So now it's down to Blame the Consumer?

[marions ghost]

So now houses, cars, college educations, health care and vacations are examples of American consumer OVER-spending? :shrug: Is that what this article is saying? And yet if the consumer suffers more, then we will CAUSE recession? Is that true? (My local paper carried this sub-heading for this article: " With foreigners no longer willing to back lavish US lifestyles, American households may finally have to stop spending. That would mean recession."

I'd appreciate any other comments about this article, which although it's well written and accurate about the current crisis --seems to have undertones of Blame the Consumer. For example he calls what a lot of us would consider The Basics-- "lifestyles." (Lifestyles is a word I associate with choice, not necessities).
So what do you guys think? Comments?
---------------

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/17/AR2008091703834.html

Scrambling to Clean Up After A Category 4 Financial Storm

By Steven Pearlstein
Washington Post Staff Writer
Thursday, September 18, 2008; A01

"You know you're in a heap of trouble when the lender of last resort suddenly runs out of money.

Having pumped $100 billion into the banking system and lent $115 billion more to rescue Bear Stearns and AIG, the Federal Reserve was forced to ask the Treasury yesterday to borrow some extra money to replenish its coffers. If there was any good news in that, it was that investors here and abroad were eager to help out, having decided that the only safe place to put their money is in U.S. government securities. Indeed, demand was so brisk at one point yesterday that, for an investor, the effective yield on a three-month Treasury bill was driven below zero, once the broker's fee was figured in.

This is what a Category 4 financial crisis looks like. Giant blue-chip financial institutions swept away in a matter of days. Banks refusing to lend to other banks. Russia closing its stock market to stop the panicked selling. Gold soaring $70 in a single trading session. Developing countries' currencies in a free fall. Money-market funds warning they might not be able to return every dollar invested. Daily swings of three, four, five hundred points in the Dow Jones industrial average.

What we are witnessing may be the greatest destruction of financial wealth that the world has ever seen -- paper losses measured in the trillions of dollars. Corporate wealth. Oil wealth. Real estate wealth. Bank wealth. Private-equity wealth. Hedge fund wealth. Pension wealth. It's a painful reminder that, when you strip away all the complexity and trappings from the magnificent new global infrastructure, finance is still a confidence game -- and once the confidence goes, there's no telling when the selling will stop.

But more than psychology is involved here. What is really going on, at the most fundamental level, is that the United States is in the process of being forced by its foreign creditors to begin living within its means. That wasn't always the case. In fact, for most of the past decade, foreigners seemed only too willing to provide U.S. households, corporations and governments all the cheap money they wanted -- and Americans were only too happy to take them up on their offer. The cheap money was used by households to buy houses, cars and college educations, along with more health care, extra vacations and all manner of consumer goods. Governments used the cheap money to pay for services and benefits that citizens were not willing to pay for with higher taxes. And corporations and investment vehicles -- hedge funds, private-equity funds and real estate investment trusts -- used the cheap financing to buy real estate and other companies."

(snip)

"In the end, however, there is only so much the government can borrow and so much the government can do. The only other choice is for Americans to finally put their spending in line with their incomes and their need for long-term savings. For any one household, that sounds like a good idea. But if everyone cuts back at roughly the same time, a recession is almost inevitable. That's a bitter pill in and of itself, involving lost jobs, lower incomes and a big hit to government tax revenues. But it could be serious trouble for regional and local banks that have balance sheets loaded with loans to local developers and builders who will be hard hit by an economic downturn. Think of that, says Dugger, as the inevitable second round of this financial crisis that, alas, still lies ahead."

[radfringe]

1. yeah it's all our fault for listening to BUSH

after 9/11 - bush said "don't worry, go shopping"... so we did, and it's our fault for listening to a republican president...

[TexasObserver]

2. Yesterday, a GOP talking head blamed it on "people getting mortgages they couldn't afford"

Those damn consumers, making banks lower their standards, making them market to said consumers.

Let's see. Who is it who is supposed to know banking? Bankers?

[shadowknows69]

3. Um didn't they just give us checks to go stimulate the economy with?

Apparently we were supposed to put our 300-1200 bucks into the stock market. No thanks, I pissed it away just fine on my own.

[WCGreen]

5. Liquor and whores...

Just like the interior Department...

[marions ghost]

6. "Sixteen Tons"

http://en.wikipedia.org/wiki/Sixteen_Tons

Sixteen tons and what do you get?
Another day older and deeper in debt.
Saint Peter, don't you call me, 'cause I can't go;
I owe my soul to the company store...

YOU TUBE COLLECTION--CHECK THESE OUT:

Eric Burdon - Sixteen Tons - Joe Versus the Volcano Theme
http://www.youtube.com/watch?v=E6m1qgnUw74&feature=related

Sixteen Tons Karaoke:
http://www.youtube.com/watch?v=YINpYjGtqXY

Tennessee Ernie Ford vintage 1956 version:
http://www.youtube.com/watch?v=Joo90ZWrUkU&feature=related

[stillcool]

4. "Foreigners seemed only too willing...

to provide U.S. households..all the cheap money they wanted--and Americans were only too happy to take them up on their offer".
He must mean this 'foreigner'

For Immediate Release
Office of the Press Secretary
June 18, 2002
President Reiterates Goal on Homeownership

Remarks by the President on Homeownership
Department of Housing and Urban Development
Washington, D.C.
******
The goal is, everybody who wants to own a home has got a shot at doing so. The problem is we have what we call a homeownership gap in America. Three-quarters of Anglos own their homes, and yet less than 50 percent of African Americans and Hispanics own homes. That ownership gap signals that something might be wrong in the land of plenty. And we need to do something about it.

We are here in Washington, D.C. to address problems. So I've set this goal for the country. We want 5.5 million more homeowners by 2010 -- million more minority homeowners by 2010. (Applause.) Five-and-a-half million families by 2010 will own a home. That is our goal. It is a realistic goal. But it's going to mean we're going to have to work hard to achieve the goal, all of us. And by all of us, I mean not only the federal government, but the private sector, as well.

And so I want to, one, encourage you to do everything you can to work in a realistic, smart way to get this done. I repeat, we're here for a reason. And part of the reason is to make this dream extend everywhere.

I'm going to do my part by setting the goal, by reminding people of the goal, by heralding the goal, and by calling people into action, both the federal level, state level, local level, and in the private sector. (Applause.)

And so what are the barriers that we can deal with here in Washington? Well, probably the single barrier to first-time homeownership is high down payments. People take a look at the down payment, they say that's too high, I'm not buying. They may have the desire to buy, but they don't have the wherewithal to handle the down payment. We can deal with that. And so I've asked Congress to fully fund an American Dream down payment fund which will help a low-income family to qualify to buy, to buy. (Applause.)

We believe when this fund is fully funded and properly administered, which it will be under the Bush administration, that over 40,000 families a year -- 40,000 families a year -- will be able to realize the dream we want them to be able to realize, and that's owning their own home. (Applause.)

The second barrier to ownership is the lack of affordable housing. There are neighborhoods in America where you just can't find a house that's affordable to purchase, and we need to deal with that problem. The best way to do so, I think, is to set up a single family affordable housing tax credit to the tune of $2.4 billion over the next five years to encourage affordable single family housing in inner-city America. (Applause.)

The third problem is the fact that the rules are too complex. People get discouraged by the fine print on the contracts. They take a look and say, well, I'm not so sure I want to sign this. There's too many words. (Laughter.) There's too many pitfalls. So one of the things that the Secretary is going to do is he's going to simplify the closing documents and all the documents that have to deal with homeownership.

It is essential that we make it easier for people to buy a home, not harder. And in order to do so, we've got to educate folks. Some of us take homeownership for granted, but there are people -- obviously, the home purchase is a significant, significant decision by our fellow Americans. We've got people who have newly arrived to our country, don't know the customs. We've got people in certain neighborhoods that just aren't really sure what it means to buy a home. And it seems like to us that it makes sense to have a outreach program, an education program that explains the whys and wherefores of buying a house, to make it easier for people to not only understand the legal implications and ramifications, but to make it easier to understand how to get a good loan.

There's some people out there that can fall prey to unscrupulous lenders, and we have an obligation to educate and to use our resource base to help people understand how to purchase a home and what -- where the good opportunities might exist for home purchasing.

Finally, we want to make sure the Section 8 homeownership program is fully implemented. This is a program that provides vouchers for first-time home buyers which they can use for down payments and/or mortgage payments. (Applause.)

So this is an ambitious start here at the federal level. And, again, I repeat, you all need to help us every way you can. But the private sector needs to help, too. They need to help, too. Of course, it's in their interest. If you're a realtor, it's in your interest that somebody be interested in buying a home. If you're a homebuilder, it's in your interest that somebody be interested in buying a home.

And so, therefore, I've called -- yesterday, I called upon the private sector to help us and help the home buyers. We need more capital in the private markets for first-time, low-income buyers. And I'm proud to report that Fannie Mae has heard the call and, as I understand, it's about $440 billion over a period of time. They've used their influence to create that much capital available for the type of home buyer we're talking about here. It's in their charter; it now needs to be implemented. Freddie Mac is interested in helping. I appreciate both of those agencies providing the underpinnings of good capital.
Thank you all for coming by.

http://www.whitehouse.gov/news/releases/2002/06/20020618-1.html

[marions ghost]

7. GAH*

Luv this paragraph: :thumbsdown:


"The third problem is the fact that the rules are too complex. People get discouraged by the fine print on the contracts. They take a look and say, well, I'm not so sure I want to sign this. There's too many words. (Laughter.) There's too many pitfalls. So one of the things that the Secretary is going to do is he's going to simplify the closing documents and all the documents that have to deal with homeownership."

"Fannie Mae has heard the call..."
Fannie Mae heard the call all right :mad:

:nuke:

Thanks for posting...mg

*gah blah ugh meh guh god rawr yay bah damn gaa grr girls your mom gosh dammit frustrated arg lol shit bleh gawd hag argh friend gaah jesus guhh gay guuh ...(urban dictionary.com)

[stillcool]

17. I know..isn't it a hoot?

makes me laugh and cry at the same time.

[tigereye]

8. the lenders were permitted to allow these types of loans with poor

vetting of those who received them.


They are to blame, and those whose lack of regulatory oversight allowed this practice, but the folks who didn't say "now, wait a minute that doesn't make sense" when offered a loan or rate that was irrational to some extent have some "caveat emptor" responsibility, I suppose.


But I think these types of loans should never have been allowed in the first place. When we got our 15 year fixed rate mortgage, it was for what we could afford on the salaries we had. We did a spreadsheet prior to agreeing to it. The lender vetted all our financial information to make sure we could afford it.


:shrug:


there's plenty of blame to go around, but it certainly shouldn't be all on the borrower.

[marions ghost]

11. right

unfortunately we live in society with a "buyer beware" mentality that makes people who are "making it" indifferent to the plight of those who struggle and are easily scammed.

Who doesn't want to hear, "sure, we can get you into a nice (middle class) home...sign here"

Gotta get past this "buyer beware" arrogance. It's so Lord of the Flies.... x(

[prolesunited]

9. This is the line that gets me

The cheap money was used by households to buy houses, cars and college educations, along with more health care, extra vacations and all manner of consumer goods.


Why is health care being lumped with extra vacations? Health care is not a luxury. When you have chronic conditions, you're spending more on health care because the cost of your co-pays (if you're lucky enough to still have insurance) have gone up along with the price of prescriptions.

[Uncle Joe]

10. The mortgage or financial crisis isn't the root cause as many corporate media pundits

and political leaders would have you believe, it's a symptom of the root cause.

The root cause is the explosion in the price of energy, a direct result of being addicted to fossil fuels, long after we should have known better. Of borrowing money from China to buy oil from other nations, which don't necessarily sympathize with us.

I believe the price of a gallon of gasoline was approx. $1.37 when Cheney/Bush were appointed to the White House, today it's cracking $4.00 in some places.

That works out to a total increase of 291.97% divided over eight years 36.50% annual inflation in fuel prices. Has anyone, other than oil corporation executives salaries increased annually by an average of 36.50% over the past eight years?

This of course doesn't take in to account increases in food, medicine and most everything else due to higher transportation costs.

I have no doubt many more people would own their homes that don't if fuel was anywhere near the price it was in 2000 or salaries had increased in the same measure so that workers could keep pace. I believe CEO pay has escalated from 26xs the average of their employees to over 400xs since 1989 and no word as to that adverse effect on moral and the general economy from the corporate media, that I can recollect.

I also believe much of the uncertainty and general fear in the market is directly related to ever increasing energy costs.

In conclusion I believe the blame the consumers meme is just passing the buck in order to avoid the fundamental discussion which needs to take place among those in power about changing our fossil fuel energy addiction. Many political leaders are beholden to the same industries which put us in this predicament in the first place, so they blame the people or victims and punish them more, instead of owning up to the truth.

Thanks for the thread, marions ghost.

[Uncle Joe]

18. I miscalculated on this post it should be around 15% average annual fuel inflation rate

as opposed to 36.50%.

[marions ghost]

19. good points

Yes energy use is one facet of the overall economy in which the average consumer has been encouraged to act like one of the pigs at the trough. It was far easier for American corporations to do nothing in both the areas of automotive fuel and alternative energy development because concern was focused on building big guzzlers and continuing wasteful energy use even when the technology for better ways has been around since the 80's. Both big oil & big bidness make money at the same time. While the Hummer will go down as the dinosaur of the auto age, the consumption of big houses and extra houses plays into the same state of mind also.

Right, the attitude is 'let's blame the victims and punish them more.' Typical attitude of exploiters and predators when their game is up.

thanks for the input Uncle Joe.

[AlCzervik]

12. let me add something, i saw some money person the other day on CNBC talking about AIG

and she said "AIG should have been charging higher premiums, their customers should have paid more". For real, yes if you Joe consumer had only called AIG and just told them to charge you more then this AIG mess could have been avoided, Joe you greedy bastard.

[Javaman]

13. why does our freedoms hate our freedoms?

:banghead:

[The2ndWheel]

14. Consumers are part of the picture

Yeah, consumers consume too much. However, if consumers don't consume more and more as time goes on, the economy will eventually crumble. The economy requires growth. Both corporations and governments require growth, be it in profits or taxes. Why? Because we have more people with more needs and wants, whatever they may be.

We have to consume, but we can't continue to consume.

[marions ghost]

15. That appears to be the contradiction all right

First it was 'Go Forth and Spend, Patriots!'
Now it's 'Let Us All Suck It In for the Homeland...'

And they wonder why people feel jerked around....

[wildflower]

16. The other interesting sentence in this article:

"Governments used the cheap money to pay for services and benefits that citizens were not willing to pay for with higher taxes."

Are people finally realizing that taxes exist for a reason? The Republicans have used "higher taxes" as a stick to beat Democrats with for so many years. I've noticed that deregulation is finally being examined critically after so many years. Are taxes next?

[SoCalDem]

20. It only took the media a few days to get it all sorted out..

Just today, as I flipped channels,I heard things like:


...living above our means
...buying too much stuff
...buying houses we could not afford
...letting ourselves be sold loans we could not afford
...not saving enough money


not heard:

greedy CEOS gamed the system they PAID legislators to put into place for them

banks/investment corps using Wall Street as their own personal rigged casino

Alan Greenspan's idiotic obfuscations & lies for more than a decade

corporation's willful deception about just how much trouble they are in ( we STILL don't know how bad their balance sheets are)

[CRF450]

26. You forgot "good paying jobs disappearing".

[Cresent City Kid]

21. Another oversimplification

What percentage of these "bad loans" were taken by people who knew from day one they could't pay them and thought they could get away with it?

How many were from those who could afford them at first, but because of interest rate hikes, or medical bills, or loss of income from the tanking economy, BECAME unable to pay them?

How many were related to those who made their living in the housing industry who saw incomes decline as the whole thing burst?

I would like to see a detailed breakdown, not more broad sweeping statements about how "greedy consumers" stuck it to the poor lenders.

[AlCzervik]

22. There was a women pundit on CNBC and she blamed AIG's failure on them not charging

you the consumer enough for your premiums so see if you the consumer just went to AIG and told them they weren't charging enough this whole mess could have been avoided, nice job consumer! See how it's your fault?

[undeterred]

23. Yeah, don't you hate it when people SPLURGE on HEALTH CARE!

How DARE THEY! :sarcasm: Spending money on bypass surgery and chemotheryapy like it was going out of style! IDIOTS! THEY SHOULD BE SHOPPING AROUND! TAKING HERBS! DYING!

[anarch]

24. I get a bit of that sentiment, but he's got a point

I know I personally have used credit to maintain my lifestyle, which was admittedly beyond my household's means...you know, continuing to pay rent (with a nice, exorbitant increase every year!), pay medical bills, and eat food and such. Going from two incomes to one, and having an unbelievably difficult time getting back to two (hasn't happened yet...) has, I suppose, made me abuse the credit card in this way. Then there was that sudden doubling of the minimum payment on the credit card each month a couple years back...along with what seemed to be an increase in the financing charges that were applied, so I'm basically just breaking even/only covering the interest with the payments I make, not decreasing the debt. So yeah, I guess this whole mess is the fault of people like me, in some sense...

[marions ghost]

25. People fare better in times of adversity with the hope

that things will improve, so of course credit cards help over rough patches. But in a society with little social safety net and no universal health care, it's easy to get behind no matter how hard you try. After all, health care is something NO middle-class American could afford if they didn't have health insurance. So everyone without insurance is running a life-threatening risk. And yet it is not a luxury but a necessity. It is obscene that anyone in America is in this boat.