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What went wrong

It's Friday, September 19th, 2008. I just listened to our mumbling and "mispronounciating" President announce further government involvement in the mortgage mess.

First things first: you had to be a complete and utter idiot not to know that housing values were way too high and had to fall. Part of that was due to the rampant speculation, and part was due to my generation of Baby Boomers reaching retirement age and wanting to sell and downsize. You had to be an idiot not to see this.

There's never a shortage of idiots.

Second thing: there are two very important things we need to learn and learn NOW. One is simply this: Big is Bad. Giant corporations are dangerous in multiple ways. Monocultures are dangerous in computers, in agriculture and (as we have just seen) in banking. We need to stop adulating the big corporations and force them to split into smaller groups. Yes, I know we can't force the Japanese or the Chinese to see the long term wisdom of this and that doing this in our country puts us in a bad competitive situation against MegaCorps elsewhere. Doesn't matter: the risks are still too high.

The other thing is going to offend some readers here. I'm sorry about that, but it's unavoidable. Like it or not, we need to stop glorifying youth. Young people, particularly young men, should never be put in positions of authority. There are two reasons for that: you simply can't have had the experience to make good judgments until you are at least in your mid 30's, and (perhaps more importantly) your brain isn't mature until at least age 30. Having "young turks" in charge of anything is just plain stupid, but we've done that all too often.

Finally, we need regulation. Laissez-faire attitudes toward business had its part to play in this tragedy. I dislike the Republican Party for its pandering to the Religious Right anyway, so this is just another reason that I will not vote Republican. Yes, some Democrats have made their own contributions to this stupidity, but the general tone of the Democrats has always been more regulation, not less. And yes, I understand that too much regulation can cripple markets just as badly as too little, but it is very plain that we have had far too little here.

OK: I've offended everyone under thirty, Republicans and the deeply religious. So be it.

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© Anthony Lawrence

Sat Sep 20 00:09:17 2008: 4582   RichardChapman

You have my vote.

Sat Sep 20 14:50:35 2008: 4586   JonR

Make that two votes (as of the hour I write this).

I don't think I would have been offended by the suggestion that youth may not be terribly wise, even when I was under thirty, which was over thirty years ago. I had already learned by that time that it took a certain number of years to develop good judgment. I probably learned it on faith, from my parents and teachers, as I certainly couldn't have picked up on it from my own behavior.

Nor could I now, alas.

Good post, Tony.

Sun Sep 21 07:45:29 2008: 4588   drag

What went 'wrong' happened years ago with the 'deregulation' of the industry.

All of these large institutions had assurances from the U.S. Government that they would be financially backed by the federal folks if they ran into financial problems. They knew this going into it. So there was little risk for what they did. They knew that the government would come in and bail them out from day one. I've known about this for quite a long time and could of predicted this coming, except I didn't realize the extent of the housing bullshit.

If a rich uncle came and told you that you could run your business any way you like and he would give you whatever you needed to stay solvent then how would you behave?

What if your a financial institution that makes money from giving loans out and the interest rates have dropped rock bottom, and you had assurances that no matter what you'd had somebody to just give you money, and all your competitors were taking advantage of the situation to gobble up as much of very-profitable debt as possible? Would you let other people eat your lunch and put you out of business or would you join the financial anarchy?

The way it works is that the congressmen and whatnot are, and always were, paranoid that unless the government was willing and able to step in and seize emergency control then we would have another 1930's-style depression. Of course they can't just 'do' this unless it was outlined in law well beforehand. And since all of this has been codified into law, and whatnot, then the people in high finance could depend on this to dramatically lower the amount of risk involved in this sort of speculative behavior.

Sure they knew that it wouldn't last forever. But it's not like they had much of a choice and it's not like they had much risk. How many of those bigwigs are now in the poorhouse for driving their company's into financial hell? I would say that the percentage is very very close to 0%. They covered their *redacted* _very_ well. They saw it coming well in advance. Very smart people, just huge asshats.

If I was a conspiracy fan I would say that this was done on purpose by the government-and-friends as a end of a 20-year long attempt to seize much tighter control over the financial industry. However I know that they are not that smart and this is just a end result of layers of incompetence, deception, and greed.

All of this is just a big example of the government stepping in and solving a problem that they created. (or in this case, heavily contributed to)

Oh, and it's completely and totally overblown. It's a self-assuring proficy. The economy isn't that bad because the vast (and I mean something like 90%) of the work, hiring, firing, and productivity is taken care of by people and institutions that don't show up in places like the stock market. They are small and medium privately held businesses. They do most of the work and most of the hiring. But the people running those businesses also listen to the news and think that stock market and other metrics that they see in CNN or Fox news have real merit. So they hear about 'OMG The economy is falling' and they get very conservative about taking risks. (such as hiring new people). So things slow down dramatically.

Sun Sep 21 13:46:34 2008: 4589   TonyLawrence

No, it's not overblown. If this was left uncorrected, it would have dried up credit, which affects all businesses, large and small. Also, it would have handed the empty bag to foreign investors - we already have enough people who hate us.

The most galling thing is that those responsible get to walk away with bulging pockets full of money. No punishment, no loss.

Sun Sep 28 15:58:49 2008: 4612   BigDumbDinosaur

The blame primarily rests with Alan Greenspan, who spent far more of his time making himself look good and far less time exercising prudent control over the financial sector. Greenspan, in my opinion (and others, see www.suburbanchicagonews.com/heraldnews/business/berko/1189327,4_3_JO28_BERKO_S1.article (link dead, sorry) for more info), acted like the parent of a spoiled rich kid and allowed the big cheeses to do pretty much whatever they wanted. Also, Greenspan encouraged what was, in effect, predatory lending by keeping interest rates unreasonably low, thus setting the stage for the subprime mortgage mess, as well as the imprudent borrowing against home equity (talk about sticking a loaded gun to your head). This mess started at least a decade ago and was actually encouraged by the Clinton administration.

Exacerbating the situation was the Clinton administration's tinkering with the Community Reinvestment Act (CRA) so as to extort banks into writing risky loans so welfare recipients and others of their ilk could purchase real estate, even though these people were (still are) financially irresponsible and would likely default on their mortgages. Well, guess what? Exactly what was predicted some 13 years ago when Clinton and his trailer-trash wife decided to use the financial sector to do some social engineering has come to pass.

Less you think I'm sympathetic to the financial sector, don't get your nuts in a knot. These people knew exactly what was going on and what was likely to happen if too many mortgages went into foreclosure. Yet, they continued to write loans like the way Santa Claus hands out gifts at Christmas. The results were very predictable, and to the greedy SOBs on Wall Street, I say tough*\***!

As for the Democrats, who are desperately trying to deflect blame to anyone they can, I say own up to it. It was your president who allowed Greenspan to continue on the road to financial crisis.

Sun Sep 28 20:17:30 2008: 4614   TonyLawrence

Well, as usual Steggy and I see things very differently.. I see this as caused by Republicans..

But honestly I'm sick of both parties.

Mon Sep 29 13:39:46 2008: 4617   BigDumbDinosaur

Well, as usual Steggy and I see things very differently.. I see this as caused by Republicans.

The Republicans certainly played their part. They could have reined in the Fed and slowed down, if not stopped, the mortgage mania. After all, up until fairly recently, the Congress was Republican-controlled, and a Republican is in the White House. However, as usual, greed and corruption got in the way of any meaningful reform. And, as usual, it took a crisis to trigger action, although I have no use for those who are pushing for a government bailout of Wall Street.

But honestly I'm sick of both parties.

As am I. No matter who's in power it's the same old crap.

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