The Economic Downward Spiral: Will It Trigger Nostalgia For The Clinton Years?

By Big Tent Democrat

The American economy is spiralling downward. The latest convulsions on Wall Street are the big stories driving the news cycle. One consistent finding in the polling is that Hillary Clinton, no doubt benefitting from the economic performance of the country during her husband's Presidency, is favored on the issue of the economy.

In Pennsylvania, her advantage over Barack Obama is a whopping 26 points (60-34) on the economy. Besides other concerns in the Obama campaign, the reemergence of the economy at the top of the news becomes the latest concern, politically speaking. Of course I do not doubt both candidates are greatly concerned about the American economy. But there is no doubt that Clinton currently holds the public's confidence on that issue, while Obama has yet to gain it. The next five weeks could be bumpy for the Obama campaign, especially if the economy continues its tumble.

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    Nostalgia? (5.00 / 2) (#6)
    by Coral Gables on Mon Mar 17, 2008 at 12:06:22 AM EST
    I've felt that way since November of 2000. Bush did what his past performance record indicated he would do...take down whatever he was overseeing.

    Past performance is not an indicator of future earnings? I say bunk. That man goes through money faster than a drunken sailor on shore leave. (or a drunken air national guardsman bar hopping in Alabama)

    I long for the day of no budget deficits so we aren't spending 10% of our tax dollars on debt interest. Let's just be thankful Bush doesn't own the White House, or it would be in foreclosure by now.

    308 days, 22 hours, 53 minutes.

    Another reason ... (5.00 / 4) (#7)
    by Robot Porter on Mon Mar 17, 2008 at 12:11:24 AM EST
    Clinton should return to full bore discussion of the economy.  Most of her issues dovetail with her economic message.  Even universal health care would have a positive structural effect on the economy, in addition to providing people with affordable health insurance.

    This is why... (5.00 / 1) (#37)
    by sar75 on Mon Mar 17, 2008 at 06:21:27 AM EST
    ...it's hard to see any Democrat losing in November, Clinton or Obama. The economy is going to get much worse this year, and if unemployment is up to 6%, inflation is soaring, and people are driving by gas stations reading $3.50/gallon, it really should be a done deal.

    But if the Democrat cannot win, it will speak volumes about our Party's incompetence.  It's a shame that this election is even a question mark.  Imagine how Al Gore, Mark Warner, or Evan Bayh would be running away with this election at this point!


    There is a hazard if she does so... (none / 0) (#38)
    by tbetz on Mon Mar 17, 2008 at 07:44:30 AM EST
    ... considering that the massive banking bubbles we are seeing pop today are largely the result of the Financial Services Modernization Act of 1999 -- most obviously, its creation of the "financial holding company" -- signed into law by her husband.

    She'd have to make sure that this history never enters into the conversation.


    Overly simplistic... (none / 0) (#77)
    by DudeE on Mon Mar 17, 2008 at 10:32:49 AM EST
    ...the real reason for the banking crisis is historically low interest rates and extremely lax underwriting standards and oversight within the mortgage industry.

    Ironically, the fact that many of the financials are now sufficiently diversified is saving their bacon.  Losses in one segment of their business can be offset by others.


    Of course, I was oversimplifying. (none / 0) (#111)
    by tbetz on Mon Mar 17, 2008 at 03:54:16 PM EST
    The deregulation that has brought us to thei downfall actually goes back to the first efforts to nibble away Glass-Stegal back in the Carter administration.

    But it wasn't until 1999 that the destruction of banking regulation was complete.  That, combined with Mr. Bubble's mismanagement of the Fed, made us the pirate nation we are today.


    and with Obama's assistance ...n/t (none / 0) (#53)
    by tree on Mon Mar 17, 2008 at 09:41:12 AM EST
    Indeed... (none / 0) (#64)
    by DudeE on Mon Mar 17, 2008 at 09:59:23 AM EST
    ...she should bury him with his own watered down 'solution' to the subprime mortgage crisis.  Too many people have no idea how far right Obama is on economic policy:

    Subprime Obama

    As he has done on domestic issues like healthcare, job creation and energy policy, Obama is staking out a position to the right of not only populist Edwards but Clinton as well.

    Only Obama has not called for a moratorium and interest-rate freeze..."One advantage to the tax credit is that there's no moral hazard involved," one of Obama's economic advisers explains..."Do you really want to give a subsidy to the guy who wasn't prudent?"

    Very progressive and akin to economic Darwinism.  


    Interest rate freeze (none / 0) (#100)
    by MKS on Mon Mar 17, 2008 at 02:43:11 PM EST
    would cause a depression in real estate.  Price controls do not work....If you freeze interest rates on subprime loans, then the rates on all other loans go up.

    Subsidies are targeted and will not further crash the system.

    Credit is hard to get now--price controls will make it only harder....This would be a disaster.


    Explain... (none / 0) (#104)
    by DudeE on Mon Mar 17, 2008 at 02:54:30 PM EST
    ...she's talking about a cap on existing mortgages - not new ones.  

    It's counterintuitive to claim that keeping people from being punted from their homes would 'cause a depression in real estate'

    And for the record we already have price controls in the mortgage market.  They're called usury laws.  Private enterprise will never turn down a reasonable profit even if denied an obscene profit.


    There is no usury in (none / 0) (#108)
    by MKS on Mon Mar 17, 2008 at 03:38:27 PM EST
    California with respect to real estate.  Real estate has been exempted from the usury laws....And none of the loans at issue are close to the usury limits for non-real estate loans....

    Capping rates on ARMs will throw into doubt the entire ARM (Adjustable Rate Mortgage) market....The only way to adjust is to raise rates on other loans--because investors will not know if the new ARMs will be capped later too.  A gov't willing to interfere once, would do so again.  Uncertainty over ARMs will make them more costly if available at all.

    Moreover, right now banks are voluntarily postponing ARM increases on some loans.....Jawboning may be the best way to go....Having the gov't fix the price in the market will freak out lenders to no end.....Investors will move their money elsewhere, and with less money to lend, the interest rates will have to go up.....The Fed is trying to decrease rates to make credit easier, not harder.

    If a Latin America country nationalizes existing factories but says it won't nationalize new factories, how many new investors do you think would go for that....


    I'm not seeing the correlation... (none / 0) (#112)
    by DudeE on Mon Mar 17, 2008 at 04:03:01 PM EST
    ...fair enough, California exempted itself from the Federal usury laws back in 1978.  If you were living in CA in the early 1980s you know it was a pretty miserable period for real estate.  So prior to '78 interest rates were capped at 10% and business was fine.  They lift the cap and a few years later the real estate market in CA collapses...

    Likewise, we did perfectly fine before exotic short-term ARMs were in existence. What you're arguing is that we should preserve the mortgage products which actually contributed to the huge run-up in prices.  All you're doing is camouflaging your argument as causing 'lending to dry up.'  If it's the kind of silly, reckless mortgages that have contributed to this crisis then so be it.


    edit: (none / 0) (#113)
    by DudeE on Mon Mar 17, 2008 at 04:04:28 PM EST
    I meant early 1990s real estate crash in CA

    The solution (none / 0) (#117)
    by MKS on Mon Mar 17, 2008 at 06:28:35 PM EST
    is to make lending institutions tighten their credit underwriting....They are already regulated in this regard....This will prevent future problems...

    As to existing problems, a temporary moratorium on foreclosures doesn't help--lenders will give extentions of more than 90 days now already.....And, as I said above, lenders are voluntarily forgoing ARM raises on some loans....The Feds should not try to take over the market....

    Stabilizing the market a' la loans to Bearn Stearns is one component....Direct payments to borrowers would be another....


    Not all ARMS are bad (none / 0) (#115)
    by MKS on Mon Mar 17, 2008 at 06:07:26 PM EST
    They worked fine for close to 25 years....

    Doing away with ARMs?  You are talking major surgery on lending practices.....You would have the federal government re-organize the industry....Money will leave so very, very fast for....probably China....but anything but real estate....It would take years for everyone to get comfortable with any new government run credit system, if ever....

    The reason why ARMs are so popular is that they allow a lender to offer a lower rate subject so reasonable adjustment for inflation....If you take ARMs off the table, then lenders will have to charge a higher rate to account for inflation, which is especially likely now with the oil shocks....

    Yes, interest rates became very high around 1980.  Prior to that time, it wasn't the usury laws that kept interest rates down but just the general economic conditions.....And the real estate decline you speak of in 1992-95 had nothing to do with ARMs or interest rates that were too high....You had a credit crunch caused by the failure of the S&Ls, a deep recession with loss of employment, and a major loss of defense industry jobs in Southern California....None of that had anything to do with ARMs....

    The California usury restrictions are found in the California Constitution.....

    The problem is negative amortization loans, no-money down loans, and very poor underwriting criteria....Many loans were based on "as stated" packages which meant that there was no attempt to verify income of the borrower....

    If you try to regulate price, all kinds of distortions occur....Better to issue checks to those in foreclosure....or bail-out the lenders....


    I didn't say... (none / 0) (#116)
    by DudeE on Mon Mar 17, 2008 at 06:25:22 PM EST
    ...take ARMs off the table.  But I think very short term ARMs serve no purpose other than to allow loan applicants to overextend themselves in the hope that they can either flip the property or refinance at a more favorable rate down the road.  

    That aside, we live in an economy rife with regulation and price controls.  One more time, it is the lack of regulation on mortgage lending practices that got us to where we are today.  After years of rampant and irresponsible lending, you're arguing the real estate market will collapse (as though it's not right now) because we're tightening up on credit?


    Yep, it will collapse (none / 0) (#118)
    by MKS on Mon Mar 17, 2008 at 06:32:18 PM EST
    worse if you have price controls.....We have not had price controls since Nixon.....

    No one here in California would support that....They didn't in 1980, or in the 1992-95 meltdown, either....


    I live in Fort Worth, Texas (5.00 / 1) (#9)
    by txchicanoforhillary on Mon Mar 17, 2008 at 12:18:20 AM EST
    and I remember in 1998 when gas was .89 a gallon.  I work in the temporary staffing industry and our unemployment rate hovered right around 3%!!!  We would pay an entry-level data entry clerk $13 an hour.  THAT same person is good to get $9 or $10 an hour now.  Ah yes, a Clinton economy.  I remember it well.  Do the Obama supporters?  That's the real question here.  I believe in change and hope.  I just hope that HRC wins so we can change the mess and reverse the damage Bush 43 is leaving behind.

    Damn!! (none / 0) (#21)
    by Edgar08 on Mon Mar 17, 2008 at 12:44:40 AM EST
    Remember hiring bonusses for Non-Management personel?

    When I moved to Colorado (none / 0) (#30)
    by Jeralyn on Mon Mar 17, 2008 at 01:07:05 AM EST
    in 1971, gas was 26 cents a gallon and cigarettes were 26 cents a pack.

    Since I know nothing about the economy, that's about all I can contribute on this topic.


    26 cents a pack! (none / 0) (#46)
    by kdog on Mon Mar 17, 2008 at 08:53:53 AM EST
    Sounds like heaven:)

    Just since I started smoking 10 years ago the price of a pack has doubled...but the massive increase is almost all tax....thanks mostly to D's.  


    All this cigarette talk... (none / 0) (#69)
    by DudeE on Mon Mar 17, 2008 at 10:11:27 AM EST
    ...is getting OT... and making this former smoker crave a drag :-/



    Definitely! (5.00 / 1) (#10)
    by felizarte on Mon Mar 17, 2008 at 12:21:16 AM EST
    The Clinton Team did it for eight years.  They can certainly do it again.  This is one area where experience does count a lot.  And the only economic undertaking that Obama can claim judgement on is his real estate deal with Rezko.

    Family Leave which has come in handy (5.00 / 1) (#28)
    by thereyougo on Mon Mar 17, 2008 at 01:04:19 AM EST
    We felt so good back in the day when the Clintons were custodians of the economy. Looking forward the 21st century.

    now 12 billion is thrown in the Iraq abyss EVERY MONTH!

    no wonder the dollar isn't worth the paper its printed on probably. I never thought I'd see this day. But George did it! one man wrecking crew.


    Yes (none / 0) (#61)
    by tek on Mon Mar 17, 2008 at 09:52:38 AM EST
    and I think the Clintons would be even stronger in a Hillary administration.  Bill appears to have learned a lot since 2000 and now appreciates the advantages of implementing change as a head of state, which Hillary would be.  I think Bill would make a great First Gentleman.

    Hillary's speeches (5.00 / 3) (#16)
    by Stellaaa on Mon Mar 17, 2008 at 12:29:30 AM EST
    Hillary's speeches are consistent.  She talks about the economy, cleaning up government, restoring rights, Bush trying to pass the law that would commit future presidents, healthcare and the war.  Solid policies and solid program solutions.  I just don't get it where everyone thinks that all she does is hate on Obama.  She is focusing the Democratic base on the core issues.  Crystal clear message.  

    The Economy (5.00 / 2) (#17)
    by txchicanoforhillary on Mon Mar 17, 2008 at 12:35:27 AM EST
    is a big mess. I doubt the sub-prime mess has played itself completely out. Foreclosures seem to be an unstoppable freight train wrecking families everywhere.  Couple that with the price of gas and stagnant wages...we have a mess.  

    Don't forget food prices.... (none / 0) (#47)
    by kdog on Mon Mar 17, 2008 at 08:56:18 AM EST
    I've noticed food prices going through the roof lately....especially bread, meat, & dairy.  

    Food prices are largely driven... (none / 0) (#51)
    by tbetz on Mon Mar 17, 2008 at 09:08:20 AM EST
    ... by oil prices.

    There's a huge... (5.00 / 1) (#71)
    by DudeE on Mon Mar 17, 2008 at 10:15:28 AM EST
    ...ripple effect.  Corn prices are through the roof thanks, in part, to the ethanol craze.  Higher corn prices increase livestock feed prices which increase the cost of eggs, milk, beef, chicken, etc.

    One thing rarely mentioned is the fact that our farm policies are woefully obsolete.  20 years ago it was all about subsidizing family farmers and propping up food prices due to oversupply.  Today's environment is wholly different.


    But corn ethanol is not economically attractive (none / 0) (#110)
    by tbetz on Mon Mar 17, 2008 at 03:51:20 PM EST
    ... when oil prices are low.  Hence, driven by oil prices.

    The Economy is the big topic (5.00 / 2) (#22)
    by BarnBabe on Mon Mar 17, 2008 at 12:47:02 AM EST
    People aren't mentioning Iraq as much except to say that it is costing way too much money and added to the decline in the economy.

    People are talking about the gas price and how the traders and oil companies are making so much money and how it is hurting the economy.

    People are talking about how much the price of a loaf of bread has gone up because the costs of gas has gone up and how this is hurting the economy.

    I could go on with the list, but it all comes back to the state of the economy. And people are starting to admit that they are scared. I hear more people saying things like I use to go to Sams once a week but the cost of gas is so high I am lucky if I get there once a month. And that is how a recession works. People get scared and don't spend and the vicious cycle continues. Once again, it is 1992. And I do remember after Bill was elected and before he even took office, the consumer confidence returned almost immediately. We are in for a bumpy summer ride because of the economy.

    Yes (5.00 / 2) (#23)
    by Edgar08 on Mon Mar 17, 2008 at 12:49:09 AM EST
    Let's see.

    Post-partisanship utopia.


    Post-partisanship utopia?


    I hope it doesn't make me a bad person, I chose the second option!

    Those aren't mutually exclusive options (none / 0) (#39)
    by Molly Bloom on Mon Mar 17, 2008 at 07:51:06 AM EST
    That said, I find post partisanship  to be way overrated. Hate to say it, but this could be HRC's best opportunity.

    I hate to say it because bad economic times hurts most people (I wish HRC well). When I was a child, I wanted summer to last longer and not to go to back to school. I wished for a hurricane. I got one. A category 5. I got 6 weeks of no school, no electricity, imported water, c-rations. I found myself in school on weekends and lost vacation time to make up lost classes. Others had it far worse. They lost everything.


    Sure Enough (none / 0) (#83)
    by Edgar08 on Mon Mar 17, 2008 at 10:49:48 AM EST
    They are not mutually exclusive options.  They shouldn't have to be.  But they can be.

    I'm just saying if it came down to actually having to choose.

    I have said repeatedly that while my dislike of Obama runs deep, I believe that there are certain benchmarks of a successful administration.

    If Obama meets all of those and I'm still alive in 2016, I will fight for his legacy just as much as I am fighting for Bill's.


    Clinton should be helped by the economic climate (5.00 / 1) (#27)
    by RalphB on Mon Mar 17, 2008 at 01:02:08 AM EST
    Please give me some more of that '90s peace and prosperity.  

    Peacce and Prosperity (5.00 / 2) (#33)
    by PennProgressive on Mon Mar 17, 2008 at 01:40:44 AM EST
    Hillary Clinton has a great line in her stump speech. "They say-they don't like the 90's. I ask them what part of the 90's you don't  like, peace or prosperity". Even my son who was  born only in 1995 and  was in her rally at Scranton, PA, shouted "yeah".

    Obama really has no plan (5.00 / 1) (#31)
    by badger on Mon Mar 17, 2008 at 01:16:12 AM EST
    From The Nation January 24, 2008:

    But [Obama's] tax credits and continued deregulation won't solve the mortgage crisis, which threatens to dispossess more than 2 million homeowners this year. "There's no evidence that an unregulated market is going to be a stable market," {Robert] Pollin [Econ prof at UMass-Amherst] says. "The unstable mortgage market is one indication of that. This is not anything new. What is new is that you have a serious presidential candidate who isn't really talking about it and doesn't have advisers that are prepared to deal with it."

    Economy (5.00 / 2) (#32)
    by PennProgressive on Mon Mar 17, 2008 at 01:35:24 AM EST
    is clearly Hillary Clinton's winning issue. For quite sometime Krugman has been arguing that she is much stronger than Senator Obama in her proposed policy measures and in general discussion of economic policies. As an economist myself, I notice that  she is clearly more comfortable in discussing economic issues. Both are aided by very able economists, but Senator Clinton is more sure footed in discussion of the economy.  Senator Obama is  often tentative. And this is nnot  just  on this  campaign. To her credit she talked about the  crisis in the housing industry long before most other politicians and even some economists paid any attention to this. And  in debates she has always come across as sommeone who knows about economic issues and policies the best. She talked about sovereign fund when the moderator  clearly did not know what it was (and it was in response to the moderator's own question!), she distinguished between long term and short term economic policies and made a very convincing case for her own stimulus package. As Krugman pointed out her policies are more progressive than Senator Obama's.
    I attended her first rally Pennsylvania, which was held in Scranton high school. She has close family ties there. Her grandfather settled there and her father lived there. She  used to visit Scranton when she was a child.After talking about her memmories of Scrranton, she  spent the better part of hher speech to talk about economic issues and her policies. She was very specific about those and although it was a policy intensive speech, the crowd loved it. She reminded them of the  roaring 90's. In Noortheastern Pennsylvania and in Pennsylvania in general there is a lot of credibility attached to the  Clinton name as far as economic issues are concerned. Most middle class people fondly remember the 90's and for the rest of the primary that can be her real asset.

    Innterest rate freeze (none / 0) (#92)
    by PennProgressive on Mon Mar 17, 2008 at 11:28:15 AM EST
    is a drastic measure, I  agree. But I  believe she is proposing it to get some time  to figure out how to bail out the system without rewarding the speculators--buying time for people who are hurting. Politically, I don't think it is feasible, but if she ccan manage to control the rate within a  narrow band for a while, even if it is not a complete freeze, it will be  helpful. Sorry for the delay in posting. Spring break has just started---.

    Ask realtors (none / 0) (#102)
    by MKS on Mon Mar 17, 2008 at 02:46:11 PM EST
    about an interest rate freeze....They are in the front lines of this....A freeze on some loans would make rates go up on other loans....Creidt is hard to get now--wiat until a freeze.  

    Price Controls do not work and have not been tried since Tricky Dick.  Subsidies are a much better approach....


    Yes, the 90s economy (none / 0) (#103)
    by MKS on Mon Mar 17, 2008 at 02:51:31 PM EST
    was good.

    What did Bill do to crate that good economy?  He had only two major economic proposals in his entire two terms ....First, he raised taxes in 1993 to close the deficit....His stimulus package, however, was not implemented.....Second, NAFTA.  That's it.  After 1994, he coasted....

    The late 90s boom was caused by the techonological boom--it came out of Boston, Silicon Valley and Austin, etc, not D.C.  To the extent the economy needed fine tuning, that was done via the Fed and Greenspan--Bill Clinton had no control over monetary policy.

    Hillary had no impact on the economy of the 90s.  


    People (5.00 / 1) (#36)
    by kenoshaMarge on Mon Mar 17, 2008 at 06:18:54 AM EST
    may hate the occupation of Iraq and be angry at the Democratic Party for not ending it but kitchen table issues will always trump that. Unless you have a family member in Iraq in which case you are finding both issues front and center.

    I admit to being a fool about the economy. I don't understand half of what is said. Strong dollar/weak dollar unless explained in simple terms goes right over my head. Suspect that's true of a majority of people. But many of us remember the Clinton years with nostalgia about our financial well-being if nothing else.

    I grew up being told that you had to live within your income. I believed it and have tried to do just that. Even when said income dwindled to nothing.

    I have no credit cards and no credit card debt thus when my significant other lost his job and we had to try and live on my small SS check we were just barely able to hang onto our house.

    I find it hard to be very sympathetic to many of the people that find themselves in financial crisis now. How long did they think they could slap that plastic down without the bill coming due?

    Many Americans, like the American government have more going out than they have coming in. I don't think it takes an economist to say this is a bad idea. Deficits do matter. Spending half your income on interest isn't smart for an individual or for a country. But then I said I wasn't smart about the economy so I probably just don't understand the big picture.

    Clinton years (5.00 / 2) (#40)
    by Imelda Blahnik2 on Mon Mar 17, 2008 at 08:04:47 AM EST
    I recall a headline from the Onion, right around (or on the day of) Chimpy's inauguration that read something like: "Our Long National Nightmare of Peace and Prosperity is Over."

    They were frighteningly prescient.

    more Onion on Clinton (5.00 / 1) (#42)
    by Imelda Blahnik2 on Mon Mar 17, 2008 at 08:28:09 AM EST
    Wow. I just googled around to find the original Onion piece, and it's even more frighteningly prescient (terrifyingly so) than I remembered. I really apologize if I'm violating site policies here. But I thought this worth posting and definitely on-topic....

    Bush: 'Our Long National Nightmare Of Peace And Prosperity Is Finally Over'

    January 17, 2001 | Issue 37*01

     WASHINGTON, DC-Mere days from assuming the presidency and closing the door on eight years of Bill Clinton, president-elect George W. Bush assured the nation in a televised address Tuesday that "our long national nightmare of peace and prosperity is finally over."

    "My fellow Americans," Bush said, "at long last, we have reached the end of the dark period in American history that will come to be known as the Clinton Era, eight long years characterized by unprecedented economic expansion, a sharp decrease in crime, and sustained peace overseas. The time has come to put all of that behind us."


    During the 40-minute speech, Bush also promised to bring an end to the severe war drought that plagued the nation under Clinton, assuring citizens that the U.S. will engage in at least one Gulf War-level armed conflict in the next four years.

    "You better believe we're going to mix it up with somebody at some point during my administration," said Bush, who plans a 250 percent boost in military spending. "Unlike my predecessor, I am fully committed to putting soldiers in battle situations. Otherwise, what is the point of even having a military?"

    On the economic side, Bush vowed to bring back economic stagnation by implementing substantial tax cuts....

    It's funny. Except it's not.

    8 years of osmotic (none / 0) (#1)
    by Miss Devore on Sun Mar 16, 2008 at 11:55:52 PM EST
    economic experience.

    I guess Clinton is counting on the stupid vote.

    The stupid vote amounts to (5.00 / 2) (#2)
    by Big Tent Democrat on Sun Mar 16, 2008 at 11:56:50 PM EST
    99% of the American People imo.

    I think all pols count on the stupid vote.


    "It's the Stupid, Economy" (5.00 / 2) (#3)
    by Miss Devore on Sun Mar 16, 2008 at 11:59:07 PM EST

    Heh (5.00 / 1) (#4)
    by Big Tent Democrat on Mon Mar 17, 2008 at 12:00:59 AM EST
    Jim Cramer: Hillary "hands down" best (5.00 / 2) (#12)
    by catfish on Mon Mar 17, 2008 at 12:22:03 AM EST
    Jim Cramer was on the Ellen show and Ellen asked Cramer which of the three candidates would be best for economy. "That would actually be hands down Hillary Clinton. It's not even an issue. Just a level of sophistication, the big issue right now is housing. She was way out in front on this issue."

    YouTube of Cramer on Ellen.

    Longer YouTube of Hillary on Cramer's Mad Money. They talk housing, trade, and more.


    SIV Structured Investment Vehicles (none / 0) (#13)
    by catfish on Mon Mar 17, 2008 at 12:23:30 AM EST
    Cramer and Hillary also talk SIVs in the second YouTube.

    Jim Cramer was also recommending (none / 0) (#18)
    by badger on Mon Mar 17, 2008 at 12:37:29 AM EST
    Bear Stearns a few months ago when it was around $100 per share or more. JP Morgan just bought Bear Stearns for $2 a share.

    Jim Cramer supporting Hillary is about the worst news I could hear.


    Yes better go with the guy (none / 0) (#41)
    by catfish on Mon Mar 17, 2008 at 08:27:36 AM EST
    who was not recommended by anybody on the economy. That's the whole argument for the Obama candidacy.

    I (none / 0) (#63)
    by tek on Mon Mar 17, 2008 at 09:56:43 AM EST
    don't really see how that is a winning argument.  It's amazing to me that people nit-pick the Clintons because they didn't have a PERFECT administration.  We know Hillary can bring this country back on track.  Perhaps the most winning aspect for her is that she has the WILL to do it.  

    Obama can't even manage his own personal finances without getting into trouble--I don't want him in charge of the federal budget.  We'd probably have Rezko running things.


    not to mention (as I mention) (none / 0) (#81)
    by Kathy on Mon Mar 17, 2008 at 10:45:08 AM EST
    that this current government has a habit of "turning" criminals who then implicate dem politicians.  Rezko strikes me as the type who might throw some of his former friends under a train in order to shave some time off his sentence.  As we learned in Alabama, it doesn't even have to be a believable story, just close enough to sway a jury.

    NAh... (none / 0) (#57)
    by smott on Mon Mar 17, 2008 at 09:47:52 AM EST
    Cramer supporting a particular stock, yes, bad news I agree.

    His buddies don't benefit from a polictical endrosement, thus he can actually give a reasonably true answer.


    That scares me.... (none / 0) (#49)
    by kdog on Mon Mar 17, 2008 at 09:03:01 AM EST
    when Cramer says Clinton is best, he means Clinton is best for Wall St., which isn't necessarily best for Main St. USA.

    Clinton may as well be endorsed by Gordon Geico.


    Heh (5.00 / 1) (#54)
    by Steve M on Mon Mar 17, 2008 at 09:41:24 AM EST
    Clinton's strength is that she is respected on the economy by both Main Street and Wall Street.  Cramer seems to respect the fact that she simply knows how things work.

    I work on Wall Street and I find both Democrats have always had about equal support from the folks that matter.  Goldman Sachs is Obama's #1 source of fundraising.  If your plan is to choose the candidate that Wall Street despises, it's unfortunately too late to go with Edwards.


    I can always go with Nader.... (none / 0) (#58)
    by kdog on Mon Mar 17, 2008 at 09:49:58 AM EST
    I'd imagine his name is Mudd on the floor:)

    I didn't mean to knock Wall St., I love gambling.  I just prefer gambling on horses and cards as opposed to people's livelyhoods.  


    Sometimes (none / 0) (#11)
    by txchicanoforhillary on Mon Mar 17, 2008 at 12:22:02 AM EST
    sarcasm doesn't convey well online. So forgive me if I am missing something. But I don't think that it's cool to call 99% of the electorate stupid.  Misinformed maybe.  Chill with the name calling.  

    Yes. (none / 0) (#5)
    by NJDem on Mon Mar 17, 2008 at 12:05:52 AM EST
    How do you like that Stockdale-esk answer?  

    Anyone around here actually get that reference :)

    I do (5.00 / 1) (#19)
    by Edgar08 on Mon Mar 17, 2008 at 12:41:40 AM EST
    But Biden did it too during one of the debates.

    It was even funnier coming from the insanely verbose Biden.


    Who could forget... (none / 0) (#72)
    by DudeE on Mon Mar 17, 2008 at 10:22:51 AM EST
    ...the wizened Admiral...

    in hindsight, it's damn shocking that the Perot candidacy went as far as it did.  Seems as though every election has its 'outsider' riding into Washington on a white horse to save the day... before ultimately imploding.  Just wondering whether Obama will implode before or after the election...


    The dollar hit 1.58 to 1 Euro (none / 0) (#8)
    by Prabhata on Mon Mar 17, 2008 at 12:17:28 AM EST
    The collapse of Bear Stearns is a preamble to a big problem, liquidity.  Most people don't understand what that means, but without a good financial system, the economy can spin out of control.  We are experiencing a little bit of what happened in Argentina, Mexico and Asia a few years ago.  The monetary system in those countries collapsed because traders didn't want it.  If people lose confidence on the dollar, trade will come to a screeching halt.  I don't know what Bush is going to do to strengthen the dollar, but I only see one solution: decrease military spending that includes bringing home the troops from Iraq.

    The weak dollar (5.00 / 1) (#15)
    by felizarte on Mon Mar 17, 2008 at 12:25:35 AM EST
    is also a big factor in the high price of retail gasoline. And the oil companies keep the supply low by not having enough refineries on top of the high price of crude. It is so sad to see our country in this mess.

    Bear-Stearsn was essentially (none / 0) (#20)
    by RalphB on Mon Mar 17, 2008 at 12:43:39 AM EST
    a run on the bank.  If Chase hadn't bought, even for $2/share, it could have spiraled.  Liquidity is certainly key.  

    Here's something that worries me. Historically, (5.00 / 2) (#24)
    by tigercourse on Mon Mar 17, 2008 at 12:54:22 AM EST
    this is basically the same thing JP Morgan did right before the big crash 80 years ago. They went out on the floor and bought in an attempt to stem the markets' fall.

    Sometimes I hate remembering history.


    Shhhhh, I remember it to and hope for the best. (none / 0) (#26)
    by RalphB on Mon Mar 17, 2008 at 12:58:31 AM EST
    I only hope the so-called mechanisms in the market work a little.

    The difference is that 80 years ago... (none / 0) (#45)
    by tbetz on Mon Mar 17, 2008 at 08:42:54 AM EST
    ... JP Morgan did the buying with his own money.

    This time, JP Morgan is using our money.

    Big difference.


    Am I sick if I find that cool - run on the bank (none / 0) (#43)
    by catfish on Mon Mar 17, 2008 at 08:32:12 AM EST
    A run on the bank. What other 1930s-era financial disasters can we fit in before Bush leaves office?

    Excactly (none / 0) (#60)
    by smott on Mon Mar 17, 2008 at 09:51:23 AM EST

    I work at Mellon Financial (now BNYMellon) and the run on the bank is exactly right. A big bank like Bear Stearns rolling over is the nightmare.

    When one goes down, everyone had to re-balance their books at EOD, without the assets they were counting on from the bank that failed. That usually means somebody else rolls over if they were heavily dependent on the first guy. So they roll over too. So everybody has to re-balance again. It's the Domino Effect, and it's basically banking's China Syndrome. This is why there was no option but bailout.

    Bernanke's basically standing there with his finger in the dike right now.

    This is bad, bad news.


    The 'uncoupling theory' (none / 0) (#35)
    by Rainsong on Mon Mar 17, 2008 at 03:43:47 AM EST
    Gets a chance to prove itself? I think confidence in the US dollar has been slipping for several months, if not longer, abroad, but its been kept very quiet and low-profile stateside.

    I'm currently based in Aust, but sometimes in Asia and Europe with work. The US economy is headline global news for several months now in the business pages, and I keep seeing the 'uncoupling theory' mentioned, as several countries attempt to "uncouple" their economies from the USA. For example, recommendations to restructure loans, investments in the US, and switch them to Asian markets. From a German source dated Dec 07:
    Full article here

    Another reason for concern is the certainty that the American real estate market is heading into an extended restructuring phase, as well as the real risk of an economic recession in the USA, with accompanying global side effects over the next two or three quarters. It still remains to be seen whether the growth of the global economy will be able to uncouple itself from the USA, as the theoreticians anticipate.

    I like the polite euphemisms like entering a 'restructuring phase'. In Aust its more blunt, using analogies like battling the riptide effect from swimming too close to a sinking ship, as their 3rd largest bank started collapsing after being too heavily invested or 'coupled' with US markets.

    On other news, I understand some world leaders are planning to visit Bush in the WH over the coming months, a kind of " So long! Nice knowing you" trip or meeting with McCain on his current tour.

    Just my guess FWIW, but I suspect that Obama's gaffe on NATO and his committee performance in the debate, really didn't go down too well in some circles. I happened to see it on a public TV in a London pub. I told them I was Canadian, (being from Maine with a Canadian mother, I wasn't too far off <grin>)


    The economy is going to be bad (none / 0) (#14)
    by bob5540 on Mon Mar 17, 2008 at 12:24:19 AM EST
    it may guarantee a Democratic return to the White House for either candidate. Up to now, I have said that Hillary's negatives are so bad she'd lose in the GE, especially to McCain (if National Security were the top concern). I may have to back off that assumption.

    Then again, Bush may bomb Iran in October, guaranteeing a Republican victory.

    Nothing in life is certain.

    Look for a major stock market pullback this week. All of Bear Stern's competitors are reporting. A 1% interest rate cut may actually spook the market more than help.

    My prediction landslide vs. simple majority (none / 0) (#29)
    by thereyougo on Mon Mar 17, 2008 at 01:06:15 AM EST
    for the democrats.

    the GOP can try to forget, but we won't.


    overseas (none / 0) (#25)
    by wasabi on Mon Mar 17, 2008 at 12:57:18 AM EST
    I was watching the financial news on CNBC tonight.  Monday's stock price for the top investment banks in Australia are down 8%.  Japan's fell 5%.  Other Asian banks down 3%.  Europe hit also.

    This is going to get really, really ugly fast.  There aren't many levers that are available to fix what is ailing us.

    The feds decided to use a provision that hasn't been used last since the Great Depression.  They bailed out Bear-Stearns and are now offering all Investment Banks the option to borrow funds at the discount rate previously only reserved for standard banks.

    I would think the climate created by the impending meltdown would greatly benefit Clinton.  My husband, who's for Obama for the same reason BTD is, is rethinking his stance.  Who do you want in control of our government if all hell breaks loose?

    I'm (none / 0) (#44)
    by tek on Mon Mar 17, 2008 at 08:38:30 AM EST
    not sure it will help.  Obama's supporters seem to be lots of younger people who don't remember the Clinton years.  If they do remember the Clinton years and are willing to demonize the Clintons as they have been, shame on them.

    I'm only supporting Obama by elimination. (none / 0) (#50)
    by tbetz on Mon Mar 17, 2008 at 09:07:13 AM EST
    My problem is that I remember the Clinton years, and I remember how he gave away the deregulation store, making the Bush administration's thieve-and-pillage economy possible.

    If there were a better candidate not named Clinton running at this point, I'd be supporting him/her.


    Will Clinton promise us another NASDAQ bubble? (none / 0) (#48)
    by JJE on Mon Mar 17, 2008 at 08:58:33 AM EST
    That's what drove the Clinton boom years.  I don't think even Hillary Clinton's formidable powers are up to that task.

    Lame talking point... (none / 0) (#73)
    by DudeE on Mon Mar 17, 2008 at 10:28:41 AM EST
    ...plenty of reasons unrelated to the stock market... which really only took off during the last two years of his Presidency anyway...

    Heh (none / 0) (#55)
    by Steve M on Mon Mar 17, 2008 at 09:45:02 AM EST
    The media is reporting this Bear Stearns transaction as a done deal, but I have no idea how you persuade the shareholders to tender their shares for a mere $2.  I'm not sure the last chapter has been written on this deal just yet.

    JPMorgan... (none / 0) (#75)
    by DudeE on Mon Mar 17, 2008 at 10:30:36 AM EST
    ...is also assuming something like $33B worth of mortgage debt as well...

    ...Bear Stearns had no choice... they would've had to declare bankruptcy since they couldn't get the cash to cover their obligations...


    Well (none / 0) (#78)
    by Steve M on Mon Mar 17, 2008 at 10:36:11 AM EST
    Bear is currently trading at over $4 a share, which tells you right there that people don't view it as a done deal at $2.

    I feel for the employees, who were apparently heavily compensated in stock.  Just last week the stock was over $60.


    Part of that... (none / 0) (#86)
    by DudeE on Mon Mar 17, 2008 at 10:51:42 AM EST
    ...is that the deal is actually fixed at 0.05xxx shares of JPMorgan for each Bear share.  JPM is up over $3 today...

    both boards approved as did Paulson... would be interesting if they went back to the table.


    Interesting! (none / 0) (#93)
    by Steve M on Mon Mar 17, 2008 at 12:41:23 PM EST
    I thought Wall Street would be really depressed this morning, but it turns out Bear is so unpopular that there's a lot of schadenfreude.

    A lot... (none / 0) (#105)
    by DudeE on Mon Mar 17, 2008 at 03:05:06 PM EST
    ...of the Bear Stearns folks are pretty pissed off.  The Fed opened the discount window today and cut rates by a quarter point to all comers...would have essentially been a lifeline to Bear had they done this on Friday.

    They got the shaft and JPMorgan got a steal.


    The dot com (none / 0) (#62)
    by PlayInPeoria on Mon Mar 17, 2008 at 09:56:01 AM EST
    bubble helped pull the economy out of a 20 year recession under the Clinton Administration.

    The next bubble should be Green Jobs. If they can create jobs and technology in these area... we will get ourselves out of this one.

    Green jobs? (none / 0) (#70)
    by faux facsimile on Mon Mar 17, 2008 at 10:11:46 AM EST
    Centered in the southwest? Wouldn't that be delicious irony - Phoenix teaching the world how to be environmentally conscious while simultaneously running out of water over the next two decades.

    Actualy- they need (none / 0) (#82)
    by PlayInPeoria on Mon Mar 17, 2008 at 10:45:52 AM EST
    the jobs and technology to keep from running out of water... and of course, they need to quit watering their lawns and landscape with local plants.

    She did not say that (none / 0) (#66)
    by Democratic Cat on Mon Mar 17, 2008 at 10:04:03 AM EST
    And let's not blame every bad thing on the Clintons, ok? I had a hangnail yesterday, but I'm pretty sure neither Bill nor Hillary had anything to do with it.

    Yes I remember those golden Clinton years (none / 0) (#67)
    by faux facsimile on Mon Mar 17, 2008 at 10:09:12 AM EST
    Median incomes up 4%, inflation adjusted, over ten years. Sad thing is, that's better than we've done since probably the Nixon administration. Yay for setting the bar high.

    Oh stop it. (none / 0) (#74)
    by Democratic Cat on Mon Mar 17, 2008 at 10:30:24 AM EST
    I thought the Democrats lost Congress because the GOP was the party of ideas. Sen. Obama has called them that anyway.

    And don't bring up Ms. Lewinsky here. Nothing could be further from being relevant to a discussion of Sen. Clinton's campaign.

    Huh (none / 0) (#79)
    by zyx on Mon Mar 17, 2008 at 10:40:55 AM EST
    I saw Al Gore show that he knew far more than George Bush about all things domestic and foreign, necessary to do  good job as president.  I saw his say earnestly that he would work hard, too, if the American people would choose him for the position, which Bush smirked like a frat boy.

    Then I saw the media boys say that Bush "won" the debates, or "tied", or made a darned good showing, when my neighbors' earnest, brilliant, and very conservative kids who had no cable and had come over to watch with us had been squirming throughout the dismal performance that Bush had put on.

    Gimme a break.

    Did you forget the part (none / 0) (#87)
    by Democratic Cat on Mon Mar 17, 2008 at 10:56:00 AM EST
    about Gore winning half a million more votes than Bush?

    Gore's problem, to the extent he had one (which is debatable given he won the popular vote and the Miami Herald's analysis showed he won Florida too), was he didn't use Clinton enough, not that there was a hangover from the Lewinsky scandal. Bill Clinton had high approval ratings when he left office.

    I'm pretty sure... (none / 0) (#89)
    by DudeE on Mon Mar 17, 2008 at 10:59:35 AM EST
    ...Bill has been the only Democratic President in 28 years - twice.

    Not trying to censor you (none / 0) (#91)
    by Democratic Cat on Mon Mar 17, 2008 at 11:16:25 AM EST
    I just think what you are saying is stupid. Bill Clinton's approval rating when he left office: 65%. If Al Gore couldn't figure out how to run on that, that's on him, not Pres. Clinton.

    You are suspended (none / 0) (#95)
    by Big Tent Democrat on Mon Mar 17, 2008 at 01:16:22 PM EST
    Indeed, I will ask for you to be banned.

    Happy Days Are Here Again (none / 0) (#97)
    by DaleA on Mon Mar 17, 2008 at 01:31:09 PM EST
    The financial news is frightening. Looking at history, the Great Depression began when a medium sized bank in Austria defaulted. This eventually brought down the whole house of cards we call 'the economy'. What worries me about the bailouts is the vast expansion of the money supply. Which might lead to hyperinflation. Everyone can be a billionaire!

    One word: Greenspan (none / 0) (#98)
    by jor on Mon Mar 17, 2008 at 02:09:52 PM EST
    Amazing, 89 comments as I post this, and no one mentions Greenspan. See no evil, hear no evil. Okie dokie.

    The Clinton years? (none / 0) (#99)
    by sarcastic unnamed one on Mon Mar 17, 2008 at 02:13:06 PM EST
    It was the brainiacs Bill Clinton and Henry Ciseros who

    encouraged the development of the subprime debacle through legislation like [Clinton's] Community Reinvestment Act, which they say forces banks to lend to otherwise uncreditworthy consumers.[39] Economist Robert Kuttner has criticized [Clinton's] repeal of the Glass-Steagall Act as contributing to the subprime meltdown.

    Holy right wing... (none / 0) (#106)
    by DudeE on Mon Mar 17, 2008 at 03:08:33 PM EST
    ...talking points.

    The CRA forced banks to "lend to otherwise uncreditworthy consumers"?

    How awful.  The CRA actually made it illegal for banks to redline and refuse to make loans in poor, inner city neighborhoods.


    Argue with the wiki authors if you like, (none / 0) (#107)
    by sarcastic unnamed one on Mon Mar 17, 2008 at 03:27:26 PM EST
    however if the CRA stopped banks from being able to refuse to make loans to people they didn't think would be able to pay the loans back, and now we have a big issue with loans made to people who can't pay them back, and whom would not have been able to get the loans before the CRA, I think wiki has a pretty strong point.

    It's a false premise... (none / 0) (#109)
    by DudeE on Mon Mar 17, 2008 at 03:38:55 PM EST
    ...mortgage loans by definition are collateralized.  In other words, secured by the financed property.  You don't pay, the bank takes your house and sells it and pays itself back.  Has worked like a charm for generations.

    What changed was not the creditworthiness of loan applicants, but the aggressiveness of lenders.  No money down, teaser rates, inflated appraisals, you name it.

    In short, blaming those in default is disingenuous and unfortunately Obama's economic camp falls into that category.


    DudeE (none / 0) (#114)
    by sarcastic unnamed one on Mon Mar 17, 2008 at 04:25:06 PM EST

    Sure, worked like a charm for generations...until now when the volume of defaulted loans is so high that they become a problem. And one of the reasons the volume of defaulted loans is so high is because the bank's ability to make loans only to those they thought had the best ability to pay the loans back was limited by the CRA.

    One of the reasons banks became so "aggressive" in making loans to not-very-loanworthy people, is because Clinton wanted his legacy to include the statistic that during his presidency home ownership was at record levels, and he did this by enacting legislation and encouraging banks to make loans to people they would not have made loans to previously.

    Lastly, did I blame those in default? Or is that just something you made up and tossed in for good measure?


    It wasn't... (none / 0) (#119)
    by DudeE on Mon Mar 17, 2008 at 06:36:14 PM EST
    ...the debtor, it was the credit.  Mortgage lenders weren't suckers in all of this.  They went in eyes wide open, crunched the numbers and made the loans even expecting a certain percentage would default.

    Why is the rate of default so huge?  Lots of reasons.  Mortgage lenders developed creative ways to overextend their clients with no-money-down, interest-only, short-term ARMs, reverse amortization, you name it kind of loans.  The purpose it servers?  Close the loan, collect the underwriting fee and bundle it up to sell to some other sucker.

    Now what Joe Schmo homebuyer has to do with that dynamic is beyond me.  I'm a bit weary of having corporations structure exotic, complex arrangements well beyond the comprehension of most consumers and then we blame the consumer for not being savvy enough to avoid being taken.


    And for the record... (none / 0) (#120)
    by DudeE on Mon Mar 17, 2008 at 06:38:44 PM EST
    ...Clinton didn't invent the CRA.  He allowed CRA loans to be rolled into CMOs which actually improves liquidity and reduces risk of default.

    So we can blame the Wall St. hedge funds for buying them.  But, no we should just blame the borrower for not knowing better.