This was one wacky election, and there are some unusual winners and losers.
Winners. Among the least obvious, but most important winners are liberal Democrats. The middle-of-the-road, milk-the-liberals-for-votes-and-then-abandon-them strategy of Bill and Hillary Clinton is definitively dead, with a stake driven through its heart. Bernie Sanders is a major victor from yesterday's election, as he now has a chance, along with Elizabeth Warren, to reshape the Democratic Party. The Clintons' decades old strategy of cozying up to Wall Street and other obscenely rich donors while talking but not walking like progressives blinded them to the prairie fire boiling up from people who work hard but for not a lot of money. Sanders and Warren, who may be the most influential Senators today, won't make that mistake. They will reach out and try to help the people who are driving politics today. Politics is ultimately about the flow of crowds, and you can't capture the energy of insurgents by condemning them as deplorable.
Another major winner is the FBI. Had Hillary Clinton been elected, the specter of possibly wholesale "personnel changes," shall we say, might have hung over the FBI, crippling its ability to function in numerous crucially important arenas. Donald Trump and whoever he appoints as Attorney General would be wise to leave the FBI unconstrained to conduct business regular way, with no hint of a political agenda. Everyone benefits when law enforcement is evenhanded.
And, of course, another winner is that . . . what's his name? Oh, yes, Trump. That Trump fellow will find out that running for President is a whole lot easier than being President. It's one thing to make speeches. It's another altogether to make things happen. Even though the Republicans control both the House and the Senate, that doesn't mean Trump will have a successful Presidency. Barack Obama had the advantage of a Democratically-controlled Congress at the beginning of his first term, and his approval ratings have fallen dramatically since then. Donald Trump will have to find a way to work with all kinds of people, and lashing out at them isn't likely to be productive.
Losers. One of the biggest losers is the Establishment. Both the Democratic and Republican establishments got their heads handed to them yesterday. An outside observer can readily tell that it's time for change. But people holding power rarely give it up without a struggle. George Washington set a noble example when he refused to run for a third term as President and returned to Mount Vernon. Try to find someone as noble as that in today's political establishment and you'll have more luck seeking the Seven Cities of Cibola. Things are likely to get ugly as both parties struggle to change.
Big Money Donors got hammered in this election. They bet on Hillary Clinton and a platoon of mainstream Republican primary candidates, and wound up only with much smaller bank accounts. It turns out that, in democratic politics, money isn't everything.
The Democratic Message was lost. In fact, perhaps the most important reason Hillary Clinton lost was she had no message. All she seemingly did was attack Trump and proclaim, ad nauseum, that she wasn't Trump. Trump had a message, a message of hope for working people who usually have only stagnation and despair. This was not a message that Clinton or the elitist mainstream press clearly discerned. But Trump got through loud and clear to his supporters. Nothing drives voters as much as hope. Trump instilled hope in his constituents. Clinton didn't seem to have hardly anything positive to say about the future, and her potential constituents lacked the most powerful motivation in politics to vote.
Of course, there is Hillary Clinton. Bill and Hillary's time in politics is over. One wonders if they know it and will be able to step aside graciously. The successful resurrection of the Democratic Party depends on the establishment of new leadership. But the tremendous cash flow the Clintons have enjoyed since Bill left the White House appears closely linked to their power in the Democratic Party. If they give up the power, the cash is likely to flow to the new power players. Since Bill and Hillary have an obvious love of money, the struggle to rebuild the Democratic Party could be grisly. The Clintons, now more than ever, need to think about their legacy. They already have more than enough money to live in luxury for the rest of their lives. But, given their baggage that was recounted ad infinitum during the campaign, their legacy needs a lot of work. Graciousness would be a very valuable first step.
Showing posts with label Elizabeth Warren. Show all posts
Showing posts with label Elizabeth Warren. Show all posts
Wednesday, November 9, 2016
Monday, September 20, 2010
The Good Elizabeth Warren Will Do For the Banking System
To listen to bank lobbyists, one would conclude that Elizabeth Warren, recently appointed an adviser on consumer protection to President Obama and Secretary of the Treasury Geithner, must be a really bad person incarnate. They were planning to pull out all the stops to prevent her confirmation by the Senate as the head of the new consumer protection bureau at the Federal Reserve. President Obama's appointment of her as an adviser does not require Senate confirmation.
What Warren and the new consumer protection bureau can, and hopefully will, do is stop the lunacy in the banking system. The baseline reason for today's economic problems isn't the federal deficit, or the tax system, or the exchange rate between the yuan and the dollar, or the Fed's printing of trillions of dollars, or the new health insurance legislation. The baseline problem is that the banking system made a shipload of really stupid, indefensibly idiotic mortgage loans. Bankers loaned money without verifying borrowers' income, assets, or employment, and paid scant heed to credit histories. All many borrowers really needed was a pulse and a signature. Bankers utterly disregarded lending standards and risk management, blithely assuming that the risks associated with the lending insanity would be passed to the investors that bought this toxic financial waste. Because of the way the mortgage market worked, higher compensation was paid to mortgage bankers and brokers for underwriting riskier loans than for 30-year fixed rate mortgages to people who had downpayments and might actually repay the loans.
The end result was the accumulation of almost incalculable amounts of systemic risk, risk that exploded and imposed trillions of dollars of losses on banks, homeowners, businesses, laid off workers, and taxpayers. Sure, some (although not all) of the borrowers who took out nutty loans had some idea of what they were getting into. But they knew of their individual risks--that the interest rate might rise, that there would be a balloon payment at some point in the future. What they didn't know--and what nailed many of them and all of the rest of us--was that the entire system was poised for a fall because the indescribably imbecilic lending had taken place on a large-scale, nationwide basis. Indeed, even the most knowledgeable federal banking regulators were either clueless, in denial, or both when it came to the systemic risk presented by the morons of mortgage lending. We're still paying the price for this disaster and will do so for years to come. The absence of consumer protection left us all without protection.
The new bureau shouldn't just impose ritualistic disclosure requirements. When borrowers arrive at the closing and find thousands of pages of documents to plow through, disclosure requirements amount to regulatory failure. The new bureau should substitute its judgment for the dysfunctional judgment of bankers (and borrowers, too, since some of them were complicit in taking out loans they realized were foolish but took anyway in order to gamble on the real estate market rising). There was a fundamental market failure in mortgage lending, and sound regulation can fix such failures. Imagine banking without federal deposit insurance if you question this notion.
Mortgage loans are already unavailable to many less creditworthy borrowers, and rightfully so. It does them--and we taxpayers--no good if the banking system accumulates a mountain of bad loans that strip defaulting homeowners of their savings, credit ratings, and pride, and taxpayers of funds badly needed for other priorities. With today's tight underwriting standards and the overall unwillingness of banks to lend, it's unlikely that the new consumer protection bureau can reduce the availability of credit a whole lot. What it may do--and this is probably what bankers fear the most--is that as the economy recovers the consumer protection bureau may prevent the banks from returning to the highly profitable insanity in which they reveled earlier this past decade. Amen, say the rest of us.
Consumer protection in this case isn't about a bunch of liberals on federal salaries singing, "If I Had A Hammer." It's about imposing and enforcing prudential consumer lending requirements on banks that protect us all. Not just borrowers with eighth grade educations, or workers whose native language isn't English, but also the most well-educated, well-read, and wealthy of Americans, because we all have a stake in the well-being of the financial system.
What Warren and the new consumer protection bureau can, and hopefully will, do is stop the lunacy in the banking system. The baseline reason for today's economic problems isn't the federal deficit, or the tax system, or the exchange rate between the yuan and the dollar, or the Fed's printing of trillions of dollars, or the new health insurance legislation. The baseline problem is that the banking system made a shipload of really stupid, indefensibly idiotic mortgage loans. Bankers loaned money without verifying borrowers' income, assets, or employment, and paid scant heed to credit histories. All many borrowers really needed was a pulse and a signature. Bankers utterly disregarded lending standards and risk management, blithely assuming that the risks associated with the lending insanity would be passed to the investors that bought this toxic financial waste. Because of the way the mortgage market worked, higher compensation was paid to mortgage bankers and brokers for underwriting riskier loans than for 30-year fixed rate mortgages to people who had downpayments and might actually repay the loans.
The end result was the accumulation of almost incalculable amounts of systemic risk, risk that exploded and imposed trillions of dollars of losses on banks, homeowners, businesses, laid off workers, and taxpayers. Sure, some (although not all) of the borrowers who took out nutty loans had some idea of what they were getting into. But they knew of their individual risks--that the interest rate might rise, that there would be a balloon payment at some point in the future. What they didn't know--and what nailed many of them and all of the rest of us--was that the entire system was poised for a fall because the indescribably imbecilic lending had taken place on a large-scale, nationwide basis. Indeed, even the most knowledgeable federal banking regulators were either clueless, in denial, or both when it came to the systemic risk presented by the morons of mortgage lending. We're still paying the price for this disaster and will do so for years to come. The absence of consumer protection left us all without protection.
The new bureau shouldn't just impose ritualistic disclosure requirements. When borrowers arrive at the closing and find thousands of pages of documents to plow through, disclosure requirements amount to regulatory failure. The new bureau should substitute its judgment for the dysfunctional judgment of bankers (and borrowers, too, since some of them were complicit in taking out loans they realized were foolish but took anyway in order to gamble on the real estate market rising). There was a fundamental market failure in mortgage lending, and sound regulation can fix such failures. Imagine banking without federal deposit insurance if you question this notion.
Mortgage loans are already unavailable to many less creditworthy borrowers, and rightfully so. It does them--and we taxpayers--no good if the banking system accumulates a mountain of bad loans that strip defaulting homeowners of their savings, credit ratings, and pride, and taxpayers of funds badly needed for other priorities. With today's tight underwriting standards and the overall unwillingness of banks to lend, it's unlikely that the new consumer protection bureau can reduce the availability of credit a whole lot. What it may do--and this is probably what bankers fear the most--is that as the economy recovers the consumer protection bureau may prevent the banks from returning to the highly profitable insanity in which they reveled earlier this past decade. Amen, say the rest of us.
Consumer protection in this case isn't about a bunch of liberals on federal salaries singing, "If I Had A Hammer." It's about imposing and enforcing prudential consumer lending requirements on banks that protect us all. Not just borrowers with eighth grade educations, or workers whose native language isn't English, but also the most well-educated, well-read, and wealthy of Americans, because we all have a stake in the well-being of the financial system.
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