Seeing Shades Of The 1930s: Newsweek

On Tuesday and Wednesday, Federal reserve chairman Ben Bernanke, a scholar of the epic financial meltdown of the Great Depression, and Treasury Secretary Henry Paulson, a survivor of more recent Wall Street crises, told Congress of their latest efforts to rescue the financial sector. If Fed chairman Alan Greenspan, Clinton Treasury Secretary Robert Rubin and his deputy Lawrence Summers were known as the Committee to Save the World during the financial crises of the 1990s, today's duo may go down as the Committee to Save Wall Street From Itself. For the past several months, the Fed and the Treasury Department have pulled all-nighters dealing with three-alarm fires, from the demise of Bear Stearns in March to the rising concerns over the mortgage giants Fannie Mae and Freddie Mac.

Fannie and Freddie play a huge role in the mortgage business by lending cash and guaranteeing loans made by others. But with the spread of the mortgage crises their stocks have plummeted in recent weeks, and questions have been raised as to whether the government would do what it implied it would all along when it established the two government sponsored organizations: stand behind their debt. Bernanke and Paulson gave an emphatic "yes," as they described to occasionally hostile Congress members their plans to allow Fannie and Freddie to borrow money from the Federal Reserve, and to empower the Treasury Department to buy (and buoy) the companies' stock and stand behind their $5.2 trillion in debt. The prospective moves, along with some slightly better-than-expected earnings reports from banks last week, calmed the markets. The price for this desperately needed action is likely to be more regulation and oversight. Will the crisis inspire a fundamental restructuring of the vital, symbiotic relationship between Washington and Wall Street, as happened during the New Deal? Or will these responses prove a temporary blip, as when the government bailed out the savings and loan industry in the late 1980s? In short, is this 1933 or 1989?

Read the whole story here.

Comments

[Mr Grey]

Will you guys stop whining, it's all psychological! Just ask our great leader, the Decider-in-Chief.

[letsgetsmart]

We had two republican presidents prior to and during the great depression. We had two republican presidents prior to and during the negative 80's economy. And now we have a two term republican president that is setting up the latest economic crash so lets wake up and not make it two republicans in a row this time. What is it with republican presidents and our country? Every time we had a problem it was the democrats that pulled us out of it. At no time did we ever have an economic spin out during a democratic administration. All of you values voters need to have a new set of values like saving our country for future generations. It seems a little pointless to push your agenda if the country fails.

[WoodyCPM]

The New Deal did not create The Appalachian Trail. The Appalachian Trail (AT) was first proposed in 1921 in an architectural magazine by Benton MacKaye. The first sections of the AT were completed (Bear Mountain, NY) in 1923. The entire AT, from Georgia to Maine, was officially opened by FDR in 1936, but his New Deal had nothing to do with it. It is maintained by an all volunteer cadre of people from 17 hiking clubs that make up the Appalachian Trail Conference headquartered in Harper's Ferry, WVa.

It remains one of, if not the, largest totally non-profit, all volunteer public works in the United States.

[lafrance]

When are republicans going to learn (and the public that keeps voting for these incompetents) that deregulation only invites trouble and pain. That is doesn't work and it is inviting such crisis as now. All for short term greed.
People need to wake up to the fact that republicans cannot run government and always mess up and it's democrats that always have to clean up their mess.

[Erdgeist]

It is thanks to scoundrels like former Senator Phil Gramm (who now helps American billionaires avoid taxes as vice chairman of Swiss bank UBS) that we are facing a possible repeat of the Great Depression.

[rwe]

Actually, due to the socialist policies of FDR 1937 was a worst depression than 1929.We are still experienceing growth ,albeit small...Instead of stopping us from progressing ,prograssives are hindering progress specifically in the energy industry by supressing more drilling ,refineing and Nuke plants.

[letsgetsmart]

Oh yes those wonderful republican stats. Unemployment from 15 to 20% is not your concern. Just like today the administration is showing a small growth as unemployment rises. Republicans are anti public plain and simple. Just out of curiosity, if you aren't from a very wealthy family, you could end up in that 15 to 20% or more unemployment. I am a peaceful person myself since Nam but there are a whole lot of people that aren't. If this does get to the point where we have another great depression you mike want to keep a low profile and shut up.

[Eric8869]

Are you smoking something?

Hoover (the Republican President) did NOTHING for the American people while the depression was raging. He was just trying to "wait it out". That is how FDR got in the office in the first place.

Then when FDR came in his "socialist" programs put hundreds of people TO WORK. This is why in every home from Democrat to Republican they loved FDR. He was helping the people.

Try cracking a history book - don't try to rewrite history. Hoover was HATED - FDR was loved. Period

[themodernleader]

The problem of continued bailouts are at least two. First, managers of increasingly monopolistic organizations recognize that incompetent and reckless business practicss will be rewarded with a transfer of bailout monies from the citizentry at large to the few miscreants. Second, bailouts cover up temporarially, the affects of unsound economic policies and procedures damaging the economy. Money becomes so plentiful and cheap that bubbles appear with ever more frequency and virulency. Borrowing and increasing debt become the outstanding economic stimulus and feature at every level of society. Big money and speculation distort value and create panic.
Finally, the entire system implodes with terrible consequences for a citizentry who were led down the primrose path of selling off all the hard work of our ancestors for easy living and vegetating off of other nations' money.

[bikerdude]

The "bailouts" should have a cost attached. It is our money they are messing with, and with the ridiculous salaries and benes these guys get, they should have to kick back some...I am also a little leery of the boards that would approve these salaries and procedures and then have us make up for their stupidity.

[lafrance]

Especially when the little guy is the one who ends up not only paying for the fat cats incompetence and greed, but, are the only who pay the price, not the ones who cannot control their greed and dubious business practices.
You never see any relief for the average guy. Only for greedy fat cats.

[Paul]

Bernanke draws a lot of flak, but I think he may go down as a hero for keeping the mortgage meltdown from taking down the financial system.

Now, to solidify his legacy, he should spearhead the prosecution of those responsible.

[ggmome]

Me and my siblings were born during the 30's, and all three of us know the signs and are currently reading the signs and concurring, that the moment of truth has come....

I have worn shoes with holes in them, I have tasted the soup from the back of the stove, gone meatless, for weeks, stood in line for welfare... Heard of suicides, and lived three sometimes four families to a home... Not a nice scenario... Lets avoid this, if at all possible...

[bikerdude]

The difference is that this time the "fat cats" are taking their money up front. We might be in soup lines but the likes of Bu sh and his "have mores" will be eating high off the hog...

[tompoe]

From the article:
"As a result, there were few early warnings and no established protocols for dealing with a failing institution. The result: regulators have had to act like John Coltrane and Oscar Peterson. They're improvising."

Ah, yes, corporate media comes through, again. Revisionist history before the event plays out swings into action. No fact-checking, and lots of scripting to bamboozle the public.

cleveland housing crisis 1995 are a few of the keywords the authors might have typed in, prior to writing their article, but then their whole premise, stated above (found deep inside the article, as to avoid instant outrage from readers) would not see the light of day. Unless, of course, they're charged with bamboozling the public.