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24 Random Observations On The Great Financial Meltdown Of The Year Aught Eight

Posted by SHAUN MULLEN, TMV Columnist in Economy.
Sep 24th, 2008 | Comments

(1.) It’s no surprise that senior citizens are among the most vocal opponents of the $700 billion financial bailout plan. Only they can recall first hand the privations of the Great Depression, the last great systemic collapse of American financial institutions.

(2.) Efforts by both Republicans and Democrats to the contrary, the meltdown does not have partisan roots. Both parties must share in the blame.

(3.) Some shameless commentators are hinting that it’s all the fault of colored people.

(4.) The last major U.S. financial scandal was the Keating Five. It is obvious that we learned little from the $160 billion savings-and-loan bailout (300 billion in today’s dollars), least of all John McCain.

(5.) Yes, George Bush is a lame-duck president. But he has so little credibility that his cheerleading seems like so much background noise, and his cancellation of a fundraising trip so he could lead the bailing was appropriately greeted with derision.

(6.) American’s faith in its financial institutions has been shattered, while the approval rating of the man who will sign the bailout plan legislation is now lower than Richard Nixon’s the week that he resigned.

(7.) And that man’s record when it comes to must-have emergency measures with no strings attached is awful.

(8.) It is, in fact, Henry Paulson who is running the show. That means that the Treasury secretary has an obligation to be absolutely clear about the course he is charting. Instead, he has been absolutely vague except when it comes to fear mongering, including the inane claim that the U.S. might slide into a recession if there isn’t quick action.

(9.) While there remains some question about whether the U.S. is technically in a recession, most Americans will tell you that it sure feels like one.

(10.) While the recovery of Wall Street and world financial markets late last week was greased by a big down payment on that $700 billion, it was predicated on the belief that the bailout plan will work.

(11.) There is no guarantee that the bailout plan will work.

(12.) The bailout plan punishes the sharecroppers and rewards the plantation owners.

(13.) Beyond malfeasance on the part of the titans of the financial industry and government, the biggest reason for the meltdown is that there is way too much debt. The bailout plan does not address that.

(14.) As it now stands, the bailout plan contains no provisions for judicial review, oversight or pay limits on the executives of firms that would be bailed out. Senator Christopher Dodd’s alternative plan does all that and more.

(15.) As well as no punitive measures for the companies being bailed out because, as Fed chairman Ben Bernanke explains, anything short of a handout might discourage them from participating. Duh!

(16.) The meltdown is a pungent illustration of how a free-market economy suffers when the government colludes with and fails to regulate financial institutions.

(17.) As tempting as it is, the bailout plan must not be loaded down with stimulus measures although they are badly needed.

(18.) Homeowners holding the short end of the stick are getting trampled in the mad rush to bail out the bigs. A one-year mortgage foreclosure moratorium on primary residences as part of any bailout package makes sense.

(19.) Pardon me for asking, but how am I and other taxpayers going to be paid back? And no I Bailed Out Wall Street & All I Got Was This Lousy T-Shirt jokes, okay?

(20.) Iraq is sitting on $80 billion in oil profits. Al-Maliki: can you spare a dime?

(21.) The next president will inherit a $500 billion budget deficit and the costs of the bailout plan. Barack Obama says his spending plans may have to be delayed as a consequence, while John McCain, who also wants to keep the Forever War going, says he will cut taxes.

(22.) But, hey, here’s some good news: The collapse of the housing market slowed last month.

(23.) But, hey, here’s some bad news:There’s still no bottom in sight.

(24.) Unlike the 1929 Crash, there have been no meltdown-related suicides reported, let alone leaps from the windows of bank buildings.

(25.) The Great Financial Meltdown of 2008 is fraught with irony, but none is bigger than the fact that the conservative architects of the deregulation movement have become what they long railed against — socialists.

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Don Quijote

(2.) Efforts by both Republicans and Democrats to the contrary, the meltdown does not have partisan roots. Both parties must share in the blame.

Bullshit!!!!

Bullshit!!!!

The Republicans have been the party of Deregulation for the last 30 years, they have also been in charge of the White House and the regulatory apparatus for the last eight years!

The laws they could not repeal, they did not enforce.

So if we are going to lay blame on both parties, let's do it honestly:

- 80% to the Republicans for being greedy short sighted dumb asses.
- 20% to the Democrats for being spineless cowards.

and 100% to the American public who elected these dimwits.

And one more time BULLSHIT!!!

DLS

Well, at least Donnie Q's comment kept Shaun from looking really bad once again.

Yes, both parties are at fault. The problems go all the way back to the Seventies with the Community Reinvestment Act, the long-notorious behavior of ACORN (which taints Obama to this day among the knowledgeable), and Dems during the Clinton bubble years who competed with the Republicans to do whatever it took to make the masses feel good (good news is one of their opiates along with cheap money). By the way, Robert Rubin, who oversaw Clinton's approval of the repeal of Glass-Steagall, allowing banks, insurers, and investment firms to merge, undoing the barrier erected in the 1930s after mischief as well as a bubble during the 1920s was exposed, then went into, where else, the financial sector, and whose campaign is he how advising, incidentally? And whose administration might he come back to Washington to join?

What we need to do is (a) decide how to repair the damage that has been done and is surfacing, i.e., prevent any economic disaster (which is separate from allowing the institutions that should fail, to fail); (b) reform government as well as the financial sector so this doesn't happen again.

Of course there should be no handouts to executives, nor to occupants of the homes who wanted something for less than it really cost, or for nothing, and who now want to be maintained as federally-supported squatters (parasites) if Obama and other Dems have their way. If loans are not going to be repaid, foreclose and evict. Any federal takeover of properties (a godawful idea) should involve foreclosure, repair and improvements, and reselling at a profit to the federal government and thus a relief eventually to the taxpayers. Hold auctions if need be.

Finally, those of us on planet Earth who have been waiting for this, and have been the first to advocate this, now have learned this is starting: The FBI is beginning to investigate fraud in and by these firms. (Cynical note to execs: Plead guilty early to lesser offenses -- you cannot hope that only underlings will take the fall for this -- and hope for a Bush pardon next January along with, say, "Scooter" Libby.)

AustinRoth

Don - right back at you. Some of the most damaging changes occurred under the Democratic Congresses under Bush I, and both party's Congresses under Clinton. This is truly a bi-partisan train wreck. Its roots go all the way back to the 60's, in fact.

Shaun - re: (3.) Some shameless commentators are hinting that it’s all the fault of colored people.

Where have you heard or seen that! I mean, what a crock of shit, but I haven't heard a hint of racial blaming. I cannot even see how that argument can be made, unless you are talking about the complaints of lending discrimination that led to the directives to loosen credit requirements. But even if someone wants to go down that path, that may be what, 5% of the cause? And the loosened credit most certainly didn't go only to non-whites, so it is a red herring anyway.

The real underlying cause (IMHO) was primarily the changing of the banking laws that tore down the walls between traditional banking and investment banking, and of course the Freddie/Fannie chicken finally coming home to roost (and THAT fiasco has roots stretching all the back to LBJ!)

re: (6.) American’s faith in its financial institutions has been shattered

So true. Multiple hundred year-old, respectable (in the past) institutions gone forever.

re: (22.) The Great Financial Meltdown of 2008 is fraught with irony, but none is bigger than the fact that the conservative architects of the deregulation movement have become what they long railed against — socialists.

Again, so true. We are nationalizing a HUGE chunk of our economy. And the 'we will give it back as soon as we are able' line, well, that just makes me do a spit take. What government agency, once it gets its hooks into any type of revenue stream or lever of power, willingly concedes that authority back, and shuts down?

Also, this will make it a lot hard to criticize Chavez! (snark alert)

As always,
your personal troll

DLS

It's more like 70-30 at most or 60-40 or even 55-45, GOP-Dem ratio. This was a 1990s-onward problem and the Dems were at the forefront much of the time then. Plus there's a big "Wall Street Left" that's well entwined with Democrats in Washington.

It's more GOP than Dem overall because of the nature of it and history shows (or demonstrates or proves) it. It's not just a matter of the GOP's own fondness for Wall Street and big money (any "privatization" program for Social Security involving large amounts of securities -- stocks and bonds, who knows, someday options and futures and derivatives as well, ayyy -- would direct vast amounts of money Wall Street's way, as we all know). The concept of deregulation is sound and obviously superior to government meddling-and-mismanaging-to-death. But that leaves us on an "honor system" and there are those ever ready to abuse it. Plus having Glass-Steagall broken during a bubble was obviously the worst thing to do (a friend of mine and I in Atlanta at the time this happened were aghast at this -- while we were also observing colleagues constantly going for call options and betting on the hotter stocks at the time in other ways as well).

History? Community Reinvestment Act was obviously wrong, but were there any problems directly attributable to it in the late 1970s or the 1980s or earlier in the 1990s? No. Deregulation with S&Ls happened in the 1980s and by the end of that decade, that's when the problems began. Deregulation of finance began in the late 1990s and about ten years later we have another disaster. The problems seem mainly arising from deregulation if history is any honest account. Deregulation is great -- much better than too much ogovernment, the "visible foot" replacing the "invisible hand" -- but where there's cheating, where experience has shown there have been problems, there need to be limits. I'm sad that Congress isn't promptly saying first and foremost that Glass-Steagall should probably be renewed. Or must we face mergers now (for survival of the remaining firms) and try to "manage" it as best we can?

DLS

"We are nationalizing a HUGE chunk of our economy."

Hell., the late Gus Hall would have loved it. "80 per cent of AIG? Better than 50.1 per cent, and why not one hundred per cent? Not merely AIG but all the firms?"

"And the oil companies are next! Solidarity with Chavez!"

DLS

" What government agency, once it gets its hooks into any type of revenue stream or lever of power"

One-way ratchet -- hooks, claws, fangs...

T-Steel

Austin Roth said: "We are nationalizing a HUGE chunk of our economy. And the 'we will give it back as soon as we are able' line, well, that just makes me do a spit take. What government agency, once it gets its hooks into any type of revenue stream or level of control, willingly conceded that authority back, and shuts down?"

Your right AR. I have to admit, I used to have a sprinkling of socialist viewpoints in my political heart. When you grow up immersed in black nationalism, it's hard not to. But the recent financial crisis, along with this bailout talk, has dried up those socialist sprinklings. I know this isn't cool to say (well among some people) but I want all of them to fall and if we go down as well, then so be it. Maybe then we can rebuild a true capitalist structure.

CStanley

AR: I think I can shed some light on Shaun's "colored people" snark. This appears to me to be the canard that if someone speaks against a social policy program that purports to help blacks or other minorities, regardless if one is speaking of the blatantly obvious flaws of the program, then one must be a racist.

You'll find this 'rule' listed under 'Exceptions' of the Democratic playbook, to the more general principle:
'Political opposition and dissent are prized as the most cherished aspect of our Constitutional freedoms, and must be preserved at all costs. Attempts to stifle dissent by impugning the motives or patriotism of the dissenting party is a despicable and unacceptable; only free and open debate of opposing opinions should be permissible. (see also, Bush, GW; Cheney, Richard; Rumsfeld, Donald.)'

kritt11

Mostly, the economic bailout is the final failure of a conservative administration that supposedly believed in Reagan's principles of smaller government and free markets, yet moved in to take ever greater executive power when those principles led to greed, excess and economic disaster.

Yes, Clinton believed in free markets and may have started the ball rolling, but when he left office the economy was sound. Its impossible to blame him when he left office with a large surplus, low deficits and low unemployment. Bush had 8 years to regulate the subprime loan industry, but he chose not to. Even now his bailout plan seeks to preserve CEO's golden parachutes which totally defy logic and any sense of accountability.

An administration which could not afford to spend a few billion to expand S-chip to help struggling working class families pay for health care, believes taxpayers should continue to pay failing CEO's massive payouts in retirement. Why not use that money to help those in foreclosure who are losing their houses?

CStanley

It's maddening to see the typical partisan talking points flying around as in your comment, Kim. What exactly do you mean by Bush failing to regulate the subprime industry? The subprime mortgage industry ballooned because of Congress's mandate for Fannie and Freddie to buy up more subprime loans, ostensibly for the purpose of fostering home ownership among people who really couldn't afford to purchase homes (unless the housing bubble continued, so that home equity would rise fast enough to make up the shortfall in the intial loan repayment schedule.)

Now, who was pushing that mandate? Why, Barney Frank and Chris Dodd appear to have been the most vocal about it- including giving speeches where they claimed that the voices expressing grave concern about the subprime situation were just the usual fearmongering (comparing it to the GOP's claims of a social security crisis.)

Now, Bush and the GOP share the blame- they voiced concern but nothing was ever done. This first came to debate in 2005 while the GOP still had a majority, but enough Republicans opposed the McCain/Dole/Sununu/Hagel bill that it died and was never brought to a vote.

But to shift blame entirely to the GOP (who made errors of being too passive) vs. the Dems who ACTIVELY opposed reform, is partisan hackery.

T-Steel

IF someone said it's we "colored folks" fault (I haven't seen it), it's so stupid that it isn't even a blip on radar. It's like me saying the hurricanes only affect bad people. Uh oh... Didn't that actually get blogged about???

Edsel_F

I believe this is the person being eluded to by Shaun

http://mediamatters.org/items/200809190021

I enjoy coming to this site, but I would like to know where the moderates are.

shaun

Edsel:

Bingo.

T-Steel

Cavuto's showing his "dumbness". Throwing in the word "minorities" just fans "stupidity flames". My wife and I bought WITHIN our "minority means" which is why we're good on that end (as well as other smart folks). But right up the street from me is a subdivision of $650k - $950k homes were only 2 of the 22 are occupied. Of the 20 that are not, 13 were foreclosed and 7 never sold. That's one messed up "minority program" that allowed da "poor folks" into those. YEAH RIGHT.

My concern is with job situation in America and underemployment. When your wage changes or isn't enough to deal with rising prices, then that's a BIG problem.

kritt11

CS- Bush puffed himself up with pride over the level of home ownership among US citizens, and could have demanded some sort of regulation. Fannie and Freddie are just part of this mess-- what about the rest of Wall St-- the hedge funds for example?

And even now Paulson is making the rounds of the talk shows begging for alms for the poor, unfortunate CEO's who might lose their golden parachutes and actually be held accountable! It boggles the mind.

RememberNovember

(3) The use of the term "colored people" went out with MLK. It's condescending and racist. Might still be in use in the South, but no big surprise there.

You know- the signs for bathrooms and water fountains that said "Coloreds only".

Cavuto is just another round-headed fat boy pablum puker. Says whatever he's paid to. Thing is, most of the smart, intelligent rational people at Fox are in the (gasp) Unions. You know, the camera men that have to stomach looking at these talking heads 24/7 cuz it's their job to. The floor managers who have to put up with the O'Reilly tirades because it's their job to. And when harridans like Coulter sit with their tight-skirted anorexic crossed legs and spout anti-union platitudes, the make-up people backstage start to wonder where they can get arsenic powder for Ann's foundation...

How high is the Fox talking head High-pocrisy? About 45 stories at least ( well ok, they don't own the whole building....but still)

CStanley

Kim, I actually meant to include in my comment that Bush did in fact claim bragging rights for increasing homeownership.

What about the hedge funds? What's your point?

kritt11

OK, CS- I'll concede that there are many in power on BOTH sides who are at fault. I tend to blame conservatives more because of their emphasis on voluntary action and reaction of the free market instead of reasonable regulation, and they seem to be more invested in protecting the same CEO's who got us to this point.

My main point is that reasonable restrictions by the government are much preferred over a crisis like this-- requiring a massive bailout with questionable results that has to be rushed through in a week. A small government role to control the excesses of capitalism rather than the FED merely warning the industry to stop making risky loans would have avoided much of this.

Now many experts are predicting that the next administration will be locked into this domestically, and locked into winding up the Bush agenda internationally. The much touted call for " Change " will now be impossible no matter who wins.

CStanley

Kim, the problem with blaming one side or the other is that we always end up with the wrong solution to the crises. Both sides push for their version of 'reform' and usually we get a mixtures that's the worst of both approaches (as many are pointing out, for instance, the current proposed bailout has the effect of privatizing the gains and socializing the losses.) That's a lose-lose scenario for the average US voter, so we'd better all wake up and start seeing through the partisan spin (from both sides.)

CStanley

I guess on your recurrent advocacy of regulation (or blame of deregulation) Kim, what I'm trying to point out is that in the subprime crisis, it wasn't a LACK of government action that was the root problem, it was the government's intervention in the mortgage industry that was primarily the cause- specifically, the concept of these private/public corporations (run like private companies, except without the risk because they were basically insured by DC) pretending that they could skirt market effects and enact social policy through the lending process. If you give out enough loans at below market cost, eventually the number of defaults will crash the system, it's as simple as that. Yet our government (both parties, but led by Democrats in Congress and by Bush with his 'ownership society' policy) kept pushing this thing right to the brink. The only thing that kept it from happening sooner was the housing bubble, but everyone knows that bubbles eventually pop and our policies have pretended that we could have an infinite bubble.

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