Someone asked me “So, what about this occupy Wall Street thing?”
Good question. I heard President Obama asked the same thing this morning, particularly why the crooks of Wall Street who brought the country to its financial knees haven’t all been lined up and shot, or at least prosecuted and their Gucci loafers confiscated.
His answer was actually very good: What the mavins of Wall Street did was repugnant and immoral and generally wrong, but it wasn’t illegal.
It wasn’t illegal because of all the deregulation done under various presidents — pick one over the last 30 years, they are all guilty — in the interest of boosting capitalism and profits and so forth. Removing the wall between banks and investment firms should have been criminal, but wasn’t, to pick one example. Investment banker, and bankers in general, discovered that there was a lot more money to be made in churning financial paper, producing profits through derivatives and other similar leveraged stock deals without producing any actual product or even any financial growth. Regular loans to build businesses, buy homes or expand factories to produce products were so boring.
It was all pie in the sky money — paper profits invested to create more paper profits that were leveraged to produce even more paper profits, and in the end it all created a huge house of cards bubble about 20 miles high.
But it wasn’t just Wall Street’s shenanigans – at the same time the dergulation was going on, huge amounts of money were floating around the globe looking for a place to live and grow. We’re talking multiple trillions of dollars.
Alan Greenspan said federal treasury rates were going to be kept low to hold inflation in check, but this had the perverse effect of sending all that money looking for higher rates of return, finding them in housing mortgate investment instruments, which kicked off an inflationary spiral in the housing industry aided and abetted by the lack of regulation pushed by those several presidents, not to mention money managers who saw a loophole wide enough for a battleship and who jumped through it with both feet.
The result is vastly well-described in the NPR show “the Giant Pool of Money” done by “This American Life” which you can read here or listen to (click) but the bottom line is that mortgage companies suddenly found themselves with piles of money seeking a way to be invested. In order to produce enough mortgage product for that money — those collections of mortgages that were combined and turned into investment bonds — the lending standards had to be made looser and looser because there just weren’t enough borrowers who could qualify otherwise.
Alan Greenspan, chairman of the fed, is criminally responsible although, sadly, what he did was criminal neglect which is hard to prosecute. Greenspan had such power that all he had to do was fart wrong and the whole thing would have come to a screeching halt. Instead, faced with housing prices that had tripled or more in a year (which is insane since wages were essentially frozen) and lending practices that were giving half million dollar loans to mothers in welfare, or even dead people, the best he could come up with was that there was a bit of “froth” in the housing markets.
Froth? The last time we saw that kind of froth was Florida in 1927, and the result then was the same as we saw now: Complete disaster. Greenspan should know enough history to realize this, but he’s also a Libertarian with blind faith in the markets to do the right thing, which is criminally stupid. He has later admitted he was wrong, the “oopsie!” heard ’round the world.
So what to do now? Pay off the mountains of debt and fix Wall Street so this can’t happen again. This means vastly stricter regulations on how banks operate.
Amazingly, Tea Party types and even allegedly mainstream Republicans are resisting adding regulation to the markets. They scream “no government bailouts!” but don’t want to stop financial crooks from stealing ever more. Spineless Democrats don’t seem able to make what ought to be as slam-dunk case.
My own solution is to give as little of my own money as possible to those crooks. They pushed home equity loans — this is really a second mortgage, but that sounds icky, so they changed the name — remember those stupid “put it on the house!” ads? – so you should never get one of those.
They push credit cards, so never get more of those than you absolutely need and pay it all off every month. Never give the bastards a nickel of interest.
The new debit card fees? Cut up the card, find a credit union with a free card, or use cash. You’ll be amazed how much less you spend when you don’t use those cards, too, and that will hit them where it hurts because they won’t be making any transaction fees as well as card fees, not even the lowered fees they’re now complaining of.
In short, become a real, true, honest fiscal conservative — that used to mean running your household with no debt, owning your home free and clear, saving money to buy stuff. Sadly, that is something all Americans got away from decades ago, mostly because of agressive marketing by those crooks.
ps: here’s a list (click!) of what the “Occupy Wall Street” folk want. Very ambitious, doomed to fail, but not bad.