Bill O'Reilly is Responsible for the Housing Bubble/Crash
I was on the Bill O'Reilly show last night and placed in the position of defending Barney Frank against the charge that he was largely responsible for the housing bubble and crash. I have occasionally had bad things to say about Frank myself, so I don't mind O'Reilly or anyone else criticizing him, but this one seemed more than a bit over the top.
O'Reilly blamed Frank for protecting Fannie Mae and Freddie Mac in their unsound lending practices. I made the obvious points that Fannie and Freddie were followers, not leaders in this mess (they lost market shares to the private sector whiz kids). More importantly, Frank didn't even take over the Financial Services Committee until January of 2007, after almost all the bad loans had already gone out the door.
O'Reilly then responded that, even in the minority, Frank could have been a Paul Revere, warning of the dangers of the housing bubble and the inevitable collapse. Indeed he could have, but Bill O'Reilly also could have been the Paul Revere of the housing bubble.
In fact, I think that we should blame Bill O'Reilly for the housing bubble. Imagine that he charged up his followers about the bubble back in 2002 or 2003, pointing out that house prices were way out line with historic levels. Imagine he called attention to declining loan standards and rising leverage ratios.
Mr. O'Reilly could have also attacked the liberal media for ignoring these impending dangers. For example, he could have mocked the Washington Post for relying on David Lereah, the chief economist for the National Association of Realtors, as its most often cited expert on housing. He could have ridiculed the Post and other mainstream news outlets for missing the housing bubble just 2 years after they managed to completely miss the stock bubble.
And of course, O'Reilly could have been beating up on Alan Greenspan for his bubble promotion as well as his neglect of regulation of the mortgage market and banking sector.
If O'Reilly had produced a steady drum beat of shows warning about the housing bubble, it might well have had an impact. News outlets like the Post may have been forced to take his complaints seriously and start asking real questions about the housing market. This may have forced the hand of Greenspan and other regulators. At the very least it might have injected the appropriate levels of fear into the market for housing, as well as the market for mortgage backed securities and various derivative instruments.
So, there you have it. Bill O'Reilly is responsible for the housing crash, the financial crisis, and the recession.
In a similar vein, Mr. O'Reilly was instrumental in initiating candida infections and jock itch in North America and the Malvinas.
October 29, 2008 8:45 AM | Reply | Permalink
Bill O'Lielly is also directly responsible for the upsurge/bubble in falafel-related skin-abrasion injuries in the last 5 years. It's an epidemic.
October 29, 2008 1:24 PM | Reply | Permalink
O'Reilly's fall back position is a staple of the right wing; "he could have done more."
Watch O'Reilly and Barney Frank and ask yourself why anyone would appear on this show.
http://www.youtube.com/watch?v=RAuOEdttjZQ
October 29, 2008 9:08 AM | Reply | Permalink
That was an excellent job of pointing out the limits and inconsistencies of O'Reilly's attack on Barney Frank.
October 29, 2008 9:22 AM | Reply | Permalink
.
Uh . . .
How can I make it through my well informed existence without allowing myself to hear one word uttered out of the piehole of this Fox gasbag for over 8 years now?
Why drive his ratings?
Why give him a second thought?
Oh I know, I know. One must know what one's "enemies" are up to.
~OGD~
*Cafe contributor since 2005*
October 29, 2008 9:24 AM | Reply | Permalink
There were voices out there who were warning all who would listen that there is a housing bubble, etc. I remember reading, years ago, about the serious dangers of derivities. Michael Hudson Michael-Hudson.com has been saying all this for a decade. O'Reilly wasn't listening to those people. He was listening to the more mainstream experts who were all saying that economic growth will continue and cure all ills. National debt is not out of controll, they said, just look at it as a percentage of "future GNP". However, there is a lot of blame to go around. The left wasn't listening very closely either. And, IMO, nobody is really listening now. Our whole economic system needs a drastic overhaul. All we're getting from Congress/Administration is bandaids.
October 29, 2008 9:49 AM | Reply | Permalink
Agreed. However, who has the objectivity to oversee a restructuring?
October 29, 2008 10:02 AM | Reply | Permalink
kimmy,
sad to say, that's an excellent question.
October 29, 2008 11:42 AM | Reply | Permalink
Kimmy,
I think that there are very qualified economists who could design and oversee the needed institutional changes. It will take more than one. The problem is that they have no name recognition and it those benefiting from the structural flaws do not allow them participate in the decision making process or even get air time. Some opposing views do get heard, e.g., Dean Baker.
There are no gods hiding in the wings and you do not have to agree with any particular economist. The problem is that no real dialog occurs and is deliberately prevented from occurring. To repeat, the problem is that no real dialog occurs. If it did, then differences in opinion could be sorted out.
You do not have to wear a tinfoil hat and cook up some conspiracy theory to understand what is occurring. The suppression of alternative views happens right in plain view. Think about the run up to the Iraq War and notice how this latest fiasco was allowed to become a "crisis" requiring immediate action. This is now standard operating technique: Declare a crisis and shove through the solution you want.
This is exacerbated by the 24/7 news cycle: A crisis is exciting and does not place any intellectual burden on the talking heads. It takes time and a lot of effort to succinctly explain a problem, solutions and so on. It is a real art and requires real intellectual effort. It is not that these cannot be explained in simple terms. It is just nowhere as easy as the kind of demagoguery you get from someone like O'Reilly or empty questions of a news anchor. Remember Richard Feynman explaining what happened with the Challenger? He pulled out a frozen rubber seal and hit it with a hammer. The seal shattered into numerous pieces. All he has to say was, "That was what happened." Feynman was a bright guy but he had a real knack for coming up with that kind of explanation and he was not boring. It does not have to be boring and dry.
The challenge for the public is to get the Congress to allow a substantive and ongoing discussion about these general issues. They do and they don't in these committees and the administration is in a much better position to create a crisis atmosphere and control the news cycle.
October 29, 2008 1:09 PM | Reply | Permalink
But Frank has a lot more power to make changes than Bill O'Reilly does. To put the two of them on the same footing with respect to what they "should have done" is silly. If it's an attempt at humor than you succeeded because I laughed when reading your post.
Frank was in favor of Fannie taking on more and more risk both when the Democrats were a minority and when they were a majority. Whenever people push Barney on his historical attacks against F&F regulation, he just brushes it off and says the Republicans were in control of the House thru 2006. It somehow doesn't matter that he has against F&F reform all along and said they pose "no threat to the Treasury"
Once Frank got into "power" he claims he put thru significant reform. Well, first, it was too late. Secondly, Frank's "reform" didn't even include any reduction in F&F's MBS portfolio. He said as recently as July that he wanted F&F to increase the size of their portfolios. He clearly didn't appreciate the problems that the GSE's were in, or chose to ignore them. I'm not sure which is worse
October 29, 2008 10:35 AM | Reply | Permalink
MCB - Bush was POTUS, and as head of the 'executive' branch of the government it was the job of the Republican administration to oversee the markets. They didn't.
Fannie and Freddie were not the primary culprits, Treasury, the SEC or even the Justice Dept./FBI could have shut down the loan scams:
Private sector loans, not Fannie or Freddie, triggered crisis
By David Goldstein and Kevin G. Hall | McClatchy Newspapers
Federal Reserve Board data show that:
* More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
* Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
http://www.mcclatchydc.com/251/story/53802.html
October 29, 2008 11:00 AM | Reply | Permalink
MiddleCLassBill said:
Hey Bill, that comment is an indictment of the Republican Congress and Bush.
As to Frank being against reform, check the Federal Housing Finance Reform Act of 2005 which would have established the Federal Housing Finance Agency (FHFA) to oversee the activities of Fannie Mae and Freddie Mac. Barney Frank and Chairman Repub Oxley passed this bill but it was killed by the Republican Study Committee.
As to Frank making the comment that there was no threat to the Treasury, it was in 2003 and Frannie and Freddie didn't get into the sub prime game until 2006.
It started with the Community Reinvestment Act of 1977, which aimed to support community groups, but in 1995 (Congress controlled by Republicans) the Act was extended and beefed up, giving regulators far more powers to punish banks who refused to lend to people in poor urban neighbourhoods – so-called ‘redlining’ – because they considered the risks too high in those particular areas. The Congress' idea, obviously, was to extend to poorer people the same rights and enjoyment of home ownership that the middle-class majority possessed.
Both parties were pushing Franni and Freddie to expand the available mortgages; the Dems wanted more low income people to be able to buy homes and the Republicans were supporting the bankers, the real estate industry and the builders.
NOONE wanted to give unqualified buyers mortgages except the sharks, the educated people who preyed on the undereducated, you know, the kind of people Reagan sicced on the world.
October 29, 2008 12:31 PM | Reply | Permalink
Dean,
please make corrections where needed on my post.
October 29, 2008 12:34 PM | Reply | Permalink
Bush tried but Congress couldn't get stuff done. Bush can't do Congress' job. He tried in 2003 to push for reform but it got squashed by Congress. Again in 2005, the Senate couldn't get everyone to agree on the banking bill that would have put restrictions on F&F. Even the New York times will agree with me on that point.
http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print
The McClatchy article was ridiculous. Of course 84% of subprime mortgages were issued by private lending institutions, such as Countrywide. But guess who was the biggest buyer of Countrywide loans - Fannie Mae!! Why else was Angelo Mozilo giving sweetheart deals to members of Congress? He knew how important F&F were to his business. The private firms would have never issued so many crappy mortgages if they didn't have a very willing buyer. F&F became the largest holder of subprime and Alt-A loans.
The McClatchy article somehow misses this point. It tries to say that F&F's market share went from 50% to 25%. But they were still the BIGGEST player.
October 29, 2008 11:25 AM | Reply | Permalink
Do you have the numbers for Fannie/Freddie's participation* in the subprime and Alt-A markets in 2006-7 and in the period of the mortgage crisis (post-July 2007)?
* Purchases of mortgages and RMBSs as well as insuring mortgages (they didn't do CDSs, did they?).
October 29, 2008 12:01 PM | Reply | Permalink
Is "MiddleClassBill" the new alias for "Joe the Plumber?"
October 29, 2008 1:07 PM | Reply | Permalink
Otoh, O'Reilly was responsible for a large spike in loofah sales.
October 29, 2008 11:40 AM | Reply | Permalink
Dave,
O'Reilly is a phone sex freak too.
He once said on air; "if you've ever been in combat like I was...."
A caller got through and called him on it saying he never served in the military. O'Reilly went on to admit he enver served and then said he covered fighting in Central America as a reporter. The caller accused him of misleading the public into thinking he was in military combat.
O'Reilly then got pissed off, berated the guy and cut him off.
Old Sergeant Bill :-)
October 29, 2008 12:40 PM | Reply | Permalink
not so fast, Mr. Baker. Bush did try to regulate Fannie/Freddie more and Frank stood in the way. The evidence for this is indisputable. We've got him on tape in Congress. Why is anyone defending this guy!!!! this is the problem with politics. Think like an America, Dean -- DAMMIT! We hold EVERYBODY accountable. If Franks screwed up, we should toss him off the Banking Committee -- but no we will leave him there and every partisan will vote the guy back in. this, folks, is why Congress approval rating is 0. They know there are no consequences for their actions, so they can do what they want.
October 29, 2008 12:54 PM | Reply | Permalink
Brook,
how did Barney Frank stand in the way of Bush wanting to regulate Fannie/Freddie.
How did Barney Frank stop this?
October 29, 2008 5:29 PM | Reply | Permalink
He stopped it by blocking it in Congress, along with his Senate counterparts.
November 1, 2008 8:53 AM | Reply | Permalink
JohnW - there's lots of different versions of that bill so maybe we have our signals crossed. But the bill I remember is one that Frank actually voted AGAINST on the house floor after it got throgh committee. He didn't like the restrictions it imposed on the kinds of non-profits that could receive funding under it. You'll tell me he voted against it because the Republicans had sabotaged it. I guess it wasn't important enough to Frank that he try to reach some type of compromise
http://clerk.house.gov/evs/2005/roll547.xml
http://frwebgate.access.gpo.gov/cgi-bin/getpage.cgi?dbname=2005_record&page=H9176&position=all
October 29, 2008 2:19 PM | Reply | Permalink
The bill you refer to is the same one I mentioned. Frank helped draft it but voted against it AFTER the Republican Study Committee added an amendment on the floor that...here let Barney Frank tell you:
http://financialservices.house.gov/pr10192005.html
October 29, 2008 4:15 PM | Reply | Permalink
Hehe. Try #3 on here http://www.myspace.com/revolucian
October 29, 2008 3:51 PM | Reply | Permalink
Freddie and Fannie were what percentage of the sub-prime mortgage market? Sub-prime mortgages are, by definition, those that do not qualify for Freddie and Fannie's standards. The total amount of sub-prime mortgages were how much? About half of the various bail outs so far. The Freddie/Fannie and sub-prime participation of minorities claims from Republicans are diversionary.
October 29, 2008 3:58 PM | Reply | Permalink
We should do our best to keep separate Republican partisan charges that the GSEs failed due to "share the wealth" obligations forced upon them by liberals and the fact that F/F did, to keep their earnings growing and their share prices up, invest unwisely in an awful lot of subprime and Alt-A backed mortgage securities.
Much fulminating may be avoided if we keep the two different issues apart.
October 30, 2008 12:32 AM | Reply | Permalink
I'm sorry, but I don't think anything can be done to help the economy if first they don't stop naming important financial institutions like a Disney movie. Fannie Mae and Freddy Mac? Sounds like a buddy movie with old Brady Bunch actors.
October 29, 2008 6:11 PM | Reply | Permalink
Salmo - People define sub-prime differently, but based on who you read, Fannie had roughly $500bn of subprime/Alt-A. Freddie was a bit smaller. But combined they were anywhere from $750bn to $1 trillion of subprime and Alt-A.
You can go on to their websites and see for yourself.
October 29, 2008 7:11 PM | Reply | Permalink
This recent news report, while bad enough from Fannie and Freddie's standpoint, doesn't appear to support your figures.
I've visited Fannie's web site and read some of its 2007 annual report. I can't figure out how much it was involved in subprime and Alt-A lending and securitization.
Do you have links to the pages you're relying on?
October 30, 2008 12:40 AM | Reply | Permalink
http://www.fanniemae.com/ir/index.jhtml?p=Investor+Relations
Here you can follow link to Second Quarter 2008 results.
The only caveat is that there is no "univeral" definition for sub-prime. Bank examiners consider it to be FICO scores under 660. FNM defines it as FICO scores under 620 (I have no idea why).
October 30, 2008 10:04 PM | Reply | Permalink
John - the bill was supposed to focus on REGULATION, not about affordable housing. Frank got bent out of shape about how much was supposed to be there for non-profits. But that should NOT have been the focus of the bill. It should have been focused on how big Fannie's MBS portfolio could grow to.
October 29, 2008 7:13 PM | Reply | Permalink
Here's a video that explains the housing bubble in 2.5 minutes. And you can dance to it!
http://www.youtube.com/watch?v=Ivp4YqGCI-s
October 30, 2008 11:36 AM | Reply | Permalink
Biggest asses on TV: Bill O'Reilly, Sean Hannity, Lou Dobbs. In that order.
October 30, 2008 6:16 PM | Reply | Permalink
So, now with a just under one week to go until a major American election, I am getting more excited and nervous by the minute. After all, whoever we elect will be the person who will be representing us for the next four years. One thing I never have, and never will, put any stock into are the so-called “political polls,” which litter nightly news broadcasts and websites. These polls sound official, and are said to be conducted by reputable news sources such as the Associated Press, NBC, CBS, ABC, and Reuters. What they don’t tell you, however, is that a poll which trumpets that two-thirds of Americans support Barack Obama just might be cause for concern. No, I’m not saying that on account of Obama’s desire to abolish legitimate financial options such as cash advance stores. Rather, because the two-thirds that the poll is talking about, represents two-thirds of their viewing audience, not the nation as a whole; see how that works? So, when you’re casting your vote, don’t let the media fool you; read the real information about all of the candidates.
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October 31, 2008 7:08 AM | Reply | Permalink