[FoRK] The Wrecking Crew - A Low, Dishonest Decade

Stephen Williams sdw at lig.net
Mon Jan 18 10:17:36 PST 2010

Michael Cummins wrote:
> Bill Moyers:
>> President Obama's made plenty of mistakes during his first year, and 
>> we've critiqued them frequently here on the JOURNAL
> I'm not a fan of Obama's policies, but I was thinking more long term.  There
> are villains on both sides of the aisle going back many years. 
> Fannie Mae?  Freddie Mac?  The changes made to the Community Reinvestment
> Act?  
> What about the S&L earlier on?  It's not like this is the first bailout.

Plenty of blame, agreed.  And plenty that should have been learned from 
and not repeated even bigger this round.  It is no excuse to say, "but 
they did it!".  To the extent that irrationality was introduced into the 
system (easy liar loans to anyone), those responsible remain 
responsible.  On the other hand, it doesn't seem to be that the subprime 
loans were so easy to get that was the core problem but that AIG et al 
had created such a large fiction that the risk could be hidden, 
forgotten, and leveraged in polynomial ways that brought doom.  They 
essentially created an event horizon of complexity and misdirection that 
fooled everyone, including themselves.  If the risk was more clear, the 
funding for the worst subprime loans would have dried up in time.
> Would it be wrong to just let the failures fail?  How can you actually have
> a "free market" if there are no consequences to failure?

There should be big consequences for the players involved, but the 
damage to "innocent consumers" should be limited, at least in some 
cases.  Some or all states have victim compensation programs that will 
give a little bit of money to people who are victims of major crime.  A 
bailout is something like that for the customers of a failed 
enterprise.  The players who caused or allowed a failure to happen 
should at least not profit, let alone make out like bandits.  However, I 
acknowledge that it is a complicated situation.  You need to pay people 
something to keep them from jumping a sinking ship to limit damage, etc.

> - MEC

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