Wednesday, September 17, 2008

A Tribunal Must Tell Us What to Fix... and Whom to Punish

The state shirked its role while stupidity and greed slid into thieving. When the crisis subsides, an inquiry is needed

If the mistakes that have collapsed the world's financial markets had been made by statesmen and had led to war, there would be corpses swinging from lampposts. If they had been made by generals, they would be falling on their swords. If they had been made by judges or surgeons or scholars, some framework of professional retribution would be rolling into action. But those responsible for our finances can apparently vanish into the forest like Cheshire cats, leaving only gold-plated grins. Not for them a Hague tribunal or a Hutton inquiry. They are not just good at shedding risk - they shed blame.

Simon Jenkins -The Guardian
A tribunal must tell us what to fix. And whom to punish
September 17, 2008

A few more select paragraphs from today's Jenkins/Guardian article:

Who are they? Where are they now? They said it could not happen again. They said they were masters of the universe. They had conquered history itself and had that wily monster quivering at their feet. There would be no more crashes, no more recessions, no more booms and busts, just moonbeams and rainbows and jam for tea. [...]
We are seeing what historians of ideas call a paradigm shift. [...]
JK Galbraith's book on [the 1929] crash is the Dr Strangelove of financial holocaust. If it offers one lesson, it is that crashes are not acts of God; they are caused by the interaction of corporate behaviour and state regulation. Nor does the market supply its own discipline. Understanding that, wrote Galbraith, "remains our best safeguard against recurrence". [...]
The naivety of all this is now exposed. Politicians encouraged the public to treat home ownership as a "right"; property became the citizen's gilt-edged stock. Bankers encouraged staff to speculate with depositors' money by awarding them huge bonuses to maintain turnover. Those charged with the guardianship of other people's savings behaved, in effect, like thieves. Sheer greed drove young men and women mad. Nobody in authority batted an eyelid.[...]
There is no perfect market. Markets need regulation, just as communities need law. [...]
Read the rest of this fantastic article here.

Once you've digested this fine article, do come back with your ever-savvy comments.


what's next? said...

I'm not that educated but I know that many that regularly post to the blog on various issues I'm hoping that someone can tell me why the takeover of AIG by the Federal Reserve isn't an example of socialism sponsored by of all people, the REPUBLICANS.

And if you could, please explain why the news that the United States Government basically seized a for-profit company using taxpayer dollars shouldn't scare the hell out of every person in this country?

straight shooter said...

The takeover of Fannie Mae and Freddie Mac was the act of government socialism. They were private companies that government regaulators had failed for years to regulate properly.

In the case of the AIG catastrophe the Federal Reserve made a loan of some $80 billion at 8% plus the Libor rate to AIG so that they could continue in business. The government did not take them over.
Aig can still go under.

AIG fills a very important, pecular niche in our financial system and they should not have been allowed to go belly-up.

AIG is the group that guarantees, among other types of insurance, that an investor buying municipal bonds has made a safe purchase. Without that guarantee cities and local governments would have a hard time finding a market for their debt.

Today was not the last of the big financial organizations possibly closing their doors forevermore.

It is interesting that Goldman Sachs which is supposedly a survivor at this time has January 2009 $40 puts for sale at $8.50.

This means that the bets are on that Goldman stock will not be worth $107.50 in January which it was today,but will possibly be worth less than $40.00 per share.

The financial world in this country is being redrawn as we watch and there are going to be more big surprises before this settles...if it ever does.

Average citizens owe it to themselves to become better informed about what caused this debacle to keep it from being repeated.

That includes their learning enough so that they will recognize when a candidate for office is lying to them with all their pie in the sky promises.

The basic thing to remember is that there is no something-for-nothing in life and that includes promises of health care for everyone and a chicken in every pot.

And that includes candidates in both political parties who promise anything in order to get your vote.

George K. said...

Comment bumped to front page

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