Please read this important post by Scott Johnson of Powerline, which reveals a deep dishonesty in the New York Times‘s coverage of a report on War-on-Terror investigative techniques. Then read Andy McCarthy’s description of the same report; it will astonish you.
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May 2013
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It is the inevitable result of years of Republican deregulation that led to banking entities that are too big to fail. If each company were smaller, we could let the market cleanse itself. But as it stands, the collapse of one AIG or Citigroup or even a Lehman Bros. can destroy our nation’s economy.
And you badly overstate the case. There undoubtedly will be judicial oversight and means of appeal, as well as mechanisms for compensation, so his does not “bypass the courts.” It is merely an alternative to bankruptcy. As with eminent domain, it is horrible, but a right of the state to act for the greater good. As you people were fond of saying while propping up your “War on Terror”: the Constitution is not a suicide pact.
The Captain knows we hit an iceberg. We’re under Maritime law,and rightly so considering that our economy is dissolving.
RCAR, the captain is steering the ship, if you didn’t notice.
Manchurian Candidate anyone?
This is The United States, not some clueless crew on the SS O-bot!
Michael, what you wrote is downright creepy. I always cringe when I read the phrase “greater good,” but your communist rant takes it to the next level.
It is bad for our economy that we spend so much on drugs. Does this mean that Obama can seize drug companies and “renegotiate contracts” to allow him to sell drugs for less?
Obama has become a combination of Hugo Chavez and the Borg.
“These are the same people who believe that no threat to national security justifies warrant-less searches or electronic eavesdropping…”
you can’t have your cake and eat it too ms chavez. either you are for liberty or you aren’t.
Standard fare for a banana republic. Communist, socialist, fascist, it doesn’t really matter what it’s called, The One wants the power, and he’s gonna take it.
Linda Chavez, I have started the practice of quoting Jose Faur’s new book, “The Horizontal Society” I think you will find these 2 passages very interesting. page 147
“The Rex’s authority is absolute. Apotheosis of kings and the worship of rulers in pagan humanity indicate the close, intimate relation between the realm of the political and the divine.”
“At that level of political organization there is no actual “state” or properly structured government. The king is god and in all circumstances his will is supreme. The norms and administrative rules of government do not have the force of law in regard to the sovereign. As with Pharaoh-
‘He as a god was the state… To be sure, it was necessary for a new state to have rules and regulations for administrative procedures and precedents, but your negative evidence suggests that there was no codification of law, impersonally conceived and referable by magistrates without consideration of the crown. Rather, the customary law of the land was conceived to be the word of the pharoah… The authority of codified law would have competed with the personal authority of the pharoah.’ footnote 167
The Rex is a supernatural being, the possessor of magical powers, not shared by any other human being.”
Michael…what de-regulation are you talking about? What law was passed in the last few years that led to AIG buying toxic assets? I’m guessing you are just doing a copy/paste of left-wing talking points because you don’t have an answer.
The root problem to this is the government pushing home ownership (Community Reinvestment Act) which resulted in the distortion of the secondary mortgage market. Suckers in Wall Street bought up these risky mortgage securities and got burned. Republicans pushed for oversight of this market years ago, but Democrats like Barney Frank and Chris Dodd, in the pockets of Fannie Mae/Freddie Mac, blocked any oversight.
Bush’s reaction to the collapsing economy was bad all around; the current administration’s reaction is only a multiplication of Bush’s failed policies. Not exactly Hope and Change.
It disturbs me greatly when someone (especially a politician) refers to “the greater good” or “the common good.”
Let’s break this phrase down. “The” implies “only,” as in the Highlander movies – “There can be only one.” In response to which, two questions immediately spring to mind: Who decides this? And by what right or authority?
“Greater”? Than what? “Common”? This is a tacit denial of individuality. It is also a philosophically void bit of rhetoric. Add “good” into the equation and you’ll quickly see what I mean. “Common good” is an oxymoron, plain and simple. What is “good” for myself or my family is not necessarily “good” for everyone else, perhaps not even a majority of others.
And again the questions MUST be raised: “Good for WHOM? Who decides what is ‘good’ for me? And by what right or authority? Have I somehow absolved myself of the right and responsibility of making these decisions?”
Think about these things before you speak these terms, or accept them at face value from others. Words mean things. They are most dangerous when those meanings are not understood, or purposely obscured by those speaking them.
“Republican deregulation” – that would be measures like the much-derided Gramm bill, overwhelmingly passed in congress and signed into law by Bill Clinton?
What created entities “too big to fail” was the overall growth of the American and world economy, the acceleration of financial transactions worldwide, and the vast infrastructure that enables it.
Of course, “too big to fail” is a relative term: Every economy develops institutions as big as it needs – you can’t one without the other. Every more advanced economic system is subject to financial panics, in the United States from the first Bank of the United States to the present day. To avoid this syndrome, you’ll have to return to a barter economy (primitive accumulation), and your booms and busts will probably be limited to weather patterns and other environmental risks, possibly including competition from neighboring tribes.
Every dynamic system will be subject to risk. Remove the risk, remove the dynamism: In fact, the likelihood of misguided attempts to remove risk poses one of the most common and most serious risks to any dynamic system, as we have seen in permanent bust command-and-control, “social justice”-oriented economic systems, and as, sadly, we may be witnessing the beginnings of now. Maybe you’ll get a chance in a few years to see how civil servants manage a $15 Trillion economy. Except, if it is still a $15 T economy, those $15 T won’t be worth $15 T, and it won’t make for a recognizably American way of life, either.
9
Excellent, but why are you dragging up the Bush administration in this thread? Obama, of course, rejects the notion of a unitary executive. Even Jennifer Rubin this morning argues that Obama cedes too much of his executive authority to the legislature.
“Michael” is the kind of person who welcomes fascism and totalitarianism with open arms, all the while telling himself and others the control and authority given to a centralized government are for the benefit of us all.
Michael, in your scheme there is authority in the courts, in the executive, and in the legislature. Only people who don’t get to decide (that is, make contracts, bargain for their compensation, run businesses, choose where to invest their money, etc.) is ordinary people.
It would be funny if it were not so scary. Punch-Drunk Obama who never ran even a candy shop will decide what to do with big companies.
this administration is becoming more comical than tyrannical. Although both go hand in hand if you’re watching from some distance….
” Beware the future if we give up on the notion that contracts are sacrosanct, subject to change only by the agreement of the parties, or through a carefully conducted bankruptcy procedure.”
Except that Inflation destroys all financial contracts,Inflation makes Bankruptcy laws meaningless because it frees debtors of their obligations outside the law,and it distorts free markets until they become dysfunctional. How many of you opposed the idea of deficit spending by the government?,who opposed the idea of an international floating fiat currency system? Who has lobbied for the return of an asset based currency? So hello Weimar.
13. Michael, sure. When things get slightly uncomfortable for you, you bring up Bush. What a novel idea. However, if you would re-read Linda Chavez’s post more carefully, it would be clear who I am directing the quote to.
Now, please list for all us the time when President Bush chose to, “seize assets, abrogate contracts, and take over management of private corporations”
You can’t find it? Ok, so let’s stick to the President at hand, and live in the here and now. Obama calls on his army of followers to knock on doors to drum up support. Concerning to you? In his 60 minutes interview, Obama can’t stop laughing about our very serious problems. Concerning to you?
Obama clearly made himself into a Messiah figure and the media and followers played along. He is now making the power grab to extend himself into every area of American life. He wants power, and he wants his followers to keep up the talking points everywhere. You are doing a bang up job, but it is very transparent. I highly recommend taking the time to read Faur’s book. You will learn about the Rex’s strategy to force the surrender of individuality, under unity and collectivism, to his master plan for total power.
Well, just what the hell did you expect from this guy? And remember that he is just getting started. I estimate we’ll see the first roundups of “dissenters and malcontents” before the end of the Summer. You are all invited…
#7–Tsk, tsk; accustomed to you being wrong, but not inane. Yet “either you are for liberty or you aren’t” is nonsense. One can, and thinking people will, discriminate between policies limiting personal liberty, and virtually all government policies, however benign, will restrict liberty in some measure.
Better lay off the silly pills.
“A Generation given the limitless riches of a limitless land. To think, they found the limits.” That was a line I read in a fiction novel called A Distant Crossing. We always assume that what has been will always be in this country, and it’s simply not the case. We CAN lose it all.
10
This is why your party is out of power. You operate in a fact free fantasyland.
You also have trouble reading. I wrote the consolidation of the banking industry was years in the making. So why counter with “What law was passed in the last few years that led to AIG buying toxic assets?”
That’s not to say there weren’t decisions made in the last few years that exacerbated the mess; it just has zero to do with my argument. If you want a recent example, one of the single biggest contributors to the economic crisis was the decision by Bush’s SEC chairman to allow the largest investment banks to voluntarily comply with relaxed capital ratio requirements. I believe that was in 2004.
The deregulation of derivative instruments –like the ebola virus credit default swaps of AIG — also bears blame. The measure that barred regulation was sponsored in 2000 by Phil Gramm and Dick Lugar. No derivative problem, no bank poblem, no AIG problem.
But the M&A boom in banking — which led to banks too large to fail — has its roots in the Gramm-Leach-Bliley Act, which removed Depression-era laws separating banking, insurance and brokerage businesses.
And you really should keep up with the news. A Federal Reserve official testified to Congress two or three weeks ago that mortgages related to the Community Reinvestment Act represented only 6% of problem mortgages and were largely irrelevant with regards to the broader crisis. So the “root problem” you chose to focus on, while no doubt ideologically important to you, was at best a minor factor.
#25,”And you really should keep up with the news. A Federal Reserve official testified to Congress two or three weeks ago that mortgages related to the Community Reinvestment Act represented only 6% of problem mortgages and were largely irrelevant with regards to the broader crisis. So the “root problem” you chose to focus on, while no doubt ideologically important to you, was at best a minor factor.”
100% Correct,without securitization,the subprime liabilities were $200Billion,easily managed.
So, to be clear, “republican deregulation” led to a unexpectedly large influx of foreign owned dollars, which led to too many dollars in the economy, which led to companies lending money irrationally. Then, “Republican deregulation” led to the securitization of those loans which caused a liquidity crisis.
Do liberal ever consider that this problem might be a bit more complicated than Obama’s stump speech would have you believe? Your argument is a non sequitur. You might as well be saying that the patriot act cause this economic crisis.
#27,”——- led to a unexpectedly large influx of foreign owned dollars, which led to too many dollars in the economy, which led to companies lending money irrationally. Then, “Republican deregulation” led to the securitization of those loans which caused a liquidity crisis.”
What led to all the above problems,the first step,was going off the International Gold Standard system in 1971,and substituting that for a floating currency,fiat system. I’ve discussed the importance of this ad nauseum,but it doesn’t resonate much with many of the bloggers at Contentions. But, if you want any details on this Economic Fiasco,I’m happy to supply them.
Rustyjalopy: Ad nauseum is abt right. As Faur might (or might not) say, “vuelva Midas Rex.”
So sorry to interfere with your prefabricated oe-sided narrative, but, just to take your main example, Gramm-Leach-Bliley, aka the Financial Services Modernization Act of 1999, was signed into law by President Bill Clinton. 75% of House Democrats and 84% of Senate Democrats voted for it. Interestingly – a little factoid I picked up while getting those numbers for you – one of the main points of contention pushed by the Democrats was that institutions that qualified for its provisions had to pass CRA muster:
http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act
Just one illustration of how the CRA and other government acts and institutions exert out-size influence on the behavior of market participants, even if the number of transactions for which they’re directly and wholly responsible represents only a small part of the mass. If you don’t understand how markets and political influence work, maybe you understand the old saying about “One bad apple…”
27
Talk about non sequiturs. Don’t attribute your nonsenical leaps of logic to me. Again, I was originally addressing the factors that led to banks that were too big to fail. What I was not attempting to list was every policy that contributed to the economic meltdown. Alan Greenspan’s easy money policies and George Bush’s weak dollar policies certainly played a part — and a much more significant role than Fannie/Freddie.
As for blame. Most of these anti-regulatory laws were quarterbacked by Republicans, and reflective of Reaganite principles, but passed with Democratic sipport. So both parties failed — but only one ideology. That would be yours.
Ahab and Jezebel had a similar plan to seize what they wanted.
30
See 31
Whose philosophy did Gramm et al reflect? Which philosophy failed?
nuff said
#10 you are so right. Notice how quickly the AIG show trial took place. Peloooosi stated that after the election Mac/ Mae would be ‘investigated’. Nothing is ever investigated about Dems. Slobbering Barney Frank needs to be in an orange jumpsuit, he stated in June 2008 that both institutions were doing well, and it was only the Republicans who wanted to undermine the success of said institutions. Oversight was already blocked under Clinton!
So, what’s next? Our homes, our cars, our bank accounts, 401k plans?
I guess that’s what the left had in mind with its idiotic ‘education plans’! When you bring up stupids, stupids will for for you. The empty crapola voted in a nice looking veneer. The veneer that hides an arrogant man who is trying to do everything, accomplishing nothing. The world knows it and comments accordingly. This entire administration needs to be impeached. The Constitution is not a football!
Michael is just repeating the liberal (socialist) mantra about “deregulation” that has NOTHING to do with the current state of affairs. True deregulation would have put badly run companies out of business long ago. I am so tired of people mouthing off about subjects they know nothing about–like economics and business. The left has no clue what the true “greater good” is…they only look out for their own special interests at the cost of losing individual liberty. The left is a parasitic group. If you REALLY want the “greater good”, Michael, then you would be for a much smaller and less intrusive government, and a free marketplace. Those principles are what made this country great and brought prosperity to hundreds of millions of people over the past 200 years. Our poorest of the poor are 1000 times better off than most average people in any socialist country. But I guess you will never know as long as you just continue to repeat the mantra of the left and don’t do any independent, open-minded research to seek the truth.
“Republicans pushed for oversight of this market years ago, but Democrats like Barney Frank and Chris Dodd, in the pockets of Fannie Mae/Freddie Mac, blocked any oversight…”
Translation: Republicans – in the majoirty – along with a Republican White House were unable to control a Democratic minotiry – i.e, incompetence, impotence – or, as the truth might reveal – just a lie…
Bush and his Republican majority had no interest in regulating ANYTHING…
By the way, Michael, economics is a science…it is much more complicated than you seem to think. I suggest taking a few in-depth courses in both Microeconomics and Macroeconomics before you even start to understand what causes what to happen in the world. It is VERY extensive. I studied the subject for 6 years and still cannot tell you EVERYthing that can happen, but I will say that I do have a much better understanding than every politician I know.
“nuff said” in your world, Michael. The “philosophy” was bipartisan. The bargain that it led to was that we’d let big finance play as long as it did what big government wanted. The path of least resistance was simple: Everybody gets a loan – the social end was more important than traditional lending requirements, especially as long as well-placed individuals in government and business, Democrats and Republicans, were able to skim like all get out, and accumulate power. Along with historically low interest rates and a number of other policies and factors, the result was an overheated housing market and overspending consumers, businesses, and governments – in the US and worldwide, in relatively “de-regulated” economies and in the most heavily regulated modern economies in the world.
We got exactly what both parties wanted – an economic perpetual motion machine, that unfortunately, but inevitably, turned out to be unsustainable. We’re now paying the bill that was all along being deferred. The Democrat policy response is to socialize the costs and defer them a second time into the future – blowing up a new monetary bubble to replace the just-exploded one, while distracting as much of the public as possible from what’s being done through demagoguery.
“It would be funny if it were not so scary. Punch-Drunk Obama who never ran even a candy shop will decide what to do with big companies…”
I wonder how long this lame meme will exist. He may not have run a candy shop – but he’s now in charge of the Executive…
In fact, he now has more executive experience than any other republican save for the Two Bush’s, Jimmy Carter and Bill Clinton…
Oh, and of course, Sarah Palin and John McCain…
In your face….
Where – oh where, were the Republicans when the left wing was screaming about drug forfeitures and RICO abuse…
Oh, I know – you were too busy spending the money on law-enforcement gear….
CK – 30 writes “So sorry to interfere with your prefabricated oe-sided narrative, but, just to take your main example, Gramm-Leach-Bliley, aka the Financial Services Modernization Act of 1999, was signed into law by President Bill Clinton. 75% of House Democrats and 84% of Senate Democrats voted for it.”
Michael 33 writes, “30
See 31
Whose philosophy did Gramm et al reflect? Which philosophy failed?
nuff said”
Michael, this is your answer? You want be taken seriously on this blog and you claim that the Democrats in the House, Senate, and Presidency are exonerated from this clear legislative failure, because they were covertly following conservative philosophy? Oh, that is truly funny.
#35 agree. Obama trolls don’t think they just repeat over and over again what their dear leader say. Other populist fascists has use polls as propaganda before.
Has Obama thank himself or his polling going down again?
#39 – “In fact, he now has more executive experience than any other republican save for the Two Bush’s, Jimmy Carter and Bill Clinton…
Oh, and of course, Sarah Palin and John McCain…”
Whhaaatttt? H’uh? Not sure what universe you’re living in, but I suggest you come visit ours for a while and study it’s history. Nixon, VP & Governor. Reagan, Governor. Johnson – VP. Kennedy – um, none. Eisenhower – Military.
Today’s news isn’t a reflection of Obama’s executive experience or lack thereof. It’s root is in his radical leftist roots. This is such an incredible invasion of the free market, Lenin would be proud. It’s a violation of the Constitution (remember that document?) and goes against everything this country has stood for.
And for the Obama supporters with some measurable intelligence, can you truly defend this on the merits. Both parties are to blame for this economic mess, the result of government’s interference in capitalism. So is more interference and control the right answer? See AIG as conservative’s evidence A that politicians can’t run a business.
“n fact, he now has more executive experience than any other republican save for the Two Bush’s, Jimmy Carter and Bill Clinton…
Oh, and of course, Sarah Palin and John McCain…”
Didn’t realize the Dems had gone so far left that you had written Jimmuh and Billuh out of it. Thanks for straightening that out for us.
All right, it’s time for a rhetorical reckoning. I’d like someone here — anyone — to explain what, in practical terms, is meant by the expression “too big to fail.”
Convince me. How are AIG, Lehman, etc “too big to fail?” Step by step, what would happen if they did?
“Didn’t realize the Dems had gone so far left that you had written Jimmuh and Billuh out of it. Thanks for straightening that out for us.”
my mistake – but us REAL progressives NEVER considered Clinton a realy lefty – and Carter – the guy who feels guilty for lusting in his heart?
That’s a republican talking….
Looks like Bernanke tried to answer your question at today’s hearings, JED.
46, you must be the bus driver of the REAL progressive bus. So many people end up under it!
J.E. Dyer gets to the heart of the error in Michael’s original post: “too big to fail” is a policy decision. There is no such thing as a business that is “too big to fail”, that is a choice made by elected officials. Any business can fail, it is the failure to let them do so- it is, in other words, the anti-market choices of both Bush and Obama- that has continued to prolong the economic suffering here.
I would contend, rather, that if we had let the market work- like we did with Lehman- and brought the zombie banks- like Citi- into government receivership (like both the Wall Street Journal and Paul Krugman advocate), we’d probably be 90% out of this mess right now and at a lot lower cost to the taxpayer. I hold up as Exhibit A that “failure works” the decision of Goldman Sachs, after Lehman was allowed to fail, to move into commercial banking. Anyone seen Goldman Sachs stock lately?
Make no mistake, if we had let the market work, we would still be in a recession. But we would be much better positioned both from the market’s perspective and from the perspective of federal fiscal policy than we are right now.
The great fallacy of the last year is that there is such a thing as “too big to fail.”
#39….I believe Ronald Regan had more executive experience than the rest of your list….only half of whom were actually Republicans. Palin still has more executive experience than “the One”.
Since I’m not listening to Bernanke, I’ll either continue in “ignorance” or someone will summarize it for me.
Meanwhile, I don’t believe our entire economy would collapse if we let the failing institutions go into receivership. What, instead, would happen is that a relatively few individuals would lose a great deal, and a relatively large number of individuals would lose some. It is absurd to say that the millions of Americans whose basic checking and savings accounts are in banks that were never overleveraged in bad debt would lose their cash balances. It is equally absurd to say that the millions of people working in low-margin industries would lose their jobs overnight, if we went ahead with the reckoning of accepting the actual amount of toxicity in our financial system. Most industries and businesses are not dependent on debt financing that can only be done through the toxically-overleveraged institutions. And there are many, many mortgage lenders out there that are not among the toxically overleveraged.
It continues to appear to me that the main losers from a toxicity reckoning would be the people at the big financial institutions — and it’s not ALL the big financial institutions — who were stupid enough to get overleveraged in the toxic debt in the first place. Others have been taking the fall for them up to now: homeowners who have seen their equity disappear, investors whose portfolios have been halved, marginal businesses that have gone under as consumers tighten our belts, workers who have lost their jobs due to all these developments. The thing about those financial institutions is that most businesses and individuals have alternatives to them. The main thing I would see soming out of a few major collapses is an increase in interest rates.
If you really think the failure of AIG is going to directly affect you, explain how — don’t just demand that I accept your terror as the governing factor in this situation, and insist that we must cede, at the outset, the premise that the government has to shore up the existing situation. Obama is taking a jackhammer and blowtorch to the Constitution and the rule of law, and too many conservatives are just sitting by agreeing that the alternative — letting the overleveraged subsidiaries of some of the big financial corporations fail — is too terrible to contemplate.
Here’s the transcript of Bernanke’s opening statement. I believe he may specifically have addressed the phrase “too big to fail” during Q and A, but I may have been hallucinatorily mixing half-overheard news bits.
http://www.realclearpolitics.com/articles/2009/03/bernankes_testimony_on_aig.html
After summarizing direct results of an AIG failure, he discusses potential effects:
35
“…Michael, then you would be for a much smaller and less intrusive government, and a free marketplace. Those principles are what made this country great and brought prosperity to hundreds of millions of people over the past 200 years”–Janine
For the love of god, please show me the years between 1976 and 2009 when government got smaller. And yet you attribute our national greatness and prosperity to this principle of smaller government? That’s some crack pipe you’ve got there. And yet, it is the left that is clueless about economics and business and history. Right.
FYI I have studied economics, made a living on Wall Street from the markets and started several businesses. Let me know if you want to stuff any more strawmen.
#53,”For the love of god, please show me the years between 1976 and 2009 when government got smaller.”
Let’s go from 1914-2009 for grins.
But Bernanke is talking here about UNMANAGED default by AIG (and potentially other institutions), which is not “the” alternative to the US Congress taking over the finance industry. He’s talking about what would happen if no one knew what was going on with AIG, and suddenly pieces started falling off of it at random, and created an avalanche of defensive alarm.
The laws are already in place to manage the failure of AIG. It’s called bankruptcy. AIG’s divisions are, even today, mostly sound, and could be sold off and continue operation. An announcement of receivership for AIG would do the main thing Bernanke expresses concern about: forestall panic. Yes, there would be (would have been) losses, but there would have been a way ahead: something to plan for. We have not had that at any point since the common path that was decided on was the TARP bailout. We have had, instead, months of uncertainty about when the toxicity is finally going to come home to roost.
The “run on the insurance industry” by policyholders and creditors sounds particularly fishy. Things with practical consequences have to take practical form: what would this one be? Does Bernanke suggest policyholders would cease paying any insurance premiums — just stop carrying insurance? (Demand from payouts from that would be a factor in life insurance policies, but Bernanke seems to be talking about business and real property insurance.) Or does he mean customers would take their business to other/smaller insurance companies that were not overleveraged in the same kind of paper as AIG? If the latter, that’s not a run on the “insurance industry,” it’s a move away from AIG. If the former — that prediction requires a lot more justification.
Now, if Bernanke means the whole insurance industry would lose a significant amount in assets with an AIG collapse — OK, I agree. That wouldn’t make the whole industry insolvent overnight, but would make the position of some insurers precarious. A consequence might be increased business — and more shareholder investment — for sounder insurance companies that didn’t get overleveraged in the toxic paper as part of their asset picture. Horrors. A reward for prudence — we can’t have that.
In my view, one of the biggest things that would come tumbling down with a genuine toxicity reckoning is the house of government regulation. We have been postponing part of the cost of regulation for decades now, with the leveraging of debt. Adjustable-rate mortgages are only one aspect of that practice; in the mortgage game, we were getting people into homes that had been priced out of their range largely by regulatory requirements (land-use regulation, local ordinances, and urban planning). This is a phenomenon that varies with locality, much worse in urban California, Seattle, Atlanta, Miami, northern Virginia, Manhattan, Boston, etc than in the suburbs and small towns of “flyover country.”
But of course another thing we’ve been burying in profitable, traded debt — debt functioning as an ever-growing “asset” — is the Community Reinvestment Act, and ACORN’s shakedown of Countrywide and other financial companies. We mitigate the impact of auto regulation with easy credit: if you could buy, for $5K, a new car that didn’t meet CAFE and federal safety standards, a lot of people would — and with cash. But you can’t, so car sales are lubricated with easy credit, and we can keep heaping regulation on cars and making them cost $12K at the entry point.
It costs a lot of money to regulate everything we do. Living in a big, comfortable cloud of debt has obscured that cost for us for some time now. I think, myself, that GOVERNMENT is more concerned to have everything continue the way it has been going, for the past 70 years, than the American people are. In its loss of revenues from the failure of big companies, and its consequent loss of redistributionist power; in the economic adjustment of industries in which it is heavily invested in terms of fees and regulation; and in the exposure of its actual costs to us, the people — the modern regulatory government would be the biggest loser from a major financial adjustment. I don’t think Barney Frank & Co are at all too stupid to see that.
Speaking personally, as how else might I, I am and have been an outsider looking in on the rollicking financial developments of the past quarter century. I do not own, nor ever have owned, stocks or bonds. I make less than $50,000 a year. I have never owned a home. I have only a schoolteacher’s pension and social security to see me to my fast approaching grave. But of course know many, many people, family friends, and acquaintances who did all those things. In sum, I simply observed the great bull market and often wondered what I was missing, but in the end, I neither made nor lost much of anything personally.
One thing I do recall quite vividly was the amount of money being made all those years. People buying homes at $100,000 and, less than five years later, selling them for $300,000. People with stock portfolios that doubled and trebled in value in less than a decade. Millions cashed out in a timely manner, and none of them, so far as I know, is going to give back a dime.
One thing I do NOT recall is anyone ever complaining about any of it. But you don’t need to be Adam Smith or John Maynard Keynes or Paul Samuelson to have known that markets always correct or that if the run up was spectacular , the run down is likely to be similar.
So I am at a loss as to the whining and the wringing of hands and burning of hearts. I didn’t envy anyone on his way up, and I don’t feel sorry for him now.
On the narrow question of AIG, in the rest of Bernanke’s comments I think the message is “in for a penny, in for a dollar” – though the proportions are more equal. In other words, at the point of the first AIG bailout, uncontrolled failure and the catalogue of horros were on the agenda. At that point, the government chose to “invest” in the assumption that at some point down the line the people would be made whole again, possibly even make a profit. That idea, the framework that surrounds it, and the residual risks to the system as a whole, now underlie resistance to letting AIG go bankrupt, and, even setting aside the TBTF issues and the complexity of AIG, it couldn’t be a “normal” bankruptcy.
I’m just playing devil’s advocate here, since I don’t pretend for a moment to have a firm grasp of the overall situation. A year ago I did happen to know what a mortgage-backed security was, and as someone who once dabbled in options and futures I had a sense of what a CDS might be, but, if you’d asked me what AIG did for a living, my ability to bs on the subject wouldn’t have lasted more than a couple of sentences, and I still find the bond market confusing and frightening (just another caveman economist, like most of us these days). My sense remains that the we’re negotiating about pain and the dosages our social-political system considers tolerable, having voted last Fall to err, when in doubt, heavily on the side of wishful thinking: Socialize the costs over the longest possible period, quit the bad habits “when we’re ready.”
I’m surprised – and may feel the urge to develop this theme further – that no one has tied smoker’s psychology into Obama’s governance, on fiscal irresponsibility in particular. “I’ll quit when there’s less stress in my life; I’ll quit on my 30th/40th/50th birthday; I’ll taper off; I’ll try nicotine gum; I’ll see how long I can make this carton last” etc., etc. You could go a long way with this: Debt is like tar deposited in the lungs of the nation. Spending is like nicotine. Liberals are like the tobacco companies, addicting the country to fiscal poisons that they themselves know are lethal…
If you are interested in what AIG does, read their 2006 annual report. You will find that they have their hands in a lot of pots, but also look at their corporate initiatives. For that matter, look at the corporate initiatives of all the companies that have taken bailout money. How can a company survive when it is forced to provide these separate programs that have nothing to do with its original business at hand?
Right now, our gov’t looks very much like a Chicago gangland machine. Extortion, money laundering, strong-arm tactics. All in the desperate attempt to fix something quickly that should have been left alone a long time ago. Except that those tactics won’t work in our economy, not without the dire consequences that we are seeing now.
#55, you are absolutely right.
Warpublican, you are a bonehead.
I’m impressed except now you’ve been reduced to trolling Contentions. bwahahahahahahaha
JoeNS #56- “I have only a schoolteacher’s pension…”
If you have a pension you have most certainly dabbled in stocks and bonds. Or, more to the point, someone has used your money to do it for you.
Pensions are also being affected by this downturn, some severely, so you may have a bigger stake in this mess than you realize.
Three hundred million people live in the shadow of purple mountain majesty and around the fruited plain. Most of them eat, live in a house, travel from place to place regularly or occasionally, and wear clothing. We’re rich in natural and human resources. The troubles we have right now are nothing to what the benighted of the third world have endured daily for millenia. Alarms go off in big buildings stuffed with computers counting imaginary money and we’re all supposed to go freak city? Those “toxic assets” didn’t go up in smoke. They just assumed their true value. And it’s only money. Easy come, easy go. Nothing to get excited about. I’ll go to work tomorrow like nothing happened.
chuck martel — in terms of reflecting the reality of the American people, I think you are exactly right. Unfortunately, Congress has the power to act as if reality is something different. This seems to be largely because we let people who have never been accountable for anything in their lives vote.
I don’t usually point out my little blog-puppy when responding at others, but my earlier rants here at this thread prompted me to muse further on this topic today. If you’re interested, click the name. It’s “Cui Bono?” — the latest post.
Anybody still think Obama isn’t a socialist tool?