War on Prosperity
Posted by aogMonday, 24 May 2010 at 08:26
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Spain finally admits that it’s “green” policies are a financial disaster. While it wasn’t the NY Times reading public’s knowledge, surely our President (or his advisers) knew this when President Obama endorsed duplicating those policies here in the USA.
But, anyone who objects to this sort of government intervention is just an anarchist who wants no regulation at all. Better to fail on purpose.
Friday, 28 May 2010 at 20:05|
It wasn’t just the gov’t that abused securitization - it was also the lenders and some purchasers.
Why did the supporting documentation for each MBS run to thousands of pages?!? Obscuration, plain & simple. In fact, the structure of each instrument was (deliberately and unnecessarily) so arcane, and contained so many variables, that for all practical purposes they were impossible to reverse-engineer. That’s some major-league chaff.
And, although it’s true that by 2002 the ratings agencies were captured by the very firms whose offerings they were supposed to be evaluating, it’s also true that, absent a few gullible, naive and/or lazy local, state, and pension public officials, everybody knew that the ratings agencies were being gamed.
The buyers played along because many of them were allowed to purchase only investment-grade instruments for their funds, and rating agency malfeasence and misrating made “alt-A” securities, with their slightly-higher yields and INSANELY-HIGHER RISK, technically acceptable for the buyers.
Governments at all levels skew market signals and incentives ALL OF THE TIME. But bubbles and manias are fairly rare. Therefore, gov’t action may cause major market distortion, e.g. California auto insurance rates, but it’s not a given. We must certainly blame the drug dealers for enabling addiction, but that doesn’t let the addicts themselves off the hook - “lenders around the world race[d] to get in on the action” doesn’t sound like the pure and chaste being dragged kicking and screaming to their debasement.
Further, since we KNOW FOR A FACT that the U.S. Congress & White House had been captured by Wall Street along with the ratings agencies, since at least 1999, can we really separate “gov’t” action from “market” action? In this instance, the gov’t was being directed by some of the largest firms comprising this particular market.
In other words, it was ALL market action. We can blame public officials and institutions for being captured, compromised and corrupted, but we cannot reasonably claim that said gov’t officials and institutions “created” the situation, since they were acting on the specific behest of those who did create the situation. (But although desired, it was unwise, and those prime actors have gotten their hubristic comeuppance, since all of the largest American retail banks and investment banks are insolvent1 - although many are currently and indefinitely staggering on as the living dead.)
1 Yes, including Masters-of-the-Universe, smartest-guys-in-the-room Goldman Sachs, who would have collapsed in 2008 if not for the Federal Reserve Bank of New York. In the fullness of time, we may yet see criminal charges brought with regard to the peculiar manner in which that situation was handled.
Saturday, 29 May 2010 at 00:51|
Well, here’s something sensible that the President has said - abominable, perhaps, but also unflinchingly realistic:
BP Suspends Top Kill Operation a Second Time, by Clifford Krauss - New York Times - [Mr. Obama] said oil and gas from beneath the Gulf, now about 30 percent of total domestic production, would be a part of the nation’s energy supply for years to come. “It has to be part of an overall energy strategy,” Mr. Obama said. “I mean, we’re still years off and some technological breakthroughs away from being able to operate on purely a clean-energy grid. During that time, we’re going to be using oil. And to the extent that we’re using oil, it makes sense for us to develop our oil and natural gas resources here in the United States and not simply rely on imports.”
Addendum: OK, the link now goes to a similar story, but with additional reportage by another individual, and the above quote’s gone. Maybe ‘cause it clashes with the “I feel your pain” storyline.
Some non-sensical stuff:
Placing the Blame as Students Are Buried in Debt, By RON LIEBER | May 28, 2010 | NYT
Like many middle-class families, Cortney Munna and her mother began the college selection process with a grim determination. They would do whatever they could to get Cortney into the best possible college, and they maintained a blind faith that the investment would be worth it.
Today, however, Ms. Munna, a 26-year-old graduate of New York University, has nearly $100,000 in student loan debt from her four years in college, and affording the full monthly payments would be a struggle. For much of the time since her 2005 graduation, she’s been enrolled in night school, which allows her to defer loan payments.
This is not a long-term solution, because the interest on the loans continues to pile up. […]
Meanwhile, universities like N.Y.U. enrolled students without asking many questions about whether they could afford a $50,000 annual tuition bill. […]
The balance on Cortney Munna’s loans is about $97,000, including all of her federal loans and her private debt from Sallie Mae and Citibank. […]
Cortney could move someplace cheaper than her current home city of San Francisco, but…
She recently received a raise and now makes $22 an hour working for a photographer. It’s the highest salary she’s earned since graduating with an interdisciplinary degree in religious and women’s studies. [Emph. most definitely added].
While I am sympathetic to many of the points made in the full article… How on God’s green Earth did Cortney or her mother think that an interdisciplinary degree in religious and women’s studies would EVER be worth paying $50K/yr, and racking up an M.D.-worthy $100K in student loans????
A graduate degree in nuclear or petroleum engineering, sure, I can see that. The aforementioned medical degree. An air traffic controller or maybe a commercial airline pilot…