Hillary Clinton proposes Alan Greenspan for mortgage bailout committee
by arodb, Mon Mar 24, 2008 at 09:43:42 AM EDT
Irony of Ironies. I would imagine that actually Greenspan would be a good selection to this committee, which would include other...
distinguished, non-partisan group of economic leaders like Alan Greenspan, Paul Volcker and Robert Rubin." (from politico.com)
Who more than Alan Greenspan, the prime architect of the current disaster would have a greater interest in providing a soft landing. And who more than Alan Greenspan, based on his own words would care less about the ultimate long range consequences of such a bailout.
I must admit I have not read Greenspan's apologia "The Age of Turbulence" but I have followed his career as the head of the Federal Research. I remember very clearly the 60 minutes interview when he denied that he was aware of the corruption and excesses of the sub prime mortgages that were creating the bubble.
He looked at the interviewer, Katie Couric, and said, with the quiet authority that made him an icon of an adoring congress, that he was unaware that the mortgage markets were spiraling out of control. Couric came back to him with a quote form another Federal Reserve board member, whom the record showed gave him an explicit detailed warning of exactly what was happening and the inevitable consequences.
His response,with a hint of a smile was: "I didn't get it." It was the exact inflection that makes the term so appropriate for the slacker who didn't understand that it was wrong to copy his term paper from the internet, or to have an extra drink before driving home on a rainy night. "I didn't get it," a phrase that could only be improved upon by Steve Martin's classic, "Well, Excuse Me"
Later in the same interview when Couric asked if he had protected his own wealth from the precipitous loss of the value of the American dollar, with that impish smile, he responded, "let's say I'm diversified." Yes, I'm sure he, and his financial elite colleagues are well diversified, in currencies not affected by the American dollar, the economy that he was charged with protecting.
Now Clinton has decided that she will take up the cause of the American Homeowner. Of course she is hoping that taxing every American to bailout those who willfully bought into this corruption will not incur the outrage of the voters. Hillary is hoping that the American people will not realize that those people who took these mortgages are the ones who have the new houses with the granite tops in spanking new neighborhoods, while those who she will tax, are struggling to pay for upkeep on their older homes, or are now paying more for rent based on a burgeoning inflation that is party caused by this mortgage disaster.
There are no good guys in this mortgage debacle. Greenspan is on top of the list of malefactors, as he could have imposed regulations that would have cut out the worst of the excesses. In a close second place is the Bush Administration, that actually prevented state attorneys General from cracking down on these excesses under the concept of Federal Premption. And then after preventing these state regulations, his treasury department did absolutely nothing to control the excesses.
And the Democratic party is far from guiltless. There were demands that the poorest segment of our society have the right to home ownership. Pressure was put on banks and mortgage brokers to provide loans to everyone, no matter what that ability to pay for it.
It was a silent conspiracy of both parties, each willfully closing their eyes to the inevitable consequences of artificially low interest rates and bogus mortgages. Everyone was in on the game: The mortgage brokers who never pointed out the fine print that made refinance onerous, the investment banks who designed these instruments and winked at the absurd statements of income, the rating agencies, the peoples auditors such as S&P who slapped these aggregations of loans with triple A ratings. And the CEOs at the top of these companies, who raked in their mega fortunes long with the hedge fund operators who knew that the bubble had a way to go before exploding on the American people.
The Democrats, ostensibly the party of the people, actually are in bed with those at the top of the financial pyramid, perhaps as closely as the Republicans. Chairmanship of Goldman Sachs seems to be the stepping stone to Secretary of treasury for both parties. Their careers were made by protecting investors, with the well being of the those whose struggle along at less than a seven figure salary rather remote from their thinking.
But it will be those people with salaries less than seven figures, and a lot less than six, who will be the ones forced to pay for this debacle. Hillary Clinton wants to protect the good "homeowners" but she is fostering a pernicious illusion. Those people who decided to take a mortgage on the appreciated bubble value of their homes were not defrauded by the lender, they got the money. They got that check for a hundred grand or several times that, and they got to spend it as they pleased.
The taxpayer next to to him didn't get that check. They didn't remodel their home, or take that trip, or buy that new SUV. Or maybe the money was used for more admirable purposes, sending a kid to college, or taking care of an elderly parent. The point is that the person who signed a loan mortgage got to provide these service while their neighbor did not.
They recieved their money, or they got their dream home, and they agreed to pay it back at the terms defined by the loan agreement. Did they really believe that their home would continue to double in value every five years. Did they not realize that if it did, anyone who worked for a living would be consigned to paying rent for the rest of their lives.
I would say their are a hierarchy of solutions to this mortgage debacle, except every solution is a bad solution. Once the well has been poisoned, once the virus is unleashed on the population, once pandemic corruption has been embraced by both parties, all solutions are are contaminated by the original sin.
It looks like Senator Clinton's answer, being that she chooses to place her distressed mortagee homeowners in the role of the innocent victims may be one of the worst of the bad solutions to this problem. She treats them like the Katrina victims, rather than those who played an integral part in this corrupt bubble.
This must be debated with honesty, with a view to learning a lesson that those in responsible positions must be charged with the long term sustainment of our economy. Blind trust in our political leadership has been betrayed, and I don't see any party, any individual leader, who is willing to accept their share of the blame.
Ideologies from both sides hide reality. Senator Clinton's justification of her bailout of her "innocent" homeowners, is the bailout of financial entities such as Bear Stearn. She does not acknowledge her own ideoligaal biases that provided bi-partisan support for mortgages for those who could not sustain the inevitable bursting of the bubble.
If there is any one who happens to be running for President who is prepared to address this crisis of the credit markets in a way that will do more than set us up for a disaster in the future, one that will be too big for anyone to bailout, now is the time to speak up. It just may be that such realism could resonate with a public that knows very deeply how much is wrong with our country, and would welcome a clearer explanation from a potential leader of a more sustainable economic-political system.