aTypical Joe: a gay New Yorker living in the rural South
Saturday, April 05, 2008
The financial crisis: do you understand it?
I’m betting you don’t. I know I don’t. And I’d be skeptical of you even if you claimed that you did understand it. But I’d want to pick your brain. And I’m sure I’d enjoy the conversation.
I found Thursday’s Fresh Air interview with University of Maryland Law professor Michael Greenberger on the sub-prime mortgage crisis, credit defaults, and the shaky future of other types of loans to be particularly enlightening.
He was not very hopeful about what we can expect from the U.S. financial markets in the near future. I recommend we all listen up.
The passage I choose to quote is about our lack of understanding:
If Franklin Delano Roosevelt were president right now, we would understand… There would be a fireside chat. We would make it so that the American public understands it. And it’s important that the American public understand it because, even as we speak, the Wall Street interests who have all the money in the world to hire lobbyists are lobbying 24 hours a day, seven days a week, 365 days a year, 366 in leap year to keep this market what we began our discussion with, a shadow market that nobody understands.
And what they tell Congress is, `Look, these are complicated things. You are not smart enough to tell us what to do.’ But the fact of the matter is, what we have seen is these guys aren’t smart enough to be able to carry this thing off without regulation. They’re losing money hand over fist, and, of course, the saddest fact in all this is that when these CEOs lose the money, they’re fired, but they walk away with hundreds of millions of dollars in severance packages. And when Bear Stearns collapses, the Fed is prepared to have taxpayer money thrown in to rescue the institution, but no money or relief goes to the person whose mortgage has been foreclosed.
RELATED: You might guess that Greenberger is no fan of Phill Gramm. Co-chair of John McCain’s campaign, Gramm’s also the man most responsible for the repeal of Depression-era banking regulations that have led directly to much of today’s economic mess.
Over at The Moderate Voice, Shaun Mullen calls him McCain’s Terrorist In Pinstripes.
The Colbert Bump is real. For Dems.
Stephen Colbert, the host of Comedy Central’s The Colbert Report, claims that politicians who appear on his show will become more popular and are more likely to win elections. Although online discussions cite anecdotal evidence in support of his claim, it has never been scrutinized scientifically. In this article I use “facts” (sorry, Stephen) provided by the Federal Election Commission to create a matched control group of candidates who have never appeared on The Colbert Report. I then compare the personal campaign donations they receive to those received by candidates who have appeared on the program’s segment “Better Know a District.” The results show that Democratic candidates who appear on the Report receive a statistically significant “Colbert bump” in campaign donations, raising 44% more money in a 30-day period after appearing on the show. However, there is no evidence of a similar boost for Republicans. These results constitute the first scientific evidence of Stephen Colbert’s influence on political campaigns.
The good news on food prices spreads
I’m fascinated to see the Dallas Morning News editorialize on the upside of high food prices. Recognizing that it means a healthier overall system, the editorial explains:
Prices for locally grown produce and locally raised (usually grass-fed) meat are becoming more economically competitive with factory-farmed rivals. Typically, consumers who buy meat and produce directly from local farmers do so because of taste and health â€“ and are willing to pay a premium. Now, though, best-selling food writer Michael Pollan tells The New York Times that higher bills for conventionally raised staples “level the playing field for sustainable food that doesn’t rely on fossil fuels.”
Mr. Pollan and other local food advocates argue that cheap petroleum and government subsidies have a profoundly distorting effect on the American diet and food system. These factors, they say, make food that is less healthy for us the easiest to afford. What’s more, they encourage an industrial agricultural system that dramatically stresses the environment. Their case is compelling.
It’s hard to dispute that creating a larger and stronger network of small farms that provide food for the local market is wise, given that the era of cheap oil is likely gone for good. Dallas consumers would be in a better position to weather future fuel price spikes if our food supply was less vulnerable to the oil market.
Nobody likes to see higher food prices. But if they unleash market forces that spur healthier eating and growth of a regionally self-sufficient style of farming, something good will have come out of our collective supermarket misery.
Pollan’s quote comes from this article in the Dining section of Wednesday’s NYTimes.
Rich Men Behaving Badly
I almost missed this... Daniel Gross, writing in Slate notes some striking resemblances between the underclass and the newly emergent super rich overclass:
In the underclass, unmarried, young fathers don’t take responsibility for their children. In the overclass, twice-married, middle-aged Wall Street daddies don’t own up to the consequences of their insane financial miscues. Wall Street titans are almost incapable of seeing the problem with taking nine-figure payouts in years in which their stocks plummet. “There’s just a total disconnect between the compensation and the responsibility for their actions,” says William Cohan, a former Lazard banker turned author.
In his book The Age of Abundance, libertarian author Brink Lindsey boils down the difference between the desperately poor and the blissfully rich to an ability to focus on the long term. “Members of the underclass operate within such narrow time horizons and circles of trust that their lives are plagued by chronic chaos and dysfunction,” he says. By contrast, elites are well-organized long-term thinkers. Riiiiight. “Modern Wall Street is a system,” says Charles Morrisâ€”a former Chase banker and author of The Trillion Dollar Meltdown-"that rewards crazy risk-taking in the short term without regard for the long-term consequences.”
Critics point to a pervasive sense of victimhood in the underclass. But listen to what Bear Stearns CEO Alan Schwartz told the troops after his firm succumbed to wounds that were almost entirely self-inflicted. “We here are a collective victim of violence,” he said. Yep, just another case of the Man keeping the Man down.
Conservative critics constantly carp that the culture of poverty has encouraged a sense of dependency on Washington. Of course, in recent months, the bureaucracy-the Federal Reserve, the Federal Housing Authority, Fannie Mae, and Freddie Mac-has generally ignored the struggles of poor homeowners. Yet it vaulted into action to save the bankers from their own disastrous bets. When Bear Stearns, the nation’s fifth-largest investment bank, approached insolvency, the Feds orchestrated JPMorgan’s acquisition of it.
Ah, but there are important differences:
The overclass is better connected, and it can cause more damage. “Poor inner-city kids selling drugs to suburban kids can harm people,” [dean of the University of Chicago’s Harris School of Public Policy Studies Susan] Mayer says. “But financial markets can bring thousands and thousands of people to ruin.”