And so on the 29th day of his presidency, Barack Obama signed the stimulus bill. But the earth did not move. The Dow Jones fell almost 300 points. G.M. and Chrysler together asked taxpayers for another $21.6 billion and announced another 50,000 layoffs. The latest alleged mini-Madoff, R. Allen Stanford, was accused of an $8 billion fraud with 50,000 victims.
“I don’t want to pretend that today marks the end of our economic problems,” the president said on Tuesday at the signing ceremony in Denver. He added, hopefully: “But today does mark the beginning of the end.”
No one knows, of course, but a bigger question may be whether we really want to know. One of the most persistent cultural tics of the early 21st century is Americans’ reluctance to absorb, let alone prepare for, bad news. We are plugged into more information sources than anyone could have imagined even 15 years ago. The cruel ambush of 9/11 supposedly “changed everything,” slapping us back to reality. Yet we are constantly shocked, shocked by the foreseeable. Obama’s toughest political problem may not be coping with the increasingly marginalized G.O.P. but with an America-in-denial that must hear warning signs repeatedly, for months and sometimes years, before believing the wolf is actually at the door. [continued…]
Editor’s Comment — There is a pathological optimism inherent in every colonial enterprise. And while a pillar of America’s founding mythology is that this is nation which cast off the chains of a colonial power, that myth serves to obscure the fact that with or without British oversight, the American project always required that America be conceived as a quasi-divine creation and not a colonial imposition on an already inhabited land.
This image of an immaculate conception has thus always made it difficult for America to develop a healthy sense of the tragic. Yet a fixation on a hopeful future inevitably requires a denial of death.
We want renewal but we hesitate to imagine that first must come destruction. Death precedes rebirth.
As yet another small sick tale of the profligacy of bankers emerges — a 43,000 pound binge on champaigne spent on banker’s night out in London a few days ago — and as growing outcry says that what banking executives call “compensation” is in the eyes of the rest of us simply theft, it might seem hard to imagine that there could be such a thing as a good banking story.
Muhammad Yunus has already been honored with the Nobel Peace Prize, but if his message until recently might have seemed quaintly out of sync with the raucous engine of capitalism, now that that engine is not merely sputtering but is emitting the death rattle, there has never been a better time to pay attention to the story of Grameen banking.
The granting of the Nobel Prize to Grameen Bank did a lot to focus the world’s attention on microfinance as a tool for alleviating global poverty, and it is encouraging to see so many countries adopting microfinance at the local and national levels. But in other ways, the last two years have been difficult.
The problems began with soaring food and oil prices. By the fall of 2008, the world economy appeared to be crumbling, with the most formidable pillars of the strongest economies on the verge of collapse and stock markets around the world plummeting.
This financial crisis offers an interesting illustration of the social failings of the existing capitalist system. Credit markets were originally created to serve human needs—to provide business people with capital to start or expand companies and to enable families to buy homes. In return for these services, bankers and other lenders earned a reasonable profit. Everyone benefited. In recent years, however, the credit markets have been distorted by a relative handful of individuals and companies with a different goal in mind—to earn unrealistically high rates of return through clever feats of financial engineering. They repackaged mortgages and other loans into sophisticated instruments whose risk level and other characteristics were hidden or disguised. Then they sold or resold these instruments, earning a slice of profit on each transaction. All the while, investors eagerly bid up the prices, scrambling for unsustainable growth and gambling that the underlying weakness of the system would never come to light. The result was to convert traditional capitalism into what many have described as “casino capitalism,” marked by irresponsibility and limitless greed. [continued…]
Speaking with a smile and in a thick but tempered accent, Dr. Yunus, an economist by training, stated, “Something is missing in the theory of capitalism…those who created economic theory misinterpreted human beings.” Dr. Yunus went on to say that, “Business is a part of [human] activities but there are other sources of happiness missing from economic theory…I am creating a door that does not exist in the theory.”
A door, if not a fundamental shift, is exactly what Dr. Yunus, the Nobel Peace Prize Laureate, has created. In the thirty three years since its first group loan of $27, Grameen Bank has grown to become the largest bank in Bangladesh, now lending an average of $100 million per month at an average loan size of just $200. Operating as a for-profit institution, but with the expressed objective of improving the socio-economic conditions of the poor, Grameen has a staggering 2,539 branches and operates in 83,566 villages around Bangladesh. Though its nearly 8 million borrowers are not required to post collateral for loans, the bank has a current repayment rate of more than 98%, current deposits of nearly $1 billion, and posted a profit of more than $1.5 million in its most recent fiscal year. [continued…]
Microfinance pioneer Muhammad Yunus, who won the Nobel Peace Prize for his work in alleviating poverty, said he wants to open credit unions in the recession-gripped United States.
Yunus, who opened Grameen America bank in New York a year ago in the bank’s first implant in the developed world, said he was seeking a US credit union license to “work in any state.”
The global financial crisis is an “exciting, great opportunity … to redo our life, our institutions, our policies,” the Bangladeshi economist, nicknamed “Banker to the Poor,” told a forum in Washington to promote his latest book, “Creating a World Without Poverty.”
Yunus said he had met earlier in the day with Federal Reserve chairman Ben Bernanke and they had discussed microfinance, which extends small amounts of credit to the poor so they can start businesses, and the US government’s bailout plan aimed at averting a meltdown of the world’s biggest economy. [continued…]
Muhammad Yunus of Bangladesh, a Nobel Peace Prize winner for pioneering a micro-lending model for the world’s poorest to engage in business, said Thursday his formula can also help recession-racked American families escape poverty.
“This is the right time to come here,” Yunus declared as he sought $2 million in seed money to establish North Carolina as another U.S. foothold for his micro-finance institution outside New York.
The year-old U.S. offshoot of the Grameen Bank that the former economics professor founded in Bangladesh three decades ago also is looking to expand into New Jersey, Nebraska, Louisiana and other U.S. states as economic turmoil closes employment doors on more people. [continued…]
Roubini tells me that bank nationalization “is something the partisans would have regarded as anathema a few weeks ago. But when I and others put it in the context of the Swedish approach [of the 1990s] — i.e. you take banks over, you clean them up, and you sell them in rapid order to the private sector — it’s clear that it’s temporary. No one’s in favor of a permanent government takeover of the financial system.”
There’s another reason why the concept should appeal to (fiscal) conservatives, he explains. “The idea that government will fork out trillions of dollars to try to rescue financial institutions, and throw more money after bad dollars, is not appealing because then the fiscal cost is much larger. So rather than being seen as something Bolshevik, nationalization is seen as pragmatic. Paradoxically, the proposal is more market-friendly than the alternative of zombie banks.”
In any case, Republicans must now temper their reactions, he says. “The kind of government interference in the economy that we saw in the last year of Bush was unprecedented. The central bank — supposed to be the lender of the last resort — became the lender of first and only resort! With our recapitalizing of financial institutions, and massive government intervention in the markets, we’ve already crossed a significant bridge.”
So, will the highest level of government be receptive to the bank-nationalization idea? “I think it will,” Mr. Roubini says, unhesitatingly. “People like Graham and Greenspan have already given their explicit blessing. This gives Obama cover.” And how long will it be before the administration goes in formally for nationalization? “I think that we’re going to see the policy adopted in the next few months . . . in six months or so.”
That long? I ask. “Six months from now,” he replies, “even firms that today look solvent are going to look insolvent. Most of the major banks — almost all of them — are going to look insolvent. In which case, if you take them all over all at once, you cause less damage than if you would if you took over a couple now, and created so much confusion and panic and nervousness. [continued…]