Bill Clinton makes as much sense as anyone else. He also seems to be admitting he doesn’t know what the silver bullet is. What happened the past 8 years? I thought Clinton left the White House with a balanced budget?
Did Bush just get side-tracked by 9/11 and his wars on terror? How did things get to this point?
It wasn’t all Bush. This has been building since we started the housing bubble and then exacerbated it with idiotic laws. Then, we’ve worsened it with failed policies of the past, ie. spend, spend, spend. And THAT was even worse because the spending, said to go to improving the economy, went to politicians, political allies, and state governments and most of that “emergency” money was held until it could be used during this election year.
The economy was going quite well until 2006…..you know, until the Congress changed hands….if you want to start blaming people….
Between the easy credit, greedy politicians, citizens, and businessmen, idiotic laws repealing banking protections and then refusing to re-regulate, idiotic commands by Congress to lend to people that could not pay, etc, etc, etc, I’m surprised it took this long to crash.
I don’t doubt that Mr. Clinton is intelligent. The guy does have a good set of ..brains. 🙂
I think he understands the underlying issues and what will (not saying if, I think it’s silly to say we aren’t headed for a double dip) push us down another dip but I disagree with his remedy.
I think if you remove the political spin that he’s trying to make and drill down more into details I think you could actually find some good nuggets of information to either correct our course or at worse make the double dip less rocky than our first dip.
FWIW, the vid was a pleasure to watch. WRT community banks (banking in general) I think he’s wrong but not sure if it’s because of politics or because of a lack of understanding of what really is going on.
For example, http://online.wsj.com/article/SB10001424052748703964104575334611037072320.html?mod=googlenews_wsj speaks to community banks being crushed by pending legislation. If smaller banks fail that only leaves us with the megacorp banks – same banks that took TARP and same ones that most people love to hate.
So, it’s interesting how things are playing out but I think more people will suffer with the government ‘helping’ than if it just removed uncertainty from the markets and allowed the markets to self-heal.
“Somebody’s got to be there making money paying taxes.”
Too bad Clinton didn’t think of that when he signed Bush #1’s NAFTA into law on December 8, 1993. You can still hear that great big sucking sound of our jobs going overseas.
And who brought in the NAFTA concept? Who talked it up?
No innocents here.
Funny that the mass exodus didn’t begin right away also. Did I hear that ‘mass exodus’ is now no longer politically correct?
No doubt NAFTA cost some jobs but I won’t put all the blame on Clinton, Bush #1 or #2 or even Obama. I put it square on Congress by passing regulations that killed jobs and made it more profitable to make goods outside of the country and bring em in then to have them made here in the first place.
I know this – Back in 2005, I would talk with a colleague, and question how and why all these people were getting such large loans on houses, and interest only loans. If I was able to see a problem coming, how come no one in our government was able to see it coming – because they were all part of the gravy train. Incumbents rarely get voted out when times are good.
Pat, I was stupid. I thought everyone just made a lot more money than I did.
Bill Clinton makes a good point. Getting the banks to lend their excess reserves would boost the economy far more than would any fiscal stimulus package, and it would create many more private sector jobs than anything Obama is talking about doing.
Clinton is wrong about the amount of available funds for lending. It’s closer to one trillion rather than one and one-half trillion. However, these days who’s counting a trillion here or there? See the graph at the attached link:
http://research.stlouisfed.org/fred2/series/EXCRESNS?cid=123
As this graph shows plainly, the financial system is still massively screwed up. Banks are required to hold a certain amount of reserves based on the loans they have outstanding. This graph shows excess reserves, which is the amount sitting around idly that could serve as the basis for new loans. To a very large extent, these reserves arose from the Fed’s purchasing bad mortgages and toxic debt. When the Fed makes such purchases, it creates these reserve assets in the private banking system.
To help prevent further collapse, in 2008 the Fed began paying interest to the banks to hold these idle reserves. In effect, the Fed is paying banks to sit on idle money. If the banks lent out the reserves, as Clinton suggests, they would help stimulate the economy, create jobs, and the Fed would no longer be paying banks to hold idle money.
Look at one more graph. This one shows commercial and industrial loans at all commercial banks. That activity is clearly not improving under the current circumstances.
http://research.stlouisfed.org/fred2/series/BUSLOANS?cid=100
I’ll give Clinton credit for fairly good economic policy after 1994. Clinton is by nature an economic moderate but pandered to the left-wingers in the Democratic Party when first in office. After he got his *** kicked in 1994 he changed direction back to more centrist policies, and that change worked out well for the remainder of his administration.
Greenspan, the Fed and excessively low interests rates are another story. Also, Clinton’s support of bipartisan blunders such as the Gramm-Leach-Bliley Act, which killed Glass-Steagall and allowed the behemoth Citigroup to emerge, is another story still.
I have serious reservations of the banks being required to make loans. My fear is that it’ll cause another economic bubble as mandating loans to risky borrowers isn’t much different from making 0 down or no-doc loans.
I do agree with you that many new regulations have also frozen shut the credit doors. You can see that partially reflected in the number of auto and home loans that were made last month. I think I mentioned that as soon as the housing tax credit disappeared that you’d see a bottoming out of new home purchases and that’s played out. That tax credit caused a bubble of excess valuation. N&M ran a story about how homeowners think there houses are worth more than they’re selling and buyers are still waiting for the numbers to come down… Tells me that the true value is probably in the middle.
I’m cheering on for a double dip.
I agree that banks should not be required to make loans. Loans should be based on an objective assessment of their merits and associated risk. I didn’t hear Clinton say one word about requiring anyone to make a loan in the clip. He referred to guarantees to offset some of the risk. I agree with him that this won’t cost taxpayers anything because the banks will make the loans. Some loans might go bad, but overall I expect the positive economic benefits and job creation to be much greater than the cost of any bad loans.
marinm – I’ve never said a bad word about any other poster on this blog before and Moon might edit this, but you are an a**h***, as is anyone who wishes for a recession. A double-dip would compound the unemployment problem and cause more suffering among American families, put more mortgages into foreclosure, hit everyone’s already battered retirement savings, etc. etc.
I suppose you think that anything bad for Obama is good for the nation. I don’t support Obama either and am looking for a change in Congress this fall and a new President in 2012. However, anyone who wishes the suffering of a recession on his fellow countrymen is neither a patriot nor a conservative. If we get a double-dip, I hope you are the first person to lose their job because of it.
Why would anyone cheer for a recession? How freaking sick. People are struggling, local economies are struggling. The recession doesn’t show up much around here but in areas in the NE and midwest, entire towns have dried up. Rhode Island and Michigan are particularly stark examples. Parts of Detroit, and not just inner city, have ghost towns.
Need to Know, spoken like a true REpublican. Getting us through a presidential time period, I vote for Clintons. The Bush years ended up a little rocky. I don’t blame Bush. I actually think he probably saved things from being far worse than they really were.
NTK, I didn’t reference President Obama as a reason I’d like to see a double dip. I understand and appreciate the human toll that will occur because of a double dip (or a continued recession (or as Krugman is calling The Third Depression). We have to collectively make the hard decisions that’ll avert that and I don’t see that happening in the near term.
MH, the gov of CA has called for paying minimum wage to 200,000 state employees because of the problems passing the state budget. Things will continue to get serious. I hate to say this but the English have a good plan for fixing there mess.
NTK, lots of people ‘wish’ for economic down cycles.. Aaron’s Rental, Repossession industry, check cashing services, etc. Those businesses stand to make a pretty penny and even expand. As home values decrease homes become more affordable to those of lower incomes (with the caveat that they are employed and can get credit of course), etc.
You have to take the good with the bad. We went through a very good upswing and now we’ve got to go on a diet. In a few years we’ll be back on that upswing and we won’t even remember how bad things were for these lost years.
How do we get out this mess?
Bush/Obama – TARP, FED injections of liquidity and asset purchases, and a few other measures such as housing subsidies to stop the free-fall of the housing market were distasteful but needed. I’m sick of hearing Tea Party people and others criticizing TARP and defeating members of Congress who voted for it. Absent TARP and the other measures in 2008 the financial system would have collapsed completely and our economic situation now would make the 1930s look like a summertime picnic.
To avoid another such episode, we need fundamental structural change such as reenactment of Glass-Steagall and preventing any firm from becoming “too big to fail.” The new Fin Reg has many positive aspects but does not accomplishment those goals.
Kennedy/Reagan/Bush – TAX CUTS put money in the private sector, and stimulate both private consumption and investment. That is where growth and jobs come from. Obama’s plans of new taxes on virtually everything and his proposed new taxes on energy in Cap and Trade are a catastrophe in the making. Moreover, anticipation of these new taxes is a big part of the reason businesses are not borrowing and banks are not lending.
Various – There are some other good ideas floating around. As I wrote above, I think Clinton’s idea of loan guarantees to get banks lending more of the excess reserves they are holding is good. The key element of Clinton’s idea is that it is aimed at getting private economic activity moving rather than further expansion of government involvement in the economy.
No more fiscal stimulus programs or nonsense such as “cash for clunkers”! Those programs are mostly pork-barrel spending, have little fundamental impact on the economy, add to the deficit, and often cause more harm then good.
NTK, I totally agree with you about TARP. From everything I have read, to not do TARP would have plunged us into an abyss…
Not sure I can be a cheerleader for the Bush tax cuts in total. Not sure I agree with whats going on now with Obama. Not sure anyone really knows for sure. These are uncharted waters. There are lots of self proclaimed economists out there. I guess we look at the worst atrocities that contributed to the crash of 2008, fix that. Look again, fix that. And man’s greed will always invent new ways to get around the system…and that greed will eventually lead to hurting bunches of people, and we begin again.
I disagree with TARP and injections. The market(s) should’ve been allowed to collapse and begin self-healing. TARP was a moral hazard and corporate welfare.
I disagree with reenactment of GSA.
I very much agree with your assessment on tax cuts and how the hanging fear of regulation is crippling markets and industry – why hire more people when you don’t know the cost of regulation that’ll be put upon you?
I’m not a fan of Clinton’s loan guarantee but I’m not dead set against it. I’d like to see more details before I make a decision one way or another.
Agreed about cash for programs.
Saying that I think TARP was necessary is not the same as saying that I liked it. Everyone’s mom made us take medicine when we were little that tasted awful but made us feel better. Moral hazard and corporate welfare were indeed underlying causes of the problem, but the circumstances that led to the crisis can be traced back much earlier to many factors such as the Community Reinvestment Act under Carter and forward. Creating the catastrophe that exploded in 2008 was years in the making and blame is shared on a bi-partisan basis.
That said, there are varying degrees of collapse. If we’re talking about poorly-run firms, absolutely they should go down. Investors and bad management should suffer the consequences of their failure. I wish that could have happened this time. However, because of the circumstances that had emerged by 2008, many firms had to become “too big to fail” and posed tremendous systematic risk. Making them suffer the consequences of their own actions in 2008 would have been an extinction-level event for the financial system and the world economy.
I don’t like this situation anymore than anyone else. The greatest fault I find now is the current failure of financial regulation (FIN Reg) to create a system again in which no firm is allowed to become “too big to fail.” If we don’t address this problem, we will find ourselves back in the same situation at some point in the future. We should never again have to face the choice of bailing out failed institutions or economic collapse.
Reenacting Glass-Steagall (GA) or something similar thereto is critical. GA and preventing any firm from ever becoming “too big to fail” are the two most important reforms we need. Currently proposed Fin Reg does neither. GA separated commercial banking (safe, low-risk and low return) from investment banking (risky and aggressive). Both types of banking are needed. However, the giant combined financial firms were doing both under the same roof – paying low FDIC-insured rates of interest on banking deposits, and then taking those deposits to the casino to gamble on investment banking, derivatives trading, and risky investments such as securities backed by sub-prime loans. Absolutely nothing in the current version of Fin Reg will prevent this from happening again. Not reenacting GA keeps moral hazard alive and well to help cause another financial meltdown in the future.
I see where your coming from NTK and I’m not unsympathetic to your arguement but I disagree on a few points (btw, I like how you pose the arguement).
1. I don’t think that a government should have the power to decide if a company is ‘too big to fail’ with the exception of anti-trust regulation. I really don’t believe in this idea of ‘too big to fail’. I think that a company that large could still be split up by smaller companies on the free market and damage contained within reasonable constraints.
2. Systemic risk will always exist as long as we have a free system. When we constrain that system and no longer keep it free we then manage it at a governmental level stiffling growth and leading to a managed economy. I think you know where I’m going with this without having to pull out the popular labels.
3. In para 3 I agree that we should never face the choice of bailing out institutions but I think the economic collapse we would’ve suffered would’ve been like pulling off a bandage quickly vice slowly pulling it off. Eventually both methods work but I’d rather have a quick sharp pain than a longer burning one. It may be that I view risk differently but I’d rather (X)M be unemployed for 1 year than to have (x)M unemployed for 10 years.
I disagree with GA (I referenced it as GSA but will use your label) as it’ll have an appreciable effect beyond the big guns of Wall Street. For example; should a bank like USAA be limited by GA? USAA take deposits (checking and savings) and also offers customers investment services. Should they have to break up into two banks? Should they have to give up one line of business for the other? Let’s replace USAA with Bank of America. I think the popular notion is that they should have to suffer to make up for there issues. So, BoA breaks up from a big bank to a bunch of smaller banks. How many jobs are lost because of that? How much will costs increase for consumers and retailers?
4. Banks right now are lending at VERY low interest rates. I got an email from Pentagon Federal basically begging for people to buy cars at 2.99% (or 2.5% I can’t recall) for 60 months. That’s almost free money. Let’s be honest, would anyone of us loan a coworker $25K for 3% interest over 60 months? If 3% is what banks are making on loans (I think mortgages are 4~%?) how can they sustain themselves? Employees need to be paid and get raises, right?
What we’re doing to our business today reminds me of the movie ‘Thank You for Smoking” and my favorite quote: …”Defending the defenseless, protecting the disenfranchised corporations that have been abandoned by their very own consumers: the logger, the sweatshop foreman, the oil driller, the land mine developer, the baby seal poacher…”