georgephillip
Diamond Member
Care to explain how legislation passed in 1977 led to a housing bubble's collapse in 2008?We're in agreement that the economy has not recovered; however, I'm not sure if your reason about the size of the Federal Government as a % of GDP makes as much sense as Dean Baker's autopsy of the President's Fiscal Commission:You couldn't be more wrong.
The economy has not recovered. 2.5% economic growth is not a recovery; we need 3% just to keep up with population growth.
The reason it has not recovered is because the size of the Federal Government as a % of GDP has increased by 25% in the past two years. The Feds sucked the oxygen out of the private sector.
"The country has a large deficit today because the collapse of the housing bubble wrecked the economy.
"This is simple and obvious to everyone familiar with the dynamics of the budget and the economy.
"If the unemployment rate were at its pre-recession level of 4.5 percent, we would have, at most, a modest deficit.
"Furthermore, the story of out of control government spending is entirely an invention of people with an agenda to pursue. In 1980, non-interest spending (?) was 19.8 percent of GDP.
"The Congressional Budget Office projects that it will rise to 21.1 percent of GDP in 2020 under President Obama's budget.
"An increase in spending of 1.3 percentage points of GDP over 40 years hardly qualifies as out of control.
"Much of any additional revenue needed can be obtained by a tax on Wall Street financial speculation.
"Remarkably, the commission's co-director's apparently never considered this obvious source of revenue."
* And who was it that forced that condition? Whom caused it? Gubmint threatening banks to comply to give loans to people that couldn't repay the loans.
In December 2008 FDIC Chairman Sheila Bair argued the exact opposite:
"'I want to give you my verdict on CRA: NOT guilty,' said FDIC Chairman Sheila Bair, according to a press release by the Federal Deposit Insurance Corporation.
"Before the Consumer Federation of America, Bair said Thursday she wanted to clear up the 'myth' that the Community Reinvestment Act caused the financial crisis and she set out to do so with vigor.
"The Community Reinvestment Act or CRA is a federal law designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.
"It has largely been criticized by conservative members of the GOP as promoting predatory lending practices."
"'Point in fact,'" she said, "'only one in four higher-priced first mortgage loans were made by CRA-covered banks during the hey-day years of subprime mortgage lending.
"'The rest were made by private independent mortgage companies and large bank affiliates not covered by CRA rules.'"
FDIC's Bair Sets...