First up, it's Pat Buchanan. I met Buchanan once and he was real nice to me even though I was disagreeing with him about stuff and wearing a defaced American flag on my jacket, so let's quote him at length:
Up through World War II, we followed the Hamiltonian idea that America must remain economically independent of the world in order to remain politically independent.
But this generation decided that was yesterday's bromide and we must march bravely forward into a Global Economy, where we all depend on one another. American companies morphed into "global companies" and moved plants and factories to Mexico, Asia, China and India, and we began buying more cheaply from abroad what we used to make at home: shoes, clothes, bikes, cars, radios, TVs, planes, computers.
As the trade deficits began inexorably to rise to 6 percent of GDP, we began vast borrowing from abroad to continue buying from abroad.
At home, propelled by tax cuts, war in Iraq and an explosion in social spending, surpluses vanished and deficits reappeared and began to rise. The dollar began to sink, and gold began to soar.
Yet, still, the promises of the politicians come. Barack Obama will give us national health insurance and tax cuts for all but that 2 percent of the nation that already carries 50 percent of the federal income tax load.
John McCain is going to cut taxes, expand the military, move NATO into Georgia and Ukraine, confront Russia and force Iran to stop enriching uranium or "bomb, bomb, bomb," with Joe Lieberman as wartime consigliere.
Who are we kidding?
What we are witnessing today is how empires end.
The Last Superpower is unable to defend its borders, protect its currency, win its wars or balance its budget. Medicare and Social Security are headed for the cliff with unfunded liabilities in the tens of trillions of dollars.
What we are witnessing today is nothing less than a Katrina-like failure of government, of our political class, and of democracy itself, casting a cloud over the viability and longevity of the system.
Notice who is managing the crisis. Not our elected leaders. Nancy Pelosi says she had nothing to do with it. Congress is paralyzed and heading home. President Bush is nowhere to be seen.
Hank Paulson of Goldman Sachs and Ben Bernanke of the Fed chose to bail out Bear Sterns but let Lehman go under. They decided to nationalize Fannie and Freddie at a cost to taxpayers of hundreds of billions, putting the U.S. government behind $5 trillion in mortgages. They decided to buy AIG with $85 billion rather than see the insurance giant sink beneath the waves.
An unelected financial elite is now entrusted with the assignment of getting us out of a disaster into which an unelected financial elite plunged the nation. We are just spectators.
So, according to ol' Pat, the morals of the story are that Big Government and global economic interdependence are the problems; that Big Government includes social spending as well as war; and that we should take note that the people deciding the solution are not elected officials (and we've already seen just how compromised one of them is).
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Okay Pat Buchanan, that was fun. Next up, former Securities and Exchange Commission official Lee Pickard puts in his two cents:
"The SEC modification in 2004 is the primary reason for all of the losses that have occurred," Mr. Pickard, who is now a senior partner at the Washington, D.C.-based law firm Pickard & Djinis, said.
What's the SEC modification in 2004, you ask? Well, let's see if we can get our heads around it:
The SEC allowed five firms — the three that have collapsed plus Goldman Sachs and Morgan Stanley — to more than double the leverage they were allowed to keep on their balance sheets and remove discounts that had been applied to the assets they had been required to keep to protect them from defaults.
Making matters worse, according to Mr. Pickard, who helped write the original rule in 1975 as director of the SEC's trading and markets division, is a move by the SEC this month to further erode the restraints on surviving broker-dealers by withdrawing requirements that they maintain a certain level of rating from the ratings agencies.
"They constructed a mechanism that simply didn't work," Mr. Pickard said. "The proof is in the pudding — three of the five broker-dealers have blown up."
So, the SEC changed the rule so that these 5 mega-giant firms didn't have to abide by the traditional debt-to-capital ratios. Unfortunately, I have basically no idea what this means, so I can't really comment. I only find it hilarious that 1. Special rules were made for companies worth more than $5 billion, 2. Those companies then collapsed and trashed the economy, and so then 3. Instead of going back to the rules, the SEC got rid of them for everyone else too. Hahahahaha.
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Anybody else care to comment? Any more informed opinions? Oh hey, look, it's the Wall Street Journal! I appreciate them for their nonbiased commentary.
The Wall Street Journal article begins like a comic book for rich stupid people:
Huddled in his office Wednesday with top advisers, Treasury Secretary Henry Paulson watched his financial-data terminal with alarm as one market after another began go haywire. Investors were fleeing money-market mutual funds, long considered ultra-safe. The market froze for the short-term loans that banks rely on to fund their day-to-day business. Without such mechanisms, the economy would grind to a halt. Companies would be unable to fund their daily operations. Soon, consumers would panic.
See! Secretary Paulson is like a superhero, watching nervously as the city begins to collapse. What to do! he thinks. And then insight strikes him:
For at least a month, Mr. Paulson and Treasury officials had discussed the option of jump-starting markets by having the government absorb the rotten assets -- mainly financial instruments tied to subprime mortgages -- at the heart of the crisis. The concept, dubbed Balance Sheet Relief, was seen at Treasury as a blunt instrument, something to be used in only the direst of circumstances.
One day later, Mr. Paulson and Federal Reserve Chairman Ben Bernanke sped to Congress to seek approval for the biggest government intervention in financial markets since the 1930s.
Eureka! shrieked Paulson, and -- billionaire that he is -- dove happily into his giant swimming pool of money. It was so simple--so obvious--Why hadn't he thought of it before? "Have the American people pay for it!" he cried, surfacing and spitting forth a stream of dollar bills. "Bail out the ultra-wealthy with taxpayer dollars!"
Yes! Henry Paulson had done it. He'd saved the economy! There was just one problem. What if anybody in Congress had testicles? Though he dismissed the idea as unlikely, Paulson still had to address the matter.
In a private meeting with lawmakers, according to a person present, one asked what would happen if the bill failed.
"If it doesn't pass, then heaven help us all," responded Mr. Paulson.
So there you have it, according to the Wall Street Journal.
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Here's something I haven't seen anybody mention. This business of buying and selling other people's debt, this business that lead to a whole lot of people getting really rich in the last decade: What the hell is its point?
In that NPR show we looked at last time, they interviewed a guy that was making up to $100,000 a month buying and selling securities. And he was the cool guy, living it up, hobnobbing with Christina Aguilera and Cuba Gooding Jr. and all these other fuckheads.
So here we have a guy that has done absolutely nothing to make anybody's life better and has contributed materially in no way at all to the rest of society. And he's rich. And he probably thought of himself as the epitome of the American Dream come true. Meanwhile other people do meaningful work or at the very least, make something useful, and can barely afford to feed themselves or go to the doctor.
What. The. Fuck.
What does that say about our society? About our "economy?" About ourselves, that we allow this sort of thing to happen, that we even cherish it and consecrate it and endow it with all these revered words like Freedom and Opportunity and American Dream?
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