There is simply no way to blame this disaster, as Republicans used to do, on labor unions or over-regulation. No, this is the conservatives’ beloved financial system doing what comes naturally. Freed from the intrusive meddling of government, just as generations of supply-siders and entrepreneurial exuberants demanded it be, the American financial establishment has proceeded to cheat and deceive and beggar itself — and us — to the edge of Armageddon. It is as though Wall Street was run by a troupe of historical re-enactors determined to stage all the classic panics of the 19th century.
By the way, this is the same system the Republicans would still apparently like to put in charge of Social Security. The same system that is minting millionaire CEOs, that is holding the line on wages, and that we will be bailing out for years.
On Monday, John McCain blamed the disaster on “greed by some based in Wall Street.” It’s a personal failing of some evil few, in other words, and presumably capitalism will start working again once we squeeze the self-interest out of it. In the weeks to come, maybe Sen. McCain will also take a bold stand against covetousness and sloth.
But the structural changes of the past 28 years that have made all this possible — the waves of deregulation, the takeover of government itself by business interests — these haven’t made too much of an impression on him. In March Mr. McCain actually called for more deregulation in response to the crisis, and at the Republican convention two weeks ago an ebullient Mitt Romney promised that Mr. McCain would take “a weed-whacker to excessive regulation.” [continued…]
Editor’s Comment — Since now’s a good time to trash capitalism and dream about a few judicious regulations that might improve the economy, here’s an idea that sure not to catch on – but I’ll toss it out anyway.
Since it’s widely accepted that a minimum wage serves the common good, why shouldn’t there (at least in publicly-owned companies) be a maximum wage?
Supposedly, placing a cap on how much executives can make would stifle talent. Talent and the desire to become obscenely wealthy apparently go hand-in-hand – or so the argument implicitly seems to go.
But Wall Street seems to have demonstrated otherwise. In fact, greed and the lust for power would seem to be countervailing forces that constrain the expression of talent.
Rewarding greed, feeds greed and greed is inherently short-sighted. On the other hand, talent — well-employed — is its own reward. Sure, it should be well “compensated” (a term that would better only be applied to the millions whose work provides no other reward), but the reward should not be allowed to metastasize into an economic perversion.
The proximate cause of the demise of AIG as a private firm was its “monoline” activities, its exposure to massive amounts of credit-risk derivatives like CDS, many of them linked to the United States real-estate sector.
The largest insurance supermarket in the world, with a balance sheet in excess of $1 trillion nationalised because it was deemed too big and too globally interconnected to fail! The fear that drove this extraordinary decision is that AIG’s failure would increase counterparty risk – actual and perceived, throughout the financial system of the US and the rest of the world alike – to such an extent that no financial institution would have been willing to extend credit to any other financial institution. Credit to households and non-financial enterprises would have been the next domino to fall – and, voilà!, financial Armageddon.
I cannot judge the likelihood of the disaster scenario, but if there ever was a case for applying the precautionary principle in economic analysis, then this is it. It was also done in the right way, by insisting on controlling public ownership, i.e. nationalisation, of the company. [continued…]
It is a measure of the existential nature of the crisis we are witnessing that, over just the past two weeks, that the US government has invested something like more than $US285 billion in what can only be characterised as the nationalisation of three major financial institutions.
On September 7, US taxpayers stumped up $US200 billion to re-float, and take control of, the near-terminal mortgage twins Fannie Mac and Freddie Mac.
Now they have bailed out the world’s biggest insurer.
Suddenly the great advocates of markets unfettered by government intervention are not so convinced by the old theory of moral hazard, that in free markets corporations should be allowed to fail. [continued…]
Is the United States no longer the global beacon of unfettered, free-market capitalism?
In extending a last-minute $85 billion lifeline to AIG, the troubled insurer, Washington has not only turned away from decades of rhetoric about the virtues of the free market and the dangers of government intervention, it has also likely undercut future American efforts to promote such policies abroad.
“I fear the government has passed the point of no return,” says Ron Chernow, a leading American financial historian. “We have the irony of a free-market administration doing things that the most liberal Democratic administration would never have been doing in its wildest dreams.” [continued…]
Editor’s Comment — “It’s pure crisis management,” Chernow said. “It’s the Treasury and the Federal Reserve lurching from crisis to crisis without a clear statement on how financial failures will be handled in the future. They’re afraid to articulate such a policy. The safety net they are spreading seems to widen every day with no end in sight.”
There is of course another dimension to the policy vacuum. The POTUS is AWOL – Bush is in his bunker. The ship of state has no one at the helm. Whether his presence or absence best serves the crisis is open to debate, but the idea that this is a moment where presidential leadership is called for seems beyond question.
Wall Street as we know it is kaput. It is not just that Merrill Lynch agreed to be purchased by Bank of America or that the legendary investment bank Lehman Brothers filed for bankruptcy or that the insurance giant AIG is floundering. It is not even that these events followed the failure of the investment bank Bear Stearns or the government’s takeover of Fannie Mae and Freddie Mac, the largest mortgage lenders. What’s really happened is that Wall Street’s business model has collapsed.
Greed and fear, which routinely govern financial markets, have seeded this global crisis. Just when it will end isn’t clear. What is clear is that its origins lie in the ways that Wall Street — the giant investment houses, brokerage firms, hedge funds and “private equity” firms — has changed since 1980. Its present business model has three basic components. [continued…]
A suspected U.S. missile strike killed at least six people Wednesday, hours after the top U.S. military officer told Pakistani leaders that America respected Pakistan’s sovereignty amid a furor over American strikes into Pakistan’s northwest. [continued…]
As Wall Street collapsed with a bang, almost no one noticed that we’re on the brink of war with Pakistan. And, unfortunately, that’s not too much of an exaggeration. On Tuesday, the Pakistan’s military ordered its forces along the Afghan border to repulse all future American military incursions into Pakistan. The story has been subsequently downplayed, and the chairman of the joint chiefs of staff, Mike Mullen, flew to Islamabad, Pakistan’s capital, to try to ease tensions. But the fact remains that American forces have and are violating Pakistani sovereignty. [continued…]
Leaders of an estimated 500,000 tribesmen who have so far remained largely neutral over the conflict in Afghanistan warned last night they were poised to support al-Qa’ida and the Taliban unless US forces retreated from their strategy of attacking targets inside Pakistan.
In a major jolt to Washington’s new policy of allowing cross-border raids in defiance of the Government in Islamabad, key tribal elders were reported to have met and warned that they were also prepared to raise an army to fight coalition forces in Afghanistan.
“If America doesn’t stop attacks in the tribal areas, we will prepare a lashkar (army) to attack US forces in Afghanistan,” Pashtun tribal chief Malik Nasrullah Khan was reported as saying in Miranshah, the largest town in North Waziristan, which has been the target of repeated US attacks in the past week. [continued…]
It would appear that the wimpish political leadership, in the wake of the no-nonsense statements of the army and air chiefs, has finally reconciled to the fact that the nation could not continue to accept the expanding US military intrusions into Pakistan. Of course, Prime Minister Gilani continued to show his timidity in the face of the US by declaring that we could only deal with the US diplomatically, and Zardari has yet to make a comment on the issue, but eventually the Pakistani security forces took action against US forces seeking intrusion into Pakistan and their non-lethal firing sent the proper message to the would-be invaders. Equally comforting was the fact that the Wazir tribesmen actively supported the security forces – showing once again that when the state is in consonance with its people rather than with hostile external players, the people will show their support.
This is just the beginning of a new threat Pakistani is now going to face, given the noises coming out of the US – especially from its aspiring leadership. The Republicans have now got a religious extremist as their vice-presidential candidate so God help the Muslim world if the McCain-Palin ticket is successful. After all, if Palin sees Iraq as “God’s War”, one can rest assured she will see other US invasions in a similar vein. As for Obama, he has been itching to have the US forces enter Pakistan since the time he began his campaign. So for Pakistan specifically, and for the Muslim world in general, the new US administration will offer no respite from the bigotry and extremism that dominates the American polity today.
Therefore, Pakistan has to be prepared to fight a dual terrorist threat – from the militants within our own polity and the state terrorism of the US that is now directly threatening Pakistan. That is why there has to be complete clarity and resoluteness on a rational national policy to combat these threats. [continued…]
Although she’s been a candidate for the second-highest office in the country for more than two weeks, there is still a lot Americans don’t know about Sarah Palin. But now we have a better sense of what John McCain knows about her, and how he plans to use her in the White House.
Surprising many at a rally in Golden, Colo., on Monday, Palin laid out the role she would play in a McCain administration. “John and I have worked out a plan, what I want to concentrate on and what he would like to kind of tap into me to help with,” she told the crowd. “My mission is going to be energy security and government reform. And — another thing near and dear to my heart — it’s going to be helping families who have special needs and children with special needs.”
Lost in the breaking news of the financial crisis and the aftermath of Hurricane Ike, the announcement made an important implicit statement about how active Palin would be if McCain were to win the White House. [continued…]
A Republican group is taking responsibility for a poll that has roiled the Jewish community by asking sharply negative questions about Senator Barack Obama.
The Republican Jewish Coalition, which is launching a campaign against Obama on behalf of Senator John McCain, sponsored the poll to “understand why Barack Obama continues to have a problem among Jewish voters,” the group’s executive director, Matt Brooks, told Politico.
The poll asked voters their response to negative statements about Obama, including reported praise for him from a leader of the Palestinian terror group Hamas and a friendship early in his career with a pro-Palestinian university professor. Some Jewish Democrats who received the poll – including a New Republic writer who lives in Michigan – were outraged by the poll, describing it in interviews as “ugly” and disturbing. A group that supports Obama, the Jewish Council for Education and Research even staged a protest outside the Manhattan call center from which the calls originated Tuesday. [continued…]
In the mid-1990s, polling that my firm conducted showed that more than 60 percent of voters were more concerned that “the federal government will try to do too much, not do it well and raise taxes.” This year, 60 percent chose the survey’s other option, expressing greater worry that “the federal government will not do enough to help ordinary people deal with the problems they face.” Americans who used to be wary of government involvement are now calling for it.
We have documented a similar, if less drastic, shift in public views of morality. Just three years ago, a majority of those we surveyed said that “there are absolute standards of right and wrong that apply to everyone in almost every situation.” Today, however, respondents by a narrow margin say they believe that “everyone has to decide for themselves what is right and wrong in particular situations.”
Surveys by the Pew Research Center reveal a concomitant change in foreign policy values. Well before 9/11, in the mid-1980s, Americans supported the concept of peace through military strength by a 14-point margin. By 2007, despite the intervening attack on the United States, that margin fell to just two points. [continued…]
A quarter of the people living in rural America make their homes in counties where the majority of the population is made up of racial/ethnic minorities — Hispanic, African American or Native American. And more than half of the rural and exurban population in the United States lives in counties with minority populations that will likely become majorities by mid-century, according to an analysis of recent U.S. Census reports.
Rural America continues to grow more diverse as minorities, particularly Hispanics, have moved out of large urban areas and into smaller cities and rural communities. From July 2006, to July 2007, for example, St. Joseph, Missouri, an hour north of Kansas City, had a 21 percent increase in its Hispanic population. That was the largest increase in the country. [continued…]