Democratic Senator Charles Schumer (NY) disagreed, essentially saying that it's not that bad. Graham later defended his comments, saying that he meant majority ownership of some banks, not nationalization of the whole industry. “Politicians are worried about words,” he said Monday. “I'm worried about outcomes.” That sensible statement helps remove him from the clown roster.
I don't know the answer. Apparently it is an idea that's being given consideration, but as a temporary measure rather than a long-term solution.
It's not the pros and cons of nationalization that interest me, however, but the reaction to it -- especially the reaction of Republicans to one of their own espousing a "liberal" idea. Some even dare to call it "socialism," the ultimate dirty word to Republicans these days.
“That's going above and beyond being a maverick,” said Glenn McCall, York County (NC) GOP chairman and a Bank of America executive. “That's saying that socialism in our country would work better than letting folks use their God-given talent to create and foster economic growth.”And just how well has "letting folks use their God-given talent to create and foster economic growth" worked? I believe that's been the policy for the past 25 years at least, and look where it got us, what with all the deregulation and greed and economic bubbles and credit default swaps.
Ralph
Alan Greenspan, who chaired the Federal Reserve during all the run-up to our current boom and bust, now joins the calls for temporary nationalization of some of the banks.
ReplyDeleteThat may be a good idea, but why should we listen to "Who Knew?" Greenspan.
Having finally admitted a few months ago at being "dismayed" at the economic crisis he hadn't anticipated, he now explains that the whole financial system that failed was based on one premise: "that enlightened self interest of owners and managers of financial institutions would lead them to maintain a sufficient buffer against insolvency by actively monitoring and managing their firms' capital and risk positions."
In other words, he had no clue that a system designed to feed more and more greed would ultimately fail.
I think the simplest explanation for the whole thing is that people lost their common sense. Any fool should have known that you can't make something out of nothing, and that you can't go on forever creating more debt than you have assets.
We entrusted our well being to people with no common sense.
Still are entrusting our well being to some people who seem to have no common sense, i.e. Geitner. Chris Matthews in referring to Geitner's public performance, and how Obama is now hiding him from discussing publicly any of the economic issues,castigated him - "He's a child!"
ReplyDeleteI love Obama. But not everyone around him.
Someone dug up a quote from Alan Greenspan in 2003:
ReplyDelete"What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn't be taking it to those who are willing to and are capable of doing so."
Now, even if you know nothing about finance, that statement lacks common sense. People "who shouldn't be taking risk" shouldn't have it taken for them. It just transfers the risk; it doesn't eliminate it. Stupid idea.
I need to clarify my previous sweeping statement about risk. After all, homeowner's insurance is a case of "spreading the risk" among people who can't afford to risk losing their only home to a tornado.
ReplyDeleteSo lots of people contribute a little bit to a pool that will pay for the tiny number who will actually have tornado damage, and it's based on keeping an adequate pool of money to cover the losses based on weather statistics.
The idea of encouraging home ownership (which has its own rewards) by making mortgage credit easier to get, and then spreading the higher risks of default among a larger number of investors -- was basically a good idea if used in moderation.
But then smart Wall Street types figured out ways to remove the default swaps further and further from the source, and to make it easy for investors to get rich by trading on bad loans, so that the end result was that this system actually encouraged mortgage lenders to make foolish loans. They made money on them anyway and passed the loss risk on to more and more distant pools that had no connection to the actual homes; and the debt became an abstraction.
Add to that the deregulation that removed any oversight to this system and it was a setup for disaster. In contrast, the insurance industry is highly regulated with strict oversight rules and consumer protection.
I still think Greenspan should have known better.
That's where it became a disastrous, stupid idea.