September 23, 2008

Our battered economy

I haven't posted since Saturday. I guess I have not had much to say (those who know me say otherwise).

Partly, I have been watching this economic nightmare, as have, I am sure, most of you. My initial response was relief that the government was going to step in. I truly feared, with faith-based policies like we have seen in the past, some kind of Hooverian "the market will work itself out" response. I am pleasantly gratified that Bush recognizes the gravity of the situation. He still isn't willing to acknowledge his own participation in that situation, but after 8 years, I have come to expect that.

I am also gratified that Congress is at least talking about challenging the "blank check" portion of this bailout. As Paul Krugman noted, the rhetoric over the weekend resembled very closely how this administration approached the war in Iraq: "just trust us, or you will die." That is wearing thin.

This morning's NYTimes suggests that Democrats (and even some Republicans) are standing up. Harry Reid said that Senate Dems were ready to move quickly, but
“We’ll respond with the urgency of action that this situation demands, but after eight years of fiscal dereliction of duty, it’s time for accountability.

It is my hope that the outcome of this will be more than a restructuring of our banking system, but a fundamental shift from blaming government for all our ills. Reagan's charge that government was "the problem" is the juvenile rantings of the Republican party--kind of like the kid who blames all his problems on his parents or teachers. Grownups can (usually) see nuance and realize the benefits and potential of government to provide reasonable regulation and oversight. This attack on government fundamentally forgets our basic American political philosophy--that we ARE the government.

But Republicans will continue to be a problem, I am sure. Read the NY Times story and tell me that Mitch McConnell is not an idiot. The same people who gutted our regulations and proclaimed the magical genius of the free market are now demanding a blank check for the government and no questions.

Time for a change. Hell, long past time.


Jack said...

More government regulation won't help. One of the reasons we have this problem is that the government pressured the banks, Fannie Mae and Freddie Mac to make bad loans to people who could not afford them. Those who applied that pressure, like Barney Frank and Chris Dodd, should be prosecuted for studpidity as well as the misuse of their office. Now, the banks want the taxpayers to take over their bad loans so the banks can take the profit, some of which they pay to the politicians to buy influence. The banks want the profit and want the taxpayers to take the risks.

I say let those who made bad investments eat their own losses; don't stick the taxpayers with them.

leighton said...

It's a foreshadowing of the 2010 Republican talking points: our current situation is the fault of liberals, Democrats and poor people.

...Come to think of it, it's an awful lot like 2008 Republican talking points.

Streak said...

Yep. No greedy bankers--liberals made them do it.

Completely counter-factual, but, as you note, Leighton, completely in line with the GOP talking points. Up is down, Palin is a reformer, she opposed the Bridge, hates earmarks, and sold the state's plan at a profit.

Jack said...

I thought I said the bankers are greedy. You must have skipped that part of my post.

Streak said...

You said banks wanted the profit. Not necessarily the same thing. But you wanted Dodd and Frank prosecuted. Republicans were in charge of both houses, but only Democrats should be prosecuted.


Bootleg Blogger said...

Streak- I don't think regulation is the answer, especially when those doing the regulation (see here and here). This whole thing smacks to me of rewarding bad business. I'm confident that there is corruption underlying all of this. If you make bad loans, mismanage cash and debt, your business fails. The comfort of a government bailout removes the consequences inherent in the system. Other companies in the sector who run their businesses well don't get the increased marketshare they should get when competitors go under. Now they have to compete with government subsidies that they don't get because they did a good job- they have to pay market for loans, make good loans, etc....
I don't have the answers, but I really don't think this bail out is a good one.

Streak said...

BB, I certainly don't deny corruption, but we have had regulations in the past that have served us fairly well at protecting the essential stability of the economy. In many of the issues underlying this most recent collapse, the people doing the bad stuff didn't do anything illegal, because the change in regulations removed those laws. At the very least, we should have some laws on the books that allow us to prosecute those who damage our system, but in this case, there are very few. Regulation may not fix the issue, but in this case, it might have provided at least a bit of a protection.

Bootleg Blogger said...

I'm sure there's going to be some regulation. Your statement about policies is probably the best way to look at it. The problem is there's no such thing as conflict of interest in Washington and no one regulates the regulators. Paulson is the former CEO of Goldman Sachs and now he's in a position to bail out the company?????

As an economist I read recently put it, "the bailout sets a terrible precedent: If you take huge risks and become too big to fail, the government will bail you out." and "...let badly managed firms go bankrupt. Capitalism is supposed to be a profit-and-loss system. Too bad the so-called capitalists and their lackeys in the government don't believe in capitalism."

I don't think there's a consensus among economists that the bailout is a good idea. There DOES seem to be one amongst politicians which is what makes me nervous.