Meta-themes: Process and Resource Allocation
ILLUSTRATED: When the regulatory process breaks down, and when resources are concentrated in a few, disasterous financial meltdowns happen. This would not have happened, not as bad anyway, if Gore were president.
Sunday is supposed to be a day of rest. However the New York Times called September 14, 2008 "one of the most dramatic days in Wall Street’s history." Two of the largest investment banks, Lehman Brothers and Merrill Lynch disappeared. Lehman to liquidation, and Merrill to acquisition. Insurance giant A.I.G. is also in trouble. A week prior, the government took over Fannie Mae and Freddie Mac, effectively socializing the secondary mortgage market. Today, Alan Greenspan said this is "oh, by far" the worst financial crisis he has seen in his professional career.
Today is the confluence of two pathologies of the Bush Administration: the breakdown of process and the mis-allocation of resources.
First, a breakdown of process. The cult of deregulation continued as the financial sector securitized more and more types of contracts. The lack of regulation ranged from abstract derivates, and derivatives of derivatives, right down to the mortgage brokers who took commissions from clients who obviously could not afford their new homes. A regulatory process is cheaper and more efficient in the long run.
The theme of abrogating process goes to the internal decision making on invading Iraq, the flaunting of the Constitution, and the reneging on international agreements and statecraft.
Secondly, there is a mis-allocation of resources. The irresponsible tax cuts of 2001 and 2003 led to money and credit being concentrated in a few. A few breached securities contracts sent the whole system crashing. Housing is the root of the current crisis. The sub-prime meltdown amounts to a large distribution of wealth, upward.
Sunday is supposed to be a day of rest. However the New York Times called September 14, 2008 "one of the most dramatic days in Wall Street’s history." Two of the largest investment banks, Lehman Brothers and Merrill Lynch disappeared. Lehman to liquidation, and Merrill to acquisition. Insurance giant A.I.G. is also in trouble. A week prior, the government took over Fannie Mae and Freddie Mac, effectively socializing the secondary mortgage market. Today, Alan Greenspan said this is "oh, by far" the worst financial crisis he has seen in his professional career.
Today is the confluence of two pathologies of the Bush Administration: the breakdown of process and the mis-allocation of resources.
First, a breakdown of process. The cult of deregulation continued as the financial sector securitized more and more types of contracts. The lack of regulation ranged from abstract derivates, and derivatives of derivatives, right down to the mortgage brokers who took commissions from clients who obviously could not afford their new homes. A regulatory process is cheaper and more efficient in the long run.
The theme of abrogating process goes to the internal decision making on invading Iraq, the flaunting of the Constitution, and the reneging on international agreements and statecraft.
Secondly, there is a mis-allocation of resources. The irresponsible tax cuts of 2001 and 2003 led to money and credit being concentrated in a few. A few breached securities contracts sent the whole system crashing. Housing is the root of the current crisis. The sub-prime meltdown amounts to a large distribution of wealth, upward.
posted by Teka Thomas at 6:50 PM
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