I guess we’ll see where this goes:
Regulatory failure, not low interest rates, was responsible for the housing bubble and subsequent financial crisis of the last decade, Ben S. Bernanke, the Federal Reserve chairman, said in a speech on Sunday.
Mr. Bernanke’s remarks, perhaps his strongest language yet assessing the roots of the financial crisis, came as he awaited confirmation for a second term as Fed chairman and as he sought greater regulatory authority from Congress.
“Stronger regulation and supervision aimed at problems with underwriting practices and lenders’ risk management would have been a more effective and surgical approach to constraining the housing bubble than a general increase in interest rates,” Mr. Bernanke said in remarks to the American Economic Association.
Why does everything have to be a binary construct? Why couldn’t a bunch of things have been responsible for the financial meltdown? I would argue that easy credit, excessive cash, lack of regulation, a culture of corporate greed, a public that has been told for decades that they can have everything they want right, and irrational beliefs that housing prices will always rise are responsible. This patient didn’t almost die because of one illness, there are multiple morbidities at play here.
It is going to be really, really depressing watching the Democrats blow this in the next couple of months. Unlike Jane Hamsher, I don’t think there are rampant anti-corporate sentiments on both sides of the aisle, but I do sense that there is rampant anti-Wall Street sentiments on both sides of the aisle. No one is happy about the bailout (except the Bankstas). No one is happy about the culture of greed and unaccountability on Wall Street and among our larger financial institutions. On that, I am in complete agreement with the the Jane Hamshers of the left.
There is a growing sentiment among even people like me, who are generally favorable towards capitalism, that Wall Street is no longer about the efficient allocation and movement of capital, but of maintaining a level of wealth and prestige for a select few. Have the right family name, go to the right school, spend a couple years at Goldman or one of the other major players, and have your ticket punched for life. Like, for example:
Chelsea Clinton, the 29-year old daughter of former President Bill Clinton and Secretary of State Hillary Rodham Clinton, has become engaged to her longtime boyfriend, investment banker Marc Mezvinsky.
***Mezvinsky is a son of former Pennsylvania Rep. Marjorie Margolies-Mezvinsky and former Iowa Rep. Ed Mezvinsky, longtime friends of the Clintons. Ed Mezvinsky was released from federal prison last year after pleading guilty in 2002 to charges of bank and wire fraud.
***The couple became friends as teenagers in Washington and both attended Stanford University. They now live in New York, where Mezvinsky works at Goldman Sachs and Clinton is attending graduate school at Columbia University’s School of Public Health.
It is going to be really depressing watching the Democrats fail to enact a tough new regulatory regime on Wall Street. I understand that the Republicans and the Blue Dogs are going to do everything they can to stop any meaningful action, but the Democrats should have the public on their side on this one, and a little bit of populism might go a long way. I doubt it, though. I’m fully expecting the Republican base to put aside their anger at Wall Street (if it even exists) and do what they can to block regulations for no reason other than for the Democrats (and Obama) to fail. Then nihilism of the GOP, in which they attack the bailouts, but then attack anyone trying to do anything to prevent the need for future bailouts (see Dick Shelby and others) will be on full display. I have no doubt that the Democrats will miss every opportunity to put the Republicans in a bind, and as soon as they start making headway, Breitbart’s Big Government will release another ACORN tape and the media will get distracted and start talking about something else.
I also think the power of the financial lobby will prove to be too much, and we have seen the beginnings of this already. Even now, there is evidence that regulations are being stripped from the bills.
We’ll see, but like everything these days, I’m not really hopeful. Our overlords have us where they want us.
General Winfield Stuck
Welcome to American Oligarchy senor Cole. It was always only a matter of time.
Napoleon
I have to say there is absolutely nothing in your post that I can disagree with.
Happy New Year :(
aimai
John, John, Twas ever thus. Wall street was composed of a small clique of white shoe/protestant guys for-evah until the jews broke into the top ranks. Who you were related to, who you knew, what your name was, where you went to school–these were *always* the qualifications for the key to the executive washroom and the rewards of unearned increment. Wall street never “efficiently allocated” nuthin’, unless you mean money from workers to elites and then ’round and ’round at the top level.
aimai
BKL
There you go making sense again John.
Davis X. Machina
I’m no more surprised, or outraged, by Chelsea Clinton’s marriage than I am by Mia Hamm’s.
That’s the world they live in — who else are they going to meet?
Screwball comedies don’t happen in real life.
Maude
What if I change my name? Will that help?
The reasons for the burst bubble were complex. The righties can’t get their teeny, tiny, little heads around it.
rob!
Its funny how a PRESIDENT’S DAUGHTER can marry the son of a guy who went to jail!
If Marc Mezvinksy’s Dad had gone to jail robbing a liquor store, that’d be the end of the relationship. But going to jail over some crooked banking? Hey, no big deal…
bago
The sins of the father.
PeakVT
Wall street never “efficiently allocated” nuthin’,
It wasn’t so bad from about 1935 to 1975. The Street only started to suck when it figured out lobbying had a better return on investment than actual investment. And that’s why it will continue to suck.
scav
@rob!: Not only are there the “right kind of schools”, there are the “right kind of jails”.
slightly OT but thematic: “and they all moved away from me on the bench there..”
Brien Jackson
I’ve never seen much of an argument that “easy credit,” which I take to mean too low interest rates, was actually much of an issue, but other than that, yeah, there’s a lot of reasons things went belly up.
As far as regulating goes, Republicans and Blue Dogs are going to block anything more or less meaningful. The House watered down Geithner’s proposal for fuck’s sake. So I don’t know where you go from there.
brantl
Because the majority of americans have become too stupid to understand more than one simple concept at a time.
Jack Roy
Ugh. I know I’m not going to be viewed sympathetically for saying either of these here, but I think Bernanke deserves a small defense here, and I would hesitate to read too much into Mezvinsky working at Goldman. First, I haven’t read the whole transcript of Bernanke’s testimony, but from the little bit quoted here, it doesn’t appear he’s being paraphrased fairly by the reporter. (I always find it difficult to find unedited transcripts of these things; it’s weird, and frustrating.) It seems Bernanke said lack of regulation was a comparatively greater force than low interest rates (he’s got a point), and the Times’ Rampbell took that to mean lack of oversight, to the exclusion of low interest rates, was the problem. My spidey-sense tells me this is shoddy journalism more than shoddy central-bankering.
Also, Mezvinksy works at GS. When I lived in New York, everyone I knew worked at GS, or else wanted to. It has the whiff of favoritism or the Matt Taibbi thesis, but there’s an Occam-preferable explanation out there, too, in that GS pays really well and employs a lot of people and a ton of people are always hungry for one of those jobs. So I would just caution against jumping to such a conclusion too quickly.
joe from Lowell
Bernanke is just blame-shifting. The central banker assures us that it wasn’t the central bank that did cause the mess.
He happens to be right here, but don’t read this as Helicopter Ben calling for stronger regulation.
Patrick
It is a Christian thing. Heaven/Hell, Orthodoxy/Heresy, blah blah. Probably why the gay thing annoys them so much, because it throws off the basic dualism of Man/Woman. The fact we even have a word in the language, “dualism”, to explain it shows how pervasive it is.
Nobody was more dualistic than Bush, and the media and political culture has been catching up for 15 years.
El Tiburon
So can the Hamshers, et al pitch a fit if the Democrats continue to screw this up?
Or do we have to STFU on this as well?
I mean, when can we push and when should we sit on our hands?
Brien Jackson
Who are “the Democrats” and what should they do differently?
Mike in NC
Hey, it’s a new year and the overlords will soon be treating the Great Unwashed to new episodes of “American Idol” and other dreck to keep everybody distracted.
John S.
Never sit on your hands! Always reach for the stars, but don’t despair when you only grasp the moon.
slag
What do you have against meritocracy, Cole?
Soshulist!
General Winfield Stuck
@John S.: nicely done.
vernonlee
How the hell is someone with a criminal record at all, let alone a stint in federal prison, working anywhere even marginally respectable? Ugh!
scav
@vernonlee: A) see earlier comment about the right prisons; B) why are you assuming that GS is respectable?
ThatLeftTurnInABQ
@PeakVT:
The other problem is that we are way too top-heavy in our distribution of income and wealth. Too many dollars are held by the folks at the top looking to invest it (even with superhuman levels of diligent effort you can only spend so much on hookers & blow, and anything left after the first 100 million or so ends up finding its way to Wall St.), and there are only so many good low-risk investment opportunties. A bipolar market and the depressions/panics that go with it is the inevitable result of too much money at the top. What stabilized the post Great Depression economy of the mid 20th Cen was high marginal tax rates and a modestly sized investment class not holding too much of the national wealth.
catclub
As Dean Baker says over at beat the press,
it was bad regulation BY THE FED, which was run by Bernanke. Along with low interest rates as a kicker.
The real point is Bernanke is indicting himself and no one is noticing.
Cat
Because people of average intelligence cant understand a system as complex as even a tiny slice of our economy.
You tell them one thing caused a domino effect and they can wrap their heads around it, but if you try to tell them about the complex interaction of 7 different things that exploited an administration who had been captured by Wall Street they get confused because its to many things to understand interacting with each other with out a knack for understanding complex systems.
Oh, and the commercial break is coming up and we have to get some sound bytes from our guests, also.
Cat
@aimai:
This.
Some of my best friends are WASPs, but damn they refuse to understand the system was have now is the system we’ve always had with the WASPs at top with a few token others.
ThatLeftTurnInABQ
@joe from Lowell:
Shorter Ben B.:
Why I never..! There outta be a law..! That roomful of gasoline I created was no problem until you stupid fools started to play around with matches!
Roger Moore
@Brien Jackson:
You’ve got it wrong. Easy credit isn’t about interest rates, it’s about lending standards. Obviously those poor lending standards were a key part, and probably they key part, of the debt crisis. It people hadn’t been lending money to borrowers who hadn’t a prayer of paying it back, there wouldn’t have been a crisis.
Grow a Pair
I’m all in favor of Democrats (while they still HAVE a majority)
emulating the behavior of Rethuglicans in congress since ’94. Unfortunately quotes from Will Rogers about the party are as valid today as they were in the day he made them.
Democrats never agree on anything, that’s why they’re Democrats. If they agreed with each other, they would be Republicans.
You’ve got to be (an) optimist to be a Democrat, and you’ve got to be a humorist to stay one.
I am not a member of any organized party — I am a Democrat.
We can make this thing into a Party, instead of a Memory.
This country has come to feel the same when Congress is in session as when the baby gets hold of a hammer.
We are the first nation to starve to death in a storehouse that’s overfilled with everything we want.
Rick Taylor
Via Atrios this Bloomberg article
__
__
So if these things tank, we have to bail them out again?
IndieTarheel
@catclub: The Corporate Media would have left it there.
__
Had they actually gotten there.
b-psycho
It depends on your definition of “capitalism”…
Our economic system is great at moving around money, provided it goes generally upward. Problem is, no one in their right mind knowingly supports that (even the ones with ill-achieved wealth have to wonder about what happens when the rabble finally have had enough).
Ruckus
@vernonlee:
If you hadn’t said reasonably respectable and been talking about Goldman Sucks…
Chuck Butcher
We keep using a tax code that sets rates, stupidly enough, on something other than a multiple factor of median wage. This means that things like the AMT wind up landing on people it wasn’t intended to and rates becoming regressive. The point of the “sky high” top rates wasn’t so much to raise revenue as it was to take away the temptation to grab those last millions and limit the upward migration of wealth. But that’s not “fair.” It was so full of holes that the AMT was passed, we’re fucking idiots.
steve
Well, low interest rates would have caused a small bubble if there were no other factors, but I believe the combination of these other factors (crazy mortgage products, fraud, no regulation, lax lending standards) were really the big ones that caused the run up and kept it going for so long. If everyone had been forced to have a proper background check and been limited to a fixed rate mortgage instead of crazy Option-ARMs and Alt-As you would not have seen McDonald’s employees buying half million dollar homes for $800 per month teaser rates and defaulting when their mortgage went up to $4000 in year 3.
SGEW
Taibbi’s latest:
Kind of irrebuttable.
chris
I miss George Carlin.
(Thanks for the reminder to a commenter at The Big Picture)
Corner Stone
@El Tiburon: Don’t trouble yourself. You will be told when you can own and/or voice a legit complaint.
Wait for it…waaaiiitt for iiitttt…any day now…
Bob In Pacifica
Chelsea’s announcement should be the final tell to Dems about the Clinton family. Bill and Hillary have spent their lives working in the vineyards of the power brokers in American politics. In return Bill helped to screw American workers in the name of free trade (read: profits). Hillary was his trusted sidekick.
They’ve all got their payoffs, including Chelsea. Hurrah!
BrianM
Levi-Strauss and a bunch of French dudes posited that humans just naturally think in terms of binary oppositions. I think they’re onto something.
Jenn
@vernonlee:
If I understand the above post correctly, the young man working at Goldman Sachs is the *son* of someone with a criminal record. Are we literally going to punish the son for the sins of the father here?
And are we really trying to dictate who on earth Chelsea Clinton falls in love with, for god’s sake?! Fall in love with someone we deem appropriate, or else we’ll accuse you of marrying in order to
Yeesh. I’m all for more and sensible regulation, but I’d be happier to leave people’s love lives out of the argument. We love who we love.
Steve
I’d add to the foregoing that Chelsea Clinton, whose father’s family background is about as humble as presidential candidates come, isn’t a great example of the kind of oligarch privilege you’re presumably trying to describe. I also remember reading back in the day, and not only in puff pieces designed to flatter, that she’s exceptionally bright. Young couples frequently meet as a result of their respective parents being friends or business associates. Unless you’re just looking for some gratuitous Clinton bashing via guilt by association I don’t see the point in bringing this up.