Tag Archives: Financial Crisis

It’s 1938 All Over Again

07 Tuesday Sep 2010

Posted by in Congress, economy, Obama administration, Politics

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Any of this sound familiar?

“The U.S. economy has been crippled by a financial crisis. The president’s policies have limited the damage, but they were too cautious, and unemployment remains disastrously high. More action is clearly needed. Yet the public has soured on government activism, and seems poised to deal Democrats a severe defeat in the midterm elections.

[…]

Gallup polling… [a]sked whether government spending should be increased to fight the slump, 63 percent of those polled said no. Asked whether it would be better to increase spending or to cut business taxes, only 15 percent favored spending; 63 percent favored tax cuts.”

The result?

“And the…election was a disaster for the Democrats, who lost 70 seats in the House and seven in the Senate.”

The year was 1938. The president was Franklin Delano Roosevelt. Now here we are again:

“More stimulus is desperately needed, but in the public’s eyes the failure of the initial program to deliver a convincing recovery has discredited government action to create jobs.”

So what is the Obama administration proposing as a solution for a stagnant economy and insufficient job creation? Tax cuts, tax cuts, and more tax cuts:

“With just two months until the November elections, the White House is seriously weighing a package of business tax breaks – potentially worth hundreds of billions of dollars – to spur hiring and combat Republican charges that Democratic tax policies hurt small businesses, according to people with knowledge of the deliberations.”

Good, sound political strategery—let the opposition define the terms of engagement and play into their theme that tax cuts are the prescription for whatever ails the economy. And speaking of political strategery, how the hell is anybody still unclear on this subject?

“If administration officials can agree on a policy path, it is not clear that it would be approved in the current environment on Capitol Hill.”

Aaaaarrrggghhhh!!

Krugman concludes:

“But always remember: this slump can be cured. All it will take is a little bit of intellectual clarity, and a lot of political will. Here’s hoping we find those virtues in the not too distant future.”

That’ll be the day.

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The Geithner Solution to Regulatory Failure: More Authority for Regulators

08 Saturday May 2010

Posted by in bailout, economy, Financial Crisis, Politics, too big to fail, Uncategorized, Wall Street

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Sure, federal regulators (like the former head of the New York Federal Reserve pictured at left) were inept, incompetent, and inadequate when it came to their ability to first foresee and then to take proper pre-emptive action based on all the red flags that were waving leading up to the financial crisis.

Sure, they may have overlooked the dangers of subprime mortgages, of major financial institutions being leveraged 30 to 1, and of those financial institutions becoming so interconnected through the packaging, re-packaging, and re-re-packaging of toxic securities and selling them back and forth that the failure of one could lead to the failure of all.

Hey, just minor oversights. No need to think they don’t deserve to keep their jobs, or better yet, be given more authority. Treasury Secretary Geithner seems to think so:

“During an appearance on Capitol Hill, Geithner acknowledged failures in the Federal Reserve Bank of New York’s supervision of Citigroup and other large banks, said regulators were “not conservative enough” when it came to overseeing banks’ leverage ratios and criticized capital requirements as not having done a “good enough job” as a buffer against risk.

He also said that regulators like himself could have done more to prevent the worst financial crisis since the Great Depression…To ensure these kinds of failures are avoided in the future…Geithner wants to leave it up to federal regulators — the same ones that presided over the housing bubble, oversaw extreme risk-taking by banks and other financial firms, and tried (yet failed) to contain a subprime crisis from mushrooming into a financial meltdown.

[…]

In short, Geithner said he wants to give regulators more authority, leaving it up to them to exercise their best judgment.”

No thanks, Tim. We’ve seen what leaving crucial decisions up to the “best judgment” of federal regulators leads to, from Wall Street to the Gulf of Mexico.

Simon Johnson and James Kwak on Bill Moyers Journal

22 Thursday Apr 2010

Posted by in bailout, Financial Crisis, financial reform, financial regulation, Politics, too big to fail, Wall Street

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Simon Johnson and James Kwak, co-authors of 13 Bankers and co-founders of Baseline Scenario discuss the financial crisis and the need to reform the system. From Crooks and Liars: Vodpod videos no longer available.

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Another Financial Crisis “More Than Predictable, It’s Inevitable”

04 Thursday Mar 2010

Posted by in bailout, Congress, economy, Financial Crisis, Goldman Sachs, Obama, Politics, Wall Street

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Remember the economy and that little thing we had not too long ago called…what was it…oh yeah, the financial crisis. While Congress and the White House spend “the next few weeks” mired in the never-ending saga of health care reform, there are some potential problems which could affect us a lot sooner than 2014. If legislators have some spare time they might want to give it a glance:

“Even as many Americans still struggle to recover from the country’s worst economic downturn since the Great Depression, another crisis – one that will be even worse than the current one – is looming, according to a new report from a group of leading economists, financiers, and former federal regulators.

…Without more stringent reforms, “another crisis – a bigger crisis that weakens both our financial sector and our larger economy – is more than predictable, it is inevitable,” Johnson says in the report, commissioned by the nonpartisan Roosevelt Institute.”

In the report, the panel, which includes Rob Johnson of the United Nations Commission of Experts on Finance and bailout watchdog Elizabeth Warren, warns that financial regulatory reform measures proposed by the Obama administration and Congress must be beefed up to prevent banks from continuing to engage in high-risk investing that precipitated the near-collapse of the U.S. economy in 2008.

But in typical Congressional fashion, “beefing up” financial regulations and “stringent reforms” aren’t on the agenda:

“The proposal” [that would ban the banks receiving federally insured deposits from engaging in trading which benefits the banks and not their customers] “faces strong resistance in Congress, where lawmakers have shown little appetite for adding to the prolonged debate on overhauling financial regulations.”

The reason for Congress’ “little appetite” should come as no great surprise:

“Goldman Sachs and Morgan Stanley would probably be the Wall Street firms most affected by the ban, known informally as the Volcker Rule…”

Goldman most affected? We can’t have any of that. Chris Dodd needs a job starting in January.