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Dad wrote this morning, expressing amazement that I hadn't commented on "this week's triumph of Reaganism." With a few edits, here is my reply:
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Reaganism?
Financial crises have been around a lot longer than Reaganism or, for that matter, the Republic. Maybe Reagan et. al. bear some responsibility, but the biggest culprit was a lack of investor scrutiny toward the banks they invested in. It's easy and seductive to claim this is a political problem. I think that's secondary to the fact that this is a business problem, brought on by a cultural obsession with short-term profits. We're finding that such profits often come at the long-term expense of these financial companies, and the chickens have come home to roost. And these sophisticated big banks weren't ignorant buyers of these shaky mortgages in the first place -- if they were going to invest tens of billions of dollars in mortgage-backed securities, they could have done a bit more homework on what they were buying. Wall Street lost its appreciation for credit risk, and that wasn't the fault of any politician. Goldman, in particular, did a good job of recognizing these risks and unloading them.
The main political issue, to me, has been the loss of manufacturing jobs and the turmoil that comes with the massive job turnover we've had in a "globalized" economy. Families which used to be able to depend on a stable, well-paying job now find that they've been living much closer to insolvency. Rather than a secure job that pays $25/hr, blue-collar guys are in tenuous jobs which pay $17. They lose their overtime for a few months, gas prices spike, and suddenly they can't make all the mortgage payments... Down comes the house of cards. The mortgage-holders didn't appreciate the actual default risk, and now the effects are cascading through the system.
So, maybe Reagan and his cronies bear some blame, but the lion's share goes to the management of these companies, who sold out their shareholders for immediate gain -- an old, old tale. But I'd be interested to hear why you think this is all Reagan's fault.
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3 comments:
I'm not so sure. The more read and listen about this crisis, thoe more I tend to agree with Bud.
In plain words, you feel that greed and myopia of these industry leaders have the most culpability for what we are witnessing. You're not wrong, but most CEOs tend to be a bit greedy and myopic, especially since they are judged based on last quarter's performance. They have been and will always be that way.
So what's changed?
What changed was that in the 80's Reagan and his acolytes (re)introduced the concept of lassaiez faire into the american markets. They felt it was best to deregulate at all costs and remove as as much accountability and transparency as possible so as to not hinder market forces in anyway. Well it sounds simple and easy, but just like with communism, the flaw lies in human nature. Without any oversight or accountability, certain corporations were able to milk the system and hoarde all the wealth they possibly could, and manipulate the market on their own at the expense of the consumer with no fear of government retribution.
We've seen this before 2 other times in recent history. The S&L crisis resulted from the recently deregulated industry and cost thousands their life savings.
The enrgy crisis in CA earlier this decade was the result deregulation of the energy industry and of one company, Enron, growing so powerful as to alter the market as they saw fit, being able to charge consumers hundereds of times more for energy than it actually cost.
And lastly what we have seen in the past months. Where with the absence of regulation, mortgagers were able to peddle alomst criminally easy mortgages to poeple who could ill afford them.
I agree that greed in the leadership of these companies were the cause of this fiasco. But before Reagan, there was a structure in place to keep that greed in check.
-Marty
It's Reagan who set these wheels in motion - check out the statement of principles (dated June 1997)and have a look at the signatories at: http://www.newamericancentury.org/statementofprinciples.htm
Who would have thought that these nutters would be running the show three years later
Since I don't seem to have a functioning email addy for you... check this out (has NOTHING to do with your blog post)...from www.electoral-vote.com:
"More Shenanigans in NY-13
Just when you thought the race in NY-13 couldn't get any wackier, it did. Here is a brief recap for people who weren't visiting the last time this story came up. The Republican congressman from NY-13 (Staten Island), Vito Fosella, was caught by a cop going through a red light, drunk. Turns out he was going to visit his Virginia family, one his New York family didn't know about (family values). Other Republicans pressured him to not seek reelection. Republicans settled on a rich businessman named Frank Powers as candidate. Powers' son hates him so much that he ran for the Libertarian nomination solely for the purpose of defeating Dad (more family values) but lost. Powers, Sr. died of a heart attack in June. Republicans then picked Robert Straniere to run. The most powerful Republican politician on Staten Island, Guy Molinari, vowed to do everything he can to defeat Straniere (party unity). Now the Republicans are trying to get Straniere appointed to the state supreme court (which is not the highest court in NY) to get him off the ticket so they can run Mr. Family Values (Fossella) again. You couldn't make this stuff up. The bottom line is that New York City council member Mike McMahon (D) will be the new congressman from Staten Island."
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