and in fact parts of Europe), defaults came from people who couldn't really afford the mortgage in the first place.

What you claim is kind of like the myth about people who get welfare being unemployed do-nothings--when in fact, over 65% of welfare recipients hold down a job.

The part of the crisis that you can attribute to people not paying back their mortgages is small. Ask yourself how this could have hurt us this badly?
The reason it hurt us this severely is that these loans were diced and repackaged as security swaps and insured again and again in shaky deals designed to generate sales commissions.
If we just had to buy the homes that were foreclosed on, that would be no big deal. But these 600 trillion of derivatives? That is the problem. That is what is taking the world economy down.
Incidentally, hype about the new Wall Street movie uses the figure "700 trillion" so it may have gone up 100 trillion since I first read about this. And yes, that is TRILLION!!!!!!!!!!!!!!
You could buy every man woman and child in America a $200,000 house for around 60 trillion so comparing the derivatives number to actual problems in the housing market is ridiculous. If all we had to worry about was the homes being foreclosed on we could get out of this in no time. It's the derivatives - the ones Wall Street types like Henry Paulson fought to exploit by repealing the regulatory laws put in place after the Great Depression.

Meanwhile, the focus in the Goldman Sachs case is on whether or not a collection of the worst swaps was put together knowing they would fail, allowing the hedge funds to profit on the short.
But that is a typical diversion from the overriding crime here: These mortgages were sliced up and repackaged with Wall Street fully aware of their real worth. Then a triple-A rating was applied. That's the fraud that makes the Wall Street component dwarf over the people who couldn't pay their mortgage.
if you drove into a gas station and bought premium gas only to find it was watered-down inferior gas, you'd call the cops. But nobody calls the cops on Wall Street. Instead we rush to give the gas station the money they would have made if business had remained the same and had the gas really been premium all along.
Why is that?

"couldn't afford a home under normal circumstances."

Well, that seems the point, if they can't afford a home, why are they buying one?

"But nobody calls the cops on Wall Street."

Well, both Mssrs Bush and Obama could've, but they did the worst thing instead and bailed them out. So now the moral hazard factor is low again and they can keep saying that they won't let banks fail because we are too big.

I mean I am still p!ssed off at what Paulson got away with to cover his G-S stock.

The "crisis" was solely created by the bankers and wall street traders connected with the bankers.
Need I remind anyone that they pulled in record profits this year (as well as the oil industry).
They both should be taxed for ALL OF THEIR PROFITS and bail out the rest of us.
End the friggen wars, the middle east ones and the ones at home. (long failed drug war)
End of crisis.


I agree 100%, but I needed to point out that everyone on down to the potential home buyer was to blame for their part in this.

In terms of the level of guilt, yes the ratings agencies colluding with the investment banks ala Goldman Sachs and their crony regulators/future employees at the SEC under Cox bear the overwhelming blame for this mess.

Then again, I hear way too many fringe right wingers place more blame on Barney Frank, Freddie Mac, and Sallie Mae for this mess. But guess what, Republicans were in control of Congress from 1994 to 2006, so why are Newt and his gang of do nothings not blamed for providing shady oversight of Federal agencies such as Freddie Mac and Sallie Mae?

Yeah, they just want to ignore that big little part, while they promoted an "ownership society" via first time home buying during Bush 2's 8 years of rampant real estate speculation.


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