Dave and Bill

I know I keep going on about this, but it is EXCELLENT. So here is the transcribed version of the Clinton thing (took forever, so energy-saving economy booster plan is not included).

Dave: I know nothing about the economy. I know nothing about the global economy. but I do know a little bit about history and now people are saying, economists and experts are saying that the American economy is in the worst condition it’s been since the thirties. Well that to me conjures images of redlines, the dust bowl, people out of work, people living in tents, people camping out, people not having a nickel to rub together. Is that true when they say that? As bad as it’s been since the thirties?

Bill: I think that’s a bit overstatement today but what their saying is that the financial system is a fragile as it’s been since the thirties. And we know it collapsed. And therefore they’re worried about it collapsing again. here’s essentially what happened.  When the bubble and high-tech stocks burst, 2001 or so, there was a lot of money in the economy at low interest rates because the federal reserve was trying to keep economic activity going. The only problem as that the only activity was in housing and real estate. That was 40, 50% of our growth the first five years so all the money went in there. Then in order to get more and more money into it and more and more people into it, they developed, the finance people did, these derivatives, these interesting instruments where you could cover more and more loans at smaller and smaller reserves so the leverage, that is you had thirty times as many loans as you had money to back it up.

Dave: This is subprime we’re talking about?

Bill: No, that’s different. This is the so-called derivatives where you could have in instrument which would in effect represent, lets say, 30 houses, but you only had enough money to cover one. That’s leverage. Ok? Now the subprime’s different. The subprime system was a way of getting more people to borrow money to buy homes who wouldn’t be able to get a mortgage under traditional circumstances. So we’d say to people “look, we’ll loan you money for just the interest on the mortgage for three years. But you’ll have to pay a higher interest rate and after three years we’ll renegotiate it and you’ll have to pay your mortgage off like everybody else. So for three years John Doe pays his mortgage at, I’m making this up, $800 a month. And all of the sudden in year four, he’s told “well you signed this mortgage and it’s now $1400 a month.” And he said “but I haven’t gotten a raise. And gasoline is more, utilities are more, food’s more, healthcare’s more, I can’t make this mortgage payment.” So you go around and for-close on people. All these things are happening together. That’s what secretary Paulson and chairman Bernankie (sp?) are trying to do by stopping the hemorrhaging but it’s not enough to bail out wallstreet. We’ve got to help mainstreet and we’ve got to have a source of new good investment for new jobs again.