Did Anyone Hear About the Housing Bubble and the Economic Collapse?
It doesn't seem as though the news has gotten to the folks working on regulatory reform in Congress. If it had, they would try to think how their proposals would have worked during the years leading up to the crisis and during the crisis itself.
For example, the proposed council of regulators to assess systemic risk would have been a pointless source of greenhouse gas emissions. Alan Greenspan would have insisted that the housing market is just fine and that there is no risk of a nationwide fall in house prices. Given Washington ways, everyone would have deferred to the Maestro, and seen nothing wrong with AIG's trillions of dollars of credit default swaps. After all, if AIG gave life insurance to 50 million people, no one would get on their case because they would not be able to pay off if everyone died at the same time.
The plan to have large banks cover the cost of bailouts of their brethren would not have been made by anyone who remembered the financial collapse last fall. When AIG went down and the world was in full-fledged financial crisis does anyone think that the Fed/FDIC would have insisted that Citigroup, Bank of America and the rest cough up additional funds to cover AIG's bad debts? Are these people serious?
I don't think they are serious.
After all, this is the same body that deregulated the Savings & Loan industry and stood by while it ran wild, then passed Gramm-Leach-Bliley while they were still paying off the S&L debacle.
If they were capable of learning, they would have learned something. But the problem may be a little less innocent than mere incompetence.
It certainly looks like what they want to do is put on a fine show that doesn't interfere with business as usual.
October 28, 2009 9:52 AM | Reply | Permalink
The FHA is still making no money down mortgages. Hello!
The problem won't go away as long as the feds both encourages and requires these ultra-high risk lending practices.
October 28, 2009 10:05 AM | Reply | Permalink
Go to RGE monitor and you'll find that highly qualified people continue to have very different views of the future. Yale's Schiller thinks we have a long way to go before the housing market hits bottom while an MIT professor believes it doesn't.
That's what politicians are up against. No agreement on fundamental matters among economists, entrenched wealth which does everything it can to protect itself, angry losers screaming for everyone's head.
So why should they listen to Baker, whose big claim to fame appears to be that he sold his condo at the top of the market and moved in with his mother to ride out the storm?
October 28, 2009 11:53 AM | Reply | Permalink
I suppose we should listen to a nasty blog post commenter instead?
October 28, 2009 6:41 PM | Reply | Permalink
Dean I usually agree with what you say and have in the past contributed to your threads. But it looks like we lost this argument last winter. Wall Street and their lobbyists won. It really seems futile to continue fighting them now (at least for myself, you should keep it up).
I don't know why Summers et al insit that they are right, but they do. I think we will just have to experience another financial crisis that threatens to bring down the house before we begin fixing the system. Then there might be the politcal will to bring is real regulation, restore Glass-Steagal (i.e. don't let banks gamble with federally insured deposits) and break up all of the TBTF units.
October 28, 2009 6:55 PM | Reply | Permalink
The persistent myth--encouraged by neo-liberals, libertarians and the like--is that we should leave the markets to "work themselves out" without government interference. The myth of separation?
The real situation is that the primary job of government is to serve business interests. So if libertarians and neo-liberals were really serious about their "separation" schemes, they should get started demanding that business get out of the business of controlling government.
In Communism government runs business, in Capitalism business runs government.
October 29, 2009 1:35 AM | Reply | Permalink
"The persistent myth--encouraged by neo-liberals, libertarians and the like--is that we should leave the markets to "work themselves out" without government interference. The myth of separation?
The real situation is that the primary job of government is to serve business interests"
Depends on the neo-liberal. Libertarians are consistenly opposed to corporations stealing from the taxpayer.
October 29, 2009 12:58 PM | Reply | Permalink
my point in including the Libertarians is that they tend to be anti-regulation and if that's so then there is no way that big business will not have undue influence on our politicians whose lifeblood is money to fuel their re-election campaigns.
October 29, 2009 1:26 PM | Reply | Permalink
The idea of regulation is that the government doesn't have the right to tell a private corporation what to do. The foundation of the anti-regulation philosophy(for libertarians anyway) is Respect. Respect other's property and freedom.
So there is a common philisophical component to opposing bailouts and regulation.
What do I think about the fact that the rich influence politicians? Your argument basically means: More freedom for the rich > More Power for the rich > more bailouts.
But the rich don't exclusively lobby for an anti-freedom agenda like bailouts. They also lobby for good things like tax cuts and deregulation.
Meanwhile, the masses do not exclusively support a pro-freedom agenda. While we might see grassroot rallies against the war, We also see rallies for universal health care and a bunch of other bad ideas.
My argument is:
More People Respecting Eachother's Rights > More Freedom For Everyone.
October 29, 2009 1:54 PM | Reply | Permalink