Black Friday

Yes! The Dow is back down to 11,232! I feel a little like Jonah sitting on the hill, waiting for the fireworks. Hearing that news on the radio brought me my biggest smile all day. Of course, Jonah was roundly rebuked, because Nineveh repented in ashes, and he still was annoyed they weren’t destroyed. He clearly had an attitude problem, and lots of people might say the same about me.

The Super Committee’s lame punt is just the most recent sign of the overall trend, though: at an institutional level, we haven’t even really admitted there is a problem, let alone started repenting. What do we need to repent of? Oh, there are plenty of things seriously wrong with the way we run our economy, including many of the favorite criticisms from both the right and the left, and the economy feeds into a lot of other things that are wrong with our society.

I’ll just mention debt for now. We borrowed like mad for the past fifteen years or so, on houses, credit cards, student loans, and government programs, and called it prosperity—short-sighted materialism (among other things), masked and rationalized with convenient economic pseudo-theory. I was getting nervous about this back around 1999, but by now a lot of readers will probably grant it to me, though there are plenty of theorists and politicians who say our problem is still that we need to spend more.

So if you’ll grant me that this self-deceptive over-spending is a pernicious vice, isn’t my schadenfreude still wrong? Jesus said that those who don’t forgive are guilty of the greater sin, and one of the most important and revolutionary insights of the Restoration is that God does not rejoice, but actually weeps over the suffering of the wicked, so I should too. I’m sorry, though, it’s hard for me to see the Dow at a little over 11,000 as an unbearable affliction. This is not like a war. It’s not even a famine, let alone a flood. It is certainly not the fire from the sky that Jonah was hoping for, and it might even save some of us from a longer-lasting fire. It just might be enough of a discomfort to make us re-think our priorities, and we are long over-due for rethinking.

Instead of Jonah, let’s look at Nephi, who prayed, “O Lord, do not suffer that this people shall be destroyed by the sword; but O Lord, rather let there be a famine in the land, to stir them up in remembrance of the Lord their God, and perhaps they will repent and turn unto thee” (Helaman 11:4).

This economic sand trap is a serious problem for some folks, no question, but it is mild in comparison with a famine. Moreover, the Dow isn’t even the economy. A decent amount of wealth, at least in the abstract, is bound up in the stock market numbers, but they change too fast for us to take them seriously as wealth, full stop. More than anything, the stock market is a barometer of where we think the economy is going, and so when it goes down, it isn’t so much a problem itself as the recognition and publicizing of a problem.

So, I’m excited that we are admitting to ourselves, in an implicit, confused way, that we have a serious problem, or at least that for the reluctant there is a highly public indication that there may be one. I’ll be more excited when I see people recognizing what we need to actually change. Will we as a nation actually turn back to God? That might be a bit much to hope for, but perhaps we will at least be less enamored with our idols of gold and silver, and some of our destructive ideas. Maybe we will stop seeing the stock market as quite such an important indicator of our wealth, because we will see that our real treasures are elsewhere.

Actually, I would be happy for more of us to just do the math, and there are signs that this, at least, is happening: credit card debt went down 11% from October 2010 to October 2011! Hurray! Some of us at an individual level, at least enough to affect the average, have started to change our ways.

44 comments for “Black Friday

  1. Jax
    November 25, 2011 at 9:49 pm


  2. Dan
    November 25, 2011 at 10:33 pm

    Two thoughts. First, the credit card improvement is misleading. The measure is accurate, but the article does not shed light on why balances have declined. Perusing large credit card lenders’ financial statements paints a picture of increased write-offs of credit card receivables (losses sustained by the lenders, not a change in behavior by the consumers). The manner in which the data is captured would show a write-off as a raw decline in outstanding balances. I am reminded of Elder Hales conference talk from April 2009 when he stated “Today I speak to all whose freedom to choose has been diminished by the effects of ill-advised choices of the past. I speak specifically of choices that have led to excessive debt and addictions to food, drugs, pornography, and other patterns of thought and action that diminish one’s sense of self-worth.” I suspect we have further to go for so many to break the cycle of addiction that drives excessive debt. I do hope that when the wrapping paper is cleaned up, the discarded ribbons and bows thrown out, and the remnants of packaging recycled, that credit card balances are observed to have declined in January.

    Second, the focus on the Dow 30 is fascinating to me. Not only is it a false indicator of spiritual wealth, it is also a false indicator of temporal wealth from equities. The Dow Jones Industrial Average, which is frequently quoted, simply, as the Dow, is comprised of 30 large cap domestic companies. It ignores mid cap and small cap, as well as all international companies. How sad that so many focus on an indicator that is misleading in more than one way. A better measure of wealth could perhaps be found in a wallet or purse, in the form of a current temple recommend.

    I appreciated your thoughts.

  3. Dan
    November 25, 2011 at 11:05 pm

    the other dan speaking here….

    A few thoughts.

    1. Debt is not our major problem in this country. If debt were really a big concern, we would not be in two countries still with our military while paying for those actions with credit cards. We have yet to actually pay for our current foreign adventures with real money. It’s all being parked on credit cards for our children to pay. When I actually hear us finally talking about this, about how to pay for our warmongering, then I will actually believe we care about our debt, or that our current debt is of any serious concern.

    2. If Debt were our major problem, why would investors flock to our debt for safety? It makes absolutely no sense at all. Investors are BEGGING the United States government to borrow money, but we’re led by this really stupid narrative that the US government ought not to spend money but actually cut back! It’s insane! There is need (workers who are out of work), there is work (infrastructure needs some serious upgrades all across the country), and there is money (investors have pushed interest rates for US government borrowing into negative territory, which essentially means that if the US government were to borrow money right now, they’ll actually GET money for borrowing money!) What the hell is wrong with our freaking narrative!?!?!

    3. Why do we need to pray that God will make us suffer? Why do I need to turn to that kind of God? That makes me suffer? yeah, you wanna turn more people off to religion? Just tell them that you are praying that your God will make them suffer for not being in your faith. That will work real well.

    4. Finally, you know what’s a problem? Here’s what it is. There are 5 people searching for jobs, and only 1 job available for those 5. In other words, 4 people are out of work no matter what the hell they do. Banks and corporations are sitting on their cash because they are rightly afraid of investing it. Who is going to create the other 4 jobs? It’s painfully clear that the private sector isn’t. The only other entity capable of doing it is the government.

    5. Our main problem is that half this country thinks the government is of Satan, votes people into office who think the government is of Satan, and those representatives then do everything they can to ensure that government fails at its job, because after all, government is of Satan. If you are to put blame anywhere for the problems we are currently facing, put that blame on the 25% called The Tea Party and the representatives they sent to Washington DC who utterly refuse to do anything that would in any way reward the Democratic party any kind of sympathetic feelings from American citizens. THAT’s your real problem. As long as we allow 25% of Americans to hijack the government and control the narrative with their allies at Fox News and other News Corp affiliates, then we will continue having this problem.

    Be sure of one thing. These guys who talk about the deficit don’t actually give a damn about the deficit. Where were they when Bush started the war in Iraq on a credit card? Where were they when Bush passed Medicare Part D in the dead of a December night? I’ll tell you where they were. They were out canvassing for Bush’s reelection. That’s how much they actually give a damn about the deficit. How can we let them run the narrative?

  4. Bryan in VA
    November 26, 2011 at 12:23 am

    Dan #3

    “but we’re led by this really stupid narrative that the US government ought not to spend money but actually cut back!”

    No less an entity than the Congressional Budget Office is saying that the Obama stimulus will be a net drag on the economy over the long run. It all has to be paid back… with interest!! For some reason Keynesian economics never dies the death it richly deserves.

  5. Dan
    November 26, 2011 at 12:55 am

    of course it’s gonna be a drag! We had a freaking meltdown, Bryan in VA. An economic catastrophe. And Obama’s stimulus package wasn’t big enough to really cause the effect needed. It needed to be far more massive than what it was.

    Oh, and Washington Times….very poor source. Owned by the Moonies. Never trust them.

  6. Ben H
    November 26, 2011 at 1:45 am

    Simmer down, Dan (#3), and watch your language, would you please?

    If it bothers you that we are going into debt to finance a war, then you are agreeing with me that we have a debt problem. For my part, I didn’t say anything one way or the other about war.

    The reason investors are eager to loan the U.S. government money is that of all the sinking ships around, it is probably going to sink the slowest, (a) because it is very big, and (b) because unlike private borrowers, it has the rather remarkable powers to tax and to lend itself money. That doesn’t mean it is a good thing for the government to take on more debt.

    As you probably know, there are plenty of people who argue that a major reason the private sector is not eager to create jobs in the current environment is precisely because of either (a) what the government has been doing recently or (b) what they are afraid the government may do in the near future, including raise their taxes to pay for its excessive debts. Our very own Nate Oman had a nice post on the GM bailout, for example, a little while back.

    However, the point of my post was not to try to convince you of this, or to argue over Keynesian economics. I noted that some people disagree with me on the debt business, and for the moment am content to leave it there. If you don’t like that particular criticism of mine, pick another of your own and plug it in.

    The point of the post is that I think we are messed up in a bunch of ways, and so I find myself in the odd position of being tickled to see the stock market go down. Maybe if we start (or continue) seeing the undesirable effects of our errors, we will start trying to correct them. You seem to have plenty of criticisms of your own. Don’t you kind of feel the same way?

  7. Ben H
    November 26, 2011 at 1:57 am

    Dan (#2), um, thanks, I think. I had really been hoping that people were paying off their credit cards more and running them up less, but I’m afraid you’re probably right that defaults are contributing as much to these numbers as frugality. So perhaps my glee should turn to gloom after all.

    As it happens, the S&P 500, Nasdaq, and international markets tend to move up and down together more often than not, at least lately, since the main things driving movement these days are macroeconomic factors, and they are all interlinked in our global economy. So as far as that sort of thing goes, I don’t think a lot rides on my choice of the Dow in particular. As you suggest, though, my concern is that while we watch all of these market indices so eagerly, we are neglecting things that matter a lot more and can’t be measured so simply in numbers or dollars or euros or yuan.

  8. Jax
    November 26, 2011 at 8:58 am

    Why do we need to pray that God will make us suffer? Why do I need to turn to that kind of God? That makes me suffer? yeah, you wanna turn more people off to religion? Just tell them that you are praying that your God will make them suffer for not being in your faith. That will work real well.

    I’ll take a stab at this… I assume most of us are familiar with the pride cycle, right. Prosperity, pride/sin, fall, misery, humility/righteousness, prosperity (in simple terms). Well, when you recognize that our nation is being consumed more and more with sin/pride, and then couple that with a desire for a return to righteousness, then you know the only way to get there is for a fall and the misery that leads to repentence (as opposed to the suffering of the damned, see Mormon 2:13). Many of us would be more than willing to go through the suffering along with them that would come with economic failure and hardship if we could return to a community of righteousness at the end. It may not attract many people to the church in the short term, but attracting wicked people just for a numbers boost isn’t really my objective – I don’t want them comfortable in our congregations. In the long run though it leads to greater numbers in the church AND in higher kingdoms of glory.

  9. Julie M. Smith
    November 26, 2011 at 9:33 am

    Ben, interesting post. It reminded me of this:

    “The credit wasn’t just money, it was temptation. It offered entire societies the chance to reveal aspects of their characters they could not normally afford to indulge. Entire countries were told, “The lights are out, you can do whatever you want to do and no one will ever know.” What they wanted to do with money in the dark varied. Americans wanted to own homes far larger than they could afford, and to allow the strong to exploit the weak. Icelanders wanted to stop fishing and become investment bankers, and to allow their alpha males to reveal a theretofore suppressed megalomania. The Germans wanted to be even more German; the Irish wanted to stop being Irish. All these different societies were touched by the same event, but each responded to it in its own peculiar way.”


  10. November 26, 2011 at 9:56 am

    Awesome quote, Julie!

  11. November 26, 2011 at 10:00 am

    I don’t have any deep thoughts to share on Black Friday, but I did enjoy bopping around SLC buying stuff yesterday. Necessaries like cheap LDS books, the latest Dominion expansion, and a cart of Costco food, not luxury goods like the latest JSPP volume or one of those big screen units that greet every Costco visitor.

  12. Brad
    November 26, 2011 at 11:03 am

    Ben H (#6),

    “That doesn’t mean it is a good thing for the government to take on more debt.”

    Taking on more debt may not be a good thing, but it is a sine qua non. We need spending to stimulate the economy. And with the constant maturity rate of a 10-year US treasury bond at under 1.9%, it is crazy for the US to not borrow more money to try to stimulate the economy. The low rate is also an indicator that taking care of the unemployment problem is far more important now than taking care of the debt problem. If the private sector is not going to do the spending then the government is the only other option.

    Ah but you say:

    “there are plenty of people who argue that a major reason the private sector is not eager to create jobs in the current environment is precisely because of either (a) what the government has been doing recently or (b) what they are afraid the government may do in the near future”

    There may be many people who argue that, but the points are simply not true. The reasons that the private sector cites for not spending are lack of aggregate demand in the economy far more than uncertainty about government regulation and taxation:

    I understand that was not the main point of your post, but you seem to be regurgitating the talking points of bad economics, and this needs to be corrected. It isn’t simply a matter of there being flaws in supply-side economics and demand-side economics and that the right answer is somewhere towards the center. That is just wishy-washy thinking. Demand-side economics is truly the only type of economics that makes sense. Supply-side econ is promoted by the types who benefit from it most, creditors and financiers. They don’t want to take a loss for their collective misdeeds and so they promote flawed economics that ends up privatizing gains and socializing losses.

  13. November 26, 2011 at 2:15 pm

    Brad (#7), you are not going to persuade me with a few quick lines and the words “bad economics.” I have read quite a lot of analysis on this, both theoretical and empirical, and I could throw the same kind of argument back at you about the motives of who says what: somehow it seems to always be the folks that want bigger government who take the view that we need more stimulus spending. This is not necessarily an indication of what is or isn’t true from the standpoint of economics, of course; it is as much an indication of the quality of economic thinking among politicians and political partisans as anything (which most of us are), and as far as that goes, I think as often as not the economics is complicated and obscure enough that they will just rely on the ambiguity to let them say what they feel is convenient for their purposes.

    In general I would agree there is a time and a place for demand-side economics, but when it is stimulus policies and excessive debt that got us into the crisis in the first place, I don’t see how more of the same is supposed to help. Sure, businesses say there is a lack of demand. Why is that? Who says there should be more demand, and why? Maybe fewer of us should be formally employed, and more of us should be volunteering in the schools and eating home-cooked meals. Maybe the reason we have high unemployment is because we artificially inflated demand by telling everyone to be patriotic and run up their credit cards for the past N years, and we don’t really need to buy more stuff. We definitely built more housing than we need. Maybe we are tired of trying to buy happiness (I can hope, can’t I?).

    But I am probably not going to convince you on the debt issue in a few quick lines, either. if you think the solution is more government stimulus spending, then perhaps you will feel the same as me, with your own favorite criticism inserted: the Dow is down, so maybe people will wake up and realize we do need more stimulus! Do you?

  14. Naismith
    November 26, 2011 at 3:09 pm

    The church is going to be screwed as much as anyone if the stock market continues to tumble, so I am not sure that Pres. Monson et al. are joining in prayers for the Dow to go down.

    The reason being that the church needs mature adults to be fiscally stable so that they can be free to serve in leadership, and they need “many, many, many” more missionary couples.

    The retirees of the next decade mostly do not enjoy the defined-benefit pensions of previous generations. And even if you diversify and have an appropriate portfolio for you time horizon, there are probably going to be some stocks as part of that mix, and thus retirement and mission service may be delayed, perhaps past the point of sufficient health to be able to serve at all.

    We were not particular greedy in our stock investments (and our portfolio has not been quite as volatile as the Dow). We weren’t looking to “make a killing,” merely to beat inflation. What about the parable of the talents? Relying only on CDs or a mattress is like burying the talent in the earth, something for which the servant was criticized in Matt 25:26.

  15. Ben Huff
    November 26, 2011 at 3:13 pm

    Great article, Julie (#9), which does a lot to advance my argument about debt and refers to a couple of books that apparently do more. Julie, as usual, is more interesting than your typical political partisan : )

  16. Ben Huff
    November 26, 2011 at 3:24 pm

    I agree, Naismith, that there isn’t really much alternative to the stock market for investments. Beyond a year’s worth of food or so, commodities depend as much for their value on a market as do stocks. I feel for people whose retirement plans have been disrupted by economic craziness that was not their doing, though the Dow was definitely inflated at 14,000. However, if we have fewer couple missionaries, perhaps we will have more grandparents, and in the long run I think we need those more than we need missionaries. I’m afraid the church itself has been in bubble mode for decades, focusing on growth in a way that is not sustainable. I’m not saying this should have been obvious, but I think it’s what we’ve been doing (I would love to be persuaded otherwise). Missionary service of course is also beneficial for the spiritual growth of missionaries, but there are a lot of other things I think we need to be doing to strengthen our young people that we haven’t been managing. Back before the stock market, people’s investment was in people, specifically children and other relationships of mutual trust and support. Perhaps we need to invest more in our children.

  17. Brad
    November 26, 2011 at 3:46 pm

    Ben H (#6),

    No I don’t expect to convince to change your mind at once. But I would hope to convince you to read more demand-side economic analysis. Your writing on economic issues shows me that you do not fully understand the arguments of demand-side economics and the case for increased stimulus spending. Demand-side economics is not about constant deficit spending or constant growth of ‘big government.’ It is about increased deficit spending during liquidity traps (meaning when the interest rates are approaching the zero lower bound and monetary policy cannot gain enough traction to stimulate investment spending needed to pull us out of a recession at a rapid rate). But quality demand-side economics advocates paying off debt during times of surplus after unemployment problems have been remedied. Currently with unemployment rates high and the consequent waste of human resources that are needed for growth in GDP and interest rates on bonds at all-time lows, debt is a secondary issue to unemployment right now. By cutting spending you risk hurting the economy even more. The austerity you seem to be implicitly calling for can be self-defeating.

  18. Brad
    November 26, 2011 at 3:49 pm

    Also a side note:

    You’ll go mad trying to rely on Dow Jones too much as an indicator of the state of the economy. And no I don’t have high expectations that the stock market will lead people to call for more stimulus spending. Increasing or prolonged unemployment will do that. Just look at Occupy Wall St.

  19. Jax
    November 26, 2011 at 4:01 pm

    The church is going to be screwed as much as anyone if the stock market continues to tumble, so I am not sure that Pres. Monson et al. are joining in prayers for the Dow to go down.

    I’m not sure if losing money qualifies as “screwed” for institutions based upon spiritual things like it would for businesses/governments/individuals. That is the great thing about it, the church would still function and the priesthood would still function when gov’ts fail, currencies disappear/change, societies crumble. It would change things… but we’re supposed to be prepared and expecting that

    the inhabitants of the earth [shall] be made to feel the wrath, and indignation, and chastening hand of an Almighty God, until the consumption decreed hath made a full end of all nations
    (Doctrine and Covenants | Section 87:6)

  20. Dan
    November 26, 2011 at 6:49 pm


    If it bothers you that we are going into debt to finance a war, then you are agreeing with me that we have a debt problem. For my part, I didn’t say anything one way or the other about war.

    no, i don’t think we have a problem with debt. I’m saying that if YOU have a problem with debt, then demand that the wars we are currently fighting be paid for already, and not just placed on credit cards for your children to pay. I don’t care about this nation’s debt, because it’s not the overriding concern, not even for those who are currently the loudest voices on the issue. As long as we are continuing to wage war on credit cards, and no one who speaks loudly against debt mentions them, i cannot take that person seriously about the issue. If you care about the deficit, Ben, which it is clear you do, then let me hear your proposal for shifting the cost of the war to taxpayers NOW, not to the next generation.

    Maybe if we start (or continue) seeing the undesirable effects of our errors, we will start trying to correct them.

    In the rest of my comment #3, i went right to the heart of the problem we’re facing Ben. Perhaps my “bad language” caused you to not be able to read my words beyond the bad language, but I did make a point related to your post. If you wish to see where the heart of the problem is in this country right now, it is with the 25% who call themselves the Tea Party. This group of people and those they chose to represent them in the Republican party don’t give a da…darn…about the undesirable effects of our errors and will not promote policies to correct them. Because promoting policies to correct them will benefit the Democratic party and Barack Obama, and the one thing, the overriding thing the Tea Party wants to accomplish, is to make Barack Obama a one term president. THAT’s their overriding goal, even if it means destroying the economy.

  21. Dan
    November 26, 2011 at 7:00 pm

    in other words, Ben, those who are advocating for cutting back on government spending, are also the loudest voices on starting a new war with Iran. Do you see what I am saying? They either don’t actually care about deficit spending, or they are hypocrites. Which do you prefer?

  22. Chadwick
    November 26, 2011 at 10:21 pm

    I am fortunate or unfortunate enough to work for a company with a befined benefit pension. It’s the only thing that gets me through the 70+ hour workweeks. But I’m vested and it’s fully funded so I stick around. My 401k and SS are a joke.

    Jax, I think the church should be concerned. Will the priesthood die with the economy? No. But if more people have to delay retirement, well, that COULD affect our ability to keep temples in operation, no? If enough people lose jobs, it COULD affect all kinds of programs that require money to function as tithing shrinks. We can argue until the cows come home how effective some of these programs are, as has been done many many times already on these blogs. But to say the Church stands independent of the world just is not true. Ask the Kirtland anti-banking society.

    I don’t cheer when the Dow falls. I actually think that seems harsh. But I do think the system is broken, and it’s going to take a lot more than the Dow falling to get enough people to want to fix it.

    And for all intents and purposes, Black Friday was such a rousing success this year that people were pepper sprayed for a better spot in line, and men got into fist fights over towels. So I’m not sure society as a whole is ready for change. As for me and my family, we skipped Wal-Mart and saw the Muppet Movie instead.

  23. November 27, 2011 at 3:00 am

    Brad (#17), there is a lot more to my understanding of the economy than I have written in this comment and thread, believe it or not. I have tossed out a few remarks for those who may find them interesting or useful. If you don’t find them congenial, perhaps we can pick up the conversation sometime in another thread that is primarily about the hydraulics of the economy. I’ll say one more thing, though: I have read a lot of supposed experts, and it seems to me that the economic developments of the past four years, when compared with the expert commentary along the way, are eloquent proof that the folks who usually pass for experts on the economy are mostly in the dark about what really makes it tick.

    Dan (#20), there are lots of things our government is spending on that we can’t afford, and I am happy to include the wars in Iraq, Afghanistan, and Libya in that well-populated category. I don’t know what the Tea Party folks are saying; I haven’t read them and couldn’t pretend to explain them to you. Oddly enough, I am saying what I’m saying because it’s what I think.

    As for your alternative explanation, considering the Tea Party didn’t even exist until after the financial crisis, I don’t see how they can be the explanation for our problems.

    Chadwick, I think it is awesome that you saw the Muppet Movie! That sounds like a great way to spend Black Friday.

  24. Dan
    November 27, 2011 at 9:02 am


    That’s because the Tea Party is just the hardcore Republicans rebranded. There’s nothing new about them. They’ve always been there. They were the ones who elected George Bush, and they are the problem.

  25. Bryan in VA
    November 27, 2011 at 9:03 am

    The Tea Party is about restraining an overreaching Federal Government. The ban in the incandescent light is a tiny example of that overreach and the Wall Street bailout is a large example of that overreach.

  26. Dan
    November 27, 2011 at 9:45 pm

    I wish the Tea Party was about an overreaching federal government, but they keep voting in the people that massively increase the size of government. Or have you forgotten, Bryan in VA, that the Tea Party are the same people that voted for Bush twice. Or that are the same people that do NOT want to rein in any defense spending. It’s a bunch of bull, Bryan.

  27. Larry Bates
    November 28, 2011 at 6:02 pm


    Please don’t pretend to have an overwhelming understanding of economics. Please make reference to the the Community Reinvestment Act that Clinton and Reno introduced in 1993 to increase demand in the housing market. In the implementation of that act alone you have plenty of evidence of what you are recommending and its impact on the economy. Please talk to all those who lost their pensions because Barney Frank et al would not allow oversight on something that wasn’t broke…and they had their money in the AAA money market. And please don’t just blame the banks. They were told what they had to do…and they did it with gusto because it was backed by the Federal gov’t.
    Furthermore, if you look at Federal deficits relative to GDP, the Bush years were lower than Clintons. Take a look at what the current admin has done re: GDP, and spending, and deficits.

  28. Brad
    November 28, 2011 at 7:24 pm

    Larry (#27), You are repeating the tired myth that the CRA and consequently the government is entirely responsible for the housing crisis. The CRA of 1977 for one had nothing to do with the subprime boom. Also Fannie and Freddie were responsible for very little subprime lending. The subprime lending phenomenon, securitization, collateralized debt obligations (CDOs), and credit default swaps spun out of control because of the overall deregulation of the shadow banking system that started in the 1980s. Is Clinton responsible for some of the housing bubble? Yes, of course. Is the government responsible for the economic crisis? Yes, but mostly in an indirect way. It loosened regulations when it shouldn’t have.

  29. Larry
    November 28, 2011 at 8:50 pm


    Let me see if I get this correct: the CRA requires that banks lend or they can’t do business with the Fed. Fannie Mae and Freddie Mac agree to purchase all the debt that occurs under this law; the banks are reluctant to lend, and are protested against if they don`t by social groups represented by none other than the current President; they then comply, being told they can lend up to 150% of the value of the home, and it`s still guaranteed by Fannie and Freddie, and you want me to believe that it played only a minor role.
    The laughable part of this is that Eric Wilder is prosecuting banks for fraud for their part in this fiasco, while at the same time prosecuting banks for not continuing to do it. Tell me the policy is not driving the behaviour. How do banks win.
    Your comments regarding regulators is accurate ( e.g.MF Global), but any attempts to oversee Freddie and Fannie were rejected by Barnie and Chris Dodd as they saw no problems with what those orgs were doing. National Review did an article on the CRA in 1993 and laid out exactly what the results would be… and they were right. It didn`t take a genius to see the end from the beginning on this mess.

  30. Brad
    November 28, 2011 at 11:34 pm

    Larry, the CRA had been around for 30 years prior to the economic crisis, same thing with Fannie and Freddie. The housing crisis was caused by subprime lending, the large majority of whom were not covered by the CRA.

    Also the worst of the housing bubble occurred when Fannie and Freddie were withdrawal from the market due to accounting scandals.

    Kevin Park finds that “…far from being forced into risky corners of the market, the institutions under the scrutiny of the CRA were crowded out by unregulated lenders.”

  31. Bryan in VA
    November 29, 2011 at 12:19 am

    I highly recommend reading Reckless Endangerment by NYT Pulizer Prize-winning author Gretchen Morgenson which chronicles how the housing fiasco unfolded. On page 114 the author notes that in 1997 federal regulators directed Fannie Mae and Freddie Mac to lower the underwriting standards of the loans they bought or repackaged and that was the start of the lowering of mortgage underwriting standards in general. In a nutshell, the Federal Government plowed the ground and planted the seeds of the current housing crisis. Private mortgage lenders (like Countrywide) took advantage of the lowered mortgage standards, and the financial ratings companies (Moody’s, Fitch, and S&P) turned a blind eye to the quality of the sub-prime mortgages because they realized there would be increased loan volume (i.e., more fees for rating loans) if they didn’t call into question the quality of the mortgage-backed securities. Also, all of these players in the mortgage fiasco contributed to politicians overseeing these activities and the politicians didn’t want to rock the boat donation-wise. It’s ironic how the same ratings agencies that were complicit in allowing the mortgage scandal to unfold by placing their seal of approval on toxic assets are now warning the US Government about its creditworthiness.

    One more tidbit – page 248 of Reckless Endangerment notes that in 2003 Freddie Mac actually contacted Washington Mutual in order to “rent” $6 billion in sub-prime loans in order to meet it’s sub-prime loan mandate. Both Fannie and Freddie repeatedly engaged in such tawdry practices.

  32. Brad
    November 29, 2011 at 6:52 am

    Bryan in VA, Fannie and Freddie are certainly guilty of several things, but they did not directly cause the housing boom and the consequent meltdown in the US housing market. Note the graph produced by the Federal Reserve just after meltdown in 2008:

    Between 2002 and 2007 (the worst of the housing bubble) mortgage debt held by agency and government sponsored enterprise-backed mortgage pools (aka Fannie and Freddie) dropped from 48% to around 36%. Whereas mortgage debt held by asset-backed securities issuers (aka the private sector) jumped from 8% to 20%.

    The Federal Reserve didn’t step in in time to attack this housing bubble. So they are at fault in that regard.

    Here is a good rebuttal of Gretchen Morgenson’s book.

    Also see:

    Bottom line: Morgenson overlooks the fact that the biggest players in the subprime market, such as mortgage banks Countrywide and Ameriquest, were NOT covered by the CRA.

  33. Bryan in VA
    November 29, 2011 at 8:04 am

    Brad #33

    If you believe that a positive comment from Moody’s about Freddie Mac in December 2006 is a good rebuttal we’ll have to agree to disagree on this matter.

  34. Brad
    November 29, 2011 at 10:28 am

    Bryan in VA (33),

    Did you just gloss over the articles without reading them in any detail? The CEPR piece is not using the quote from Moody’s to shed positive light on Freddie Mac (let alone commend the questionable ratings agency), but to buttress its overall claim that Freddie and Fannie were late comers to the junk mortgage market. The quote from Moody’s from Dec. 2006 is strong evidence that Fannie and Freddie had been “losing market share to private issuers” and that they were jumping in the junk market to try to catch up with the damaging trend that had already been started by the private underwriters, most of whom, might I remind you, were not covered by the CRA. Later in the CEPR piece the author criticizes Fannie and Freddie as “horrible actors in this story.” But they did not cause the bubble.

    Perhaps what would be more fitting is not to “agree to disagree” but for you to concede a need to educate yourself further about the causes of the housing bubble and to discontinue perpetuating the well-debunked myth that Fannie and Freddie caused the debacle. No one who is anyone is trying to absolve them of blame (yet another myth that conservatives perpetuate against liberals). The main point is that the housing crisis probably would have happened even without Fannie and Freddie simply by virtue of the high-risk taking of the deregulated securitized mortgage market.

  35. Larry
    November 29, 2011 at 1:20 pm


    No one is arguing that the CRA idea wasn’t around for years. In fact, it started under Johnson. Carter enacted it in 1977 but couldn’t implement it given the environment. Clinton and Reno did implement it in 1993. The purpose being to provide low and middle income folks the opportunity to borrow without strict credit rules being applied.
    Liberals will try all they can to shuffle the blame to everyone else, but this is the source of the problem and Fannie Mae and Freddie Mac were in on it from the start. They helped set the rules and they bore the brunt of the mortgages that were subprime and they are the ones that cooked the books to keep it going.

  36. November 29, 2011 at 2:55 pm

    Ben H.,

    I just finished reading Lewis’ Reflection on the Psalms. He was very uncomfortable with a number of the psalms, since they consisted of dancing on the grave of the wicked. This is not, as you point out, the kind of thing one expects in Christian ethics.

    I think he goes too far. I have no doubt that the Almighty weeps for those who choose wickedness, but I also have no doubt that once they have chosen it, it is appropriate to exult in His victory over them.

    A sense of justice is an essential element to holiness, and triumph and vindication is an appropriate emotion at seeing justice prevail just as gratitude is an appropriate response to blessings.

    He that sitteth in the heavens shall laugh: the Lord shall have them in derision.

  37. Brad
    November 29, 2011 at 4:31 pm


    I’ll give you this. The Clinton administration did contribute to the mess by relaxing credit and down-payment requirements for home-buyers, so in effect contributing to the deregulation of the system. But the CRA and Fannie and Freddie did not cause the housing bubble. As I said before most of the subprime loans (around 80%) were not CRA-backed, so how then was the CRA causing the problem? Fannie and Freddie were only guilty of following the lead that had already been taken by Wall St. and mortgage companies (see comment #34). Bear in mind that the housing bubble was worldwide beginning circa 1998-1999 and popping in 2007-2008, note the linked graph:

    This is a clear indication that unregulated market forces were the drivers of the bubble far more than the CRA or Fannie and Freddie, which only applied in the US.

    Note that Fannie and Freddie’s accounting fraud happened just before the housing bubble exploded in the mid-2000s. They had to play catch-up with the private sector.

    Also, the government didn’t force the private sector to wheel and deal in the mortgage-backed securities industry. They were making a fortune from this.

  38. Larry
    November 29, 2011 at 10:44 pm


    Good point.

  39. Bryan in VA
    November 29, 2011 at 11:26 pm

    Brad #34

    Did you just gloss over my posts without reading them in any detail? I haven’t mentioned the CRA once! :) In a token of right-left unity I offer for your and everyone’s enjoyment the Keynes-Hyack rap!

  40. Ben H
    November 30, 2011 at 11:42 pm

    Adam, you raise a very interesting point at the heart of what is on my mind. I am not sure how to respond, but I’ll take a stab.

    I actually don’t think it is a good fit to think of God as celebrating victories over the wicked. Perhaps part of this is because I don’t see him as feeling threatened by them. It seems to me that celebrating the passing of a threat presupposes that you see someone as first and foremost a threat, but this view seems like the viewpoint of someone who is weak in a way that God isn’t. I’ll grant there are lots of passages in the Bible that portray him as doing this, but I am inclined to see them as inaccurate, perhaps reflecting the imaginative projection of a human point of view. If you show me more examples, I might have to reconsider in light of details, but that is how I would be inclined to explain them.

    I also realize that seeing God as above threat might sound like a move toward seeing him as overly absolute, and I do think that classical theists go too far in their descriptions of God. Still, my primary picture is of God as a father who loves his children and is distressed when they choose wickedness, with the attendant harm to themselves and others. To see them as enemies, he would have to be more worried about the harm they might do to him than the harm they might do to themselves. I see God as rather worried about the threat they pose to his other children than to himself, and to the extent that he might be relieved at the passing of a threat like that, it is more as one might be relieved at the passing of a hurricane. God might laugh when he sees us come through a storm, but he is not laughing at the storm; he is laughing with pleasure at seeing that we made it through.

    What do you think, Adam?

  41. December 6, 2011 at 12:11 pm

    My comment got eaten somehow. Lessee if I can recreate it.

    I actually don’t think it is a good fit to think of God as celebrating victories over the wicked. Perhaps part of this is because I don’t see him as feeling threatened by them. It seems to me that celebrating the passing of a threat presupposes that you see someone as first and foremost a threat, but this view seems like the viewpoint of someone who is weak in a way that God isn’t.

    I don’t agree. There is an American, possibly human, taste for underdogs where the greater the improbability of the victory, the more we enjoy it. And in drama and fiction without the element of some risk of failure (or ‘threat,’ as you call it) we’re bored. These same attitudes bleed over into our ordinary lives. But they shouldn’t. Taking the certain for granted is a temptation, one that I believe we should try to overcome and that the Divine has certainly overcome.

  42. December 11, 2011 at 6:23 pm

    Hm. So Adam, I gather you are saying that there is real risk in God’s plan, that it can be actually threatened by the wicked. Am I reading you right? I would agree that there is at least the risk to their own souls, or rather, the certainty that their wickedness is damaging to them and makes them miserable. There may be much greater risks. However, it seems to me that rejoicing in the destruction of the wicked doesn’t only imply a sense that they might not have been defeated, but also a lack of sorrow at their misery.

    What do you make of the Moses passages? What they show is sorrow, not rejoicing, at the destruction of the wicked. If the psalms portray something else, I am inclined to think that Moses is more reliable. Would you agree it looks like we have to choose which to trust? Or are you suggesting that God is sometimes glad and sometimes sad when the wicked are destroyed? What would determine which?

  43. December 11, 2011 at 6:27 pm

    Ah, I think I see what you’re saying better now, Adam. You’re saying God rejoices even though it wasn’t uncertain. But does he both rejoice and sorrow? I could see him rejoicing at the salvation of the righteous, and at the prevention of victory for the wicked, but I can’t see him rejoicing at the destruction of the wicked.

  44. Cameron Nielsen
    December 12, 2011 at 1:38 am

    RE the laat few comments–I think if I were to undertake the attempt at empathy for Heavenly Father, then my take would be something like this:

    He sees the end from the beginning. Everything is before Him. Nobody and nothing is understood or evaluated in the context of mortality alone (whereas the godless see mortal wrongs and injustice as the ultimate tragedy).

    When the wicked suffer, God may rejoice when he knows that suffering will lead to repentance. When wickedness is removed from the Earth via death by any means, God may rejoice that his righteous children still in their mortal probation are relatively safer from evil, while his wicked children have been blessed with an expedited opportunity to receive correction and a review of the plan ‘as it really is’ in hopes for repentance and change.

    Of course, we also know that both converses happen as well, according to God’s will, in order that justice might be satisfied to condemn those who have let Satan control their hearts, and because God is willing to ‘try the faith of [His] people’ by sending forth rain on the just and the unjust.

    Like any parent with children of various degrees of obedience, God experiences the full spectrum of emotions, often simultaneously. He is like Alma, whose joy is as exquisite as was his pain, but to an infinite degree. A perfectly stretched heart has perfect understanding and a perfect capacity for love and sorrow. Great grief saddens Him and causes Him to weep, as Enoch learned, but He also has an eternal increase in love, joy, and satisfaction in His children who trust and love Him completely and are willing to submit to all experiences He sees fit to bestow upon them, even as my young 2 year old daughter is easily entreated, full of love, and (almost always) submits to my honest and pure advice and commands with perfect trust and obedience.

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