RE: Blame for the housing crisis
The last two articles I posted place the blame for the mess squarely on the Clinton admin. I have several points of view on the matter which I will discuss below. Fundamentally, I think that Clinton started it, but "W" failed grossly to bring things back down to earth, and even enjoyed surfing the Clinton wave. I think it modestly important to understand the history as it affects my ability to understand the evolution going forward and to adjust my investments accordingly.
It is clear to me that Clinton got the ball rolling. I can recall being bored to tears back in the mid-'90s about banking this, banking that, and redlining. I recall a lot of radio hype about redlining. It didn't mean much to me, and I didn't understand banking at the time. It was a big part of Clinton admin policy.
Clinton was big on using the Department of Justice as a policy tool. I am not sure that this is a bad thing, or that every other president doesn't engage in it. DOJ like every other corporate entity has a limited budget, and priorities must be set. That prerogative belongs to the Prez. For sure, he was putting direct federal pressure on the banks to make mortgage loans to those on the edge. Expanding to the broader governmental sphere, we all saw Barney Frank recently castigating some republican for being a racist because he wanted to reign in FNE/FRE. For sure congress in its various forms since the '90s has been pushing the envelope of housing to the untenable.
Clinton was also prosecuting the daylights out of the coal generation plants. I know this from direct experience. It hurt me financially because I took positions against coal given the Clinton aggressiveness. Of course "W" got in there and reversed all of that, to include dropping cases which were pretty far down the pipe.
As far as "W" goes....does the phrase "ownership society" ring a bell??? He had the opportunity to shut things down. He was so proud that home ownership reached 69%. So heap a big piece of blame on him. No doubt about it.
Congress, executive.. Pubs...Dems. are all to blame in various portions. Frankly I don't care to apportion the blame. What I think important to recognize for the future is that it is endemic. I don't see the federal government doing anything but printing more money with the focus on producing housing inflation - much easier said than done. I rather firmly believe that the US is headed in the direction of a Japanese lost decade. The Japanese had zombie banks and zombie corporations. We will clearly have zombie banks - although the government briefly showed some spine when they let Lehman fail. That is now regarding by those at the financial levers as a big mistake - so count on more zombie banks. Zombie corporations??? Lets start with Detroit. Need I say more??? We will add the new twist of zombie homeowners. We got close - and we still may have zombie consumers. Think putting credit cards under the TARP. This has been discussed, and we already had the ridiculous tax rebate stimulation.
Where does that leave us??? Stagnation and infaltion. Or will it be stagnation and deflation - as Roubini suggests.
I have painfully been holding my oil stocks. I didn't know that the hedge funds had been so deeply involved or would be margin squeezed so hard. Depletion is on my side. So is the credit crisis because as we all know - banks are hoarding cash and not lending to drill. And won't. Why??? The politicians don't like drilling. They want green power. If you think that banks are reluctant o do mortgage deals in an environment of dropping home prices, will they feel better about financing crude production with dropping crude prices??? Energy was the only thing that did well in the stagflationary '70s. |
