Letters to the Editor
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Hold Greenspan Accountable for the Great Credit Crunch!
There was an article in the NY Times a few weeks ago. It stated that it was Alan Greenspan who willfully ignored the early warning signs of subprime mortgage crisis months ago when some of his deputies raised concerns about the potential havoc it would cause. Greenspan's response at the time was -- according to the article -- that he would rather err on the side of increases in homeowbership in the country (because of easy access to money) than be concerned about the financial fall-out that now engulfs the money markets!
It would appear, therefore, that it is Alan Greenspan -- more than any other single individual -- who should be held accountable for the Great Credit Crunch, for if he had intervened with responsible managment early on when he was asked by his subordinates to do so, the country would not be in the mess it is now.
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Correction
last line in 3rd par should read:
which merely reinforces existing incredulity in capitalism.
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What need has George Bush to search for a legacy?
By repeating, on a much larger scale, the record braking savings and loan failures he instigated in the 1980's, he has perfected his methodology and left us with an enduring legacy. I hate to tell you I told you so, but I have been, since 1999.
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About that bailout
The consequences of Bear Stearns' failing are simply too great ... the world's financial institutions are bound together more closely than they have ever been before in a web that is extraordinarily fragile. If one string unravels, the whole structure seems poised to disintegrate -- a process that will inflict pain on a far greater number of people than those who go to work in buildings on the southern tip of Manhattan.
It seems that whenever people try to explain why the bailout was necessary, they give us nothing but metaphors. The complex web, the unraveling string, etc. It's beginning to sound as flimsy as the claims that if the govenment can't have unfettered eavesdropping then the terrorists will kill us.
If there's a really good (metaphor-free) explanation for why the collapse of Bear Stearns would have been unacceptable--and I grant that there may be one--I have yet to hear it.
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Misdirection
The subprime lending debacle is a serious market failure due to political corruption. It's like the S&L crisis of late 80s/early 90s, a corruption scandal for which incidentally our current president's brother and the current republican presidential front runner were both indicted. (Neil Bush settled out of court, John McCain was rebuked by the senate ethics committee).
But it's only a part, and I suggest that it's the smallest of the "trifecta" of problems that GW Bush (worst president ever) and the (mostly) republicans have wrought on us. Not the trifecta he's thinking of, economic cyclic downturn, 9/11, Katrina, but the real trifecta:
1. Governmental corruption and incompetence - appointing people to important governmental roles based solely on their connections, campaign contributions, and beliefs, without regard for experience or skills. Various impacts include the subprime meltdown, turning the judiciary into a political weapon, and the Katrina follies.
2. Irresponsible tax cuts - any sensible analysis at the time saw the WPE Bush (that's "worst president ever") tax cuts leading to deficits as far as the eye could see
3. Unnecessary, poorly planned, poorly executed war in Iraq. This had 2 economic impacts, first we spent vast amounts of money unwisely - not only shouldn't we have done this at all, but by doing it so poorly we spent far more than we should have (halliburton, mercenaries, undocumented cash outlays). Second, war in Iraq has driven up the price of oil (surprise!). Although higher oil prices make Bush's true base happy, it depresses the economy and slams the dollar overseas.
So we've got out of control debt, the dollar in the worst shape it's been in since the great depression, respect for our nation internationally at probably the lowest ebb since pre-world war I (contributing to further decline of the dollar), the housing market in the tank, and people going bankrupt at unprecedented rates. The word "stagflation" is coming back, a condition that is caused in part by pissing away your economic strengths in the good times (excessive tax cuts) so that you have no reserves left to boost the economy with in the bad times.
And WPE Bush wants us to know that he's on top of it, that now that the ship is sinking he's bailing as fast as he can. Well, thanks for that. Oh, and don't blame him, it's all those greedy wall street types who are the real problem. They've single handedly ruined the economy. WPE Bush had nothing to do with it.
Feh.
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Wow, what a tangled web of letters here!
Everyone has a theory, from a lack of "green industry" (how could that POSSIBLY prevent morons from buying worthless collaterized debt?) to the Democrats taking power in 2006 (I don't even know what to say to that...)
I don't think more regulation is necessarily the answer to the subprime mortgage meltdown; when you have supposedly sophisticated investment banks ripping eachother off by calling "BAD" debt "GOOD" debt (I guess they fooled the credit rating agencies like Moody's, S&P too), there's little the gov't can do. This is just a case of CAVEAT EMPTOR not being followed prudently. Maybe the market for this is small enough that it wouldn't require too many resources to police, but come on - investment banks and mortgage lenders are "big boys" - they should be taking care of themselves.
The last thing we need is bailouts or more regulation. Just make them take their proverbial medicine, and move on... poorer... wiser.
I still maintain that the inflationary pressures / weakness of the dollar have nothing to do with this, and everything to do with profligate gov't spending (as I said in my previous post).
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crash
Might one suggest a simple alternative to bailing out the firms that have caused the trouble in the first place?
How much will be eventually be spent on a bailout? Ten billion? Twenty? Probably more, a lot more. Where will the money come from? Taxes. Who will bear the heaviest tax burden? Those who have the lowest incomes.
No matter how you slice it, the working public gets charged for the shenanigans of the speculators.
How about a new public works administration instead? The infrastructure of this country is in serious trouble. Okay. Instead of spending money saving dishonest institutions, and thus penalizing the average citizen, how about paying out-of-work people to fix the infrastructure? That would ensure that the money went to the people who needed it and not to the crooks who caused the trouble, and would at the same time address the problem of our failing roads, bridges, parks, and railroads.
Conceivably such an approach could be more valuable than military service--which costs us how much each year and delivers exactly what in terms of quality of life?
The true wealth of a country is in the wellbeing of its citizens, not in "money" created by speculation or jiggering the books. This law is as absolute as the laws of heat exchange. You can ignore the law but you cannot circumvent it. If you inflate speculative fortunes, you weaken the actual economy. If you do not look after the wellbeing of your citizens, your other institutions will fail. It's inevitable.
And if there are speculators who are put out of work or (heaven forfend!) lose their fortunes, they need not despair. They can always get jobs with the new public works administration.
Finally, a musical salute to the architects of our current situation: Ooo-ooo, that smell! Can't you smell that smell? Ooo-ooo, that smell! The smell of death surrounds you.