Blue Mass Group

Reality-based commentary on politics.

What do Greenspan, Geithner, Summers and Glenn Beck have in common?

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Nothing I’ve seen argues more effectively for regulatory market reforms so that the government (you and me), which bailed out financial institutions, can limit systemic risk and know what risk is being taken with capital we provide through our investments, retirement plans, debt for housing etc.

And don’t forget to tell your Congressperson and Senators to address this issue so we don’t face boom and bust cycles every 10 to 15 years.

You can watch the whole thing online  here.  

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    • Greenspan and Glenn Beck’s ideological soul mate is Ayn Rand. Watch the program. It’s pretty clear Greenspan would not disagree with my assertion that Ayn Rand was his ideological soul mate.  You can google to find Beck’s embrace with the philosophy of Ayn Rand too.  

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      p>Geithner and Summers are also anti-regulation although it’s not clear to me they are Ayn Rand zero goverment regulation advocates.  My point here is that they were working in Clinton’s White House in the same direction (de-regulation and even ignore fraud!) as Greenspan. They are still in the White House.  

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      p>Freedman is known for seizing on crisis to implement radical policy change as documented in Naomi Klein’s Shock Doctrine… or maybe I missed you point.

      • even though you both spelled his name incorrectly.

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        p>I started to read about Naomi Klein’s Shock Doctrine, but the batteries in my tin foil hat went dead.

        • i can see you’re not actually interested in this topic if you’re talking about spelling mistakes and tin foil hats.  

      • I plan on watching the program and maybe I’ll agree with you afterwords, but I doubt it.  I doubt that the economists at the Chicago school, upon reading Atlas Shrugged had a “eureka” moment, rather they more likely said, “finally, a novelist who ‘gets’ it.”        

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        p>Ayn Rand is a third rate novelist and a second rate science fiction writer who was influenced by actual philosophers and economists.  She’s very good at taking the core ideas of complex philosophies and turning them into stories – although I find them predictable, two dimensional and despite her and her many supporters cries to the contrary, smacking of fascist imagery.  

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        p>I don’t deny her influence, the libertarians who dominate the computer science world, especially those at Wikipedia, are far too often her disciples, but I doubt very much that the masters of the universe who run our government weren’t far more influenced by economists than novelists.      

          • That is so depressing.  I remember hearing JFK loved the Fountainhead, I immediately thought less of him (and I’m no fan).  Basing your political philosophy on the likes of Ayn Rand is like using Michael Moore as the foundation of your critique of capitalism – I regard scientologists and objectists with the same regard, but prefer the writing of L. Ron Hubbard…    

        • Libertarians are much more prevalent among programmer types than among other professions in my experience, but they are still by far in the minority.

  2. Hasn’t Greenspan said in the past year a few times that he’s reconsidered some of his past ideas and thinks he was wrong?  Does that still count as a “fanatical devotion”?

    • I haven’t heard him speak up since. Have you? I’d like to hear him talk about how regulation to manage systemic risk is necessary to avoid a boom bust free market economy but … crickets.  

      • … at the end of the program.  Of course this reconsideration took place after the current crisis and his retirement.

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        p>As to ‘fanatical devotion’, what it means is that possible the word ‘has’ could be replaced with ‘had’.

  3. That’s not a failure of the marketplace, that’s a failure of government.  There’s a place for effective regulation, and a place for unfettered free market capitalism.

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    p>It’s no coincidence that the first entities to go under at the beginning of this financial crisis were 2 government sponsored entities, Fannie Mae and Freddie Mac.  They were used as a political lever ever since the Carter administration.  It was their underwriting standards — benchmarks for the entire home mortgage industry — that led to the subprime mess.  They were the origin of this financial smallpox.

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    p>Certainly Wall Street has a lot to answer for spreading the disease.  But so does Congress.  They helped, directly and indirectly, to incubate the virus.  How many politicians, like Chris Dodd, recipient of a sweetheart loan from Countrywide, played along?

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    p>Warren Buffett has been warning about derivative securities for 10 years now, since before the dot com boom.

    • specifically a failure of those in policy-making positions who advocated for laissez-fair free market capitalism, deregulated systemic risk controls, and opposed systemic risk controls, such as regulating OTC derivative trading (see the program.)

      • especially the unregulated financial derivatives market.

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        p>However, trying to regulate risk across the global financial industry is an impossibility.  No one can even define “systematic risk” let along begin to create effect regulation.  

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        p>There are areas where the government should have been more involved, and if involved, more effective, but don’t use this crisis as a way to impose employment-choking government regulation across our free-market economic.

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        p>Let me point out that Dems like Chris “Friend of Angelo” Dodd and Barney Frank were lenient on OFHEO, the regulator of Fannie and Freddie.

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        p>Are you an unemployed Gosplan accountant or something?

        • don’t use this crisis as a way to impose employment-choking government regulation across our free-market economic.

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          p>The imposition is the 10.8% unemployment rate, massive home foreclosures, homlessness, medical bankruptcies, soaring national debt, multi-billion dollar stimulus packages to keep us out of a depression, toxic collateralized debt obligations and credit swaps, banks on the brink of bankruptcy, and retirement savings accounts worth half of what they were.  That is the imposition.  

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          p>To hear you worry (whine) about the potential of over-regulation is ironic at best and laughable at worst. Republicans are reactionary, full of fear and determined to defend policies that are against their own best interest.  

        • “However, trying to regulate risk across the global financial industry is an impossibility.”

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          p>We do this with insurance all the time.  Indeed, the CDFs were effectively functioning as default insurance but without all the regulations that mandate a certain amount of management with the risks (such as reserve requirements).

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          p>As to the Fannie and Freddie ‘problem’… the problem wasn’t that Fannie and Freddie were operating without enough regulation, the problem was that the investment risk the zeitgeist decided to embrace was real estate.  Consequently, the resulting distortions that these investments made hit large real estate entities first and the resultant problems for the financial sector first showed up in the actual real estate sector first as a leading indicator.

          • As to the Fannie and Freddie ‘problem’… the problem wasn’t that Fannie and Freddie were operating without enough regulation, the problem was that the investment risk the zeitgeist decided to embrace was real estate.

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            p>

      • There are many players responsible for this mess, no doubt, but as MA residents one person we should especially be asking questions to is Rep. Frank. Frank is a great Rep for many reasons, but his efforts to de-regulate Fannie Mae in the 90’s, and his questionable conflict of interest involving his relationship with Herb Moses certainly merit some questions. As chairman of the Financial Services Committee he should have played a much more active roll in preventing this from happening before the fact.

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        p>I really like Barney for a lot of reasons, but if his committee does not come up with a very strong financial regulation bill I will certainly be writing to Frank and House leadership calling for the resignation of his chairmanship.

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        p>I believe there was a post about this about a month ago, I couldn’t find it (maybe it was just a comment), but anyway, I am not an expert on the subject, but it certainly is deserving of its own diary, and I would love to see the subject discussed further. Is there someone who knows more about it that would be willing to enlighten us?

        • There are many players responsible for this mess, no doubt, but as MA residents one person we should especially be asking questions to is Rep. Frank. Frank is a great Rep for many reasons, but his efforts to de-regulate Fannie Mae in the 90’s, and his questionable conflict of interest involving his relationship with Herb Moses certainly merit some questions.

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          p>I have a lot of doubt about Frank’s role.  I’ve heard the accusations about Frank’s involvement on Fox News but I haven’t heard any reputable sources commenting on his role.  I would like to know more too.  That said, the big picture about what happened and why will lead us to the solution – the right kind of regulation that strikes the balance between competitive financial markets and systemic risk management.  

        • As chairman of the Financial Services Committee he should have played a much more active roll in preventing this from happening before the fact.

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          p>Didn’t Republicans hold all the House chairmanships between 1994 and 2006? If yes, then are you suggesting that the meltdown could have been prevented by actions that started in early 2007?

          • provide oversight of the executive branch agencies responsible for regulation like SEC, EPA, FDA etc.

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            p>Under Bush, industry folks were given agency head appointments and they took as their mission, to not exercise their regulatory authorities when the regulations impacted business interests.  Arthur Levett and the SEC, despite Harry Markopolous’ repeated whistle-blowing never followed up on Bernie Maddoff hedge fund activities. The head of the SEC, sat back.  The head of the EPA did not enforce clean air or clean water authorities it had, until they were successfully sued by the Commonwealth. Dept of the interior held cocaine sex parties with Shell Oil emplyees. They gave away leases to mineral rights for pennies on the dollar.  The fox was ni the hen house for eight years and when Congress said come talk, the Bush administration said get bent.  

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            p>Clearly Democrats had votes in bills like the one Phill Graham sponsored in 1998 that withdrew the authority of Federal agency’s authority to regulate derivatives but as far as regulatory oversight of financial markets, it was up the the executive branch and they purposefully did not do their jobs and resisted all attempts by the legislative branch to be held accountable.  

    • I gave you a 4 for floating two debunked Republican talking points.

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      p>First, Fannie Mae and Freddie Mac were not the first entities to “go under”. In 2007, New Century Financial, the largest subprime lender, went under. Bear Stearns failed in March 2008. IndyMac Bank failed in July. Then, in September, all hell broke loose, with Merrill Lynch, Lehman Brothers, and Fannie Mae & Freddie Mac all going down. To suggest that the 2 GSEs led the pack and in effect caused everything is absolutely disingenuous.

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      p>Also, it is widely recognized that Fannie Mae was a late entrant to the subprime game; they only started ramping up their subprime portfolio in 2005 when they realized they were losing market share to the financial services companies. Plus, toxic mortgages everyone talks about were bundled and sold to investors, not to Fannie Mae. Those private financial services companies led the way with their exotic products, like the “NINJA” loans. And they were simply responding to their inputs, namely deregulation of securities and the open spigot of money coming from the Fed.

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      p>Second, Dodd was cleared of the accusations that he got a sweetheart loan from Countryside. He didn’t even get the best rate that was available out there. At best, he was treated like a VIP, with people acting on his application in an expedited fashion. Similar to if the mayor walks into a restaurant and the owner tells his staff to make sure that he’s happy.  

  4. I highly recommend that everyone watch this. Brooksley Born tried her best to make the case for transparency and regulation of OTC derivatives, and she was ganged up on and shot down by Summers, Rubin, Greenspan…and eventually Congress. A complete and utter disgrace. “Smart guys” F#%@ FAIL.

    • … we get a glimpse of that ever so elusive creature, the genuinely repentant Ann Randian.  

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      p>He didn’t just admit he made mistakes, he admitted that his underlying assumptions (philosophy) were wrong.

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      p>I have to get a clip of that saved so every time I hear that markets can regulate themselves I can play it.

    • I watched it last night and was riveted.

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      p>Last week’s FRONTLINE program called “Obama’s War” on Afghanistan is excellent too.  

  6. I classified that piece as mainstream in 60 seconds and I should tell you why.

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    p>It’s too not PC.  It’s too much tin foil.  It’s might offend somebody.  It’s not in line with the party platform.  I can’t PROVE it, I have no EVIDENCE, no LINKS, no testimony of EXPERTS.

  7. Whether the Republicans call themselves capitalist and the Democrats wish to be known as socialists, the truth is that they behave as corporatists.  Truth be known, they both serve the interests of the corporate boards.  

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    p>Few can see differences in the present administration over the last.  Same economic policies (much the same people in charge), same wars, same stomping on individual liberty.  I’ll only grant you that the administration we have now is brighter sounding than the comedy team that ran against them.

  8. How much debt can be accumulated before the house of cards collapses?

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    p>Common sense dictates that at some point—we must stop adding to the debt—spending more than we take in—-what is the cut off and why isn’t congress heeding all the signs of impending disaster?

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    p>What kind of legacy are we leaving the folks who will be around forty and fifty years hence?

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    p>How soon will this crash our economy?

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    p>What’s the story on the skyrocketting inflation that we are being warned about?

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    p>This are not frivolous questions ast they affect each and every one of us, more importantly you folks in your 20’s and 30’s.

  9. …weren’t Summers, Greenspan, and Rubin on board in the 1990s which gave the Clinton presidency the longest sustained economic growth in our history.  They must have done something right and it didn’t look to me at the time like they were adhering to Ayn Rand.

    • … drove the 90’s boom were several.  First of all we got a handle on our debt situation for the first time in a long time and bond markets noticed.  This made for very favorable conditions for the one area of economic intervention that Greespan thought was ok for the Fed (interest rates).  The tech sector, with the internet, created two synergistic phenomena as well – growth in a previously small market sector (without significantly negatively impacting other sectors – that is it created real value) and the realization (which was a long time coming) of the ‘dream’ that computers could improve overall worker productivity (there were computers before of course, but the impact on worker productivity was negligible).

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      p>What I didn’t know at the time (nor did any of us really) was that an additional area of growth was in secret, opaque and highly leveraged money deals.  It had the effect of looking like real economic activity, but ultimately just piled too much money on risky structures.  The collapses of the 90’s were minimal to the recent collapse, but it still happened.  Because we didn’t fix those structural problems then (sticking with Rand), those same models doubled down on themselves when the money that was made this way screamed for further investment and we happen to be having a decent real estate market (due in part to those great interest rates mentioned earlier).  

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      p>So Rand was a play, but in a way that didn’t really hurt us because a) the other shoe would drop (mostly) after Clinton, and b) other positive factors in the economy hid this little problem from the majority’s general ‘feel’ for the economy.

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      p>I often say that, as American’s we’re very well know for fixing problems but only after something has gone terribly wrong.  Not before, especially if someone is making cash (and campaign donations) on it.

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