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• Wednesday, April 8, 2009 11:03 PM

  There's a forest behind those trees. Really.

  I think Mr. Leonard is taking the wrong thing from the sentence ("If its assumptions are correct, Treasury's current approach may prove a reasonable response to the current crisis.") he's reading. Elizabeth Warren is openly skeptical of TARP/Gaulson and has been openly critical of the bailout bonuses. She and most others who have looked at this thing without being somehow beholden to Wall Street know that TARP/Gaulson puts the cart before the horse.

  Which came first, the meltdown in housing or the meltdown in finance? Answer: Housing.

  Why did housing melt down? Answer: It was in a bubble and the bubble popped.

  Why did the bubble pop? Answer: Because they ran out of buyers when defaults arising from the utter lack of credit underwriting began. And when defaults began, they had to start actually underwriting. And when they did underwriting, there were no new buyers. And to keep a bubble inflated, you need a source of inflation. And that source was gone.

  Why did buyers default? Answer: The most fundamental reason is not even part of the real estate or financing equation. It's foundational. The reason people began defaulting is because they were paying too much (buying in a bubble) and were being paid too little. Real wages have stagnated or declined for years and the finance system's answer to that was to create EZ financing (which made it possible to buy stuff you can't really afford) and asset bubbles (which gave people the illusion of wealth.)

  The TARP/Gaulson plan wants to go back to the days of EZ credit and asset bubbles. They want to pour money in the top and try to put a new roof on a house that has crumbling walls and a crumbling foundation. Sorry, but you have to fix the foundation first, otherwise the new roof is just gonna fall down with the rest of it.

  Elizabeth Warren is a smart cookie. She knows the TARP/Gaulson plan stinks. She's just professional in how she says it.

  If people really want to get a handle on where we are, they should start by educating themselves. Chris Martenson's Crash Course is an excellent place to start. Copy and paste the link or click my sig.

  http://www.chrismartenson.com/crashcourse

  —Roman Berry Read Roman Berry's other letters
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