Sunday, October 12, 2008

Before I Forget

The current financial crisis, 3 weeks on, draws out us experts, assessing blame. There are some blame-assessors who readily identify themselves among those you needn't listen to. What are the criteria to gain this list? First anyone speaking with authority on a Fox affiliate, and more generally those who blame the regulators and in particular, of late, those blaming Barney Frank.

The chorus is like this: the legislators pushed Fannie and Freddie to give loans to those who couldn't afford it, those bad Americans (likely of questionable origin) who never were supposed to have a house and were basically handed it by those bleeding hearts in Washington. This would be fine were it not for a few missing details. Notably the identity of the tens, if not hundreds of thousands of people it took to push the bad paper, who were making piles of money for bundling these debts, and calling them assets. Clearly regulation and even legislation permitted, if not promoted this behavior. But let's be a little reasonable here. Do we look at, say, a pregnant teenager or first time drug addict as the culprit. Either of these social ills was brought on with the help of someone else, in the market, as it were, who sold them on their condition.

This problem is not new. I recently read Upton Sinclair's "The Jungle", where the obvious problem is the conditions in the meat-packing business. But for the Rudkus family, it's set against their exploitation by the propertied class. A no-small section details how they are sold this wonderful home, close enough to the factory, but which takes everyone's salary, even the pan-handling children, just to stay in. The terms are all in behalf of the mortgage company, who routinely throws people out, and with another coat of whitewash recycles the property for the next in the supply line of victims of the plant.

Back to our current dilemma: I hear little of the blame laid on the group of people who fill the logical void left by heaping blame on those among us who live beyond their means and the legislator/regulator who allows/permits the extravagance. Those who bloviate on Fox, blame Barney Frank, or regulators overlook this group. After all, what has been a not-hidden agenda of the last two or three decades in Washington? The growth of the lobbyist/consultant class. Who is writing the legislation? Not the people's representatives. The representatives of the moneyed class.

And why is Barney Frank on the hit list? Well, for all of two years he's been the chair of the House Banking committee. And surely, that's been enough time for a turn-around in the debacle that's 3 decades in the making. Watching Bill O'Reilly trying to blame Barney Frank for assuring investors that F&F were now stable enough to rely on as investment advice generated both disgust and comic relief. Frank repeatedly pointed out the quote O'Reilly focused on included more caution than not. I was disappointed Frank didn't challenge O'Reilly on that most sacred of capitalist dictums: "let the buyer beware". _and_ remind O'Reilly that nothing any congressman, much less the banking chairman, can be considered investment advice. No, Bill, those who poured money into F&F after the bailout did so with their capitalist eyes wide open.

A friend in my office (on Wall St!) is a little incensed at Obama for not making this point in the recent campaign. I think Barak is holding back on this because he's smart enough to know the people are smart enough to figure this out for themselves. After all, if Barak were to starkly point his finger at those who've actually raided the treasury, it would be out of his character, and, like all pointed weapons, it's difficult to control the collateral damage. Let's hope the wisdom of the electorate is in fact represented in this year's election.

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