Blame Game

“It’s the Democrat’s fault for this economic crisis because they forced lenders to make ridiculous loans to high-risk borrowers under penalties for not complying it is a Dodd and Frank legacy.”

I can’t count the number of times I’ve heard variations on this theme from conservative voices around the net. If it’s not the Democrats fault its all those sub-prime borrowers fault for taking out loans they couldn’t handle.

I want this nonsense stopped. No doubt the sub-prime lending was a contributing factor, but the total amount of money involved on all sub-prime loans is 1.2 Trillion dollars. Go to the Federal Reserve itself and look it up if you like.

Now lets look at how much the government has given to banks, AIG and general ‘stimulus’ since December of 2007 via Slate. So far a total of $5.568 trillion dollars has been thrown around and the economy is still in the dumps. So even if EVERY SINGLE SUB-PRIME MORTGAGE FAILED (hint: they didn’t) it’s not nearly as much as the government has spent in stimulus or trying to ‘save’ Wall Street.

I guess you can look at this in one of two ways. You can  believe that the banks and AIG were so highly leveraged that ANY downturn in the housing market, would cause this huge house of cards to come crashing down, or you can believe that the difference is ‘proof’ that the Democrats are just ‘stealing money’. {Feel free to throw your “third way’s” at me.}

One way of looking at this requires you to believe that Wall Street was HIGHLY leveraged, using unregulated derivatives and securitized investment vehicles no one really understood, which had such highly inflated values, that basically they were just inventing fake money, which was used to line their own pockets.

The other way of looking at this requires you to believe that the Democrats are just shoveling money to their friends or pet projects, because they can, the whole economic downturn is just a huge conspiracy and if we could just stop the Democrats from stealing from our kids futures then everything would go back to normal.

Personally I believe the former. When you have people like Dick Durbin telling us that basically banks ‘own’ the congress it’s REALLY easy to believe. Why? Because it makes a lot of ‘important’ people happy. It looks like the US GDP was going up when it really wasn’t[Politicians/economists happy], it made a lot of very rich people vastly more rich[Top 5% of wealth happy], and it caused even more money to be funneled as ‘lobbying’ to congress to make sure the gravy train could continue[Top 5% AND Politicians happy, a two fer!].

So, the next time you hear someone trying to blame this ‘economic mess’ on poor people, point out the vast difference in value of the entire sub-prime housing market and the amount of money thrown at Wall Street. So far it’s a difference of almost 5:1 and trust me the ratio will go even higher before this is over.

We desperately need banks and the derivatives market to be regulated, but the one thing where many conservative and liberal people will agree in all this, is that our congress may be so far in the bank’s pocket that we won’t be able to save our way of life. I’m told we get the government we deserve because votes MATTER. I’m simply at a loss for how finance was allowed to get so far out of hand and somehow NO ONE EVER NOTICED. I know I didn’t until recently.

Will Wall Street see the need for changes or will they simply think they can go back to business as usual? I’m betting on BAU.