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January 30th, 2009

One-Party Dynamic — How Politics Influences Economic Risk

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Despite its passage on Wednesday, not one House Republican voted in favor of the stimulus. HSH prides itself on the of delivery non-partisan information and analysis, but sometimes things need to be said, no matter whose feathers they singe.

On Wednesday Reuters published an interview on the global economic crisis with Ian Bremmer and Nouriel Roubini, two renowned experts on global economics and their political influence.

The interview began with the question “In which countries do political and economic risks intersect most ominously in 2009?” Both Bremmer and Roubini agree on the front runner.

“I would start with the United States. How U.S. policymakers respond to the meltdown of the U.S. economy hugely affects both the global financial crisis itself and much of the associated political risk. The politics are especially worrisome because the new Congress will likely wrestle with the White House for control in several key policy areas,” said Bremmer.

Addressing the influence of the one-party majority, Bremmer continues, “Feeling empowered, even Democratic senior lawmakers won’t always wait on the inexperienced young president to set the agenda. That dynamic creates even greater risks than usual that policy will become a product of political horse-trading rather than coherent economic analysis.”

In an opinion piece from today’s Wall Street Journal, Peggy Noonan addressed the ramifications the one-party dynamic had on the House’s approval of the pending stimulus package:

All that was needed was a sober, seriously focused piece of legislation that honestly tried to meet the need, one that everyone could tinker with a little and claim as their own. Instead, as Rep. Mike Pence is reported to have said to the president, “Know that we’re praying for you. . . . But know that there has been no negotiation [with Republicans] on the bill—we had absolutely no say.

“Our hopeful, compelling new president shouldn’t have gone with this bill. He made news this week by going to the House to meet with Republicans. He could have made history by listening to them,” wrote Noonan.

Party affiliations and opinions on the spending aside, Ms. Noonan said it best: “the parties exist to fight through great political questions.”

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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