In an Associated Press article this morning we see how the panacaea of regulation can, and often does go wrong.

We have all heard horror stories of products from foreign manufacturers coming to America tainted with lead, melamine, or other cheap but deadly industrial chemicals. It is perfectly understandable that in the face of such news government would wish to regulate the content of these products, especially those that find their way into the hands an mouths of children. What makes no sense is that regulations intended to reduce the danger of foreign shops working on a massive scale would be so vague that they threaten tiny shops producing toys out of wholly benign materials. Unfortunately this is the way government usually does work.

As the article states-

Without changes to strict new safety rules, they say, mom-and-pop toy makers and retailers could be forced to conduct testing and labeling they can't afford, even if they use materials as benign as unfinished wood, organic cotton and beeswax.
The article goes on to state that efforts are being made to set common-sense rules and exemptions, but, as usual, such common sense is arriving late at the gate, given that the deadline for American toymakers to show proof of having tested their wares, via independent testing laboratory, for dangerous chemicals is February 10th.

People who cry out for more regulation usually imagine such rules saving us from vast corporate schemes to lay waste to the health and welfare of the downtrodden for the sake of an extra penny a product. Obviously there is a need for such rules because competition can create pressures to cut even reasonable corners away, but there is also a temptation in government to reduce the number of points of contact in the market place, to make the chore of regulation easier. To do that all one must do is create rules that make running a small business impossible. If these new testing regulations are carried out to the letter the number of American toy manufacturers will plummet.

Common sense dictates that if the government really wants American small business to thrive, and I have my doubts, simply labelling products based on their content while keeping reasonable records of the sources of such materials as natural wood, wax, and lead-free paints (Every manufacturer selling paint products in America must clearly label any product for hazards) should suffice for an assurance of product safety of domestic products.

As an artist, though, I have another question. What of the products I and fellow artists all over the country make, product many of which find their way into homes with small children? Many of them overtly contain such chemicals as lead, arsenic, manganese, cadmium, and barium. All of these materials are known health hazards, and those are just common artist's paints. Could the famously hazardous art market run afoul of regulations intended to make consumer products safe? Will our great museums have to post health hazard labels? Will we have to test every painting for hazardous chemicals?

Sure, it sounds like a stupid question. But is it, really?

Posted by Lee Emmerich Jamison at December 24, 2008 11:46 AM
Comment #272793

Lee -

Remember these?
“It’ll cost us too much to install seat belts in all the cars!”
“It’ll cost us too much if we raise CAFE standards!”
“It’ll cost us too much to inspect incoming cargo!”

Y’know, back in the ‘80’s, the Navy banned lead-based paint…and we use a lot of paint. I’m not afraid to say that one aircraft carrier uses as much paint as a city of 30,000 or more. Yes, people griped about it - but we did just fine thank you very much.

But of course you’re talking about the business world -

And I say it’s time to wake up - the cost of switching to non-lead-based paint is not that great. More of anything it’s griping by the manufacturers because they’ve got to do a little bit of retooling.

And what would be the cost of NOT retooling per the new regulations? Europe and Japan are two of our biggest customers - how would THEY react if our toy manufacturers refused to stop using lead-based paints?

Which costs more? The retooling? Or the loss of customers?

Posted by: Glenn Contrarian at December 24, 2008 12:47 PM
Comment #272794

Lee good article and you make an excellent point. It does seem that once we start to regulate we go overboard on many occasions. I guess it is easy to blame the government for trying to fix the problem and not those that cause the problem in the first place but don’t you think we Americans also tend to insist that the rulemakers over react to these situations lest we think they are not doing their job?

As small business is the real backbone of the Country I think most of us can agree that new regulations take into consideration these smaller ventures and adjust accordingly. That being said I don’t think we should create loopholes for small Chinese businesses to import their toxic junk into this country. Although I have to say I think if we would execute a few CEO’s as the Chinese do for these excesses perhaps we wouldn’t have such a regulation problem ;)

It seems to me it is extremely tough work to craft a regulation that can withstand a corporate lawyer yet serve the intended purpose without unintended consequences. Perhaps the answer lies with those that make the product and/or service and cause the problem. Unfortunately they have proven to many times to be the problem not the solution.

As far as artist and their paints, when you make the work small enough and for toddlers perhaps you could voluntarily use non toxic paints as a way to keep the regulators at bay.

Have a Merry Christmas Lee.

Posted by: j2t2 at December 24, 2008 1:11 PM
Comment #272795

Well, Glenn, you obviously didn’t read the background article.

We’re not talking about people who are resisting switching to safe materials. (at least not among the toy makers) We’re talking about people who use no harmful materials at all, but who could be put out of business simply by the expense of having to jump through the government’s hoops to PROVE they have not used the materials they already didn’t use.

As to my questions about artists, I have actually worried about this over many years. I discontinued the use of flake white in the early eighties, but for some things, strong, bright, permanent yellows, for example, there is not now a good replacement for cadmium colors. One of the major goals of art is permanence (at least if you intend to speak to the future as I do) so the application of a standard drawn from the world of common consumer products could be devastating to the art world.

Posted by: Lee Jamison at December 24, 2008 1:12 PM
Comment #272796


I imagine that the cost basis of chemical testing in China will be as great an advantage to the Chinese as the cost basis of other labor there is.

For the most part small manufacturers in the U.S. get their raw materials from larger suppliers who can reasonably vouch for the fact they don’t put lead in their trees, their bees, their cotton fibers, paints, etc. It should be a simple matter of letting records of this sort of proof suffice for domestic small businesses.

Posted by: Lee Jamison at December 24, 2008 1:21 PM
Comment #272797

Oh, and j2t2, you have a very Merry Christmas as well.

Woops, this comment was just caught in the potential offensive comment filter! O.K. have a acceptable religious annual holiday…

Posted by: Lee Jamison at December 24, 2008 1:25 PM
Comment #272801


And a Merry Christmas to you, and all!!

While this is a difficult question, it behooves the small toymakers to be able to prove that there is no bad material in what they make. If the proof were accepted from the manufacturer of the raw materials that would solve it. Perhaps providing copies of the testing results on the raw materials to the toy maker.

To absolve them from the burden of proof is not acceptable in order to keep our children safe.

Posted by: womanmarine at December 24, 2008 1:51 PM
Comment #272805

Lee, your entire premise is flawed. Just because it is a fact of political life within any government that any, and EVERY, piece of legislation will unavoidably impact some negatively and some positively, in NO WAY warrants abandoning regulation which has a greater positive consequence than the negative consequence it will also engender.

I am not saying that this legislation should not be amended to make it work with less negative consequences. I am saying your implication that regulation is inherently bad because it always affects some negatively, is literally, irrational.

Posted by: David R. Remer at December 24, 2008 2:05 PM
Comment #272827

Lee intended to name this thread, “Miss Regulation”, and have a cheesecake picture with that banner across her chest, but the Watchblog Manager frowned about that ,and Lee had to perform a last minute change…

Posted by: Marysdude at December 24, 2008 8:34 PM
Comment #272831

Lee Jamison-
The real problem is, Republicans typically operate their regulatory efforts mainly for show, for political theater until they can get people off their backs. So, you folks don’t think things out. Why should you? You folks aren’t typically going to want to make a good faith effort towards enforcement. You’re fixers, not regulators.

Unfortunately, you can’t be everybody’s fixer, and some individually beneficial policies might work at cross purposes with other corporation’s, or even the general public’s interests.

Much of the problematic regulations or lack of same over the last few years have come from Bush Administration officials and “business-friendly” members of Congress.

People have to think larger than the special interests. The system can form itself, but it doesn’t always mean it should. Also, we should keep something in mind: people can adapt to legal realities much like they would adapt to other shifts in market conditions. One philsophy in dealing with the markets might be to intercede and intervene in such a way as to create those adaptations in the market, with the market working out solutions Another philosophy is to recognize places where the market simply needs to be given a flat “no”.

Should we approach regulation with just one philosophy of action? No, of course not. We should, however, attempt to have a consistent plan of action, consistent goals concerning what we want to prevent, and what we want to allow.

Posted by: Stephen Daugherty at December 25, 2008 12:02 AM
Comment #272833

In ‘29, the collapse came to an unregulated financial system run amok.

In ‘07/’08, the collapse came to an unregulated financial system run amok.

Between the two collapses, when we had some regulation, even when the regulation may have been faulty, we had controllable ups and downs, but no collapses.

And, you know, we still have folks more worried about regulation than they do about collapse…go figure…

Posted by: Marysdude at December 25, 2008 6:05 AM
Comment #272838

It’s actually not that hard to pick and choose regulations with pervasive, unintended, negative consequences. I agree that this toy testing regulation is onerous and probably almost entirely pointless, other than most likely to drive the ankle-biter competitors of big business out of business.

Notice that in response, instead of perhaps an entrepreneurially-spirited subject matter expert creating a subsidiary to do testing and certification of their raw materials as a service to the mom-n-pops, they formed a political lobbying organization to try to reverse the rules and prevent future ones. I think the lesson in that is that they made the business decision to fight rather than comply; whether that will ultimately turn out to be the best decision or not remains to be seen.

What we should really be asking is “What is it about our system of government that causes this to keep happening?” We can complain (and many in fact do complain) until the cows come home about all the bonehead regulatory moves our elected representatives make and, as we have seen lately, it makes zero difference, maybe even less than zero difference.

But until we do something to correct the root cause, we are engaging in insanity, i.e. “Expecting different results from the the same actions”.

Call me d.a.n. jr. if you like, but it seems the culprits are two:

1) The ability of legislators to hold office indefinitely (i.e. lack of term limits)

2) Unlimited political contributions (i.e. lack of campaign funding limits)

Maybe I’m showing my conservatist streak or maybe merely my political myopia (or maybe they’re exactly the same thing), but to me it seems that we have a lot more “misregulation” lately than, say, 80 to 100 years ago.

For example, let’s take the 2nd Glass-Steagall act a.k.a. the Banking Act of 1933 (I’ll abbreviate as BA1933), 75 years ago. This act (quoting Wikipedia) “…introduced the separation of bank types according to their business (commercial and investment banking), and it founded the Federal Deposit Insurance Company for insuring bank deposits.”

This act I believe was largely responsible for the many years of relative banking stability to which Marysdude refers. But in 1999, the banks decided they couldn’t make enough money with the BA1933 in place and so they bought themselves some legislators and had them pass the Gramm-Leach-Bliley (GLB). About 8-9 years later, the exact scenario which BA1933 was intended to prevent unfolded, bringing us to our current still-unstable economic situation.

So I contend that while it is certainly true, Lee, that the regulation you cite is a misregulation, it is not a valid logical conclusion that all regulations are misregulations. I realize you never said that in so many words but my gut feel tells me that’s the conclusion you’d like us to draw for ourselves.

I imagine that in the debate in Congress, the proponents of GLB derided BA1933 as being outdated and standing in the way of economic progress. Apparently they convinced enough of their colleagues that this was true.

I can’t honestly say for sure, but I have to believe that the legislators who drafted and passed BA1933 were a lot less economically interested in its passing than were their counterparts of GLB. I suspect but cannot prove that the BA1933 legislators were more “temporary public servants” if you will, that their GLB counterparts. Maybe not.

Nevertheless, as I see it, that’s the real problem: lack of money and term limits in our political system. We’ll never correct the “misregulation” problem until we fact up to our money and term limits problem.

Finally, maybe we need to think about how our economy is evolving. Whereas 50 to 100 years ago our economy was almost entirely about making things, today a much larger proportion than back then is about doing things: doing deals and doing services. The sad fact is that while 50-100 years ago, finance was mostly about enabling people to make things, nowadays finance is an end in itself. And when finance goes bust, as it has done now, there’s nothing left like factories, raw materials, parts and equipment that represent the money put into it. At least when and if GM and/or Chrysler go down, there will be some useful hard assets that someone may be able to do something with, compared to say Lehman whose assets really amount to nothing more than (more or less fictional) account entries in their computers - nothing hard you can make anything with.

Posted by: Varsity at December 25, 2008 12:53 PM
Comment #272841

Varsity, the vast majority of the problem in the last 8 years has not been a dearth of regulation, but, the absence of enforcement. Madoff for example, was reported to the SEC on several occasions as running a scam or Ponzi scheme beginning in 1999. Cox has admitted that the SEC simply refused to listen. That is tantamount to having NO INTEREST in enforcing regulations, regardless of the reason.

Flawed regulations exist but, are dwarfed in consequence by the absence of enforcement. Hopefully, that will change abruptly and across the board over the next 12 months with our new president, an office charged with the vast majority of enforcement of regulations and laws. A duty held in pretty low esteem by the current president, who viewed regulations as an obstacle to his supporters and campaign contributors.

Not the case with the incoming President.

Posted by: David R. Remer at December 25, 2008 1:20 PM
Comment #272844

IMO, this regulation is an example of how the politicians compromise to serve their two masters.

The people want the government to regulate and set standards for safe products. The people have the power of the vote.

The corporations don’t want regulation, prefering instead, self-regulation and a buyer beware approach to the market. The corporations provide the money necessary for politicians to influence votes and retain incumbency.

As a result, the politicians provide regulations that allow corporations to recover some of the cost of regulation with an increase in market share as small competitors are unable to meet the costs of regulation and go out of business.

I would like to say that we need a government institution to test all resources and products but, we have seen the creation of a huge government bureaucracy called Homeland Security which cannot do its job because of government resource restrictions on its mandate.

Posted by: jlw at December 25, 2008 2:17 PM
Comment #272845

David Remer is right on about the Bush Administrations adversity to regulate. And, it has been felt in nearly every aspect of our lives. It has resulted in less safe food, less safe drugs, less safe products of all varieties including financial products. This adversity to regulations has been enforced with fewer convictions for wrong doing from tainted dogfood to Wall Street insider trading.

“Not the case with this incoming President.” Hopefully this is true but, the hardest thing to regulate, prosecute and prove is quid pro quo.

Posted by: jlw at December 25, 2008 2:46 PM
Comment #272851

David, I could not agree with you more about the failure to enforce laws by the Bush administration.

But I was trying to address Lee’s contention that seemed to blame poor regulations for most of our problems.

My position is that while it is true that some regulations are bad, not all are.

In fact, some so quietly, unobtrusively go about doing their jobs for decades that people forget about the problems they have solved and bought-and-paid-for politicians seek to undo them thus bringing back the bad old days pre-regulation.

Posted by: Varsity at December 25, 2008 4:33 PM
Comment #272853

I hope the new administration is as eager to enforce immigration and border laws (already on the books) as you believe he will be on import regulations.

“In ‘29, the collapse came to an unregulated financial system run amok.
In ‘07/’08, the collapse came to an unregulated financial system run amok.
Between the two collapses, when we had some regulation, even when the regulation may have been faulty, we had controllable ups and downs, but no collapses.”

At what point in history did the savings and loan fiasco occur?

Posted by: Oldguy at December 25, 2008 5:44 PM
Comment #272854

Ever since the market began to implode, I have seen a constant reference to the Gramm-Leach-Bliley Act. As if this is the reason for all our woes. After this bill was failed to win a 60 vote majority, it went to conference committee to work out differences between the house and senate versions.

“On November 4, the final bill resolving the differences was passed by the Senate 90-8 [7] and by the House 362-57. This legislation was signed into law by Democratic President Bill Clinton on November 12, 1999”.

Therefore, it was a bi-partisan bill. When the collapse of the housing market took place, as a result of Freddie and Fannie, and the blame was put on the GLB act, by the left, it was for the purpose of a cover-up.

Posted by: Oldguy at December 25, 2008 6:15 PM
Comment #272857

Oldguy >Therefore, it was a bi-partisan bill.

I never said it wasn’t. But enactment of GLB and repeal of BA1933 was in fact a major cause of the banking crisis we have been experiencing for the last 2 to 3 months and continue to experience.

Oldguy >When the collapse of the housing market took place, as a result of Freddie and Fannie,
Oldguy >and the blame was put on the GLB act, by the left, it was for the purpose of a cover-up.

No Oldguy, you’re confusing the housing crisis with the banking crisis. GLB was and is a major cause of the banking crisis, i.e. the problem that the $700B Paulson-inspired bank bailout was intended (and so far has failed miserably) to solve. If the commercial banks had been required, as per BA 1933, to maintain separation of their commercial operations and their investment operations, it would have been feasible though painful to let the investment bank operations fail without a taxpayer-funded bailout of the commercial operations.

It had little if anything to do with the housing crisis and I’m unaware of anyone on either the left or right that blames GLB for the housing crisis, especially with regard to any cover-up. Maybe you could provide a little more detail about this alleged cover-up.

If you want to turn this into a partisan p!ssing match, I’m game; “bring ‘em on”, as someone once said. But, as I stated in my original, carefully non-partisan response, the issues raised in Lee’s original post, the repeal of BA1933 and the passage of GLB all have as common root cause our legislators being in the pockets of the highest bidder due to the mechanics of our campaign finance system and the lack of term limits.

Until we face these facts and deal with them, we’re screwed, condemned to experiencing these problems over and over.

Posted by: Varsity at December 25, 2008 9:47 PM
Comment #272858

Oldguy >At what point in history did the savings and loan fiasco occur?

Good point. The S&L fiasco did occur during the 1929-2007 time frame but S&Ls were covered by a different set of rules than the banks, i.e. not BA1933 or GLB. It came to a head in 1992, which was the year Clinton first took office.

In fact, the S&L fiasco occurred not too long after Republican/Conservative loosening of regulations and emasculation of the regulatory bodies during the Reagan and Daddy Bush administrations.

So if you want to be partisan about it, the S&L fiasco was another good example of the perils of poor enforcement and de-regulation, which reinforces Marysdude’s point.

Thanks for bringing that up.

Posted by: Varsity at December 25, 2008 9:54 PM
Comment #272859

I find it remarkable that people on the left keep bringing up GLB only to have people on the left tell them their theories about the law are complete nonsense. No one who was in the Clinton White House when the law was passed gives more than a sniff over this nonsense. The law modernized American law to conform with the banking practices of Europe and was necessitated by the loss of contracts to European banks. You can debate its wisdom if you wish in the light of hindsight but you can’t blame virtually the whole Congress and the president given the limited insights of the times.

One lesson that is being sorely missed on both sides of the aisle is the nature of the recovery from the Great Depression. It was a recovery of the sense of well-being on the part of the middle class. In 1945 it was born, 1. of their assurance they had rebuilt their nation and were strong, 2. that they had recreated a foundation of their own wealth in the form of savings bonds and other forms of savings during a period in which they could not spend on consumer products, and 3. the leaders of the country and of business owed the soldiers and workers who had saved the country a rapid transition to a consumer economy and “normalcy”. Conservative economists are wrong to say the war didn’t end the depression. Liberal economists are wrong to think the transition happened because of spending programs per se.

The war effort put many people to work doing things they never would have learned how to do without the vital effort. It produced a culture of innovation and bravado. When it was over the ordinary people of America weren’t sitting around thinking how much they needed someone to save their asses. They wanted people to point them to the problem and put them to work.

They could do anything- themselves, and they did.

The people today who look down on that generation, who can’t think of what to do without some government agency telling them what to do with themselves, are are thumbsucking fools. We really do only have to fear fear itself.

If government wants to help it should foster an environment in which the great middle of this country works its way up, dealing with real challenges, as that generation did, and develops a pride not based in false assurances of self esteem, but in real accomplishment, hard work, and education.

Posted by: Lee Jamison at December 25, 2008 10:36 PM
Comment #272860


I don’t remember reading your posts on the subject of the housing collapse 3 months ago. But I do remember many outspoken liberals from the blue column blaming the fall of housing market on the GLB Act. Since it was considered to be the reason for de-regulation. I’m sure, if you go back a few months, you will find the same thing.

It’s not good to have thin skin. My reason for pointing out that the GLB was by-partisan is to prove the point that even though republicans introduced the bill, it was a huge by-partisan vote and a democratic president who passed the bill. Therefore, there is no purpose in trying to lay the blame of the Act on republicans.

The housing crisis is the cause of the banking crisis. Democratic leaders, such as Barney Frank and Chris Dodd along with Atorney General Janet Reno, used their positions on banking committees to force banks to make bad loans. In turn Freddie and Fannie bought up every bad loan they could and at the same time showing growth and giving large bonuses to their CEO’s. Democrats are so concerned about golden parachutes for CEO’s of banks and other businesses; why aren’t there cries for investigations into Freddie and Fannie?

The $700+ billion bailout was called for and voted for by democrats, against the wishes of the American people. The money was given to Paulson with absolutely no oversight. In fact Dodd and Franks are trying to get as much of the bailout money as they can pumped right back into the democrat slush fund of affordable housing. Why would the left be upset when the same people who caused the problem are left in charge of the money again? Do you think things will be better the second time around? If the government can’t control bailout money, how do you expect them to control 17% of the countries finances in the form of a national health program?

The S&L was not part of the banking problem and neither was Enron part of AIG or the Madoff fiasco, but I believe there is a common denominator. Whether it is greed or the stupidity of our political leaders, we have a problem and throwing more and more money is only going to make things worse. At what point do you stop bailouts? When the country is broke and we are nothing more than a third world nation? So now, the states are broke and BOH is calling for another trillion in stimulus to bail the states out.

This statement will not be well received, but FDR’s social programs of the great society only prolonged the depression and Lee is correct, it was the war that brought about the end of the depression. It put people to work producing goods to be bought by the military or foreign allies. I consider the jobs that BHO promises to be nothing more than slugs on society. Federal, state, city, and county employees produce nothing. All they do is spend tax money that private enterprise has produced. Government sponsored jobs produce no goods that can be sold, but it does enslave people to be dependent upon government handouts. I realize we must have government employees, but it is for this reason the founding fathers supported limited government.

Don’t cry on the left, you got what you asked for and you’ll get a lot more of it before anything gets better.

Posted by: Oldguy at December 25, 2008 11:58 PM
Comment #272862

“Sure.it sounds like a stupid question. But is it?”

Yes. If you start painting cribs you might consider non-toxics.

Another reason for the post war boom was the de facto world domination of the means of production by the US. Most of the other manufacturing base had been destroyed. America became the dominent power. There are those that suspect FDR of planning this or at least set up the US to take advantage of circumstances to allow the US to become a superpower comparitvely with little loss of blood.

Old Guy
Building and repairing roads and bridges,improving and building new schools and investments in reasearch are far from “slugs” on the economy. The grade school in California where my daughters attended is surrounded by a low retainning wall. That wall was built by the WPA better than sixty years ago and is still working to benefit society by holding up a school. If you look around where ever you live in the continental US you will find bridges,often vital, that were also built by the WPA. You probably drive over them on your way to work. The needs for educational facilities should be self-evident. If you can’t see it then there is no point in trying to convince you.Research? The creation of the internet arose directly from government reasearch. What is being proposed is far from “slugs”.

Posted by: bills at December 26, 2008 1:17 AM
Comment #272865

Oldguy >But I do remember many outspoken liberals from the blue column blaming the fall of housing
Oldguy >market on the GLB Act.

Maybe you have a better memory that I do, but I don’t remember seeing any such thing. So, I challenge you to give one example either on this blog or in the MSM where someone on the left blamed the housing crisis on GLB. I’m not saying it didn’t happen, but I sure don’t remember it.

Oldguy >Since it was considered to be the reason for de-regulation.

No, GLB wasn’t the reason for de-regulation; GLB WAS de-regulation. It allowed commercial and investment bank operations to be combined in one organization and resulted in the increased severity of the banking crisis; had it not been for the combining of commercial and investment bank operations as a direct result of repeal of BS1933 and enactment of GLB, the $700B bank bailout would not have been required.

Oldguy >Therefore, there is no purpose in trying to lay the blame of the Act on republicans.

Go back to my original post on this subject and quote the part where I “lay the blame of the Act on republicans”. You can’t do it because there’s nothing like that in there. Maybe you should take your own advice about thin skin.

Oldguy >The housing crisis is the cause of the banking crisis.

I agree that the housing crisis was *A* factor in causing the banking crisis, but not THE cause. Had it not been for GLB, the banking crisis would have been much less severe and it would not have affected the entire banking system such at it has now. The main difference would have been that the commercial credit markets would not have seized up like it did, resulting in the need for the $700B bailout.

Oldguy >The $700+ billion bailout was called for and voted for by democrats

The bailout was called for by Bush, Bernanke and most of all Paulson, not by any Democrat. It was voted for by many Democrats but also by many Republicans. The Democrats couldn’t pass it all by themselves. Finally it was signed by Bush, a Republican. Why is it when I mention a piece of legislation like GLB you’re falling all over yourself calling it BI-partisan, but when you bring up the bailout, you conveniently forget that it, too, was BI-partisan?

Oldguy >Don’t cry on the left

I’m not “on the left”. But the left didn’t ask for the de-regulation that was GLB. The left didn’t ask for the bail-out, the right did. The right has always been in favor of big business and against regulation, so why are you now trying to blame the left for these things that the right has always wanted?

What I’ve noticed about you “on the right” is that you’re all for big business, you’re all for less regulation and you’re all for cutting taxes but not cutting government spending. Then when you get all these things, such as you have gotten from Bush and his cronies, and it all falls apart, you blame the left. Why is that?

The banking crisis and the housing crisis is a direct result of the things the right has demanded and gotten from Bush these last 8 years, but now you want to blame the left for it. The only fault of the left in this is that they didn’t push back against the excesses of the last 8 years more than they did.

Posted by: Varsity at December 26, 2008 8:34 AM
Comment #272866


There was, in fact a great deal of industrial devastation in the rest of the world, most notably in the former Axis powers of course, but what we sent to those parts of the world didn’t represent a net economic gain to us. Think about it. Truman truly did learn the lessons of Wilson’s failures and took on a massive and extremely costly rebuilding project in both Japan, which we did essentially on our own, and in Germany, which we shared with the other Allies. The Berlin Airlift was a huge cost.

Yes we did hold a tremendous manufacturing advantage over the rest of the world. That was also true DURING the Depression, though. It was one of the things Yamamoto attempted to use as a reason to dissuade the War Party in Japan from engaging us in a war. Our industrial advantage in the fifties, though, ten years after the war and after Europe had been essentially restored to more than pre-war status and West Germany and Japan were again free standing nations, was so great that the U.S. burned considerably more than half the fossil fuels used on Earth.

That prosperity was not a product of a contrast with the rest of the world. It was made at home.
My family’s Volkswagen, purchased in 1958, was one of the very few imported things we owned (it was actually built in Mexico). The radios, mixer, record player, air conditioner, and other things were all made in America.

Posted by: Lee Jamison at December 26, 2008 8:51 AM
Comment #272867


I will go back and find the info from a few months ago, if I have time, but I don’t think it would prove anything. The left would simply deny they even said it.

The GLB was used by the left to prove deregulation led to the housing market failure. I did not say this; the left did when discussion was about Freddie and Fannie. Unless you were going by a different name, I don’t remember any posts from you concerning this subject.

It is true that Bush called for the bailout, just as he has called for the big three bailout, but he did it over the protests of about 65% of the American people. Just because Bush wanted this bailout, it doesn’t mean we all fell in lockstep with him. There were many republican senators and congressman who lost support of their constituents because they wanted the bailout and ultimately it caused them to loose elections. The democrats jumped all over this bailout because it would put taxpayers money in their hands for slush funds.

The democrats along with Bush also pushed for billions more to bailout the auto industry and when that failed, Bush again, went against his own people by promising a bailout from the $700 billion. BHO’s people along with Harry Reid and Pelosie wanted to pass an additional trillion-stimulus package to be on BHO’s desk when he was sworn in and that would have also been blamed on the republicans when it failed.


Highway taxes and fuel taxes are supposed to pay for infrastructure, including bridges and highways. But the left can’t have their cake and eat it too. You want to shut down the use of fossil fuels, cut drilling, and drive electric cars. When this happens, the result is loss of tax revenue, thus, loss of infrastructure money. As a result of this, California is proposing new tax increases for gas. This is punishing people for cutting back their usage.

Now when the government starts jobs and tax money is used to pay their salaries, what money is put back into the coffers of the government? I see money going out and nothing coming in. My point is that the larger the government, the more money that is paid out and we get nothing in return for our investment. Once you start down that road of government welfare, there is no incentive to turn around. Federal, state, and city employees not only receive good pay and benefits, but also retire early with the best retirement and health care that taxpayer money can buy. And they do it after 20 to 25 years of service. What private enterprise can do this?

Posted by: Oldguy at December 26, 2008 10:39 AM
Comment #272869

Lee Jamison-
Gramm Leach Bliley essentially opened the door to greater consolidation up and across the finance industry, tearing down the firewalls that would have contained the collapse in the housing sector.

Anti-trust laws serve similar purposes, disallow similar races to the bottom.

I don’t think Americans have declined in their virtues as much as the press likes to say. I don’t think Americans of times before had the options in credit and loans that folks now do (or did) American simply never got use to financial responsibility in that kind of environment. Sometimes circumstances make austerity easier. A war, for example.

If you ask me, one problem over the last few years has been the gearing of economic policy towards absolute mitigation of economic downturns. On a micro and macro level, nobody can keep up growth forever. You can gear the system to where it grows more than it contracts, but sooner or later, batteries have to recharge, people have to resolve debts, winners have to be sorted out from losers. The trick is managing this process to where it doesn’t get out of hand.

Needless to say, the Republicans have let things get badly out of hand. You could say, in fact, that your folks have a track record on this issue. Bond Market Collapse in 1987, the S+L crisis in the late 80’s, early 90’s, The late 90’s early 00’s saw the dot-com bust, the early part of this decade The Enron scandals and attendant company collapses and accounting scandals, and finally the housing market collapse and the subsequent credit crunch.

Republicans have had plenty of chances to vindicate their view of how the market economy should be run and prove the Democratic Party’s thesis of the need for tough regulation and disciplined enforcement wrong. It’s time to take the hint, as Republicans did long ago: Americans want markets that function and do not collapse in ruin.

The current regulations have allowed a culture of speculation, where people are more interested in playing numbers games with stocks than with actual productive behavior, more interested in resisting regulation and moderation than making compliance economic and efficient.

It’s allowed critical, important sectors of our economy to go overseas, making America far more dependent on foreign powers than it should be, for the sake of its national and economic security. I mean, what happens if some natural disaster or civil unrest in China takes out its cheap manufacturing base? Or even, what happens if they succeed in becoming an environmentally green, efficient society ahead of us?

We’ve got some catching up to do, and some responsbilities to take up once more.

Posted by: Stephen Daugherty at December 26, 2008 12:01 PM
Comment #272872

When will we see “the Democratic Party’s thesis of the need for tough regulation and disiplined enforcement” put into action?

For instance, does anyone really believe that the Obama Administration or the Democratic Congress has any intentions of repealing the Gramm Leach Bliley Financial Services Modernization Act?

Posted by: jlw at December 26, 2008 3:02 PM
Comment #272874

I would be surprised if they didn’t do something. Put another way: who wants to blamed for the next collapse, or tagged as an opponent to the regulation of Wall Street? to paraphrase Bill, the era of Small Government is over.

I know you don’t believe anybody’s going to do anything, but that’s your opinion.

Posted by: Stephen Daugherty at December 26, 2008 4:04 PM
Comment #272877


“The current regulations have allowed a culture of speculation, where people are more interested in playing numbers games with stocks than with actual productive behavior, more interested in resisting regulation and moderation than making compliance economic and efficient.”

Don’t you think internet access to stock trades have helped to exasperate this problem?

Posted by: Oldguy at December 26, 2008 6:27 PM
Comment #272879


It only took me a few minutes of research to come up with a post in the blue column called “From ‘Mortgage Crisis’ to ‘Economic Meltdown’” posted on 9/19/2008 by Rowan Wolf.

The article begins with the Mortgage meltdown, which leads to the banking meltdown. And deregulation is named as the cause of the problem. phx8 went so far as to name the GLB Act as the root of the problem.

Now, if you want to read the entire post, you will find liberal’s blaming the GLB for the entire deregulation and the failure of Freddie and Fannie.

This is only one article out of many which say the same thing.

“Maybe you have a better memory that I do, but I don’t remember seeing any such thing. So, I challenge you to give one example either on this blog or in the MSM where someone on the left blamed the housing crisis on GLB. I’m not saying it didn’t happen, but I sure don’t remember it.”

So in answer to your challenge I present this article.

Posted by: Oldguy at December 26, 2008 11:51 PM
Comment #272881

I would say internet stock trading, by itself, would have just impoverished the fools among its users more quickly. It may add a little volatility, but if you look at the problems over the last decade, daytraders are not the major problems.

The biggest problem is a lack of good, meaningful information that can be trusted as a basis for making decisions. Whether it’s a lousy credit rating that gets laundered into a sterling one, a massive shell-game of an accounting scheme at a company, or the use of derivatives to camoflauge exessive leveraging.

If you don’t know about the conditions of the market and those within it, only sheer luck can keep the disasters from occurring. But only the law can uniformly compell disclosure.

Posted by: Stephen Daugherty at December 27, 2008 12:53 AM
Comment #272894


I’ve tried on numerous postings to make a case for:

Even bad mortgages had value, and as long as debt has value, as in the bad mortgages held by Freddie and Fannie, and others, the economy could have survived. It was NOT the bad mortgages that caused the meltdown…period. Bad mortgages were only a contributing factor.

I’ve tried to explain that GLB caused the collapse, because the buy up and bundling of those bad mortgages lost sight of their VALUE. In the rarefied atmosphere of high finance the big banks were trading in hot air, and AIG was insuring them against failure without knowing the VALUE, and without the resources to cover the losses when they occurred. GLB allowed that to happen, because it tore down oversight walls, and allowed banks and insurance companies to grow so large they became too big to fail.

Old, Lee, and many on the right still want to blame Joe Poophead Ragman, who paid too much for a house and could not keep his commitment, for the collapse of our entire economy. And when that doesn’t work, they blame Clinton or FDR…pathetic…

Posted by: Marysdude at December 27, 2008 10:02 PM
Comment #272899

I think you deny the housing market being to root cause of the economic problems because of the democratic involvement in protecting Fannie and Freddie. These two organizations were nothing more than slush funds for the democrats to use for the purpose of buying votes.


So, whose fault is it if I max out half a dozen credit cards? I think the major difference between liberals and conservatives is responsibility. We believe in personal responsibility and the left does not. From school student’s bad grades, to criminals in prison, to teen pregnancies, and now to not being responsible for ones own financial status. It’s always someone else’s fault. I grew up and was taught the principle; if you can’t afford it, don’t buy it. This is only part of the problem. The rest, is people are given so much, they have no sense of ownership. If they loose the house, who cares, they had nothing invested in it.

Posted by: Oldguy at December 28, 2008 7:04 AM
Comment #272903

We have seen, time and again, that manufacturers and other corporations will not do anything to protect consumers unless there is a requirement for it. In fact, they will deceive the consumer. History bears this out. The ultimate outcome of capitalism is for any given company to put all of their competitors out of business, thus ending up as the only one remaining. This is not done by altruism and self-regulating. It’s done by vicious, cut-throat methods of competition, often at the detriment of consumers.
Regulation is needed, and it needs to be strict and well-watched. If we don’t have it, then we’ll continue to see the corporate sector lay waste to our world.

Posted by: Seatech1 at December 28, 2008 11:18 AM
Comment #272904

Just because a lot of people you trust repeat that BS doesn’t make it true.

Your assumption is that banks were lending because they were forced to by regulation. Out of the top 25 lenders, though, only one was solidly covered by the Community Reinvestment Act, which was essentially a measure to make sure that minorities and their neighborhoods wouldn’t get cut out of home loans.

Your assumption is that these minorities and their neighborhoods would be greater credit risks. They weren’t. CRA lending actually did better than average on defaults. Minority does not means stupid. It does not mean irresponsible. It does not mean bad with money.

Your assumption is that the GSMs were leading actors in the collapse. The reality is, they were losing market share.

Your assumption is that the GSMs were buying up bad mortgages. By law, though, they could not scrape the bottom of the barrel of credit risks. They were forced to maintain certain standards as to what loans they bought up.

Private mortgage lenders neither had the regulatory burden nor the scruples that would prevent them from engaging in predatory lending.

You’re acting like the credit markets were fine before the secondary mortgage market came along. One problem, though: the market’s been around for decades, has been the basis for widespread home ownership. Secondary mortgage markets are not the problem themselves.

Here’s the problem: credit markets have been allowed to become predatory. However, there are natural limits to that: namely that you run out of money to lend, and of course you’re left holding the bag on the money you lent out. Secondary mortgage markets provide a way out, but there’s a problem, another natural limit: that is, who’s going to buy a bad mortgage? Well, you might, if you didn’t know what you were buying. A system was created that allowed people to endlessly pass on the bad debt. This also allowed credit card companies to permanently endebt a huge portion of the population without having to admit that it was very unlikely that all that debt would be paid back.

Look at events, as they have happened. If this was purely about mortgages, why the credit crunch? Why are credit card companies suddenly becoming more choosy? What has happened is that the system for offloading good debts and bad alike has broken down.

What makes that more of a problem is that this is the system that conservatives deliberately made us more dependent on. I mean, how do you keep an economy growing when people’s incomes remain stagnant, when the cost of nearly everything that matters has been going up for the last thirty years?

Credit, and lots of it.

If you want to encourage people to pay with cash, from what they have, to manage their money, then don’t deliberately create a system where they really have no other choice but to take on debt in order to maintain, much less improve their standards of living.

Posted by: Stephen Daugherty at December 28, 2008 11:23 AM
Comment #272907


It is not my assumption that banks were forced to lend because of regulations, they were forced to lend because ofSD

It is not my assumption that banks were forced to lend because of regulations, they were forced to lend because of threats; threats by Attorney General Janet Reno and others. Why would a bank, loan money with no proof of income, or better yet why would a bank not be allowed to turn down a loan because the proof of income was a canceled welfare check?

The key word was “Affordable Housing” and it is still a secret word that is being thrown around by Dodd and Frank. All you have to do is listen. Frank is still calling for part of the $700 billion to pay off the property that was bought be people who could not afford it.


Just because a lot of people you trust repeat that BS doesn’t make it true.

The left continues to repeat the housing market had nothing to do with the economic meltdown. I might make the same statement to you.
threats. Threats by Attorny General Janet Reno and others. Why would a bank loan money with no proof of income, or better yet why would a bank not be allowed to turn down a loan because the proof of income was a cancled welfare check?

Posted by: Oldguy at December 28, 2008 1:05 PM
Comment #272913

> Why would a bank loan money with no proof of income,
Posted by: Oldguy at December 28, 2008 01:05 PM


Mostly because they could unload those bad loans upward…what in the world do you think we’ve been talking about here. No one had to worry about making a bad loan or mortgage because they could pass it along…guess why…GLB…no regulation on size, no oversight on bad debt, no limit to dishonesty, because of GLB…our economic free fall, because of GLB…period. It was not Joe Blow’s fault, he merely contributed the signature on the bad paper.

Give me the citation on Reno telling a bank it HAD to provide mortgage money to Joe Blow.

Lowering requirements for debt encouraged bad loans, but BAD DEBT STILL HAS VALUE. When there is no value, there is NO ECONOMY! Value was lost in the stratosphere of high finance, which was brought on by GLB! No value…no economy…one, two, three…a, b, c…I can’t make it any simpler for you…if you don’t understand it this time…oh, well…

Posted by: Marysdude at December 28, 2008 6:16 PM
Comment #272919


I put this into the left column by mistake, so I’ll just paste it here too. Now you know why you may see a double entry…

>Take a look at the words of Cheney/Bush’s first Sec Of Treasury, Snow:

>And both Mr. Paulson and his predecessor, John W. Snow, say the housing push went too far.

“The Bush administration took a lot of pride that homeownership had reached historic highs,” Mr. Snow said in an interview. “But what we forgot in the process was that it has to be done in the context of people being able to afford their house. We now realize there was a high cost.”

I know you’ve got a lot to say about Reno, but…but…but…

Posted by: Marysdude at December 28, 2008 9:44 PM
Comment #272928


It really gets ‘old’, writing the same thing over and over, and over, and over…you give me reference to Democrats who were proponent of high risk loans…I give you reference to Republicans who say they took their eye off the ball about bad mortgages…blah…blah…blah.

You completely lose sight of the real issue, because you only want to play nanynyanynyana. Even bad debt has marketable value, it CANNOT bring down an economic system. It is the loss of VALUE that brings down an economic system, and it does so because without VALUE, there is NO economy.

Posted by: Marysdude at December 29, 2008 7:21 AM
Comment #272930

This is called a stalemate. I’ll admit I don’t know crap about the issue, if you will too.

I guess we’ll have to wait and see how much damage further bailouts will cause, along with the latest BHO plan to raise taxes on the middleclass. Seems like he is bailing out on all the promises he made to the left.

Posted by: Oldguy at December 29, 2008 7:51 AM
Comment #272933

Oldguy states “I guess we’ll have to wait and see how much damage further bailouts will cause, along with the latest BHO plan to raise taxes on the middleclass. Seems like he is bailing out on all the promises he made to the left.”


“Reporting from Washington — President-elect Barack Obama’s top advisors said Sunday that they wouldn’t back away from a promise to cut taxes on the middle class and raise them for the wealthiest Americans, as they made the case for a massive new stimulus package geared toward reviving the slumping economy.”

Oldguy just so you know the middle class and poor have absorbed the lions share of the tax burden since Reagan started “cutting” taxes in the early ‘80’s. Taxing the middle class while excusing corporations and the moneyed elite is a hallmark of conservative principles.

Posted by: j2t2 at December 29, 2008 12:00 PM
Comment #272935

You’re repeating what others said about whose fault this is. Those others, I believe, are speaking from ignorance, or just plain lying to you. It’s easy to start making claims about what somebody will do, or what has happened without knowing what you’re talking about.

Obama has made no indication that he’s going to raise taxes on the middle class. He’s even eased back on the tax cuts for the rich, which he’ll simply let lapse, rather than attempt an immediate repeal. I know what you expect of Democrats, but expectations do not equal actual actions. If they did, the Bush Administration would have cut spending, maintained the surplus, won the war, found the WMDs, and generally won the day.

And despite all the rhetoric from the right, the problem was never the loans, but the leverage.

You know what the real problem is like? Its like running a whole line of cars ten feet apart at 200 miles per hour, and then having the lead car slam on its brakes. As long as every car is going at the same speed, there’s no problem, you could run those cars indefinitely like that.

The basic business model was sound: originate a new mortgage. Costs money, but you get it back with interest. Then sell that mortgage off to folks who package it with others, and sell it to still others. Even there, it could be sound, so long as people were willing to pay for the product.

But, of course, it all depends on the quality of the mortgage. A bad mortgage won’t sell as readily as a good mortgage. The logical, sensible thing to do would be to make sure all your mortgages are good.

The corporations didn’t do the logical, sensible thing. They took shortcuts. Many companies went out and actually sought people who couldn’t be counted on to pay back their loans.

The reasons to do this could be so they could mark up late fees and interest charges as additional potential profits; permanently endebting people also has the advantage of making sure that people are paying you interest and other charges forever. Folks are actually called deadbeats in the credit card industry for paying their debts in full and on time. People are encouraged by multiple incentives to remain indebted.

Another reason to seek out bad loans would be to essentially create financial instruments out of them, after you’ve laundered their credit ratings.

The cars closely following each other are the loans. When somebody hits the brakes in the first car, everybody else either has to get out of the way or join the pileup. It’s a lot easier if you’re not playing things on the margin.

What enabled that margin was the secondary credit market. The main function of the housing market collapse was to disrupt the credit market’s ability to convert definite liabilities on the balance sheets into ostensibly positive assets. It froze people up on the credit markets, made them supremely uncertain as to what their assets in that market, if you could call them assets at all, were worth.

Bubble happen from time to time in the economy; the market isn’t perfect, people overvalue and undervalue. The severity of the bubbles is the issue here.

One of the major drivers of this economic collapse was predatory lending: making loans to folks you know are likely to default in order to expand your market beyond the folks with good credit. But another driver was the speculative ballooning of home prices, one aided by the lack of restrictions on predatory lending.

Our government, left, right, or whatever, enabled much of that predatory lending with executive orders and lending laws making it easier to loan in this fashion. They also made it easier by allowing certain lenders to act like banks without being subject to the requirements of banks (like having cash on hand, for example.) Ironically enough, the CRA, the piece of regulation often blamed by Republicans for this fiasco was inapplicable to most of the banks responsible for the bad loans. It really could not have been the strong influence claimed by Republicans.

Similar restrictions on Fannie Mae and Freddie Mac prevented them from buying up those bad loans. One important thing to keep in mind is that those two companies only operated in the secondary market- that is, they would buy up loans so that other Mortgagors could lend to other mortgagees. Republicans like to blame them because they have the smell of government intervention on them, and that makes them an easy rhetorical target to rabble rouse around.

The reality was, their market share was shrinking in the secondary market. The fastest growing part of this fast-growing market was completely private, and mostly not regulated like the banks.

The banks encouraged such inflation of loan value and downplaying of the risk, because it improved what they could sell in the secondary market, markets they did their best to leave unregulated.

The whole system depended on people not realizing that they were investing in crap, a deliberate deception of the rest of the market to increase profits. If people were given some warning that too much leverage was being employed, or if a limit had simply been set and enforced on it, we wouldn’t have a problem here.

Instead, we have a credit market crippled by folk’s inability to figure out how much the instruments are worth. Without that information, the rational response is to simply freeze up, neither buy nor sell, but hold.

We’ve given these people the opportunity to regulate themselves, and they’ve failed miserably. Worse yet, they’ve taken down a huge part of the economy with them. Without good regulation, we see this kind of chaos, this kind of inability of the market to anticipate or prevent this kind of exploding uncertainty.

I believe the market system requires good rules, effective rules, in order to function properly. It requires an system that, in its official capacity, discourages irresponsible and deceptive behavior that is self destructive to the economy.

Posted by: Stephen Daugherty at December 29, 2008 12:21 PM
Comment #272937


I don’t know about you, but I received a significant tax reduction from the Bush tax cut. If BHO allows the Bush tax cut to laps, I would call that a tax increase for me and I consider myself middleclass. I have to respectfully disagree with who pays the “lions share” of taxes.


“You’re repeating what others said about whose fault this is. Those others, I believe, are speaking from ignorance, or just plain lying to you. It’s easy to start making claims about what somebody will do, or what has happened without knowing what you’re talking about.”

So you tell me I shouldn’t believe anything I hear from the right, but I should believe you because everyone else is ignorant, but you know the truth? I’m having a little problem with this logic. In fact, this link I am providing seems to be able to back up everything they say with documented evidence:


Posted by: Oldguy at December 29, 2008 2:13 PM
Comment #272940

This is the lede from my blog entry that I linked to above, the one entitled 84, 83, 24, or Why the Fannie Mae Charge is a lie. It explains what the title means.

84 is the percent of subprime mortgages privately originated in 2006. 83 is the percent of subprime loans originated for middle and low income homeowner by private lenders. 24 is the number out of 25 of the top subprime lenders that year that were not fully subject to the Community Reinvestment Act, the scapegoat thrown out there by Republicans who stil haven’t learned their lesson, and who misrepresent the true source of the Mortgage Meltdown: An overheated private mortgage market.

The market share should tell you everything you need to know. I regularly check a site called Eschaton. Real snarky liberal, but also an economist by trade. He was on this in Sept of last year, months before the dominoes really began to fall. Who were the first to fail? Not Fannie Mae or Freddie Mac, but Countrywide, and private lenders like them, folks who were barely covered, if covered at all under the CRA.

They were outcompeting their rivals among the GSE, rivals who formerly had the majority of loans in the secondary market. They were the ones originating the actual loans to begin with, since the FMs were purely buyers of loans, not maker of loans themselves.

Ask yourself, if private lenders were not primarily responsible for the mess, why places like Bear Stearns and Goldman Sachs got hit so hard. These people should be clear of the mess, if the only problem was bad loans.

But it was more than that.

How could so many bad loans be made? The answer of the folks you link to is that they were forced to make loans to minorities with bad credit. But that answer is contradicted by the facts, which indicated most of the lenders in that market were not really effected by the law. If they were not affected by the law for the most part, it should have been easy for them to wiggle out of this, in favor of a more conservative approach.

The trick is, that’s not what they did, or wanted to do! They intentionally increased the risks, intentionally sought out riskier markets. They got the government to rollback state laws that were getting in the way of their predatory loan practices, using an obscure provision of the law from the civil war era.

So, the better answer to the question would be, “They were allowed to engage legally and illegally in deceptive and byzantine practices that prevented the market, their investors, and sometimes even themselves, from properly reacting, in a timely fashion, to their bad business practices.”

Or, the folks who ran the business got too clever in juggling the numbers by half. All the mortgages did was provide something in the real world that forced a reckoning among these people for their overly complicated and opaque numbers game. If it hadn’t been for the mortgage meltdown, it might have been something else.

The only necessary element to all this was that the values of some kind of securitized debt be thrown into question. It might have been credit cards, or the failure of some hedge fund or something else.

I think one of things that influenced policy was the political resistance of the Bush Administration to wanting to admit any kind of economic downturn. For years on end, real estate was effectively the bright spot, the housing starts holding up things. The Regulatory framework was set up to encourage the bubble to rise higher, last longer. That’s how Wall Street firms were making a great deal of their money: selling the mortgage securities, selling the CDSs, CDOs and other derivatives.

It all worked well, so long as somebody was buying. The mortgage meltdown stopped people from buying. All of a sudden, people stopped buying in the secondary market, freezing up credit processes that had become dependent on it. That’s why you’re seeing companies that were otherwise doing relatively well suddenly going into bankruptcy and out of business. That’s why Credit Card Companies are suddenly clamping down on who they give a card to.

Our economy has been running like a line of cars on a freeway going a hundred miles an hour, spaced ten feet apart. As long as the formation was tight and working together, it all worked. But when the lead cars started slamming on the brakes, the back cars had two choices: get out of the line, or join the pile-up, because nobody left room for error.

We’ve been encouraging this lack of room for error for quite some time now. It’s supposedly “efficient”. What it was, in fact, was expedient.

I think we should consider the difference between the two: some ways of cutting costs merely lead to other costs and other hazards of doing business. Sure, you might save money cutting R+D, but you might miss out on making the next big product, an outcome which could hardly be called efficient. Same thing with certain kinds of downsizing, benefit cuts, and so on and so forth.

We’ve been making the assumption that the people running this market have been wise and smart, but that judgment hardly holds up now. We’ve set up a system that seems to mire us in debt, reduce our flexibility, and overpower our ability to discern the true state of things.

I’ve got a conservative streak in me, but my sense of conservatism is one of preserving and promoting virtues, rather than the status quo of business, or the state of law as it was in some past age. I think we have to consider what it is we want to encourage and discourage in business. I think we have to consider what we want the end result of the interaction of policy and market to be, and what we don’t want it to be.

Posted by: Stephen Daugherty at December 29, 2008 4:19 PM
Comment #272945

Off subject, the Associated Press wrote today;

“There were also hints from China the government could go on a crude-buying spree to take advantage of prices below $40 a barrel. A senior government official writing in the People’s Daily said China wants to increase its oil reserves to cushion supply shocks that it believes are inevitable.
China is encouraging companies to use all spare petroleum storage capacity to take advantage of the current low prices, the official said.
Asia’s biggest refiner, the state-owned China Petroleum & Chemical Corp., recently completed construction of its largest storage project, a 38-tank facility with a total capacity of 32.4 million barrels.”

A week or so ago I posted a link to an article that suggested the U.S. begin buying up oil and storing it in empty tanks or in pumped out oil wells. Some were very critical of this idea. It looks as though the Chinese don’t think it’s such a bad idea. Any new thoughts by anyone?

Posted by: Jim M at December 29, 2008 7:14 PM
Comment #272946

OK Jim M I’ll bite.
Boy you sure have to give them communist a hand for thinking ahead don’t you? Of course they are flush with cash and can actually do something like you suggest. To bad we have been led by starve the beast conservatives the past 8 years and have only debt to show for it. Do you think China will lend us the money to buy up some cheap oil? If not how would you propose that we pay for this oil?

One suggestion could be to consider storage tanks as infrastructure and start building some with the stimulus money. Of course that doesn’t fill them with oil does it, but maybe the next time around we will be ready for it.

Seems we will have to rely upon the big oil companies and speculators than made the billions on the ‘08 oil bubble for what you are suggesting. I’m sure they will be fair when … oh wait that doesn’t serve their best interest does it.

Posted by: j2t2 at December 29, 2008 7:37 PM
Comment #272953

Jim M

We could never stockpile oil because it would destroy the ultimate goal of crippling our nation. How can we be expected to mount sails or solar panels to our cars if we are not out of oil? You see, we must not drill and we must not store. Although, it would be interesting to find out how much oil we could buy with the latest trillion-dollar bailout proposal by BHO. I’m sure the money would be better served bailing out states and democratic governors.

It’s pretty bad when communist leaders think further ahead than democratic politicians. Makes you wonder which one actually has their nations best interest at hand.

Posted by: Oldguy at December 30, 2008 8:54 AM
Comment #272959

J2T2 writes; “One suggestion could be to consider storage tanks as infrastructure and start building some with the stimulus money. Of course that doesn’t fill them with oil does it, but maybe the next time around we will be ready for it.”

I know it’s a stretch for some folks, but, unlike China, we do have many empty oil wells perfectly capable of holding oil again. Storage is not a problem and neither is the money to pay for the oil. We are being told that we can spend billions or trillions of dollars on all sorts of pork and government make-work. We have spent huge sums of money already and now hold equity positions in banks, insurance companies, financial entities and soon…automobile factories. And, we are being told that these are investments that can and should produce profitable returns to the taxpayers.

Is it impossible to imagine that purchasing and stockpiling huge amounts of crude, at fire-sale prices, could not be used to stabilize energy prices here in the U.S. when the price of oil once again goes orbital?

Recently, I heard calls from leading democrats and others to tap into our strategic oil reserve to help offset high oil prices. If it made sense a few short months ago, would it not make sense in the future? And, imagine the return on investment for the American taxpayer to purchase oil at $40 a barrel and sell it for $150 a barrel. My goodness j2t2, there may be enough profit in this deal to pay for NHC.

The old adage in stocks…”buy low and sell high” makes perfect sense with the only problem being timing. Now is the time to buy and store oil. Like gold, it will never be worthless and could just possibly be the best investment this country ever made.

Put aside your hatred of conservatives and the Republican President George Bush and for once, think about American self-interest and our future. There is nothing un-American about being a shrewd trader or about thinking of our future needs.

Posted by: Jim M at December 30, 2008 12:52 PM
Comment #272961

Jim M., now is the time for who to buy and store oil in empty oil well?

If the oil companies thought it was a good or profitable thing to do, they would be doing it. You have to expend the energy necessary to get the oil out of the ground twice. It also calls for looking furthur down the road than next years profit margins, so it doesn’t comply with current business models.

I can’t believe that you think the government should do this, that’s communism isn’t it? If you are saying that the communists Chinese can do it, our government can to, I agree completely, I would love to see energy nationalized, not for profit.

If, over the next twenty years, we were to replace every auto in America with electric cars and a national highway charging grid, the children born from this point on will never miss the internal combustion engine. It has been around for more than a century and it is time for technology to replace it.

We need to spend money on our deteriorating infrastructure. Obama should concentrate on bridges and dams while our best electrical scientists and engineers compete to develop a highway grid system capable of providing electricity on demand to cars and trucks in a safe manner. Then we can incorporate this system into the interstate highways, the U. S. highways, state highways and possibly a few county roads where necessary if some people live more than battery distance from the highway grid. The revenue collected could be used to maintain the infrastructure.

IMO, we have the technological ability to build such a system and it will be less expensive in the long run. Electric vehicles should be less expensive to maintain and the cost of building additional electrical generating capacity will be more than offset by the cost of drilling, extracting, refining and transporting oil and oil products, all of which are added to the cost at the pump.

Of course, those who choose to do so can still mount solar pannels and sails on their vehicles and drive to the museum to see internal combustion engines.

We need to preserve some oil for future generations, they may need it for something other than fuel.

Posted by: jlw at December 30, 2008 2:35 PM
Comment #272964

jlw responded to me by writing; “If the oil companies thought it was a good or profitable thing to do, they would be doing it.”

Oh right, just as farmers or auto makers purchase their own products when prices are too low. Your suggestion is silly as oil companies cut back on production when prices are too low just as OPEC is doing right now. You may not know this jlw, but oil has a long shelf-life and it won’t spoil being restored in dry American oil wells.

Sorry jlw that you don’t appreciate the difference between drilling for oil and storage of oil. Have you ever heard of the Strategic Petroleum Reserve? All I am suggesting is that it be expanded. “Strategic” is not a difficult word to understand and can apply to many different emergency situations.

jlw also writes; “Electric vehicles should be less expensive to maintain and the cost of building additional electrical generating capacity will be more than offset by the cost of drilling, extracting, refining and transporting oil and oil products, all of which are added to the cost at the pump.”

How are you proposing to generate this additional electrical capacity? Nuclear, coal, natural gas, or what. I believe coal now accounts for about 1/4 of electrical capacity. Your magical thinking concerning electric power grid highways is a few quadrillion dollars and light years away from practical reality. I live in the real world and need transportation today and tomorrow. Oil does just fine for that and will do so until the new energy is ready, in sufficient amounts and at a competitive cost to replace it. Until then, the sensible course of action is to make certain that we have an ample and cheap supply of oil.

There will never be a better time to buy up surplus oil and store it for later use

Posted by: Jim M at December 30, 2008 5:08 PM
Comment #272978


The left doesn’t care about the difference between drilling and storage, they just hate oil and are willing to absolutly cripple our country and turn us into a third world nation in order to accomplish their goal.

If the oil companies did buy oil low and hold it until the price rose, which is what profit seeking companies do, they would again be attacked for gouging the american people gaining obscene profits. It’s a no win situation.

Posted by: Oldguy at December 31, 2008 9:26 AM
Comment #272984

Well Jim M and Oldguy it seems you have been able to vent on the left a bit.

Jim M. to have such a socialistic idea as nationalized oil coming from you makes me believe their is hope for us all. This flexibility in thinking by those on the right is a good sign for this country.

The strategic oil reserve is primarily, if I am not mistaken, for military use. To see it expanded for lower consumer costs of oil by borrowing and printing more money may not make as much sense as it would appear. However I am sure our wise and esteemed representatives in Congress will use this as a negotiation tool, if nothing else, in future bills.

So if we store it in the same places we drilled to get oil to begin with how much will it raise the cost of $40 barrel oil to transport it to these locations, pump it in and then eventually pump it back out of the ground while paying for securing and leasing the sites back from the drilling companies as well as interest on the borrowed money to foreign investors? It still may be a good deal but it will need to be thought out a bit more don’t you think? Do you think King Abdullah will allow Bush to do anything like this?

I am not against this idea be it a repub and or conservative idea or not Jim M., In fact it is superior to the drill baby drill nonsense as a solution to the problem emanating from the right this past few months. Can we afford it after the bi partisan doling out of billions of dollars to the financial sector, the oil war spending and other abuses of the past 8 years?

Oldguy your misunderstanding and subsequent misleading rhetoric regarding the left illustrates a profound ignorance in the reasons people think different politically than yourself. Further it serves to illuminate true conservative motives as the one truth to conservative politics is “do it and then accuse the other guy of doing it.”
As an example the application of Reaganomics by the right this past 30 years has lead to a decline in this Country that has put us into a depression much like the last time we had such an economic system. The deregulation and deification of the financial sector by the right has done more to cripple our nation than any terrorist. Read your history, Britain, The Dutch and before them the Spanish all went from global power to broke for the same reasons,yet you persist in trying to ridicule the left with these comments while trashing the nation with your failed ideology.

Have a Happy and Prosperous New Year, all.

Posted by: j2t2 at December 31, 2008 11:00 AM
Comment #272988

j2t2 writes; “It still may be a good deal but it will need to be thought out a bit more don’t you think? Do you think King Abdullah will allow Bush to do anything like this?”

Thank you for your reasoned response j2t2. I agree, cost factors must be considered before action is taken. Perhaps the biggest expense of oil is in exploration. This large cost would be nonexistent since we would know down which hole we placed the purchased oil. And, no drilling is necessary, just the reliable old pumping currently being idled in many areas.

Frankly j2t2, I don’t see objections from King Abdullah or any other OPEC member. They desperately need to sell their oil to keep their restive populations from revolt and to finance their many nefarious groups. They are reducing production to try and increase prices with no luck. Huge buying from China and the U.S. will certainly help increase prices which would please them.

A very Happy and Healthy New Year to everyone.

Posted by: Jim M at December 31, 2008 12:06 PM
Comment #272991

If the U.S. government produced a procurement bill to buy 20 million barrels of oil a day for one year, transport it and store it, the price of oil would skyrocket before the ink dried on the bill.

Twenty million barrels of oil is a one day supply for our country. There is not enough oil tankers to ship double the amount, and the infrastructure would be inadequate to handle the increase.

If we bought 1 million barrels per day, in twenty years we would have a one year supply.

Posted by: jlw at December 31, 2008 2:02 PM
Comment #272993

Well jlw, let’s just kiss our collective asses goodbye then as there is no solution that will satisfy you and the other naysayers and oil haters.

And, please…don’t lecture me about green energy. We need oil today and tomorrow as well as ten or twenty years from now when it may just be possible to convert some of our need to green energy technology.

I am sure glad that Mr. Obama is not such a closed-minded person as many of his followers appear to be. We need to start immediately building new nuclear plants and clear the way with legislation to make it possible for these plants to be built without the usual lawsuit blocking efforts by the crazies who would have us all walking to our non-existent jobs.

Some will sit in their darkened homes waiting for their government welfare checks wondering why the lights went off. Others, will take action.

I and other independent people are survivors and aren’t sitting on our butts hoping big government will fix everything for us. I have a plan for survival regardless of what government does or doesn’t do. What do you have? HOPE and BLIND FAITH!

Posted by: Jim M at December 31, 2008 3:07 PM
Comment #273034

>What do you have? HOPE and BLIND FAITH!
Posted by: Jim M at December 31, 2008 03:07 PM

Jim M,

Hmmm…when did the subject change to Christianity???

No one here is an ‘oil hater’ as you so abjectly put it. We are realists. Oil dependence has hurt us…we have an addiction to it, and like most addicts, we faint at the thought of having to do without our next fix. We will make every denial, use every excuse we can come up with in order to justify keeping a stash within reach…what we really need to do is quit denying, and get to work on solutions that will carry us into a future without oil. While we concentrate on alternatives and renewables, do you think OPEC will become so petulant that they won’t sell us any more oil? You guys haven’t figured this thing out yet. Putting resources into new energy applications does not stop oil consumption cold turkey, it merely sets us on a viable course of action to wean us off a harmful product that we are addicted to…talk about knee-jerk reactions…you’re like a bunch of coke heads when they see a flame thrower heading toward the coca field, you forget there are other fields with coca available.

Posted by: Marysdude at January 2, 2009 3:22 AM
Comment #273044

I spoke of blind faith and Marysdude responded with; “Hmmm…when did the subject change to Christianity???”

This comment is symptomatic of a closed mind and a disturbing obsession apparently fearful of anything religious. I have faith in my wife and friends, my car starting, my ability, and many other things not associated with Christianity. Where we differ Marysdude, is in our faith in government to solve all our problems.

He talks of our use and dependence of oil as an addiction. Take your same objections to oil and replace the word oil with the word “food”. Is food not an addiction as well? Remove oil from the world today and there is no food, transportation, jobs or much else. What remains would be death and destruction.

Is Marysdude not aware of the huge increase in the world’s population since the days of non-mechanized farming?

Marysdude missed my point by light years. Since oil is an absolutely necessary commodity today and for the foreseeable future, we should do all we can to ensure our supply at the lowest cost possible.

Posted by: Jim M at January 2, 2009 12:20 PM
Comment #273088

>Remove oil from the world today and there is no food, transportation, jobs or much else. What remains would be death and destruction.
Posted by: Jim M at January 2, 2009 12:20 PM

Jim M,

Wow, talk about knee-jerk…who in the world said ANYTHING about removing or doing away with oil? You built a strawman out of thin air, and pulled a don Quixote, tilting at scarecrows or some such. I propose we quit drilling for MORE oil. The world has oil enough to last until we’ve developed alternative or renewable energy sources. The thing is…burning oil products is bad for the earth and the living things that crawl across her. Oil is a finite supply, not infinite, so if OPEC and others raise prices, we will use less of something that is bad for us, and that’s a GOOD thing, plus we will postpone the inevitable depletion of our only viable energy producer.

It is a win-win to stop drilling, and a WIN-WIN to establish better energies.

What makes you think I don’t understand what you write?

>Marysdude missed my point by light years. Since oil is an absolutely necessary commodity today and for the foreseeable future, we should do all we can to ensure our supply at the lowest cost possible.
Posted by: Jim M at January 2, 2009 12:20 PM

I saw that one and raised you one…:)

Posted by: Marysdude at January 3, 2009 1:53 PM
Comment #273121

Marysdude writes; “I propose we quit drilling for MORE oil. The world has oil enough to last until we’ve developed alternative or renewable energy sources.” and then writes; “we will postpone the inevitable depletion of our only viable energy producer.”

Huh…what does that mean? We have enough of something you describe as facing an “inevitable depletion”.

How quickly memories dim and fade. Perhaps Marysdude was happy and not affected by $150/barrel oil but the rest of the world was suffering and the economic impact was unsustainable.

Apply your logic to food, or some other necessity of life as we know it, and then promote its intentional scarcity. Sounds rather silly in that light.

If I follow marysdude logic I could reasonably conclude the following. 1) Cease the exploration for and production of a vital commodity, 2) sit idly by as the commodity becomes more scarce and valuable, 3) force our country to use less of this commodity as prices rise, 4) allow our economy to falter and shrink from lost productivity as energy supplies shrivel, and 5) hope that there is an alternative energy source available to bail us out. This is the blind faith of which I referred to in a previous post. There are thousands of prudent reasons why one should not discard what works for what is merely on the drawing board.

Magical thinking at its most absurd.

Posted by: Jim M at January 4, 2009 2:49 PM
Comment #273171

>Magical thinking at its most absurd.
Posted by: Jim M at January 4, 2009 02:49 PM

The REAL magical thinking (at its most absurd) is that we can ‘drill baby drill’ our way to a better life, or stockpile oil for future use and still get to the goal…in case you forget…alternative and/or renewable energy.

Jim M, if we decided to store oil, as you suggest, during cheap oil times, how long before India and China figure out what is going on and just outbid us in the world oil market? Please be advised that THEY have the wealth to do what you suggest…we do not.

What a sorry state we find our unregulated free-market selves in…broke, because of a dishonorable war, unscrupulous scoundrels in high places and no accountability in financial markets, and the only real manufacturers left in America are reproducing the 1957 Chevy with the 283 V-8, dual-quads and a high-lift cam, in plants that really did produce that car.

Posted by: Marysdude at January 5, 2009 9:41 PM
Comment #273191

NEWS FLASH FOR MARYSDUDE…China has already built the storage tanks and is purchasing cheap oil now for future use when prices rise.

Meanwhile in the US, we fiddle around spending vast sums of taxpayer money on schemes to bail out the crooks and incompetent. Many call for increased taxes and ridiculous MMGW scams to bilk the public of even more of their money.

The inmates are now in charge of Bedlam.

Posted by: Jim M at January 6, 2009 11:24 AM
Comment #273228

Jim M,

As I said, Socialist China has the wealth to purchase storable oil, while free market America is still crawling through the muck of economic meltdown. Don’t worry, without buyers in America, China will soon start to fail as well. No nation is exempt from our lack of economic oversight. Them damned commies won’t buy up very much of that oil you need a snort of so badly.

I quit worrying about oil a long time ago…just as soon as I realized it was eventually going to run dry…now I worry that we will continue the stupid pursuit of it until it is too late to develop its replacement.

Posted by: Marysdude at January 6, 2009 11:18 PM
Comment #273329


China is making noises about not buying any more American debt…seems we’re losing financial credibility…who’s next?

Worrying about stockpiling oil is beginning to look petty…

Posted by: Marysdude at January 8, 2009 1:25 PM
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