Supply and demand
Basically, the number of people who could obtain mortgages and the terms on which those mortgage can be obtained has shrunk significantly. Substandard borrowers who could get a mortgage to buy a home in 2004 no longer can. Stronger buyers who can still get a mortgage, cannot get terms as attractive as before. Those two changes reduce the number of buyers who can actually get a mortgage and buy. That reduces the effective demand for homes. Effective demand is the combination of desire to buy a home and the ability to do so. People who want to buy a home but who cannot are not demand for the purposes of determining the supply-demand-price equation.

Why did this happen?

Appraisers exaggerated values more than normal
People were more eager to buy homes and rental houses because of recent increases in value which they assumed portended future increases
Commissioned loan officers get paid the same to make bad loans as to make good loans
Lenders were less interested in making sure loans were good because Wall Street was throwing money at them to buy subprime (higher yielding) loans
Commissioned Wall Street people discovered that the man in the street had heard real estate was the place to be and were eager to take their money
Commissioned real estate agents were eager to get increased number of commissions from easier mortgages and more sales
All of the above were more likely to commit fraud because of the large sums of money to be made by doing so so more fraud was committed
Government regulators and bond- rating companies were too slow and too timid about blowing the whistle when it became apparent that imprudent loans were being made
Optimism about continued increases in home prices convinced all concerned that they need not take normal care
Basically, what happened was what investment historians call a speculative mania. Irrational exuberance is another name for it. Greater fool theory. Etc. When prices go up by extraordinary amounts, dopes start to think they always will. Arugably, everyone in the above chain of responsibility could be convicted of criminal activity and/or civil negligence or fraud. It appears however that only the borrowers and the Wall Street companies are taking hits. And there is agitation to have the taxpayers bail them out in part.


Justice
If there were justice, the appraisers, loan agents, and real estate agents who got rich during the boom would have to give back the portion of their commissions attributable to doing deals they should not have done. But no one is even trying to do that.

Wall Street firms and others who did not take appropriate care are taking big losses. That is justice that no one need enhance. The same is true of the many subprime borrowers who are in financial difficulty. They deserve it. They lied in many cases on their loan applications. They borrowed more than they could pay back and if they were too dumb to understand that they should have guardians appointed to handle their financial affairs henceforth. They were also gambling that they could get rich on the home going up in value before the bubble ended. Had values continued to go up, they would never have complained about being abused by the lenders.

Bill Clinton says Dems shouldn't attack Palin
Posted: 10:36 PM ET

(CNN) — Bill Clinton said Monday the Democratic ticket should steer clear of launching personal attacks on Sarah Palin over her relatively thin resume, and instead acknowledge she was a "good choice" for the No. 2 spot on the GOP ticket.

"Why say, ever, anything bad about a person? Why don't we like them and celebrate them and be happy for her elevation to the ticket? And just say that she was a good choice for him and we disagree with them?" said Clinton, who faced repeated charges during the primary season he was overly negative toward Obama on the campaign trail.

Clinton's comments appear to echo advice Karl Rove gave to Barack Obama in his regular Wall Street Journal column last week, when the former Bush strategist noted attacking the VP candidate has rarely proven to be an effective strategy.

In one of the former president's few extended comments to date on Palin's surprise VP candidacy, Clinton also told reporters in New York Monday he knows why the Alaska governor is attracting massive crowds on the campaign trail.

"I come from Arkansas, I get why she's hot out there," Clinton told reporters in New York, according to the Associated Press. "Why she's doing well."

"People look at her, and they say, 'All those kids. Something that happens in everybody's family I'm glad she loves her daughter and she's not ashamed of her. Glad that girl's going around with her boyfriend. Glad they're going to get married,'" he said.

Referencing Palin's 5-month old child who has Down Syndrome, Clinton also said voters will think, "I like that little Down syndrome kid — one of them lives down the street, they're wonderful children.”

Earlier Monday, Clinton suggested his wife, Sen. Hillary Clinton, would have been a better political choice for the Democratic VP spot than Joe Biden.

“She would have been the best politically, at least in the short run, because of her enormous support of the country,“ he said on the daytime talk show The View.

Posted by sebstar:

Snake ass Billy Bob Clinton. Clintons are worthless.

Obama Has Clear Lead Over McCain in Poll
By Dan Balz and Jon Cohen
Washington Post Staff Writers
Wednesday, September 24, 2008; Page A01

Turmoil in the financial industry and growing pessimism about the economy have altered the shape of the presidential race, giving Democratic nominee Barack Obama the first clear lead of the general-election campaign over Republican John McCain, according to the latest Washington Post-ABC News national poll.

Just 9 percent of those surveyed rated the economy as good or excellent, the first time that number has been in single digits since the days just before the 1992 election. Just 14 percent said the country is heading in the right direction, equaling the record low on that question in polls dating back to 1973.

More voters trust Obama to deal with the economy, and he currently has a big edge as the candidate who is more in tune with the economic problems Americans now face. He also has a double-digit advantage on handling the current problems on Wall Street, and as a result, there has been a rise in his overall support. The poll found that, among likely voters, Obama now leads McCain by 52 percent to 43 percent. Two weeks ago, in the days immediately following the Republican National Convention, the race was essentially even, with McCain at 49 percent and Obama at 47 percent.


As a point of comparison, neither of the last two Democratic nominees -- John F. Kerry in 2004 or Al Gore in 2000 -- recorded support above 50 percent in a pre-election poll by the Post and ABC News.

Posted by Hank:

Article exposes corrupt ties between top executives of Fannie Mae and congressmen.

http://freakonomics.blogs.nytimes.com/2008/09/22/john-steele-gordon-on-the-financial-mess-greed-stupidity-delusion-and-some-more-greed/

Greed, Stupidity, Delusion — and Some More Greed
By John Steele Gordon
A Guest Post
Looking just at the Friday closes, it was one of those ho-hum weeks in the stock market. The Dow had ended the previous week at 11,421.99, and last Friday it closed at 11,388.44 — down 33.55 points — a measly 0.29 percent.
To be sure, in between the two closes things got a tad volatile: down 504 points on Monday, up 141 on Tuesday, down 449 on Wednesday, up 410 on Thursday, and up 368 on Friday — all on huge volume (with a record on Thursday of 10.2 billion shares). And in this remarkable week, the landscape of American capitalism changed profoundly. Great names like Merrill Lynch and Lehman Brothers will disappear, and government responsibility for backing up the financial system will increase considerably as the administration asks Congress for $700 billion in borrowing authority to handle the situation.
What happened? Simple: panic. Vast amounts of assets in the financial system became unsellable as no one knew what they were worth, and thus they were useless as collateral for loans. As a result, highly sophisticated bankers refused to lend to other highly sophisticated bankers overnight; Ma and Pa Mainstreet rushed to take their money out of uninsured money-market funds and put it in Treasury bills paying practically nothing, and in gold, which pays nothing at all (and indeed costs money for storage or insurance).
The world’s financial system came perilously close to seizing up — like an engine without oil. Had that happened, the consequences would have been very nasty indeed. Let us hope that the market’s bets on Thursday and Friday are a sign that the government is getting a handle on things.
But the first thing to do in a panic is … don’t panic! “If you can keep your head when all about you are losing theirs,” you’ll be fine.
There have been headlines that this is the worst economic crisis since the Great Depression. No. It is a financial crisis.
The underlying American economy is not in bad shape. Unemployment is at 6 percent; that’s a little high by the standards of the last decade or so, but not by longer-term standards (unemployment reached 10.8 percent as recently as 1982). In 1933, it was over 25 percent (and actually far higher, with many working part time). In 1933, G.D.P. was little more than half of what it had been in 1929.
G.D.P. has grown smartly in the last five years, even in 2008. Farm mortgages were being foreclosed at the rate of 20,000 a month in 1933. The nation’s farmers have never been so prosperous as they are today. When F.D.R. was inaugurated on March 4, 1933, banks were entirely closed in 38 states and restricted in the other 10. Over 5,000 banks had already failed by then, and had taken the savings of millions with them. Today, millions of families have substantial savings, retirement funds, and equity in real estate. In 1933, exports were one-fifth of what they had been in 1929. American exports are booming today.
In 1933, we were a country of haves and have-nots; today, we are largely a country of haves and have-mores. The poverty of the sort seen in the immortal photographs of Walker Evans simply does not exist today.
How we will get out of this mess is becoming clearer, and Congress will have to act very quickly. But the members of Congress stared into the abyss along with the rest of us last week, so my guess is that even they will act responsibly for once.
But there is no doubt at all about how we got into this mess.
To be sure, there is plenty of blame to go around. Greed, as it periodically does when traders and bankers forget the lessons of the past, clouded judgments. Some very smart people talked themselves into believing in the repeal of one of the fundamental laws of economics: risk will always equal potential reward. The idea that risk can be eliminated and high yields guaranteed is as idiotic as the idea that gravity can be suspended. Remember Long-Term Capital Management? Ten years ago it figured out how to eliminate risk using highly sophisticated computer programs and rolled up annual returns averaging 40 percent — until it collapsed in a heap.
Credit ratings agencies such as Moody’s and Standard and Poor’s gave good credit ratings to securities they didn’t understand.


But at the heart of the problem is Congress and its deeply corrupt relationship with Fannie Mae and Freddie Mac. Congress was equally at the heart of the savings and loan disaster 20 years ago and, obviously, learned nothing from it. (For a history of what led to the savings and loan collapse, see here.)
Fannie and Freddie, two of the largest publicly traded financial institutions on earth, are headquartered in Washington, D.C., where the next-largest non-governmental financial institution is probably a local credit union. Big financial companies are headquartered in New York and other cities where capitalism is practiced. That should tell you a lot about Freddie and Fannie: they were political to their fingertips.
Being “government sponsored entities,” they were able to borrow at lower interest rates than other profit-seeking companies, had less regulation, had lower capital requirements, and had an “implied” guarantee on their huge debts. This was supposed to translate into more money available for mortgages, but was used instead to roll up big profits and, not so incidentally, big bonuses for their top management — which came not from the financial world but from the political one.
Franklin Raines, Fannie C.E.O. from 1999 to 2004, had been budget director in the Clinton White House. He cooked the books at Fannie to increase his compensation (more than $50 million). Jamie Gorelick, vice C.E.O., was number two at the Clinton Justice Department before going to Fannie Mae. She made $26 million. Jim Johnson, a perennial Washington big-foot, was chairman from 1991 to 1998. He too, according to an official government report, cooked the books to increase his compensation and failed to publicly reveal how much he received.


The Wall Street Journal editorial page has been giving chapter and verse for years on why this was a disaster waiting to happen (Pulitzer Prize judges, please note). The Bush administration tried way back in 2003 to change the system. It got nowhere. Alan Greenspan, then the chairman of the Federal Reserve, frequently noted the danger of Fannie and Freddie’s weak capitalization. He was ignored. Congressman Mike Oxley, then chairman of the House Financial Services Committee, introduced a bill in 2005 to correct the situation. Lobbyists from Fannie and Freddie succeeded in gutting it to the point that Rep. Oxley pulled the bill.

Why were Fannie and Freddie so successful at maintaining the status quo? Check it out.
Senator Chris Dodd — formerly ranking member and now chairman of the Senate Banking Committee, with oversight over Freddie and Fannie — recently said on Bloomberg Television: “I have a lot of questions about where was the administration over the last eight years.”
Excuse me? Just where the hell were you, Senator? Oh, right. You were standing in line at the bank in order to deposit the political contributions Fannie and Freddie were lavishing upon you. At least they got their money’s worth — until the party ended and the American people got the bill.
Members of Congress — aided and abetted by their many waterbearers in the media — wonder why their collective approval rating is about on par with colon cancer’s. The reason is simple enough: Congress is the sick man of Washington; a textbook example of the truism that institutions tend to evolve in ways that benefit their elites, at the expense of the people they were created to serve.

[Edited by - hank on 09-22-2008 7:03 PM]

Posted by Cookdcokehop:

Sarah Palin is a Hot MILF and a inspirational Motherly figure. Republicans will get more votes just based on that. I just find it funny how as soon as Obama announces Biden as his VP and not Hillary Clinton, the republicans got get Sarah Palin. Politics is so much strategic bull****. A politician would kill his on mother to get into office. This is how I feel...Fuck Obama and McCain! Some people just don't realize how ugly America really is.