Robert Krulwich had an excellent report on the ABC Evening News broadcast last night. He was asked to explain the current credit crisis in terms that most Americans can readily understand.  He came up with a wonderful animated segment that showed a banker lending out $100 to a farmer who then spends it on supplies.  The farm supply business then uses the $100 to order more items and then that business owner uses the money to pay for other goods and services and so on. Money circulates around the system and businesses can thrive and workers can get paid.  (You can see this great animation segment at the ABC News website.)

The report and the animation cut to the heart of the problem we are facing and explained why Congress needs to act quickly. The bank lending system is slowing to a dangerous crawl. This is not just a problem that affects Wall St firms. Small businesses in cities and towns across Massachusetts and the country are being adversely affected.

Senator Kerry held a press conference in Boston today to argue the urgency of the problem. At the press conference, the Senator stated his strong support for a balanced rescue plan that puts the interests of the taxpayers first and demands accountability and oversight in the process. The legislation he supports:

• Requires the Treasury to modify the loans they buy to help American families keep their homes and expands federal assistance to families facing foreclosure;
• Includes strong Congressional oversight, establishes a special Inspector General and allows Judicial review of the program;
• Requires companies that take advantage of this program provide warrants so taxpayers will benefit from any future growth of these companies;
• Includes important limitations on executive compensation for those participating in the program.

These provisions safeguard the investment the American taxpayers are being asked to make in the financial system. There will be no "golden parachutes" of money that reward corporate executives for failure. The money the plan dispenses will be carefully watched and used as necessary to help weather the financial storm, not reward the very people who might have helped worsen the storm.

The credit crunch is a problem for the whole country, not just Wall St.  Addressing these problems honestly and quickly will help small businesses and consumers alike. As Robert Krulwich explains in the ABC News segment, the lending and credit system cannot be allowed to freeze up. Too many jobs and businesses might never recover and the problems would only get worse. Congress needs to put aside partisan politics and concentrate on actions that serve the interests of the American people.  Congress should craft responsible legislation that is not a give-away to special interests, that has oversight built into it and that keeps the interests of the taxpayers first and foremost.  That is what the American people want and expect their leaders in Congress to do. 

 

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The events of the last week have been bewildering to a lot of Americans. Talking heads on the news are screaming about a financial crisis that needs action and attention right now in order to save the country from terrible consequences. Americans grasp the outline of this, but the details are fuzzy at best. What is going on and what does it mean for people worried about their futures, their ability to keep their homes, provide for their families and put something away for retirement? Who is watching out for the interests of the people in this noisy and chaotic debate going on now?

The last thing this debate needed was an injection of partisan politics. Americans do not want to see their financial futures sacrificed for a game of political chicken that doesn't solve anything. The people want their elected representatives to do their jobs and find solutions that begin to address our problems, not posturing and finger pointing that accomplishes nothing.

Americans want to know that their interests are first and foremost in the minds of government officials. The current turmoil is not just about derivatives and credit swaps and other distant financial terms that only investment bankers and financial gurus seem to understand. This crisis directly affects millions of Americans who are worried about keeping their homes and jobs. It's about small business owners who want to make sure they are not an afterthought in this financial battle over the interests of huge banks and financial institutions.

Small business relies on access to credit. Restaurants and small shops on Main Street need access to loans and lines of credit to get their businesses started and to keep them running. The current financial crisis threatens that flow of credit.

Senator Kerry has filed legislation that would lift some of the restrictions that are preventing small businesses from using loan programs from the Small Business Administration. Credit from private banks has become too difficult to obtain for a lot of small businesses.  The new legislation aims to eliminates some fees in certain SBA programs and increase the loan size in other programs. These actions, and others in the legislation, aim to help small businesses get what they need to weather this crisis and preserve jobs.

It is vital that we look after the interests of small as well as big business in this financial crisis.  As Senator Kerry said in remarks about his new legislation:

"If we can spend $700 billion to fix Wall Street, we should be able to help our everyday entrepreneurs who employ half of America's workforce and pump almost a trillion dollars into the economy each year," Kerry said. "These owners are suffering today because of a credit crisis that is preventing them from gaining access to the capital they need to keep running - let alone to expand their firms to compete globally."

"At the root of this mess is a lack of oversight and severe deregulation of the financial industry, causing turmoil in America the likes of which we have not seen since the Great Depression," Kerry said. "In addition to reducing fees and regulatory burdens on programs that stimulate economic growth and job creation, and improve liquidity for small banks, my proposals also increase lender oversight." 

"My changes will fill the gap left by the private sector at a time when our nation's owners and employees on Main Street are wondering why the CEOs who created this crisis are receiving a bailout when they're struggling just to keep their doors open," Kerry said. "It's essential that we bring our economy back to life, but we must do so in a way that doesn't continue to punish America's hardworking entrepreneurs for the sins of Wall Street's titans."

 

 

The Community Redevelopment Act ("CRA")  was passed in 1977 to encourage banks to lend credit in their own communities.  This was an answer to the problem of "redlining" in which districts or areas of a community were being effectively shut out of getting home mortgage loans from local banks.  Banks with assets over $250 million dollars were required to show that they were not discriminating in their loan programs against residents because they lived in a predominantly minority or low-income area. The CRA was weakened in 2004-2005 when a bank had to have assets of $1 billion or more before it became subject to the CRA rules.

Investor's Business Daily and other right wing sites have started to blame the three decade old CRA for the current subprime mortgage crisis. They claim that the CRA forced banks to make loans to low-income customers who were unable to pay them back. This interference in the "free market," according to some right wing sources, is the cause of the current mortgage problems and the reason why banks, investment firms and so forth are in trouble.

 This is patently false. According to an independent study done by the firm Traiger & Hinckley LLP in a study release on January 7, 2008:

Our study suggests that without the CRA, the subprime crisis and related spike in foreclosures might have negatively impacted even more borrowers and neighborhoods. Compared to other lenders in their assessment areas, CRA Banks were less likely to make a high cost loan, charged less for the high cost loans that were made, and were substantially more likely to eschew the secondary market and hold high cost and other loans in portfolio. Moreover, branch availability is a key element of CRA compliance, and foreclosure rates were lower in metropolitan areas with proportionately greater numbers of bank branches.

The American Prospect, in an online article by Robert Gordon dated April 7, 2008, called out those who were blaming the CRA for the subprime crisis.  It noted:

The argument turns on a simple question: In the current mortgage meltdown, did lenders approve bad loans to comply with CRA, or to make money?

The evidence strongly suggests the latter. First, consider timing. CRA was enacted in 1977. The sub-prime lending at the heart of the current crisis exploded a full quarter century later. In the mid-1990s, new CRA regulations and a wave of mergers led to a flurry of CRA activity, but, as noted by the New America Foundation's Ellen Seidman (and by Harvard's Joint Center), that activity "largely came to an end by 2001." In late 2004, the Bush administration announced plans to sharply weaken CRA regulations, pulling small and mid-sized banks out from under the law's toughest standards. Yet sub-prime lending continued, and even intensified -- at the very time when activity under CRA had slowed and the law had weakened.

Second, it is hard to blame CRA for the mortgage meltdown when CRA doesn't even apply to most of the loans that are behind it. As the University of Michigan's Michael Barr points out, half of sub-prime loans came from those mortgage companies beyond the reach of CRA. A further 25 to 30 percent came from bank subsidiaries and affiliates, which come under CRA to varying degrees but not as fully as banks themselves. (With affiliates, banks can choose whether to count the loans.) Perhaps one in four sub-prime loans were made by the institutions fully governed by CRA.

Most important, the lenders subject to CRA have engaged in less, not more, of the most dangerous lending. Janet Yellen, president of the San Francisco Federal Reserve, offers the killer statistic: Independent mortgage companies, which are not covered by CRA, made high-priced loans at more than twice the rate of the banks and thrifts. With this in mind, Yellen specifically rejects the "tendency to conflate the current problems in the sub-prime market with CRA-motivated lending.? CRA, Yellen says, "has increased the volume of responsible lending to low- and moderate-income households."

 There is plenty of blame to go around for the current financial crisis affecting Wall Street and the mortgage market.  The CRA, however, should not be sharing in that blame.

 

There's this idea that when you are on the attack, you're winning. Mean works. As contemptuous as you can get, that's as contemptuous as you should be.

I think it's all Zell Miller's fault. He gave a speech that was a spittle-laced, just-short-of-unhinged attack on John Kerry last election as part of an incredibly negative GOP convention, and the convention seemed to work. John Kerry's "negatives" went up, George W. Bush took a lead in the polls, and Kerry could never catch up. It didn't matter that the attacks were mostly lies and smears against a tremendously honorable man. It didn't seem to matter that the people delivering them had no particularly redeeming qualities of warmth or grace. Mean worked.

So, the GOP went back to the well last night. But they missed the real reason why they were able to smear John Kerry so successfully. It wasn't being mean that worked, it was being on message.

Every speaker advanced the same basic lie about John Kerry, a "for it before he was against it" line designed to cover up Bush's weakness by trying to portray Kerry as indecisive and weak. The meanness, the contempt seemed tied to a specific reason for contempt of that single person they were trying to defeat. And while people may have not particularly liked Zell Miller, thought he was too mean, they were left with a lasting negative impression of JK.

Which takes us to last night. During the speeches last night, I, like many others, flashed back to 2004 and thought this may be more effective than I thought. I mean, I found the whole thing to be incredibly hate-filled and alienating, but, if it worked in 2004, then maybe it'd work again.

And then I woke up this morning, and I honestly couldn't remember a single thing they attacked about. Oh, I could recall a few specifics if I really searched my memory, but the overall impression was only, "Boy, they really hate Obama." Which, frankly, just isn't good enough as a political attack. The overriding impression is just one of anger. I remember the attackers rather than the attack. This is not good.

Especially when paired with the second impression: "they are really contemptuous of a lot of Americans." The attacks seemed not tied to a specific candidate or a specific trait in that candidate, but instead it was just a soaring, bellicose anger directed outward and egged on by the delegates in the hall.

Really, the only things that really stuck with me were the bizarre derision of community organizing and a single moment from Rudy Giuliani. Rudy said, when talking about the story of Barack Obama, "Only in America." And he used it contemptuously.

Well, you know what Rudy? Screw you. "Only in America" is one of our proudest traditions. There's a freedom to strive and achieve here that really is different than much of the world. We have had one of the most complicated and at times brutal histories of race relations of any country, and yet we now have an African-American son of a single mom as the leader of our country's majority party. That's pretty damn cool. And, yeah, it's only in America.

In the convention last night, the effect was not so much a contempt of Obama as it was a contempt for an entire vision of America, a vision that's part of the fabric of the American Dream. Community organizing, pluralism, tolerance, compassion, respect, humility, optimism, the rule of law, a self-made man, all of it was subject to a sneering derision. Unless you were white, from a small town, loved country music, and hated everyone else, there was almost nothing for you. Well, unless you are an oil exec who wants more oil leases to sit on and boost your balance sheet. Then they were chanting sweet nothings just for you.

The speech people should be thinking of is not Zell Miller, but Pat Buchanan. Buchanan's 1992 culture war-cry has been widely considered as a major factor in George H.W. Bush's defeat to Bill Clinton. It was exclusionary and angry, and it turned many people off. It was, like last night, not so much an attack on Bill Clinton as an attack on whole swaths of America.

So, forget the pundits, and forget the snap judgments. Many people in 1992 thought Buchanan's speech was a success because it "rallied the base." It was only later that the impression of an angry party intent on pushing its narrow views on the country took hold and became the lasting legacy from that speech.

I suspect that's what we'll be saying about last night in a couple of months.

update: Here's Roland Martin on CNN getting angry about the attack on community organizers:

The first national decision of consequence that a nominee for President makes is the choice of a running mate. How this choice was made, what critieria (were) used to make the pick and what views and experience the vice presidential candidate brings to the ticket are legitimate areas for scrutiny. The selection process itself is a window into how the presidential nominee thinks. The choice reveals something about the judgment of the nominee and how that person will make decisions as President.

Senator McCain, at best, seems to have rushed into the choice of Alaska Governor Sarah Palin. There are legitimate questions about her that have been overlooked in the vetting process itself. What foreign policy experience does Gov. Palin have? What is her thinking on the Iraq and Afghanistan wars and American foreign policy in the Middle East and other troubled areas of the world? Senator McCain has made national security a paramount issue in his campaign for the presidency, yet his chosen V. P. candidate has no substantive national security experience. What does it say about the judgment of John McCain when he doesn't require his running mate to have experience in the very area McCain regards as critical to the future course of the United States?

Personal attacks on the Palin family are wrong. Senator Obama has clearly said that the children of a potential nominee should be off limits to partisan political attack. The choice of Gov. Palin for the Republican ticket is questionable on the merits of Palin's record and stated positions on the issues. Her selection raises questions about Senator McCain's judgment and the vetting process employed in selecting this Vice Presidential candidate. These are serious questions and deserve serious answers from the McCain campaign. The News Herald of Panama City, Florida had an editorial online that speaks to these concerns as well:

Media reports have raised concerns that the McCain campaign did not do a thorough job vetting Palin before she was chosen (a charge the campaign has vigorously rebutted). If the decision to tap the Alaskan was hasty, made from the gut without ample information, that makes the differentiation between Palin's experience and judgment even more acute. How deep is McCain's knowledge of the governor's performance? How much does he know about the way she made her decisions, the deals she cut and the compromises she made (or didn't make)? Is McCain confident that the initial burst of Palin stories was just the obligatory opening fanfare of media scrutiny that was to be expected, or has his campaign realized it has rappelled down a well whose bottom can't be seen?

The Los Angeles Times stated on Saturday that it found the choice of Gov. Palin, given her lack of national experience, to be a gamble for Senator McCain:

Let's be honest: The learning curve that confronts Palin is the steepest facing a vice presidential candidate in recent memory. That McCain was willing to take this gamble may not be a sign of desperation, but it gives a new and unsettling meaning to his claim to be a maverick.

The New York Times also weighed in with an editorial on Wednesday that asks what the choice of Gov. Palin says about the judgment of John McCain:

If John McCain wants voters to conclude, as he argues, that he has more independence and experience and better judgment than Barack Obama, he made a bad start by choosing Gov. Sarah Palin of Alaska.

Mr. McCain's supporters are valiantly trying to argue that the selection was a bold stroke that shows their candidate is a risk-taking maverick who - we can believe - will change Washington. (Mr. Obama's call for change - now "the change we need" - has become all the rage in St. Paul.)

To us, it says the opposite. Mr. McCain's snap choice of Ms. Palin reflects his impulsive streak: a wild play that he made after conservative activists warned him that he would face an all-out revolt in the party if he chose who he really wanted - Senator Joseph Lieberman of Connecticut.

The McCain campaign wants to pretend that any objections to Gov. Palin as a V.P. choice are somehow improper. Questioning the amount of time that went into this important choice and the depth of the vetting process itself is not improper. It is a way of sounding out the judgment that Senator McCain employed in making this choice. That judgment should be probed and questioned. It is a vital way to take a measure of Candidate McCain and project forward what his judgment and decision making process as President would look like. That is a very legitimate area for questions and something Candidate McCain should address.