Who's To Blame?

I don't have a lot of time this morning, and I'm getting pretty sick of all attempts to complexify this question, so I'll lay it out for you right here.

Who's to blame for this incredible mess? It's really clear.

No, it's not Wall Street. Wall Street is there to work within whatever rules there are to make people who invest in stocks and other instruments (and pay their broker fees) as much money as possible, with billions left over for Itself.

No, it's not Greedy People. Captialism is all about rewarding the greedy. If Greedy were a crime, they'd have to set aside Kansas, Nebraska and the Dakotas to hold all the felons.

No, it's not the Banks who pressured the Feds to change the rules, jobbed the system and did whatever they could to build double-digit growth into a machine set up to operate in the low single digits. They were playing by the rules they were allowed to set up for themselves, and, more importantly, by the demented rules of the Street.

And no, it's not the fat cats who profited, or the weasels who sold the same bridge over and over again, or even the realtors who squeezed every last bit of juice out of the blood orange that was offered to them. These are all shallow, self-interested, slightly sleazy, ambitious, avaricious, mendacious forces that are DESIGNED to do what they did: Get away with whatever they could. Make the most money. Figure out rationalizations to make it all sound good. So you can't blame the intellectual courtesans in academia, the press or the research departments of now defunct institutions who helped them do that either, no matter how tempting it is to do so.

It's the guys who were supposed to watch this sorry bunch and prevent them from taking over the funny farm. They're the ones to blame. How simple do I have to make it?

Guy #1's job is to eat as many pies as he can before he dies. Guy #2 is hired to make sure that everybody gets his or her fair share and plays by the apple-pie rules. If Guy #1 and his pals get all the pies, he's just doing his job. It's Guy #2 who isn't.

So I'm looking at Guy #2, who changed all the rules when Guy #1 asked him to. Who didn't enforce the few, tattered rules that remained. Who, over the course of the last couple of decades, never learned the most simple two-letter word in the English language, one that translates pretty well into virtually any global tongue. That word is NO. Who, in a very real sense, simply went missing. Who got gone.

The system is built to reward the fast, the greedy, the sharp, the amoral. In a totally free market, it is they, unencumbered by restraint, who do what's necessary to reach their objectives. That's why we have laws and regulations and people to manage them -- not to destroy freedom, but to make it possible in a world that is not set up to truly establish it.

I blame Guy #2. Isn't it time we took him out behind the barn?

Comments

[Poboy]

No. I am not buying it.

Now wasn't that easy.

I'm not buying your argument about the regulators and not buying any derivatives.

What's that old sayin', let the buyer beware.

Well, the buyer didn't show due deligence, and thus must eat cost. Society shouldn't do it.

[Shortyfuse]

The elephant in the room would be the ELEPHANTS in the room. If you do not think so drink your KOOL AID.

I thought this was interesting:

http://www.onlygold.com/articles/ayr_2001/So_Whose_Gold_is_it_at_Fort_Knox(September_1_2001).asp

[Shortyfuse]

WOW they pulled the article within minutes after I posted it. Damn I should have copied it.

[ntmessage]

CORRECT.
The CDSs were insurance policies named CDSs to get around regulation. The loophole, reversal of Glass-Steagall, by the Democrats unregulated Fanny and Freddie (Franny). Once the Pubs got control of the executive branch in they wanted the same for investment banks. The logic respectively and predictably, the government can always bail out Franny according to the Dems, (they did) and since housing prices never decline no more than a few pennies for every dollar we insure would be necessary according to the Pubs (wrong).

1. If I made investments on margin and cannot come up with the money I go to Jail. All of the bad actors MUST go to jail.
2. Fight ANY changes to Mark to Market accounting. This was the ENRON loophole. If there is no Mark to Market then things are valued at whatever people want them to be since we already know that rules and regulations are made to be broken.
3. This fund can become our Nations Sovereign fund to fight other bad actors or countries from attacking our economy. The worst were from London and other "dark" exchanges overseas.

[Robert59]

Stan,

The problem with your argument is its oversimplification. Guys #2 could have done his job making sure Guys #1 didn't eat too many pies, but Guys#1 used their connections with other Guys #2 making it impossible to stop Guys #1 from eating too many pies.

For instance why did Guy #2 named John McCain or Guy #2 named Phil Gramm forget their job was to keep Guy #1 named Lehman Brothers from eating too many pies?

Why did the head of the SEC (a Guy #2) let the industry (Guy #1) he was charged with regulating let them convince him it was okay if they regulated their own intake of pies and it made perfect sense if they took a dollar and ordered 40 and 50 dollars worth of pies knowing it was mathematically impossible for them to have enough dollars on hand when the pies were delivered?

[markshemtob]

The severe economic problems we face did not just happen. Economists have been issuing warnings for a year. So where was Congress when this problem was unfolding? Why did they wait until now before they acted? And why did the TARP not pass without unneeded earmarks? Of course many Representatives will blame other for causing and not correcting the problems.

If action been implemented a half a year ago we more than likely would not have reached this point of crisis. The primary job of our elected officials is to protect us. This extends to economic security. The late and rushed nature of TARP along with partisan wrangling is not what the American people felt they deserved from their elected officials at a time of national crisis.

The crisis we now face should be proof that the way of viewing the responsibilities and evaluating the performance of those we elect must change. We need to make it clear that those elected to go to Washington must serve the entire nation when confronted with a pending national crisis. We should review the actions and inactions of each elected Congressman over the last year as it relates to the subprime crisis as well as multi year records in working with Representatives across the aisle. If we fail to send the message on this Election Day that we have had enough Partisan Politics, Blame Game, and Pork we can only look to ourselves the next time they fail us.

[undecidedaboutPOTUS]

My recommendation:
1- take a Macroeconomics Class, or the very least read a Macroeconomics Text book like the 17th edition of McConnell/Brue.
2 - Find out the definition of "Market Failure". If you don't want to read McConnell/Brue, try Brad Schiller's Macroeconomics text (11th edition.)
3 - Read the chapters on the Global Economy, and the Public/Private Sectors and the role of Government.
4. Research the failures of Reagan's trickle down economics. (Google it)
5. read the CCN. com: Is this the start of another Great Depression?
Editor's Note: Barry Eichengreen is George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley. He is the author of "Golden Fetters: the Gold Standard and the Great Depression, 1919-1939."
http://www.cnn.com/2008/POLITICS/10/09/eichengreen.depression/index.html?iref=mpstoryview
6. Vote for The One That Won -- I just did.

[Oldbuck]

If you were to go back to 1929 people would think they were in 2008 this can be laid at the feet of the Republican party and deregulation just as it was in 1929. The Republican will tell you as they did in 1929 that this is just a market adjustment. Which is bullshit. Roosevelt came along and from several government program like the WPA which rebuilt bridges and roads. If you want to see where to start go back and look at a history book.

[Jon Raymond - Huffpost Blogger]

That would be Bush

[Yermammy]

He's too blame for so many things, I've lost count. And Nancy Pelosi has lost her mind. I mpeac H.

[Thad]

"Guy #1's job is to eat as many pies as he can before he dies. Guy #2 is hired to make sure that everybody gets his or her fair share and plays by the apple-pie rules. If Guy #1 and his pals get all the pies, he's just doing his job. It's Guy #2 who isn't."

Argument by analogy is for people who can't win an argument on the facts.

Who's to blame? They BOTH are. It's not mutually exclusive. I'm a computer scientist and even *I* know the world doesn't all boil down to a one or a zero.

[helpmeouthere]

Ok, I'm just trying to understand this whole "crisis." I'm thinking that in the US alone, there must be TRILLIONS of dollars of mortgages out there - most of them, like yours and mine are perfectly sound and legit. In fact, I know, thanks to the way these loans were structured (forgive me, I just wanted to own my own home), I paid the banks (sadly, most recently not the ones I made the original deals with) gigantic chunks of interest before I collected the first measly cent of principle. OK, I digress. My gut is telling me that the "losers" who defaulted on their mortgages in the last few years are but a tiny drop in the proverbial bucket of mortgage capital, and someone is trying to tell us that "they" are the ones who have brought entire nations to their knees. Doesn't quite make sense to me. But if there's someone out there who can explain it, I'm all ears.

[JBS]

The corrupter is just as guilty as the corrupted. Guy #1 AND Guy #2 ought to be doing hard time, breakin' big rocks into little rocks.

But it ain't gonna' happen.

What's gonna' happen is both of 'em are going to get to keep the money, PLUS, we the taxpayers are going to make good their paper losses in order to "restore confidence to the financial markets".

The swindlers STILL hold the reigns of power.

[Christian]

http://www.nytimes.com/2008/10/09/business/economy/09greenspan.html?partner=rssuserland&emc=rss&pagewanted=all

Then here ya go, remember the man of money they called "the Oracle" ?? Them and everyone else preaching Friedman Economics.

[WorkingClass]

#2 is our elected officials at the federal level. #1 is BIG MONEY. #1 pays #2 to look the other way while he robs #3 (the rest of us). Sorry Stanley. Just because its #1's nature to be a scum bag doesn't make it right. Us #3's need to put #1 AND #2 in prison. Of course, having neither money nor high office, the #3's can only beg for mercy and pray for a miracle.

[UnknownSoldier]

#3 is supposed to be number #2 Citizen representatives, not permanent politicans.

[WorkingClass]

That was when we had a constitution.

[jsarets]

"That's why we have laws and regulations and people to manage them -- not to destroy freedom, but to make it possible in a world that is not set up to truly establish it."

We can't throw around the word "freedom", because freedom is a self-contradiction. Freedom, in the context of market capitalism, is the exclusive control of properties by their owners. We are the masters of our own properties and the slaves of everybody else's. How "free" we are depends on how much property we own.

Worlds or societies are not "set up", they are functions of social, economic, and political institutions and the values they represent. It's our institutions that are not set up to establish the vague notion of freedom we desire. The very fact that we yearn for it unsuccessfully is evidence that our world and our people are wired for freedom-oriented values while our institutions are not.

In an ideal social order, our institutions would reflect our aspirational values. If our institutions are so out of touch with our sense of social justice that they run roughshod over our values if not painstakingly regulated, then we are not lacking for diligent regulations so much as we are wanting for virtuous institutions.

Market capitalism is not an usurious economic institution that can be rectified with the political equivalent of duct tape and baling wire. It is what it is, and the rest is just lipstick. Don't blame the regulators, blame the institutions.

[Christian]

Companies are legally bound to put shareholder values first. That means to them, whatever maximizes profit it their job and only job. The decisions made my a corporation do not take into account their effects on workers, communities, society, and in their view would be sacrilegious to do so!
Steal 5 bucks from me off the street and you go to jail, move the company over seas for better profits and rob me of a job, cause my default on my home, possibility destroy my marriage and keep me from sending my kids to college, and it's cool, it's what happens in a capitalistic system ruled by "Friedman Economics." What counts is the owners and share holders made a good profit for their select few pockets.

[dagnome27]

there needs to be an enforced balance between what's right for capitalism, and what's right for society, otherwise we would have a market meltdown - oh, wait - too late! Maybe next President can fix this crap. which is EXACTLY what BushCo wanted - rob the USA blind, leave the mess behind for Obama to clean up, then BLAME him when he can't do it in four years (see, he doesn't have experience!) what a load of cr*p!

[joebaggadonuts]

Jsarets, this is not clear stuff you are writing. Freedom's underpinning is responsibility. Failure of responsibility yields loss of freedoms.

In a functioning society we have laws to establish norms for actions taken based on power and freedoms of individuals which have limits that the laws prescribe. Police handle the obvious stuff, regulators handle the more obscure realms of activities, and judges handle what goes wrong. Responsible actors stay within the norms prescribed by laws. Police, regulators and judges help define the fine points and keep responsible actors within the proper boundaries for the society to continue being functional. When neither the actors in freedom nor the police, regulators nor judges can be relied upon to do this job within their scope of responsibility, things break down and society becomes non functional. I am not talking ideal here, but about what is true.

We put an irresponsible brat in charge of our greatest and most powerful office. We, through misdirection or lack of intelligence acted irresponsibly. We let our elected officials create regulations which did not protect our society. We are now suffering the consequences of that irresponsibility.

It's as simple as that.

[joebaggadonuts]

I think you did a good job explaining things here Stanley. The only nit I have is that you only by implication blamed the voters for letting Guy #2 off the hook for the last several election cycles. What started with reform in the first Reagan election turned into a rout of regulators that never stopped. Guy #2 is the Republican's responsibility, with a little enabling help from the Clintons.