Once again I got stiffed. Because the Seahawks were sold out, I got stuck watching a garbage game when there were other perfectly good games to watch. I hope all the teams that this happens to lose, because the fans are losing out and the game is built on the fans. No fans, no NFL. Remember the XFL? Of course you don't. No fans, no game.
Alright. On to more important things. You might be reading a lot of financial news lately, what with the implosion of the mortgage market, the takeover of Fannie and Freddie, the $700 billion bailout, the sell-off of banks, and the folding of Lehman Brothers. There are a lot of articles and "analysis" purporting to explain the root causes of the situation. They call it "infinite optimism" or "misguided enthusiasm" or "poisonous debt positions". It all means GREED. They don't call it that but the reality is that this whole situation was caused by greed- greedy banks, greedy lenders, and greedy mortgage companies.
There are two truths that seem to have gone unnoticed so far in the debate. One- this is what you get for taking mortgages, re-packaging them as debt securities, and then reselling them to the people that have the mortgages in the first place. Essentially, you're selling people their own mortgages to invest in. It's the same principle as the meat industry uses- take the leftovers, grind them up, and feed them back to the animals (animals that are NOT carnivorous I might add). In that case, we ended up with E. coli and mad cow disease (which caused CJD in humans). In this case, we ended up with a debilitating crash of the housing and financial markets and a $700 billion dollar taxpayer-funded bailout of greedy businesses. Playing stupid games with money in order to make a quick buck ended up a massive failure. Who would have thought?
The second truth- policies, rules, and regulations (many not even official laws) WERE in place to prevent these types of situations from happening. They were implemented by the Roosevelt administration to address some of the key reasons for the Great Depression and the massive stock market collapse of 1929. These laws were implemented to curb speculation, to keep lenders from giving money to people unable to repay, and to keep businesses from getting into a position where their failure imperiled an entire industry (think anti-monopoly laws). They were implemented to constrain and watchdog government programs such as the FHA to make sure these types of institutions were looking out for the public good and not acting as profit seeking entities. These rules and regulations were eroded over time under pressure from big business and zealots that believed markets are always self-correcting and self-sustaining. They were decimated by Reagan and Bush Sr. amid economic policy that proved, in the long run, to be a massive failure for much of America. I mean, for crying out loud, Reagan believed in the "magic of markets" (a direct quote) like they were somehow separate from the social, political, and cultural climate of the people that used them. (As a side note, the policies enacted by Reagan have since come under the more appropriate moniker "voodoo economics".)
Without the regulatory and oversight structures in place, it was simply a matter of waiting for people to do what they do- put short term profits and money ahead of responsible business growth and sustainable practices. And here we are. My surprise is that it took almost two decades, although the S&L fallout in the 1980's and the dot com collapse at the turn of the century were good harbingers of the things to come. To be fair, there are economic policies, cultural norms, and types of money and loans that were unheard of and unthinkable when FDR and the Congress implemented the regulatory strictures after the stock market crash. So it's reasonable to think that this type of meltdown could still happen. But under a sophisticated regulatory structure that was meant to point out that lending people money with no income verification was stupid (and the rules used to be there), the chances it would happen at all were greatly reduced.
I guess a big thank you is in order to the market zealots, the anti-regulation crowd, the CEOs of the corporations that put profit over common sense, and to the members of Congress and the White House that listened to what any reasonable person would point out as bad logic. If we're going to worship money and profits, we may as well go whole hog. After all, what's faith without blind faith?
I close with our own President elect. He stood on the White House lawn and acknowledged for the first time, more than a year after it was obvious that the housing market was bust, more than 9 months after it was obvious we were in a recession, and more than a two months after it was obvious that the problems ran deeper than just Fannie and Freddie, that the economy is fucked. Of course, he phrased it as a rough patch, turbulence, and other non-committal garbage, but at least the beginnings of a hint of realization were there. He then spent copious amounts of time arguing that markets are the answer to all life's problems (an exaggeration, admittedly, but not by much) while shoving money into the pockets of companies that deserve nothing more than complete removal from the planet, once again proving that government is willing to prop up big business on Wall Street (the S&Ls, airlines, banks, brokers, government entities like Fannie and Freddie) but not on Main Street. All this underscores the bottom line: greed will get you places in this society. Even if you sell people back debt they already have, make bad business choices, and destroy the home ownership dreams of millions, you too can have a fat severance package, no responsibility, and a loan from Uncle Sam's wallet at artificially low interest rates to rebuild your empire and do it all again.
Anybody that doesn't lay the blame for the current situation on greed is trying to hide something. The root cause is simple. It's the ramifications, the ripples throughout the entire economy, that are complicated. The effects of the event are up for debate. The cause is not. It was pure, unadulterated greed.
2 comments:
Pure capitalism is just like any other "ism"-- on paper, it works; in practice, people fuck it up.
I am intrigued by the idea of regulation, but STOCK-HOLDER regulation. I want to see a system where stockholders get a tiny say in the long-term direction and policies of the companies backed by THEIR money.
That would end the "guaranteed bonus" policy outright, and set a course for long-term stability rather than short-term profiteering. No CEO would ever walk away with a $37 million severance package while thousands of Americans lose their portfolios-- whatever happened to the captain going down with the ship?
This is the captain flying off in a solid gold ROFLcopter while all the passengers drown.
Granted, a stock-holder regulation system would be tricky to put in place and could be problematic, but I see no other solution besides government regulation. "Self regulation" is an oxymoron, and the way bonuses are handed out on Wall Street, no CEO has any incentive to care about anything beyond posting the highest quarterly profit possible.
Bottom line, someone needs to be saying "hey fuckers, quit screwing the pooch", and if it's not going to be vigilant and empowered shareholders, then it HAS to be government. And those bastards can barely manage themselves-- I don't really want them managing businesses too.
And one last thing: no company, ever, for any reason, should be "too big to fail". If a company is too big to fail, SPLIT IT UP.
If Frannie and Freddie combined handled 25% of mortgages instead of 70%, those bitches would have crumbled into dust like they should have, and Wall Street debt would not be magically transformed into national debt.
There is a form of stockholder regulation currently in place. Essentially, all stockholders are allowed to vote for certain company practices (mergers, CEO or CFO changes, etc) but this is not across-the-board policy.
The votes are a joke anyway since the "stockholders" are typically institutional holders or major investers like Warren Buffet. The average person that owns Coca Cola stock as part of an mutual fund doesn't get jack say in the company and, quite honestly, doesn't know enough to make company policy. Although the average person, I would hope, would put the smack down on retarded-huge severance packages and golden ROFLcopters.
The entire system requires oversight, but in a form that is ultimately responsible to the product consumer and the investor. Government oversight, once implemented, will be chipped away by lobbyists once people forget about this. Self-oversight is equivalent to putting a fox in the hen-house and leaving it up to him not to eat the chickens.
In a truly competitive market, the excess of choice keeps any one business from being able to collapse and bring the entire market with it. With only a handful of companies packaging and selling mortgaged-backed securities, the odds of catastrophic failure were much higher. And, once some funny business started happening, where were people going to go? They were forced to continue buying from the few big gorillas.
Fact is, Wall Street bet big, took a high risk gamble, and lost big time. There's no reason they should be rewarded for doing that. For Christ sake, the $700 billion dollar bailout plan was presented to Congress ON THREE SHEETS OF PAPER. Seems a lot like why we got into this mess in the first place.
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