Democrats & Liberals Archives

Nationalize This!

We (the world) have a big problem, Namely that the global economy is crumbling. That crumbling started, and was facilitated by, an ideology that markets (including financial markets) are self-regulating.

It is a fundamental belief in laissez faire capitalism. However, the ideology combines with the ranking of corporations as fictive "individuals" and therefore that they should be protected from the intrusion of government in their affairs.

The former belief ties to Adam Smith's theory of the "invisible hand" of capitalism. In its contemporary iteration, this means that people (including the fictive ones) will function within their own self interest, and that self interest includes "regulating" themselves against long term harm.

Over the last quarter of a century, this ideology has been converted to policy and practice. We have seen the removal of regulating mechanisms in the United States. We have seen the tacit, and sometimes explicit, orders for regulators to either look the other way or to accept the self-reports of corporations as fact. We have also seen the creation of global economic system that is focused on placing control in the hands of corporate and monied interests that know no borders.

Certainly in my lifetime, there has been no "invisible" hand. However, there has been one where that hand is deliberately obscured. In other words, every effort has been made to make the markets invisible.

Alan Greenspan, who was Chairmen of the Federal Reserve from 1987 - 2006, played a significant role in institutionalizing this ideology. Therefore, it is significant that in his prepared October 2008 testimony before the Senate Committee on Government Oversight and Reform he stated:

As I wrote last March: those of us who have looked to the self-interest of lending institutions to protect shareholder's equity (myself especially) are in a state of shocked disbelief.

Under questioning regarding his "mistake," Greenspan replied:

I made a mistake in presuming that the self-interest of organizations - typically banks and others - was such that they were best capable of protecting their own shareholders. (see 16 sec YouTube clip below)

This "mistake" by Greenspan and many others (neo-conservatives and neo-liberals alike) have led us to a situation which is far from "hitting bottom." George Soros stated that:

"We witnessed the collapse of the financial system," Soros said at a Columbia University dinner. "It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom."

Soros was attending the Columbia University 6th Annual Conference on Emerging from the Financial Crisis Friday, Feb. 20, 2009, sponsored by the Center on Capitalism and Society. Present were other economic luminaries, including Paul Volcker (one of Obama's economic advisers) who admitted "Even the experts don't quite know what's going on." The article also reports:

Volcker stressed the importance of international cooperation in creating a new regulatory framework, particularly for major banks that operate across national boundaries -- the reverse of what's happened in recent years.

In fact, the "experts" are saying "nationalization is the only way out." Therefore, as the stock market declines on fears of nationalization, Obama (and his spokespeople) are announcing that nationalization is not on the table.

Each "expert" points to the sub-prime mortgages as the root of the problem. This is a shorthand for saying a lot of things. Many people are still holding onto the image of undeserving homeowners running a scam on mortgage lenders to get loans they could not afford. In other words, potential lendees scammed lenders. This is clearly not what happened. However, it explains public resistance to Obama's mortgage bailout plans. The reality is that it is the people who got scammed, and that this entire collapse was manufactured. I highly recommend reading Are YOU Listening, Rick Santelli? at Talking Points Memo, where the author details the housing situation (and collapse) in California. She states:

The harsh reality is that the financial community is to blame for not putting a halt to the sale of over-priced homes by just not writing mortgages on them. Not because there was something wrong with prospective homebuyers, but the home sale was flawed. How do you justify inflating the cost of a home by more than 200% in 5 or 7 years? How do you knowingly write a loan for that house? They did it because they could sell confusing mortgage products to customers in need of housing. And it would make the lenders loads of easy money.

Which brings us to the ongoing claim that "toxic assets" are at the bottom of the economic collapse. What is being implied is that the "toxic assets" are the foreclosed (and foreclosing) properties. What is reality is that we are dealing with "toxic investment" which leveraged mortgages and markets to defraud and exploit people receiving mortgages. The "toxic assets" we are acquiring are the leveraged investments. Therefore, the primary benefactors of the bailout, as with the "bank" bailout, are "toxic investors."

In April 2007, MarketWatch reported "Mortgage crisis to hit holders of risky derivatives." In June 2007, Gillian Tett, writing at the Financial Times penned:

When Anthony Bolton speaks, bankers quiver. Last month the highly influential Fidelity fund manager took a sideways swipe at "cov-lite" loans, arguing that these instruments (which lack traditional covenants protecting investors) pointed to a world where liquidity had gone mad.

This week, he laid into collateralised debt obligations, arguing that these instruments contained significant "risks" - and thus could create losses for naïve investors further down the road. Whether this claim is correct remains to be seen (unsurprisingly, many bankers do not agree with this assessment). But if Mr Bolton is even partly right, it begs an interesting question: namely if these instruments do end up producing losses, exactly who would be hit?

Well, we are beginning to see the "who," yet big money continues to be poured into the pockets of those who manufactured the investment schemes.

I support nationalization; however, not nationalization of the banks. If we are going to nationalize something it should be the properties themselves. Take the banks (and investment firms) clear out of the picture. The government should step past the miscreants and renegotiate the mortgages directly with the homeowners. Let the government be the mortgage bank. Sound, and community oriented, credit unions and community banks can serve as the intermediaries. They have a vested interest in the community, and are more easily accountable to it - and to the government.

Leave the toxic investors in the cold - not the victims of their avarice and the tax payers present and future.

------

Of Related Interest

Committee Questioning of Greenspan (9:24)

http://www.youtube.com/watch?v=55-A1-D3MR0

Soros Sees No Bottom for World Financial "Collapse". Pedro Nicolaci da Costa and Juan Lagorio. Reuters. 2/21/09.

Greenspan backs bank nationalisation. Krishna Guha and Edward Luce. Financial Times. 2/18/09.

Experts: Nationalization Is Only Way Out. Michael Gray. NY Times. 2/15/09.

Obama tries to halt talk of bank nationalization. Ben Feller. Business Week. 2/20/09.

Volcker sees greater international cooperation on regulations growing from economic crisis. Eileen Connelly. Newsday. 2/20/09.


Mortgage crisis to hit holders of risky derivatives. Alistair Blair. MarketWatch. 4/02/07.

Collateralized debt obligation. Wikipedia.

Market insight: 'Risky' CDOs remain alluring. Gillian Tett. FT. 7/05/07.

Gillian Tett: 'Derivative Thinking'. Economic Dreams - Economic Nightmares. 6/01/08.

2/22/09 Reuters, EU leaders back oversight, tax haven sanctions

Greenspan Concedes to `Flaw' in His Market Ideology (Update2). Scott Lanman and Steve Matthews. Bloomberg. 10/23/2008.

Prepared Testimony of Alan Greenspan - Committee on Government Oversight and Reform 10/23/2008 (pdf)

Posted by Rowan Wolf at February 22, 2009 2:10 PM
Comments
Comment #275936

Rowan,
congratulations on de-mystifying the financial crisis…..I’m a little tired of hearing the Community Reinvestment act (and “those people” who derived mortgages from it) touted as the cause of the depression. And the “toxic asset” drivel that doesn’t go all the way toward explaining what exactly a toxic asset is. My understanding is that there are some seven hundred TRILLION dollars in credit default swaps that have gone south. My guess is that poor minorities were not behind this (sorry Rush!) The rate of defaults among lower-income mortgage holders is no greater than than the higher income types who got a no-doc loan for their second home or addition.

Posted by: steve miller at February 22, 2009 8:43 PM
Comment #275937

Very thorough Rowen.

Let me see if I understand this. The worldwide banking collapse wasn’t caused by some poor people in America defaulting on their mortgages. It was caused by unscrupulous real estate agents pushing sub-prime mortgages on naive people. (Knowing they were going to sell the mortgages immediately, they even took on borrowers who had no way to pay back the loans.) This along with the overly inflated state of the housing market did in the housing market, but not the banks.

What did in the banks were some really smart thieves who took all these bad mortgages, shuffled some papers, and created instruments that were so complicated no one knew what was in them. Some how they got the rating agencies to rate them triple A. And then they sold these bonds as stable investments. At the same time they were pushing credit default swaps on these same bonds. ( A credit default swap is like insurance, you give me a little money now and if the bond defaults I cover your losses.) If it was called insurance instead of a swap there would be regulations like the insurer would have to have capital to cover their obligations.

Now some of our financial institutions are holding these worthless mortgage bonds while others like AIG are trying to pay their obligations which they can’t afford. I can’t believe rich people are that gullible, I’ll bet it was those poor people in America defaulting on their mortgages.

Posted by: Mike the Cynic at February 22, 2009 8:44 PM
Comment #275945

The rich were gullible and the hedge fund (and others like Madoff) knew it. They promised over the moon returns on investment and “the rich” went after that the way that folks (poor and not) took the “bait” of the mortgage companies. The institutions making the various deals made out quite well. The institutions (and individuals and pension funds) got left in the cold. However, there are big debts out there, and more mortgages set to “reset” over the next couple of years, and the housing “bubble” is still deflating. The assumption is that it will ultimately get to its “real” value, but who knows what that is. For people without jobs, any price for housing will be too high a price.

Posted by: rowan at February 22, 2009 11:23 PM
Comment #275947

Markets are self-regulating - it is called boom - bust cycles. The problem with self-regulation is that during the boom cycle a minority get filthy rich, and during the bust cycle, only a few of those filthy rich walk away still filthy rich (those first out of the market), and everyone else affected by the markets pays and does without to get the bust cycle over with.

When markets are appropriately regulated for transparency, accountability, and oversight properly, there are still cycles but the booms and busts are either eliminated or dramatically mitigated.

What really is a travesty is the way the Republicans cut taxes on the boom reapers during the boom years mid 2003 into 2007 when others and I warned the bust cycle was coming. Republicans failed to garner the revenues needed to halt deficit spending during those boom years lowering the national debt from its 2008 election level, to which we now must add deficits in the efforts to prevent a complete meltdown in the bust cycle.

For Republicans raising taxes during the boom cycle makes no sense, and raising taxes during the bust cycle makes no sense. There is never a time for Republicans to raise taxes to pay off their government debts. There would never be a time in which deficits and debt did not grow under modern Republicans, as evidenced by the growth of debt under every Republican president since and including Ronald Reagan. Pres. Ford may have been the last Republican president who actually oversaw a move to halt deficits (I would have to check on Ford.)

Democrats have the opposite problem. They believe government needs to increase spending during the boom cycles and increase spending during the bust cycles. Hence, there is never a time for Democrats to cut spending, which leads them to always wanting to raise taxes and/or increase deficits and debt.

So, when the voters think taxes are too high, they vote in Republicans. When they think the economy is tanking, they vote in Democrats. And under both parties, we get buried closer to our eyeballs under rising national debt that will be the end of America as we knew her, if this horrible cycle is not changed by the voters waking up and rejecting both Parties as the answer to national debt, and voting for individual candidates regardless of party who are committed to both a stable present economy and buying down the national debt at the same time.

And that will mean both cutting spending and raising taxes, because their simply is no other way to address a 12 trillion dollar national debt, and growing, in a timely fashion to prevent economic collapse under the weight of unfunded entitlement programs waiting in the wings to bury us. But there has to be method to both cutting spending and raising taxes.

That method has to be some kind of rational priority system in which essential spending to maintain a functioning society and economy is ordered, agreed upon, and cuts made to everything else.

Same method for taxation. Poverty leads to crime and crime leads to increased social and government costs. Taxation which makes the working poor confront working poverty or unemployed poverty, precludes raising taxes on the poor.

While the economy is suffering from a broad lack of consumption by the largest consuming class, the middle class, raising taxes on the middle class makes no sense. However, when the economy is growing again and unemployment is falling in a clear trend, it will be time to raise taxes on the middle class to help pay down the national debt, and relieve ALL taxpayers of the enormous burden of paying interest on our national debt, 60% of which will be going to foreign investors.

When the economy is faltering or slowing due to a lack of venture capital and cash resources by businesses, it is no time to be increasing taxes on the wealthy or businesses, from which a significant portion of venture and capital reserves are needed. That is a time to cut taxes on the wealthy and business. However, when the economy is faltering due to a lack of consumer demand, and the wealthy and business are saving their wealth and cash reserves for a better investment climate, that is a time to increase taxes on the wealthy and/or business. And so is it time to raise taxes on the wealthy and business when the economy is growing at a healthy rate. In fact, there simply is no better time to raise taxes on the wealthy and business than this, when the whole nation is paying taxes on interest which buys not a single service, road improvement, nor hires one more soldier to defend our nation. Interest on our national debt is lost economic opportunity for the present and future.

Such a common sense, rational, and intelligent strategy for prioritizing optimum taxation and spending to both get the most bang for the tax dollar and reverse this growing national debt is no longer an option. It is an absolute necessity if America is to save herself from the debt quicksand we find ourselves mired in, and sinking deeper.

If we voters demand on election day with our vote representatives committed to such a priority system, we can save our nation. If we continue to vote along party lines, holding the ignorant beliefs that more spending or less taxes as a philosophy will ensure our future, we shall suffer the enormous cost of such ignorance and party loyalty.

Posted by: David R. Remer at February 22, 2009 11:48 PM
Comment #275957

Nationalize this!
Quite the little Bolshevick,aren’t you.
Didn’t the Soviet Union try things like that?
How’d that ever work out,anyway?

Posted by: Brian P. Thibeault at February 23, 2009 5:01 AM
Comment #275962

Brian,

Sweden nationalized its banking system in the early 90s under circumstances similar to ours today. It turned out well. Confidence was restored in the Swedish economy and the nationalized banks were returned to private status after a few years.

Now, whether that is the best strategy for this crisis is debatable. However, what is not debatable is that the banking system has been crippled and rendered largely insolvent by the highly leveraged “toxic investment” instruments related to mortgages. So, what do we do short of nationalization to save the banking system? Whatever the choices, they will involve massive government expenditures to stabilize the mortgage related assets.

Posted by: Rich at February 23, 2009 8:45 AM
Comment #275965

http://www.forbes.com/2009/02/13/housing-bubble-subprime-opinions-contributors_0216_peter_wallison_edward_pinto.html

So,the very people who caused the problem are the ones we need to fix it.
Banking was fine till the government mandated that people who didn’t qualify deserved to get loans.

As for our little Boleshevick
http://www.watchblog.com/democrats/archives/006063.html
The above reads like a show trial during the Stalin years. Some truth,some fiction,and some unabashed fantasy.

Posted by: Brian P. Thibeault at February 23, 2009 10:04 AM
Comment #275991

>Banking was fine till the government mandated that people who didn’t qualify deserved to get loans.
Posted by: Brian P. Thibeault at February 23, 2009 10:04 AM

Brian,

1…The government did not mandate loans for unqualified borrowers.

2…Bad mortgage debt did not bring down our economy, Gramm/Leach/Bliley did.

You’ve been listening to Rush too closely…that guy has a big mouth, but a small mind…you’d be better off unplugging your radio.

Posted by: Marysdude at February 23, 2009 1:35 PM
Comment #275995

seems this had something to do with it too.

http://www.cbsnews.com/stories/2008/10/26/60minutes/main4546199.shtml?source=search_story

“In retrospect, giving Wall Street immunity from state gambling laws and legalizing activity that had been banned for most of the 20th century should have given lawmakers pause, but on the last day and the last vote of the lame duck 106th Congress, Wall Street got what it wanted when the Senate passed the bill unanimously.”

seems we can thank ALL our wounderful lawmakers for this one.

Posted by: dbs at February 23, 2009 2:05 PM
Comment #275998

Marysdude
I never listen to Rush.
Never.
Did it ever occur to you that some folk can think for themselves?
I’m a Libetarian,not a fool.
Do you think all Conservatives listen to Rush?
That is an insulting sterotype.
I could counter and say that that is just the sort of thing I would expect from a Liberal,but that too,is an insulting sterotype.
You’d be better off judging people on their own merits, rather than broad,uninformed comments.

Posted by: Brian P. Thibeault at February 23, 2009 2:36 PM
Comment #276001

Dude-

Gramm defends in this WSJ Opinion piece. As you know President Clinton has also defended GLB.

Gramm’s piece tracks with the MSNBC House of Cards special except that MSNBC took it easy on the partisan stuff (HUD goals). House of Cards laid a lot of blame on the pizza guy turned loan originator for the fraud but omitted the other players at the closing the table: the borrower, the closing attorney and the realtors.

Posted by: George at February 23, 2009 2:48 PM
Comment #276004

Oh, and I listen to Rush when I can. I listen to Mike Church too. Also Mark Thompson, Bill Press, Big Eddy, and Alex Bennett.

Don’t know what any of that says about my views though.

Posted by: George at February 23, 2009 3:20 PM
Comment #276010

Brian P. Thibeault

Observe our rules or your comment privileges will be suspended. Your comment: “Quite the little Bolshevick,aren’t you.” is clearly a violation of our rules.

Posted by: WatchBlog Manager at February 23, 2009 5:06 PM
Comment #276011

My appologies to Rowan Wolf and the rest of the board.
It won’t happen again.

Posted by: Brian P. Thibeault at February 23, 2009 5:10 PM
Comment #276029
That crumbling started, and was facilitated by, an ideology that markets (including financial markets) are self-regulating

What a huge pile of steaming poo. Starting out an article which such a huge flawed perspective didn’t bode well for the rest of it, and I was proven right…

David gets it right in his comment, the desire of the far left to see this as an opportunity to implement their agenda will backfire in their faces. Only, as usual, we all will be left holding the check, asking China to bail us out.

Posted by: Rhinehold at February 23, 2009 6:54 PM
Comment #276030
1…The government did not mandate loans for unqualified borrowers.

Ok, whatever you say there, Marysdude…

2…Bad mortgage debt did not bring down our economy, Gramm/Leach/Bliley did.

Actually, neither did. It usually helps to display a better understand of economics than what you and Rowan display if you want to be seen as having the answer to the problem.

Otherwise you are going to just make it worse. Looked at the stock market lately? Seems people, at least the people who invest in businesses in the US, aren’t all too happy with what is going on…

Posted by: Rhinehold at February 23, 2009 6:57 PM
Comment #276031

BTW, that Talking Points Memo you cited is one of the most ridiculous things I’ve ever read. :/ When you pretend that your article is the one and only ‘objective view’ of the situation that no one else presenting and then go on to say that what is happening in California has any bearing at all to the rest of the country, you automatically throw your credibility out of the window.

I am in LA right now for work, the housing market her is not only ridiculous and down right moronic, it is also nothing like the rest of the country… Thank god. California makes their own messes and they get to lie in them. A perfect example of the type of running of a government that we are going to see running the US for the next 4 years, only instead of CA looking to the US to bail it out of it’s sad administering, the US is going to have to look to China.

You realize that LA is now facing a > 10% sales tax and they STILL can’t pay their budget without help from the US? Which means, if you aren’t paying attention, that the US is going to take money from states like Indiana (where I am from) where we are keeping our financial house in order and give it to California, who can’t do that to save it’s life. Yet California has that extra bathroom that Santelli is speaking of, metaphorically speaking.

Posted by: Rhinehold at February 23, 2009 7:08 PM
Comment #276035

Rhinehold,

You make a good point about leaning on China in the future if we continue down this path…hmmm…I wonder who we’ve BEEN leaning on…oh, I guess it was okay in the past, but now your arch enemies are in charge everything has changed…?!?!?

Posted by: Marysdude at February 23, 2009 7:37 PM
Comment #276036

Rhinehold,

If you are looking to Wall Street for your understanding of our economy, perhaps it is you who needs to study a little. Look to the high finance houses for your meltdown. Wall Street panics when a mosquito sneezes, but it recovers as soon as the tissue is presented. GLB loosed the savage beast, and we are trying everything possible to re-cage it before the meltdown becomes total.

Posted by: Marysdude at February 23, 2009 7:51 PM
Comment #276055

Marysdude,

At what time have I ever said that our being in debt was somthing I approved of, Republican or Democrat?

We could be out of debt in 15 years, if we had the courage. We don’t. So, we are doomed.

Posted by: Rhinehold at February 24, 2009 1:28 AM
Comment #276057

No, Marysdude, you want to blame GLB because it is politically expedient, but that is not the cause, nor the tipping point.

It has a combination of many things, including things that both Dems and Reps are responsible for. That they refuse to take credit for them for political reasons is, IMO, treasonous.

If we had allowed the markets to be temporarily exempt from the Mark to Market rules put in place because of Enron, we would be coming out of the recovery of a short term minor recession. But that wouldn’t have helped get a Democrat it office. Neither would a stimulus package last year when it would have REALLY helped and the Democrats could have done something…

If you want to really get into the causes and find real solutions, it requires looking past the partisan talking points and accepting that everyone, except those being told they have to pay for it, is responsible for where we are now. The responsible middle class homeowner who purchased homes within their means and planned to stay there for longer than 3 years? Screwed.

I should could have used an extra bathroom myself… But I need to pay for someone else’s apparently.

Posted by: Rhinehold at February 24, 2009 1:34 AM
Comment #276063

Rhinehold, both Clinton and the Republican Congress were responsible for th GLB Act, and we never suffered this kind of economic crises when Glass-Steagal was in place. The GLB Act is a major contributor to the creation of financial corporate entities like AIG, so diverse in their lines of business, and so deeply entwined with the balance sheets of a myriad other financial institutions, as to threaten the entire national economy should AIG fail as a solvent corporation.

You are right to point out that this crisis is multi-faceted and multi-causal, but, the GLB Act paved the way for corporate entities ‘too big to allow to fail’ which put tax payers directly on the hook when these financial institutions DID fail, threatening the entire national economy and jobs of 10’s of millions of Americans.

Imagine how much less threatening this recession would be if that aspect of this crisis did not exist? If all we had to deal with was falling home valuations, a slumping construction industry, a growing percentage of home foreclosures, and the resulting failure of some single line of business mortgage companies, the clouds on the horizon would not be nearly so dark and threatening as they are in reality today. Reason, the private sector could have absorbed considerably more of the losses through normal bankruptcy channels alleviating the threat of dire growth of the national debt and the long term economic consequences of that.

Posted by: David R. Remer at February 24, 2009 6:16 AM
Comment #276064

Marysdude, the real threat from China showed itself yesterday in their announcement to issue their own stimulus government borrowing. China’s flagging growth threatens internal domestic harmony, forcing the Chinese government to redirect more of China’s investments back into China’s economy and government stimulus programs and therefore, less investments in United States Treasury’s going forward.

That leaves the U.S. ever more dependent upon the Middle East investors like Saudi Arabia, you know, the birth place of some of our most dangerous and active enemies. And it raises the question whether the Middle East even has the capacity to take up the slack from the Chinese in floating our deficits going forward?

Folks just don’t realize how perilous and fragile the global economic system is right now, and as a result, like Rhinehold, they have some notion that the government should just beg off, allow it all to collapse, allow the earth’s population to diminish by 1/3 or more, and poverty to take up residence with 100 million or mroe American men, women, and children, so that business can get a fresh clean start on their profit motives again.

Fortunately, such a Libertarian view as extolled by Ron Paul and others, is not shared by anything close to even a large minority of people in the world or world’s governments. What Libertarians would like to see happen, may still happen, but, there is a moral imperative to prevent it with all means available to do so.

And if global efforts are successful in preventing a global economic meltdown and partial return to Medeival existence for a few billion people on the planet, one can only hope that Libertarians would have the integrity and be objective enough to admit their prescription was wrong, and the likes of Obama were right in saving the world’s people from economic holocaust, even if the cost of doing so had to be passed on to future generations limiting to some extent their optimal economic opportunities had they not inherited debt obligations from our generation and those preceding ours.

But, you know, my granddaughter will fare far better in America suffering our generation’s deficits as a $40 more tax payment from each pay check to save the world’s economic integrity, than she would being born in Somalia, China, India, or Saudi Arabia. And if our efforts are successful, that is approximately what it will cost my granddaughter. A fair price for her mother and father having been employed in America at all while she was growing up.

Posted by: David R. Remer at February 24, 2009 6:39 AM
Comment #276067

>But, you know, my granddaughter will fare far better in America suffering our generation’s deficits as a $40 more tax payment from each pay check to save the world’s economic integrity, than she would being born in Somalia, China, India, or Saudi Arabia. And if our efforts are successful, that is approximately what it will cost my granddaughter. A fair price for her mother and father having been employed in America at all while she was growing up.
Posted by: David R. Remer at February 24, 2009 06:39 AM

DRR,

You betcha!

Posted by: Marysdude at February 24, 2009 6:50 AM
Comment #276083

David-

Citi bought Traveler’s in 1998 as approved by the regulators; GLB closed the casket but Glass-Steagal was already dead. I don’t see how you can give it even 5% of the blame for the current mess.

Factcheck’s list of culprits is pretty good. I thought House of Cards was fairly even handed although, again, how can you lay all of the blame on the loan originators when the buyers, realtors and closing attorney were complicit?

Posted by: George at February 24, 2009 10:38 AM
Comment #276086

George,

I’m not David, but all the low end sins combined would not set off the catastrophe currently in the offing…as long as those bad debts and bad mortgages had value, even 70 or 80% value, there would be no crash, just a huge hiccough. GLB is the cause of finance houses growing so large and cross grained they thought trading in VALUE was no longer necessary.

Posted by: Marysdude at February 24, 2009 11:47 AM
Comment #276103

you seem to rely on george soros an awful lot… this man does not have americas best interests at heart… the fact is that he is a flaming comunist of which he even admits…

name me one time when government has ever had a good outcome when it decided to try to regulate something…

obama is the lapdog of soros along with the rest of the liberals in congress…

nelson thomas, a socialist that ran for president in the ‘30’s made the statement that “the american people will never accept socialism in it’s present form, but under the name of liberalisim they will accept every asspect of it and wake up to a socialized nation and never know how they got there”…

a liberal is by no means an american and has no place in government… all liberals as far as i’m concerned should be deported form this FREE nation and sent to a socialist country so they can truely enjoy the oppresion of what they beleive is damn good…

Posted by: bob at February 24, 2009 1:52 PM
Comment #276110

bob said: “name me one time when government has ever had a good outcome when it decided to try to regulate something… “

The Savings & Loan industry after its debacle. The Savings & Loan industry remains the safest place for Americans to put their money, even in today’s financial morass, thanks to regulation of the Industry. Same is true of Credit Unions regulation, who are still making car and home loans to qualified buyers without any problem, thanks to government oversight and regulation.

Posted by: David R. Remer at February 24, 2009 2:31 PM
Comment #276111

bob
I will ignore you ad hominem attack and address just one part

name me one time when government has ever had a good outcome when it decided to try to regulate something…

Clean air, water pollution, social security, the highway system, power generation (dams, flood control.

Now before you go off on the problems - because clearly each of these are current problem areas, I want to point out WHY they went from be effective to ineffective and failing.

Social Security was fine until it was looted to fund every project under the sum - including the wars in Iraq and Afghanistan.

Air and water were much better until people were put in charge of those agencies whose job it was to destroy them or turn it over to industry for “self policing.” Infrastructure was doing pretty good until it was decided to not fund their maintenance because apparently we wanted a government small enough to “drown in the bathtub.”

Military contracting worked pretty well until the military decided that oversight and regulation was not necessary and put more (unmonitored) contractors in charge of monitoring.

In other words, as we corporatized government responsibilities and increased the power of big money in government, we went down a rocky road.

Regulation is not socialism or communism. If you want to see the effects of removing regulation and NOT providing oversight, you need to look no further than the global economic crisis.

Posted by: rowan at February 24, 2009 2:31 PM
Comment #276114

George said: “Citi bought Traveler’s in 1998 as approved by the regulators; GLB closed the casket but Glass-Steagal was already dead. I don’t see how you can give it even 5% of the blame for the current mess.”

Exemptions from Glass Steagal were permitted under Glass Steagal. Ergo, Citi’s purchase of Traveler’s. GLB removed nearly all constraints on cross breeding of lines of business of what we now term “too big to allow to fail” mega-financial institutions like AIG. Those mega-financial institutions threatening the entire global economy if GLB had not been passed. If you don’t understand that, it is because it is an inconvenient truth creating cognitive dissonance by its recognition. Many on the Right are afflicted with that psychological defense mechanism these days.

Posted by: David R. Remer at February 24, 2009 2:36 PM
Comment #276132
and as a result, like Rhinehold, they have some notion that the government should just beg off, allow it all to collapse, allow the earth’s population to diminish by 1/3 or more, and poverty to take up residence with 100 million or mroe American men, women, and children, so that business can get a fresh clean start on their profit motives again.

Wow, great way to write down something and attribute it to someone, actual facts matter nothing apparently…

I have never said once that we should ‘do nothing’, can you please provide that link? I do think that we should be tackling the real problems, including our DEBT, if we are going to fix things, not take this time to try to enact political programs that will cost more and put is in more debt.

There is a stupid way of doing something and a smart way. I would like to see a smart move being done, not a politically popular one.

We agree, I thought, that we needed to have some real political will in this country to actually solve the problem, which would mean not putting in programs and pork into these bills, focus on getting our own financial house in order, etc. Instead we want to take money from those who have done what everyone should do, save their money and live within their means in order to bail out those who lived beyond them and those who took advantage of those people to make some quick cash.

Again, you show a complete lack of what libertarians want, how those things should be achieved and why. But, fortunately for your agenda, that actually helps your cause since you can then just say whatever you want to dismiss valid and sound ideas as ‘kooky’. Not necessarily intellectually honest, but hey, that’s not the goal for some…

Posted by: Rhinehold at February 24, 2009 4:51 PM
Comment #276135
Social Security was fine until it was looted to fund every project under the sum

SS was not fine. It is less fine now, yes, but it was in trouble all on its own as the working group started to decline in numbers as retirees’ numbers increased. We may have had a plan to deal with it, but it wasn’t ‘fine’.

Posted by: Rhinehold at February 24, 2009 4:54 PM
Comment #276136

Rowan

“Social Security was fine until it was looted to fund every project under the sum - including the wars in Iraq and Afghanistan.”

who started that looting ? ANSWER- Lyndon Johnson, and the democrat congress. so what did they spend it on hmmm ? care to add that list to ” iraq, and afganistan.

i agree it’s been squandered, buts lets give credit to ALL who have helped squander it, not just those you find politicaly expedient.

Posted by: dbs at February 24, 2009 5:02 PM
Comment #276157

Rowan, Rhinehold’s point about Soc. Sec. above is valid. Soc. Sec., due to demographics, was not fine as written in terms of being a funded mandate. For nearly 2 decades now, it has been known that the Soc. Sec. program was on a path to deficit spending to maintain, without either increases in premiums or cutting back on benefit provisions.

Posted by: David R. Remer at February 24, 2009 6:57 PM
Comment #276158

Rhinehold said: “I do think that we should be tackling the real problems, including our DEBT, if we are going to fix things,”

Tackling DEBT right now would bring about the calamity I attached to those who oppose deficit spending to prevent economic contraction for many years or decades to come. Because tackling DEBT now as you advocate, would preclude economic stimulus spending which, without severe hardships created for untold millions of Americans, must be deficit spending.

If you are suggesting we can afford stimulus spending without deficits, please advise what taxes you would increase or spending programs you would cut, that would balance stimulus spending without deficits and without harming the quality of life for millions and millions of Americans.

Posted by: David R. Remer at February 24, 2009 7:03 PM
Comment #276178

I have read a number of good points here but, my question here is the scope of the arguement. We and the rest of the world do have a real problem economicaly but, I would argue that it is symptomatic of a larger issue.

The financial picture in the US has been a growing concern for at least a couple of decades. Social Security, as an example, has been discussed entering into every election cycle for how long? Yet, what substantial progress has been made?

I would make the obvious point that Social Security is just one issue and that it represents the general progress we have seen overall.

I beleive our economic situation is, on a larger scale, representative of a system that has gone astray and an American public that has failed to hold its representatives accountable.

My overall point would be that if we continue to vote and speak on the basis of soundbites and parties with no defined platforms. Lining ourselves up behind a party line to argue individual points of argueably broader insignificance, then it really doesn’t matter what “solution” is taken relative to the economy.

Currently the only real focus in this country is on the President. The majority of the work or, lack there of, is in the hands of the Congress. With the general public AWOL, regardless of what approaches are taken with the economy, Congress will continue to play the shell game. They will keep the ball moving as they work to concentrate the wealth within their own interests.

Posted by: Tm at February 24, 2009 9:36 PM
Comment #276181

dbs

i agree it’s been squandered, buts lets give credit to ALL who have helped squander it, not just those you find politicaly expedient.

I did NOT lay the blame for raiding Social Security on anybody. That raiding did not start under GW Bush.

In my post, I did not reference either Democrats OR Republicans. Nor was I stating - or arguing - a Democratic position.

Posted by: rowan at February 24, 2009 10:42 PM
Comment #276185

David,

You don’t think the quality of life for millions of americans is being harmed now and over the next several years? You want to fix the symptoms with no pain, thinking that we will fix the real problems later?

That’s what got us here in the first place. You are part of the problem, not the solution. And you know nothing of political will that you talk about if you think we can ever fix the problem without affecting the quality of life of millions of americans. the question is, which millions do we affect, the ones culpable or the ones who live their lives within their means because they don’t want to be burdens on others.

We know where the Republicans and Democrats stand. As evidenced by where we are today. Now Obama says we aren’t going to raise taxes, ala Bush I. Remember how well that worked for him? And we weren’t nearly as bad as we are now…

Posted by: Rhinehold at February 25, 2009 2:49 AM
Comment #276188

Rhinehold said: “You don’t think the quality of life for millions of americans is being harmed now and over the next several years?”

Sure I do, acknowledging 47 million without health insurance for preventive health maintenance, and 2 million newly unemployed in the last couple months.

But, why would anyone call for government inaction which would compound those numbers dramatically, elevate unemployment many fold, and throw 10’s if not a hundred million Americans out on the street with no means for housing, all in the name of balancing the budget and paying down the debt THIS YEAR?

Rhinehold said: “You want to fix the symptoms with no pain, thinking that we will fix the real problems later?”

That was an absurd comment. I look forward to seeing my taxes increase when the economy improves so that I can reduce the opportunity cost of debt upon my daughter and her children.

Sending this nation into prolonged economic contraction and unsustainable capacity for the population in the name of some ideological demand for a balanced budget this year and zero debt in 10, or some other unrealistic time period, would constitute a far greater assault on my daughter’s future and her children and vastly higher opportunity cost for them. They need to inherit a functioning and sustaining economy. Not one driven into the ground by ideologues in a world where our competitors can live middle class quality of lives in their own nations on $40 to $100 per week.

There would be no recovering our economy against such competition if we allow this economy to collapse putting as many as 40 million or more workers out of work, and sending nearly as many families into the streets. You think individual charity would take care of that kind of poverty? You think government assistance, such as could be provided by a bankrupt government receiving aid from the International Monetary Fund would adequately address such widespread American poverty?

You have every right to hold to the ideology you do, and voice them, and I respect your adherence to principled fiscally responsibility. But, they are not going improve America’s economy or future if applied at this moment in time of economic peril and crisis. They would simply send our economy over the edge and into the abyss, along with the living standards of billions of others in other nations.

I am reminded of a philosophy instructor of mine who said:

‘Simple minded clarity deplores complexity, so, simple minded clarity should never be dispatched to remedy a complex problem.’ All ideologies with a simplistic clear vision of how things ought to be, are not to be trusted with complex systems management.

It is as true of liberal ideologues as conservative. For times such as these, clear thinking pragmatists, versed in ideology but not wed to it, and capable of assessing complex and differing scenarios, are called for to proffer optimal remedies. After last night’s speech by Obama before the Congress, it appeared we have such a person at the helm of the executive branch of government.

And as he said, it is now up to all of us to unify around a plan to rescue our economy and future. The implication being, without a unified effort backing one plan, failure gets a leg up. A divided nation following multiple ideological plans results in no impact upon the challenges facing us.

No action is sure to fail the economy and the future. A unified action toward a common plan has dramatically better chances of succeeding. Would you not agree with that?

The American people through our Constitutional process of electing representatives and a president, have chosen their leaders in the hopes of their developing a plan to rescue our economy and future. The plan is now put forth. We can unite behind it and improve our chances of rescuing our economy and future, or, we can divide over divergent courses of action lacking consensus to act at all.

The choice seems incredibly obvious to me; and according to the polls, to the majority of Americans as well. How about you?

Posted by: David R. Remer at February 25, 2009 3:47 AM
Comment #276189

Rhinehold said: “Now Obama says we aren’t going to raise taxes, ala Bush I.”

What accounts for this gross misrepresentation of the truth, Rhinehold?

Obama said he WILL raise taxes on the wealthiest 2%, and corporations exporting jobs, and rescind the Bush tax cuts which Republicans say is a tax increase. He also said we must not pass these deficits on to the next generations.

Clearly, Obama has not made the general statement you attribute to him that he would NOT raise taxes.

Just curious as to what accounts for this demonstrably false statement of yours quoted above. Obama campaigned on raising taxes on the wealthiest. Did you miss that as well?

CBS’s transcript of Obama’s speech last night:

“…and we will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas.

In order to save our children from a future of debt, we will also end the tax breaks for the wealthiest 2% of Americans.

And he is not just going to raise taxes, but cut spending as well:

In this budget, we will end education programs that don’t work and end direct payments to large agribusinesses that don’t need them. We’ll eliminate the no-bid contracts that have wasted billions in Iraq, and reform our defense budget so that we’re not paying for Cold War-era weapons systems we don’t use. We will root out the waste, fraud, and abuse in our Medicare program that doesn’t make our seniors any healthier,…

I highly recommend listening to the man before attributing false words to him in a public venue, which doesn’t hurt Obama’s reputation at all, but one’s own.

I am truly perplexed why, given your philosophy of governing, you are not applauding Obama’s words instead of misrepresenting them. Obama says he will raise revenues, cut spending, and cut deficits as the economy gets back on its feet. Aren’t you for what Obama is proposing? And if you read or listen to his speech, he had the political audacity and courage to itemize cuts and specify tax raises and set time limits on his agenda.

That takes not only political courage inviting assessment of his performance based on his meeting those conditions on record or not, but, a genuine commitment to those agenda items upon which one’s integrity and position rest.
Obama is not your cookie cutter politician, nor is he a typical Democrat putting Party before nation, even though his policy agenda is rooted somewhat left of center.

Posted by: David R. Remer at February 25, 2009 4:24 AM
Comment #276191

>Obama is not your cookie cutter politician, nor is he a typical Democrat putting Party before nation, even though his policy agenda is rooted somewhat left of center.
Posted by: David R. Remer at February 25, 2009 04:24 AM

Well Said, and so true…

Posted by: Marysdude at February 25, 2009 7:41 AM
Comment #276192

Exemptions from Glass Steagal were permitted under Glass Steagal. Ergo, Citi’s purchase of Traveler’s. GLB removed nearly all constraints on cross breeding of lines of business of what we now term “too big to allow to fail” mega-financial institutions like AIG. Those mega-financial institutions threatening the entire global economy if GLB had not been passed. If you don’t understand that, it is because it is an inconvenient truth creating cognitive dissonance by its recognition. Many on the Right are afflicted with that psychological defense mechanism these days.

AIG opened up a London based subsidary back in the 80’s/early 90’s, the subsidary blamed for bringing it down, specifically to get around Glass-Steagall. Had it been given an exemption like Citi instead of going off shore (where there was much less regulation) to get around a failing Glass-Steagall then it might have survied.

Why are you so wetted to GLB as the main cause of today’s mess? Is it because of Gramm’s name on it?

Posted by: George at February 25, 2009 9:16 AM
Comment #276210

George, I never said it was the main cause, the housing valuation and foreclosure debacle would have occurred whether GLB passed into law or not.

The GLB Act, as I have said numerous times in numerous places now, opened the gates wide for the creation of mega-financial institutions “too large to allow to fail” without damaging the entire economy.

Why are you so wetted to defending GLB? It was a bi-partisan action which has now cost America more than it created.

What is amazing is that the Obama administration doesn’t seem to get it, and is saying nothing about breaking down these mega-financial institutions into privately owned separate financial institutions which can not pose a threat to the nation’s economy in the future should they belly up again.

Posted by: David R. Remer at February 25, 2009 5:11 PM
Comment #276223

>What is amazing is that the Obama administration doesn’t seem to get it, and is saying nothing about breaking down these mega-financial institutions into privately owned separate financial institutions which can not pose a threat to the nation’s economy in the future should they belly up again.
Posted by: David R. Remer at February 25, 2009 05:11 PM

DRR,

First things first, David. I think there are several seminars scheduled in the near future to discuss just those things you mentioned. Those institutions are going to go, but there will have to be legislation to kill GLB first, and those requirements will be front and center in those discussions I’m sure. Legally those ‘monopolistic’ entities are sacrosanct.

Posted by: Marysdude at February 25, 2009 7:27 PM
Comment #276241

Marysdude, if we are to take first things first, changing the law and breaking up these mega-corporations is the first order of business. THEN provide the ONLY consider whether the broken up single line of businesses should receive tax dollars or be sent packing to bankruptcy court.

As we learned from the last $350 billion of the TARP funds, the profitable businesses benefitted from taxpayer dollars along with the those in serious balance sheet trouble, as with AIG, where there international banking business was profitable but there investment banking and insurance company underwriting investment banks was in serious trouble.

Of course, I don’t know all the ins and outs, but it seems to me some of the component businesses targeted for TARP funds could be allowed to fail or sent to bankruptcy court for restructuring without serious consequence to the economy, and we should distinguish which companys those are BEFORE handing out another $350 Billion dollars.

And distinguishing which ones those are, requires breaking up the mega institutions into their component companies, insuring the afloat component companies ARE NOT receiving TARP funds.

Posted by: David R. Remer at February 26, 2009 4:50 AM
Comment #276248

Those ‘banks’ that are accepting TARP are to go through what is called a ‘stress test’ (the first testing has begun), when/if they fail, TARP will stop and the bank will either be broken up or dissolved. So, the first steps are being taken as we speak. AIG is not a bank, but I believe, as a recipient of TARP, it will get the test as well. I read a note in the AJC that rumor of AIG break-up is already in the mill. We might want Obama to do everything at once, but realistically he still has to put one foot in front of the other to walk, just like the rest of us…

Posted by: Marysdude at February 26, 2009 6:48 AM
Comment #276267

Marysdude, AIG is a Bank, an Insurance Co., and Investment Bank, and I don’t have names for several other of their lines of business in Hedge funds and Credit Default Swaps, which they insured.

AIG is an example of the kind of mega-institution Glass Steagal was designed to protect the economy from. But, idiots Clinton and Bush and our infamous Republican Congress didn’t learn their history lessons and went headlong with the GLB Act into repeating the calamity of 1929 and 1930’s (less the Dust Bowl of course).

Posted by: David R. Remer at February 26, 2009 3:31 PM
Comment #276303

>But, idiots Clinton and Bush and our infamous Republican Congress didn’t learn their history lessons and went headlong with the GLB Act into repeating the calamity of 1929 and 1930’s (less the Dust Bowl of course).
Posted by: David R. Remer at February 26, 2009 03:31 PM

DRR,

The current dust bowl may very well be in the making, not in Oklahoma et al, but in the Southeast…Alabama, Georgia and South Carolina have been parching for several years and it ain’t getting much better. This summer could tilt the apple cart one way or the other.

Posted by: Marysdude at February 26, 2009 7:30 PM
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