Responding to Robert Reich's: Why Atheist Libertarians Are Part of America's 1 Percent Problem

I will only respond to this one part,

"But then came the period of Reagan’s holy trinity: privatization, deregulation and free trade. Now here we are today, facing the largest economic crisis since the 1930s."  

The writer of this writes as though he never heard of the Freddie Mac and Fannie Mae, and the Community Reinvestment Act.  Let me refresh your memory. The act forced banks that wanted to expand their operation to lend to what was termed the subprime market, which consisted of mostly blacks and Hispanics who did not have neither the credit history nor the ability to pay the banks back the loan they took out to buy their houses.  A lot of theses subprime loans were balloon loans which had to be refinanced at the end of a certain time, 5 years I think, at whatever the prevailing interest rate was to be at the time of refinancing.

Meanwhile Freddie Mac and Fannie Mae started selling derivatives of the mortgages called sliced papers.  The sliced part was a mixture of prime and subprime mortgages from which the derivative was the money that was to come to the investor in a monthly stream from the repayment of prime and subprime mortgages.  This stream of money for consistent until the balloons started to mature, but instead of the interest rates dropping like he homeowner had hoped, it went up.   But during this period Freddie and Fannie had sold these papers/derivatives all over the world, many banks had bought them to hold as their reserves required by the Feds and other Central Banks.  AIG who was in the business of selling insurance sold policies to the buyers Freddie and Fannie’s derivatives in case they went south.

Well when the holder’s of the subprime mortgages started defaulting the income derive from the mortgages started drying up, income derived from the prime mortgages was still flowing, but the derivatives no longer the value it had once had, and many banks had to call in loans to meet their reserve requirements, and did not have the funds you make new loans.  See, the way it worked is that the banks would make the mortgages,  Freddie and Fannie would then buy them from the banks giving them more money to make new loans with, they would in return sell their derivatives to the world so they could buy more mortgages from the banks.

It was a house of cards built upon the ability of people who had never been able to get a good credit rating, regardless of the cause, and when they started reneging on their part the house fell down dragging us into this “…largest economic crisis since the 1930s.”  It was most defentently not a, “Abject Failure of Reaganomics”, it was most defentently an abject failure of Progressive economics.  One which they want us to believe was Reagon fault, at least he did not blame Bush.

Responding to:  Why Atheist Libertarians Are Part of America's 1 Percent Problem