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TechnoratiIt would be nice to write off the current crisis on Wall Street and global financial markets as something that only matters to the investor class.
Unfortunately, the effects are already being felt in lower-income communities around the United States. Worst-case scenarios for what spins out from the U.S. mortgage meltdown are truly frightening -- a severe world recession is a distinct possibility.
Whether such worst-case scenarios can be averted, or softened -- and preventing the recurrence of similar crises in the future -- depends on abandoning the laissez-faire financial regulatory regime entrenched over the last decade.
The current crisis is the predictable (and predicted) result of a massive U.S. housing bubble, which itself can be traced in part to global economic imbalances that could have been prevented.
At least five distinct regulatory failures led to the current crisis.
Regulatory Failure Number One: Failure to Manage the U.S. Trade Deficit. The housing bubble (as well as the surge in leveraged buyouts of publicly traded companies ("private equity")) was fueled by cheap credit -- low interest rates. One reason for the cheap credit was an influx of capital into the United States from China. China's capital surplus was the mirror image of the U.S. trade deficit -- U.S. corporations were sending lots of dollars to China in exchange for the cheap stuff sold to U.S. consumers.
Regulatory Failure Number Two: Failure to Intervene to Pop the Housing Bubble. Along with an influx of capital, Federal Reserve policy kept interest rates very low. There were good reasons for the Fed Policy, but that did not mean the Fed was helpless to prevent the housing bubble. As economists Dean Baker and Mark Weisbrot of the Center for Economic and Policy Research insisted at the time, Federal Reserve Chair Alan Greenspan simply by identifying the bubble -- and adjusting public perception of the future of the housing market -- could have prevented or at least contained the bubble. He declined, and even denied the existence of a bubble.
Regulatory Failure Number Three: Financial Deregulation and Unchecked Financial "Innovation." A key reason that mortgages were made available so widely and with such little review of recipients' qualifications was a shift in which institutions hold the mortgages. Traditionally, banks made mortgages and held them. In the new era, banks and non-bank mortgage lenders made loans, but then sold the loans to others. Investment banks packaged lots of mortgage loans into "Collateralized Debt Obligations" (CDOs) and then sold them on Wall Street, with a promise of a steady stream of revenue from interest payments. These operations were pretty much unregulated. Despite the supposed sophistication of the investors involved, no one took account of how shoddy the loans were or -- more fundamentally -- the certainty that huge numbers would go bad if and when the housing bubble popped.
Regulatory Failure Number Four: Private Regulatory Failure. It was the job of ratings agencies (like Standard and Poor's, and Moody's) to assess the CDOs and give investors guidance on how risky they were. They failed totally, likely in part because they wanted to maintain good relations with the investment banks issuing the CDOs.
Regulatory Failure Number Five: No Controls Over Predatory Lenders. The toxic stew of financial deregulation and the housing bubble created the circumstances in which aggressive lenders were nearly certain to abuse vulnerable borrowers. The terms of your loan don't matter, they effectively purred to borrowers, so long as the value of your house is going up. Lenders duped borrowers into conditions they could not possibly satisfy, making the current rash of foreclosures on subprime loans inevitable. Effective regulation of lending practices could have prevented the abusive loans, but none was to be found.
Unfortunately, the consequences of the mortgage meltdown go far beyond the foreclosure epidemic, as horrible a toll as that is taking. The entanglement of the financial sector with mortgage instruments, and the ripple effects of the housing bubble, has made lenders uncertain of who even among large corporations and financial institutions is credit worthy. The resulting credit crunch endangers the functioning of the global economy. Financial markets are guessing wildly about the prospects of banks, insurers and other financial corporations, and the plunging value of stocks poses immediate dangers to the real global economy.
Less acute, but probably more profoundly, the popping of the housing bubble is driving down home prices. U.S. consumer demand over the last five years has been driven by consumers borrowing against the increased value of their homes; with housing values falling, that process is working in reverse. The depressed housing market is also ravaging the construction sector, a nontrivial portion of the U.S. economy. A serious recession looms as a real possibility.
Mitigating these harms and preventing the worst now depends on active and interventionist government -- a government stimulus plan, and aggressive efforts to force lenders to adjust mortgage terms and let people stay in their homes. Preventing financial panics of the kind now underway require new standards of transparency and regulation for high finance. The coming days and months will tell whether any lessons have been learned.
Robert Weissman is editor of the Washington, D.C.-based Multinational Monitor, and director of Essential Action .
60 Comments so far
Show AllSome excellent comments here; just thought I'd add this possibly apocryphal anecdote to the mix:
In April of 1912, the Titanic had hit an iceberg and was starting to sink. In one of the exclusive salons in the bowels of the ship, off-limits to all but the very rich, several important wealthy men were playing cards. The Bell Captain told one of the Stewards to notify the men to join the other passengers on deck, but to do so without unduly alarming them. The Steward went to the table and announced that, as unpleasant as it was, the gentlemen had been requested by the ship's Captain to join him on deck to participate in a review of safety procedures, should the ship take on water. The wealthy men yelled at him to bring another round of drinks and leave them alone. The Steward did as he was told and informed the Bell Captian he had tried, but they'd ignored him. The Bell Captain instructed him to try again and use stronger language this time, but still take care not to alarm the VIPs.
The Steward served the drinks and told the men that Captain Smith was very insistent that they join him on deck immediately to rehearse escape procedures as the boat was possibly on the verge of sinking. One of the wealthy men sputtered angrily, "Damn your hide, stop bothering us and wasting our time with this nonsense! The Captain and everyone else in the world knows this ship is unsinkable! Get the hell out of here!" With that rebuff, the Steward excused himself and he and the Bell Captain went up on deck, leaving the men playing cards in the salon.
The Steward and the Bell Captain both survived the sinking of the Titanic; the very wealthy men playing games in the salon did not.
… sometimes paper cuts can be so annoying,
whereas the _b e a s t_ sure knows how to get the bite down … more like a tree chipper (on meth + steroids) than any real ferocious animal could ever create TERROR
it is different now because of the technology created for the military/indust. now they really are watching--really are watching and they can really arrest you on a whim and that arrest will be legal (if contested). so, this really is not the same ol' bull shit. no, my friends, this is very very different and my adivce is; do-not-get-on-that-bus! AND I MEAN THAT!
Don't be concerned, folks, it'll be okay. If we let all this "recession talk" scare us away from the malls, we will cause the recession. So, it's not the Fed, deregulation, or any of that incomprehensible "financial gibberish." It's us! We can spend our way out of recession! "Don't worry. Keep spending!"
Tyrannosaurus train wreckssplattered w/o mattered,
gobbled not hobbled,
business not freedom of America
Americans will not stop drinking the Kool-Aid of Bushism, Obamaism, Clintonism, McCainism, Romneyism or any other ism made in Jonestown, D.C. They won't. Uncle Sam dropped his pants a generation ago to show the world the size of his member. His bloated gut prevented him from seeing the peanut shell he wears as a jock strap. It's over for this country because this country cannot and will not learn. We've lost our manufacturing base but we do grow a lot of chickens which have now come home to roost. Daddy Chicken will be the next president.
"This morning on NPR I learn that the post Enron accounting regulations applied to everyone except the Banks."
Here's another brain wreck for ya, Doom...
This morning you didn't learn on NPR that the regulations don't apply to the Government, either.
Strangely in anticipation of new daily shocking revelations I wake up with my chin already on the floor. This morning on NPR I learn that the post Enron accounting regulations applied to everyone except the Banks. This cosmic omission caused a temporary brain wreck. When I awakened I had hemorrhaged my thoughts save one: insanity rules.
papercut,
It all starts with whining. When we have perhaps tens of million people whining the same whine, rather than buying the line, we can then properly organize. But as it stands now, people don't really see the crux of the problem.
Big_Money,
That's right. This is as old as civilization, both East and West. The whole thing is ultimately predicated on power issuing from the barrel of a gun. The IRS (and corrupt politicians) wouldn't get a dime from anyone if they didn't have the ability to garnish wages, imprison, or reposses property for the banks, etc. It bears far too many isomorphic/homologous similarities to the Middle Ages to be mere happenstance. It would appear that our greatest advancement since the Middle Ages has been a change in terminology, not fundamentally a change in forced taxation and the upward passage of tribute to the already rich-and-mighty.
Well, it's not just the american people. That fox has been ravaging the chicken coop for thousands of years. The americans of some centuries ago had some of the best ideas, ever, for protecting the chickens, and those ideas have spread throughout the world to the benefit of chickens everywhere. But, as is usually the case, the Foxes rose to the challenge presented, corrupted all the possible farmers, and here we are.
Hi Big_Money, well, it seems to me that I do have more that 2 "choices" even being the chicken that I am. But all this whining is worth little now as the damage is done. too bad the american people never did find a way to stop the fox. if only they could have had the courage to do something other than whine and complain and smile while they cut their own throat. sick people in a sick society.
Papercut, you may not be able to blame a cat for eating a bird, but it was the farmer that put the fox in charge of guarding the chicken coop, not the chickens.
So the chickens get a choice between two farmers every four years. Both farmers are itching to make sure some GoldmanSachs operative has access to the infinite box of money. The chickens have no idea what a GoldmanSachs operative is. Go ahead, blame the chickens.
but, why did you people let this happen? you can't really blame a cat for eating a bird(greenspan robbing you blind) why did you let these criminals and thugs do this to you. what is the matter with the american people that they cant become involved in their own demise. you guys are a very sick society and probably will not make it thru the night.
PrestonDigitator,
I saw that the Democrats were largely corrupt almost 20 years ago when they bailed out the (mostly Republican) fleecing of the S&L's rather than following the money trail, TAKING IT OUT OF THE HIDES of the people who caused the "crisis", and jailed corrupt bankers by the dozens.
They prove that crime does -- indeed -- pay. As I've said elsewhere, it's actually two crimes for the price of one. #1 the initial gaming & fleecing, #2, the bailout at taxpayer expense.
Apparently if you want to rob a bank you should get an MBA and some sympathetic politicians, not a handgun. This is just the usual good cop/bad cop thing. I fully expect to be penalized as an honest taxpayer, and sensible homeowner who didn't go in over his head. The folly of too many of my countrymen and corruption of my politicians and bankers is a constant kink in my style.
Just make it illegal for companies to own other companies. It'd solve a whole swag of problems in one go.
Y'all remember the "get big brother (gov't) out of your lives"? Well, it was never in OUR lives, it was in THEIR lives via the regulations and controls FDR placed on capitalism. Now that it's gone, "Fuck you America, we did it...and you bought it." There is no one in US politics with his kind of power and sight and ability--just a bunch of rich kids playing Monopoly and Risk and the rest of us are pawns, i.e. disposable items. Welcome to the good old days!
Robert Weissman:
Who the hell are you? From the looks of the article, it would be safe to assume, that you are connected to the mortgage industry. Keep Americans in their homes?
"Mitigating these harms and preventing the worst now depends on active and interventionist government — a government stimulus plan, and aggressive efforts to force lenders to adjust mortgage terms and let people stay in their homes."
Shrink back, shrink back to the hole you came from, and do not shame yourself by appearing here again.
"Unfortunately, the consequences of the mortgage meltdown go far beyond the foreclosure epidemic, as horrible a toll as that is taking. The entanglement of the financial sector with mortgage instruments, and the ripple effects of the housing bubble, has made lenders uncertain of who even among large corporations and financial institutions is credit worthy."
Unfortunately, you represent, the investor class. "It would be nice to write off the current crisis on Wall Street and global financial markets as something that only matters to the investor class." But your worry appears to be for the large corporations and financial institutions.
Yes, it matters to the investment class now, Robert, their investment in the American people is depreciating. Low returns on investments, you know, old boy! We need government to bail out the investor class, stimulate the economy and all that, all boy!
Yes, wouldn't that be grand, Robert, the government to the rescue of the rich once again. Hey! How about a tax rebate, say a $150 billion, that'll do the trick! Worked once before!
Robert, you write, "require new standards of transparency and regulation for high finance", I suggest that the transparencey begin with you. Because your defense of "high finance" is so @#$%%^ un-transparent.
Ramsay
lizard:
Too true, we in the states can complain about being fleeced by our own government and corporations, but its still all relative. People in the US have this funny idea that slavery was a temporary aberration that ended 140 or so years ago (if they even know any history at all, that is). How far from the truth. Something not too far from slavery was rapidly reintroduced in this country and still exists to a great extent. But when it became obvious that we couldn't have open slavery and a close approximation wasn't generating enough profits, we simply exported it, as all great colonial powers do (e.g., Spanish American "War"). There's always some other country that can have slavery so that prices can keep falling at Walmart. We also managed to export the lion's share of the environmental degradation as well. People like to roll their eyes and feel superior looking at the working conditions and pollution in places like China, but take a look at where all the stuff crammed into your home came from first and then take a good look in the mirror. Those are OUR SLAVES living in OUR POLLUTION.
The only things this outfit we call a government wants to regulate are everyone`s sex lives, abortion, evolution teaching, revising the Constitution (just a dammed piece of paper), all of one`s private business, our election results, and the military,for a few. We are reaping what the great communicator, Ray Gun, started us on for a new course of no government oversight except for the above matters. Looks like it is working out real well for everyone, maybe just a little better for the super rich and the giant corporations. Strange Obama would even mention his name in a positive way___ notice Edwards said he would never have done that so give him another mark in his favor.
These bankers you rile against have kept the dollar as the world currency for 50 years giving all us Americans a free ride. Now that they are having trouble maintaining this unfair and destructive supremacy everyone blames them. Sure the bankers got the biggest cut, but you got your cut too. Now its time to live by what we produce only, because plunderin' ain't what it used to be. Kill Chavez. He makes us pay 25% instead of 10% for the oil, like we used to. Like I said, plunderin' ain't what it used to be.
Satya - Ah, the Fed.
Here's a famous quote from Ben Bernanke, Chairman of the Federal Reserve, the fellow who stunned the world with the surprise rate cut this morning:
"...the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."
Yup, Helicopter Ben said that. The Chairman of the Federal Reserve. Cool, eh?
Oh SHIT, get a load of this:
"Democrats Want FHA Bill in Stimulus Plan, Frank Says "
BARNEY AND THE DEMOCRATS want to raise the debt ceiling of Fannie Mae so they can off-load bad mortgage debt ONTO WE THE TAXPAYERS. Their sales pitch is that they don't want people to lose their homes……BUT THESE ARE THE JUMBO LOANS…..you know….MCMANSIONS….loans of $417,000 and up. Many of these JUMBO LOANS were INTEREST ONLY…..because they were taken out by HOUSE FLIPPERS who planned on making a fast killing "flippin th big ones" before the rates jumped up. Hey lemme tell you something, a person who can qualify for a loan of that size is in the stock market…..so let em sell some of their stock and BAIL OUT THEIR OWN GAMBLIN, HOUSE FLIPPIN ASSES. Barney conveniently ignores that his actions REALLY help out the bankers of malfeasance, and the wall street sellers of CDO's, who walked away with hundreds of millions perpertrating all of this. Barney also ignores that if he and his Congressional Oversight Committees had been doing the job that WE PAY THEM FOR, then we wouldn't be in this mess. GAWDAMIT BARNEY, HAVE YOU LOST MIND? WHO TH HELL DO YOU THINK YOUR INSULTING???
jskinner
Thanks for the article on the Fed/Central Bank. It was well-written and enlightening. How do you stop a behemoth like the Fed? Where is our next Lincoln or Kennedy? Edwards?
Satya
Actually, the only purpose of our regulatory system is to legalize corporate fraud.
These financial crisis are manufactured. At the end of the day, more money ends up in the pockets of the corporate fraudsters, and less in the working class, and new regulations will be passed that are written by these same fraudsters, that give them new powers to steal. Our Congressmen do not even read the crap the vote on and pass, do you think they write the legislation. Heck no.
This is yet another neocon failure. With their supercilious, aggressive and poorly considered policies they have brought military, foreign relations, environmental, judicial, constitutional and economic ruin. And yet the NY Times just hired William Kristol! What's next, a child rearing column by Britney Spears? A marital issues column by OJ Simpson? We still see these blowhard know-nothings on television and in periodicals dispensing their disastrous, long-discredited advice and being treated as though they actually deserved respect.
I am starting to feel like a Los Angeleno living on the San Andreas fault line. Everytime the ground shakes, you wonder, "Is this the big one?". Cause we all know it is coming. So, is this the big one? Or just tremors leading up to the big one? This is so stressful.
mastershake,
The "rationale" for excluding food and energy from the core rate of inflation is that they are too volatile and can make broader based trends more difficult to decipher.
Of course, when the impact of energy and food prices are so pervasive and they've been rising so consistently and rapidly, you have to wonder what the point of bothering to measure "core" inflation is.
That's basically my read on it. I see that the Wikipedia page on the S&L fleecing and subsequent bailout has been updated to include association with the sub-prime "crisis". One of the key terms to know is "moral hazard". That is, if these banks/lenders/etc. know that a bailout is forthcoming, they are not fully exposed to risk, and they have little incentive to run a tight shop. At that stage, a moral hazard segues into an immoral opportunity.
With leaders like Bush & Co, who needs Vikings, warlords and pirates?
The funny thing is that those coastal villagers who would have welcomed the marauders with open arms would have been the first weeded from the gene pool, whereas the same doesn't apply today. They continually run out with open arms (and wallets) to the pirates. A social Stockholm Syndrome?
Anybody remember the Savings and Loan and Junk Bonds crises of the 80's??? A lot of people lost their life's savings, but most of the very wealthy people/corporations involved in these scams (including a member of the Bush clan, as I recall) are still around and, worth even more now in relation to the masses then they were back then.
I'm sure that over the course of the current "crisis," a few wealthy people will lose their shirts and just as in "crises" past, a few will also have the misfortune to endure the necessary ceremonial public scapegoat role (with little in the way of actual meaningful penalties paid).
Rest assured however, that the few very rich people/corporations that can afford the billions in "losses" (investments) now being seen will in the end possess all of the houses and other property (which will eventually regain its worth) as well as all of the money "lost" by all of the unfortunate massess. Meanwhile, as the "crisis" unfolds, these very same people/corporations will be the main beneficiaries of various government "initiatives" to fix the economy that they and their partners and servants in the government created. All the while, a steady stream of bread and circuses (Walmart and phantom enemies) will continue to keep people distracted.
Yeah, why would they include food and energy in the Core Inflation calculation? It's not like those are important for every human to survive.
"It would be nice to write off the current crisis on Wall Street and global financial markets as something that only matters to the investor class."
What kind of nonsensical statement is this? This "investor class" does not exist apart from the "producing class", ie, the people who work for a living producing something useful. This investor class produces nothing useful and yet it controls the money. When it screws up through its irrational greed for greater and greater inputs of unearned income, the producing class always pays. At no time has a crisis for the investor class been limited to the interests of that class. Always, the people pay the highest price.
The influx of capital from China has little to do with the current problem, which is purely the result of Alan Greenspan's decision to create another bubble to replace the burst dot.com bubble by intentionally keeping interests rates too low. This allowed the unregulated investor class to access that Chinese cash and to create an elaborate infrastructure for speculation, on which Alan Greenspan bestowed his blessing.
This is business as usual for the privately owned and operated central banking system to which the people have entrusted the care and management of their money. This "investor class" will suffer little in comparison with the suffering of the people.
It is time to throw the bums out, the Greenspans of this world, the Rockefellers, Harrimans, Whitneys, and many more whose names are unknown, the elite members of the investor class, the rich, who have demonstrated their utter incompetence. Throw them and their private banking system out.
It is time for the people to take control of the money power, take it back from this scurvy parasitical elite. It can be done and it does not require a bloody revolution, nor is it a complicated matter ( in theory ). Read the post above by jskinner. Go to globalresearch.ca and go over the articles there by Richard C. Cook.
As the financial system spirals down the drain, it will be consoling to realize it didn't have to happen.
That's always nice, isn't it? To understand that it never had to happen and shouldn't have happened....if only we weren't such a flock of sheep, such a crowd of spineless fools who thought we could trust the rich to look after our financial system! If only....
As John Lennon said, you think you're so clever, so classless and free, but you're still fucking peasants so far as I can see....
Read today's Wall St Journal and learn all about Bill Clinton's investments in Dubai.
When Bill was a consultant for Dubai Ports who were trying to buy our Eastern Ports, Hillary made like she was against it as a danger to our country. Will the Candidates address this issue?
As soon as I heard about the 800 Buck rebate I went straight down to circuit city and put a new play station and an I Pod on my Mastercard. I'll pay for them when the check comes in. I've done my part. Every good American should do the same.
You got the gold, you make the rules.
Good point, gcshaw. The idea that government is bad, regulation is bad, has been pushed down the public's throats by a media that has been rewarded by being deregulated - but people went for it and were happy to see it occur. Certainly if the liberal/left/commies do it, it's gotta be bad.
Sad thing is, while governments are set up with the intent of protecting the average constituent from anything predatory, they get infiltrated by opportunisitic immoral operatives, and the whole thing falls to ****. I think politicians have to be sociopaths to even get out of the starting gate these days. Well, not municipal politicians, maybe.
The title mentions deregulation, and I, mistakenly, thought it would include all deregulation. This is not to say that the article is wrong. It isn't wrong, but it doesn't go far enough. All of the deregulation -- of the airlines, trucking, banking, etc. -- and all of the destruction of the old "safety net" and the destruction of the unions has contributed to this meltdown.
All of the work over the years, to make sure that another "Great Depression" wouldn't occur, has been destroyed in the last 20 years. Those that fail to learn from history are doomed to repeat it.
It was said that FDR saved capitalism for his kind. He was wealthy and wanted to stay that way and so did his friends. At the time, Marxism was looking more stable, so they had to stop that in its tracks.
Jess, there is one of the candidates who goes on endlessly about the Federal Reserve. They don't mention him in the MSM, and one might solicit negative responses by mentioning him in this forum. He's a "conservative", you know. You know who I'm speaking of?
Not one of the presidential aspirers ( they are not qualified to be called candidates )has mentioned the role of the Federal Reserve System ( it's not federal, by the way, it's the private banks ) in our economy. Hell, they don't even know what it is or how it was founded. What a bunch of dummies, jusy like Bush. Just print more paper money for people to spend. Disaster!
One of the key problems with deregulation as practiced is that it's supply-side deregulation. There's no demand-side deregulation, no deregulation rules affecting the bottom 90%'s ability to garner wealth.
On the contrary, we're increasingly spied on, need increasing amounts of data on our passports, cannot outsource our income taxes to the Caymans, etc. We can't print our own money, steal from the rich, etc. Why didn't the conservatives toss a little deregulation our way as well?
I'm old enough to remember when the words "conservative" and "skeptical" were nearly interchangeable. When presented with a "new idea", the first words out of a conservative's mouth were, "How ya gonna pay for it?"
Today, the voters who support the Republican party seem to be the most gullible on Earth.
I plan to tar them with that word so thick that they'll never be able to wash it off.
annabelle "Inflation. Resession. They don't mean a #### thing to the homemaker who goes to the grocery store and finds that the price of a dozen eggs has doubled. Really. What would you call the rapidly rising prices of everything necessary for daily existance?"
"Non-core inflation." That's right! The government excludes food and energy from the "core inflation rate" that they track and publish. This is the number that determines Social Security payments. This is the number that employers base salary increases on. This is the soothing opiate of the masses that says, "Well, at least inflation isn't so bad."
If you factor in food and energy, inflation is probably closer to 10% these days.
Inflation. Resession. They don't mean a #### thing to the homemaker who goes to the grocery store and finds that the price of a dozen eggs has doubled. Really. What would you call the rapidly rising prices of everything necessary for daily existance? Is the egg farmer making twice as much as he made last year? He is probably just breaking even like everyone else, that is, unless he is one of the mega agricultural conglomerates. Struggles with everyday living expenses is simply part of the 'trickle down affect' we hear so much about. It is true, every cent is trickling right down the drain.
Deregulation - another "gift" to the American people courtesy of Ronald Reagan and the Republican party.
Good one, jskinner. I'd belabour the point to say that the passage of the Federal Reserve Act plays into my Monopoly analogy (I seem to be enjoying that) as the moment the banker yields to the temptation to start slipping the bills out of the box and putting them into play.
Boil all these failures down to one cause: Our debt-based monetary system, i.e., fractional reserve banking. Well-stated in
"Will Economic Stimulus Measures Stave Off Recession?" by Richard C. Cook.
Read the article at
http://www.globalresearch.ca/index.php?context=va&aid=7852
As noted, it's all by design. One might pinpoint the surreptitious passage of the Federal Reserve Act as the turning point. A good bit of history about that by Stephen Lendman in "Dirty Secrets of the Temple" at http://sjlendman.blogspot.com/2006/06/dirty-secrets-of-temple.html
Arguably the most important "regulatory failure" is the complete lack of consequences for those directly responsible for this foreseeable and avoidable mess. Lie, cheat, steal - get promoted, receive obscene "bonus," donate part of said bonus to either pol party, receive free pass on the lying, cheating and stealing. Repeat.
In the other world, the one the rest of us live in, people do 25 years for stealing videotapes, get Tazered for asking questions, and lose their driving privileges if they're a week late on a parking ticket. In this other world, "ignorance does not constitute innocence." In this other world, neglect is a criminal offense in many areas as well.
But up there in the sky-high club, even the threat of a possible wrist-slap has been eliminated. It's as if the FBI announced that, from now on, bank robberies will no longer be investigated.
If we expect anything to change, ever, fellow Americans who choose to screw other fellow Americans must be arrested, tried and jailed in real prisons, and stripped of everything they own, just like any other scumbag petty thief. Clearly, the honor system - AKA, the self-regulating market - is nothing more than a license to rape, pillage and burn in a country suffering from an unrecognized but obvious pandemic of Greed Disorder. The only deterrent left is 10 years hard labor.
How much longer are we going to keep trying to patch-up our herky-jerky capitalist junker, instead of just looking around for a smoother-running new vehicle? If Extraterrestials are indeed visiting us, then they certainly did not come here from planets with anything like our economic structure.
But as you know, fpal, the black-and-white choices that the media presents are false. You know that whichever you pick, of the choices you are presented, the theft will continue. The few thousand who call the shots have turned you against hundreds of millions with a different "brand", and they against you. While they steal from you all. Know your enemy. Divided you fall.
You know, Big_Money, if you listen to the mass media, as the majority of Americans do, you hear conservative vs liberal, Republican vs Democrat, red state vs blue state.
Your nuance maybe correct but I'm more interested in changing the path of America.
fpal, these are not conservative policies. The political "neo-conservatives" subscribe to something called "economic neo-liberalism". Neither of these groups/philosophies are conservative. They're crooks in fancy suits.
Excellent article, you nailed the reasons.
The conservative agenda that promotes reducing government regulations is a sham, a mockery of law and order. Why don't liberal politicians counter this garbage propaganda.
The banks, by repackaging these loans and allowing the highest credit rating to be placed on them, were effectively swindling buyers of those loans. This is unethical and against the bank charters (plus unethical actions by many professional who supposedly must live up to ethical standards, such as CFAs) thus grounds for censure and litigation.
It's time to show that conservative policies are bad for America.
The Failure of the American Narrative.
Eric Barth writes: "The goal here is to lay waste to whatever is left of what they think of as the "Welfare State,"or what the rest of us know as a "Mixed Economy.""
They've never heard the famous last words, "Let them eat cake."
One thing history repeats over and over again: when the rich/poor divide becomes too great -- in both resources and numbers of people, revolution results.
Right now, the poor are a small enough minority that the huge middle-class can ignore. As long as the middle-class can dream of being rich, the truly rich are safe. Why do you think the middle-class let the past four administrations get away with massive wealth transfers to the already wealthy? Because it was still within most people's imagination that they could be a recipient of this windfall some day.
But there may be a mood shift happening. Those who once dreamed of being wealthy are now scared of the poor house -- not that there is anything as charitable as a "poor house" any more.
As the huge middle-class sees themselves sinking, year-by-year, into poverty, the pendulum may begin to swing back again. Combine this with the coming energy decline, which will make it more difficult for the wealthy to wield the infrastructures of telecommunications, transportation, deep bureaucracies, etc. upon which they depend for control.
Downsize. Get out of debt. Work at home. Join with others of like mind and buy land communally. Grow your own food. Stop buying plastic crap from China. Treat each purchase as a lifetime investment. Starve the beast!
I posted this on another thread, and it seems to be relevant to this discussion as well... It's a MonopolyMicrocosm of how the money has unscrupulously moved to that certain handful of individuals, and what that $800 for everybody thing may signify...
So, as the banker in a game of Monopoly, it occurs to me that I can slip bills out of the kitty and bring them into play. Of course I don't want the other players to know I'm doing this, so I start slow. I buy a railroad or two for double the original price - make a couple of players happy with their "gains". Then they start spending all that money I gave them, bidding up prices on other properties up. But I can always slip out a $500 bill, pick up some more properties, at an appearant gain for the other players.
But the day comes, that I own everything. The other players may have big wads of cash, and with rents the way they are with me having all the monopolies, the wads of cash start coming my way.
The crux is the $200 the players get at payday - it's no longer enough to get them around the board without a loss. It's not a living wage anymore.
Next thing you know, I've got to give each player $800 so we can go around the board a few more times. Should I care, knowing that I'll get the $800 back? I would only care if I didn't want the game to end soon.
However bad things get, the wealthy class, mostly Right wingers who have gotten that way through dishonest means, think that it won't be so bad for them. The goal here is to lay waste to whatever is left of what they think of as the "Welfare State,"or what the rest of us know as a "Mixed Economy." This is the ideology of the Heritage Foundation, the Cato Institute, Hoover Institution, the Hudson Institute, etc. etc. ad nauseum. So, to them the driving of the American economy into the ditch is worth the risk. They do it by controlling labor, quashing regulation of financial markets, controlling the media and endless war.
Again, it may be a misnomer to read any of these as "failures". Like the S&L and Enron crises, we have every reason to conclude that this is an orchestrated plundering (crime #1) with a subsequent bailout at taxpayer expense rather than imprisonment (crime #2). Two crimes for the price of one.
Our problem, as academics, ordinary people, wage-slaves, etc. is that we expect the economy to be a sober, rational, and sustainable process -- rather than a gamed boom-bust vehicle where they ream us coming and going.
It's a complete misnomer to read any of this as regulatory lapses. It's a premeditated collapse.
another factor not mentioned here--the trade agreements (wta, nafta).
the us trade imbalance with china wouldn't be anywhere near what it is if clinton, gore and the rest of the DLC dems, along with repubs, hadn't pushed for free trade.
what has passed for a healthy economy since the mid 90's was actually the result of two bubbles--
first, the dot-com bubble, which we weathered successfully enough because it was essentially a market event, and its effects could be isolated to some degree from the larger economy;
and now the housing bubble, whose roots go much deeper--markets again, only worldwide; home ownership (the last bastion of personal savings in the US) and the construction biz and related industries--a huge segment of the US living-wage job base, because most other US manufacturing has been outsourced (because of what? the trade agreements!)
Not "when", but rather 'how soon', and to 'what Ends'.
Little in our-World 'happens' by accidents, and few-'mistakes' are made, either.
All financial 'ups and downs' since our Founding were very-much Deliberate, planned-carefully, and Instituted 'with desired effect'. [Just like Rome's were...there's 'nothing New[neo] under the sun']
The most surprising thing to me is that people are surprised. It was never a question of if the problem would happen, it was only a case of when...
Failures? Hmm...
My goal is to cut government in half in twenty-five years, to get it down to the size where we can drown it in the bathtub.
- Grover Norquist
"Lenin is said to have declared that the best way to destroy the Capitalistic System was to debauch the currency. . . Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million can diagnose."
- John Maynard Keynes,
The Economic Consequences of the Peace,
1920, page 235ff
I don't think that the folks who flipped the switches to allow this to happen feel any sense of failure. Other quotes likely exist to illustrate this more precisely....