Thursday, October 23, 2008

Covering His Posterior For Posterity

It leaves me in a state of shocked disbelief that he's in a state of shocked disbelief.


Sarah Laurenson said...

Ok. Why are we playing beat up the old guy? Everybody tired of the OMG what will Wall Street do this minute?

When he was in, no one could breathe until they heard from him. Now they want to dig up his body and whip it? Whatever. How about whipping some of the greedy mortgage brokers who 'helped' all those people with crappy deals? Why we're not going after them and making sure they didn't break any obscure laws is beyond me.

Certain crimes do pay.

How about doing something to fix this mess, like letting those business bite the big one since they happily participated in the subprime mortgage disaster - which they knew was extremely risky. Accountability means nothing.

pjd said...

I have mixed feelings on the whole thing in part because I don't really understand the financial markets, and in part because I don't really understand the mortgage markets.

But I think I'd make a good pundit, so I won't let my spectacular lack of understanding stop me from giving an opinion. Or two.

First, regarding banks and free market. I think there were a few banks that did self regulate and which are still in solid shape. Absolutely everyone has taken write-downs, but there's at least one bank I can think of that that is doing quite well now, and in fact is gaining huge market share as people flee the troubled banks and look for quality.

What this means is that I think the theory of free market is good. But I think the execution fails because, well... it's done by people. And people are notoriously self-interested and short-sighted. If a banker makes a bunch of money by selling risky loans, gets a great short term portfolio, and rises up into management so he no longer has to be on the hook for his bad loans, what (besides integrity and a strong corporate compliance department and government oversight) is there to stop him? Free markets don't kill economies, people kill economies. The solution: Yeah, regulate the banks so they'll keep closer tabs on the bankers, who will be incentivized by integrity rather than the quarterly balance sheet.

Second: McCain's solution to "buy up all the bad mortgages" is like taking an aspirin when you have a brain tumor. Actually, it's worse. McCain said during the third debate that if we get house prices back up, people will regain their equity and all will be right with the world... so buy up the bad mortgages so housing prices will rise again.

That is so ass-backwards I don't know where to begin. Any suburban Californian knows that housing prices have been artificially inflated for the past seven years. Re-inflating the balloon that popped is not the best strategy. It is short-term thinking to a problem that requires overhaul of the system. It's putting gasoline on a waning campfire. Yeah, it'll burn bright for a short time, but your coals will get cold again.

I'm not at all saying Obama can solve the crisis. I think the only thing that solves it is a huge cultural shift from consumerism-based short term profit focus to more conservative, long-term planning focus. For individuals, families, companies, and governments. Slow and steady wins the race. Our media love the sprinters, the spectaculars, the big splashes. But the families that are unhurt now, and the companies that are strong, are the ones that have all along worked on a solid foundation and did not get seduced by the quick profit and feel good high of bigger newer brighter shinier.

Somewhere along the way (some would say the 60s, some might say the 80s, some might say the combination of the two) our good old fashioned Puritan ethic of self-sufficiency and hard work got replaced by an ethic of entitlement and instant gratification. I'm not sure it can be fixed, but I am certain it can't be fixed with a few swats of the magic bailout wand.

ChrisEldin said...

It is sickening. I always despised this man, simply for the God-like persona he wanted and everyone gave.

DH works in investment, and sadly there are companies springing up that will be buying these mortgages. The money never trickles down.

blogless troll said...

I've been playing beat up the old guy for about nine years, so I'm not jumping on any bandwagons here. I agree pointing fingers doesn't solve anything in and of itself. BUT the culprits—all of the culprits—need to be named if for no other reason than to learn. The thing about this mess is there are no clean hands. It wasn't just Greenspan, or Bernanke, or the SEC, or Congress (BOTH sides of the aisle), or the Treasury, or shady mortgage brokers, or greedy Wall Street, or a lack of regulation in some areas, or too much regulation in others, or the obstruction or willful neglect of regulators enforcing existing regulations in yet other areas, or tons of people who bought homes they couldn't afford. It was ALL of them and more. And to only focus on one or two scapegoats, or to dismiss finger pointing as a waste of time (and in effect give most of them a free pass) is to bury our heads in the sand instead of learning about the things we should've been paying attention to. Not what "they" should've been paying attention to. What we the people should've been paying attention to.

I was going to go into what really pissed me off about this particular testimony from The Maestro, but I'm not up for it right now. Maybe I'll do a post next week on it.

blogless troll said...

Pete, I agree completely. No doubt if the rest of them had conducted business like your company there'd be a hell of lot less mess. What's the sentiment over there about being forced into partial nationalization anyway? Are people pissed? Or just looking for ways to survive it and maybe come out ahead?

blogless troll said...

Chris, did you know early in his career he was actually against the Federal Reserve System? Probably because he was one of the very few people on the planet who understood it all. So they hired him. They said, "How does absolute power sound?" He said, "Sounds great." Actually, he probably said something like, "Residual uncertainties related to prior introspective cognition conditions appear to have abated and have turned decidedly more accommodative..."

Scott from Oregon said...

I think this has to be the lie of the century. Truly. As bad as the WMD lie. Or worse, because ignorance can't be claimed here.

An ignorant carpenter like me saw what was happening by 04 and got the heck out of speculative real estate in 05.

I knew all about the real estate bubble (I saw it first hand in Japan) and told my brother to SELL his million dollar Bay Area home in the burbs.

His wife the regional bank manager said no, things had a few years to go before they would sell...

They lost 300,000 in phony earnings but are still in the house..

Point being, if WE were chatting about it, Greenspan knew all about it.

He also knew he was the one who caused the bubble and in so doing let the US economy get malformed.

I'd call for a full investigation of the Fed-- all of it-- in public view with full tranparency and an historical evaluation of its effectiveness and ineffectiveness.

A US referendum on monetary policy is also in order.

Now is a good time to air out this whole banking and money business...

pjd said...

What's the sentiment over there about being forced into partial nationalization anyway? Are people pissed? Or just looking for ways to survive it and maybe come out ahead?

Even if I knew the answer, I'd be forbidden from blogging about it as a matter of policy. That said (and no, I don't know "the answer" because I actually know very little about banking but know a lot about giving money away to charity)...

My observation is that my company doesn't want the government's forced loan and is looking to pay it back ASAP. As a matter of daily business, my further observation is that the employees continue to focus on the customer--how do we continue to help our customers succeed financially? After all, you can easily get a sale, but the trick is to sell more to that person in the future. Help them be successful, they'll buy more from you. It's an honest and reliable ethic, and as I said before slow and steady wins the race.

Again, I don't know much about the actual banking business, but every day I become more impressed with the management of my company. I've been here seven years, and I hope they keep me another twenty five.

Robin S. said...

My bank has been bought by Pete's bank ( I don't work at 'my bank', but they do have our money market account and our checking account.)

I'm very relieved his place is the one that made the purchase - I talked to one of the economic people at my place of employ- and apparently if Pete's bank ever goies under, we can all kiss our asses bye bye - they are that rock solid.

Also, I like Pete's bank's anme way better than my bank's name - I liked my original bank's name - but that bank was bought by my banmk several years ago and now my bank has been bought...

Wish I'd paid more attention to the game of Monopoly. I hardly ever won that game. Oh well.

blogless troll said...

Point being, if WE were chatting about it, Greenspan knew all about it.

Scott, that's exactly it. Plus, you had nearly the same scenario in the late nineties with stocks. FED cuts rates, creates new money. All that money has to go somewhere. It went into tech stocks. People were over leveraged buying stocks on margin--buying stocks on easy credit. Artificially inflated bubble bursts. People can't pay the margin calls, they have to sell, sell, sell making the downswing more volatile. Greenspan overshot cutting rates, then he overshot raising them in 2000. People forget, but the markets were a mess between March 2000 and Sept. 2001. 911 made it that much worse. Then the man who saved the world set about cutting rates and pumping in more cash after 911 and it started all over again, only this time the money went into housing. Because real estate prices never decline they go up and up and up forever. Just like tech stocks.

The lie is bad enough. I'd like to think covering his ass is the only thing he's trying to do. But I don't know, because now he's joined in the bashing of free markets and capitalism. That's what really pisses me off. He knows everything us little people know and lots more. He knows monetary policy affects the direction of "free" markets. I don't know if he's finding these "fundamental flaws" with free markets to shift attention away from monetary policy, or if he's jumping on the bandwagon to badmouth capitalism in order to usher in something new. But his shocked disbelief is total bullshit.

Sarah Laurenson said...

I think you hit the nail on the proverbial head there, BT. My main objection to beating the old guy is that he's starting to look like the scapegoat. The finger pointers are out there trying to pin down one person to blame. Lessons learned? That would be a great way to look at it. Unfortunately, it doesn't appear to be the 'American way'.

I'd like to see all who are responsible be held accountable. And not just with slaps on the wrist and No, no, bad CEO's.

blogless troll said...

I'd like to see all who are responsible be held accountable.

Yeah, I'm still waiting for Congress to throw itself in jail.

Sarah Laurenson said...


Um, yeah. That'll happen. Is there a five star jail resort somewhere? I think I heard about a federal pen that was the bomb.

Sarah Laurenson said...

When are you going to run for Congress?

pjd said...

You didn't know, Sarah? Blogless_Troll is already a member of Congress. Remember, he lives in Florida.

Anyway, I think if Obama is elected and the Congress goes big majority Democrat, I could see Congress voting themselves to jail, then Obama vetoing, then Congress overriding the veto, then Obama pardoning them. Or better, he could pardon only the Democrats. That way, everyone wins and Newt Gingrich will disappear in a spectacular spontaneous combustion. And Clinton can finally enjoy a cigar again. Maybe even a Cuban.