In this January 2008 article for Alternet Larry Bienhart, the author of Wag the Dog and Fog Facts: Searching for Truth in the Land of Spin, did an uncanningly good job at detailing all of the economics policies leading to the inevitavible bank failures that occured over the last couple of weeks. I’ve always liked Bienhart’s writing and often hoped that one day my own prose would reach a fraction of his ability and style. As far as I’m concerned Larry out performed himself with this article. It narrows down, in specific detail, the failures of administrative policy that brought us to the downward spiral of the financial services industry.
To fully understand the article it’s nice to have some knowledge of the 1999 deregulation of the financial services sector that allowed commercial banks to start competing with investment banks. Once this concept of deregulation is understood Bienhart’s article is easy to digest as an account of facts more than angry rhetoric. Furthermore it clearly spells out the reasons we should be weary of McCain’s economic platform and why more tax breaks for wealthy corporations would be the most damaging path of policy any administration could pursuit. Larry summed it up best in my favorite excerpt from the article:
“The administration largely believes in supply-side economics (otherwise known as “trickle down,” or “piss on the people.”); if you increase the supply of something, consumers will appear to buy it.
The actual results are a perverse triumph of the idea.
The supply of money was increased. The price of money was kept artificially low.
Think of borrowing as buying money. It is.
People (and businesses and corporations) did rush forward to buy it. Once they had it, what was there to do with it? There was no new trend, no dot.coms, no high techs, no bio techs, no nothing.
So they went out and sold money. That is, they made loans.
There are two big retail loan areas, credit cards and housing loans. Both were pushed very aggressively. With cheap, cheap money available to finance home buying, that market heated up. At the same time, commercial interests started aggressively buying up loans, packaging them together, and reselling them as financial instruments. That created more desire to make more loans (sell money). Financial institutions bought more money (borrowed), in order to sell it at a profit (make loans). Since the loans were quickly resold — and profit taken off the top — the quality of the loans didn’t matter to the people who made them. The housing market — or rather the loans that fueled it — grew into a bubble.
The subprime crisis, the housing bubble, whatever you want to call it, is not the problem.
It’s a symptom of pumping in money with no place to go.”
While Bush may not have been responsible for the initial deregulation this article is testament to the fact that we cannot continue to support the supply side or “give to the rich” economic policies of the Republicans which McCain endorsed at inception and continues to endorse to this day.
If we’re lucky McCain will just let the Caribou Bimbo speak in public a few more times. It’s comical but at the same time demoralizing because this mindless airhead actually has a following. One that is more about ideology than genuine understanding of complex economic and policy issues. As long as she continues to proclaim that gay people can’t get married and that we ought to ban abortion those focused on these narrow issues (the ones they understand) will go out and vote for her, not McCain. I live in NC and I can assure you most Republicans are still undecided about McCain. He forgot to bring his bible.
Okay, here’s one I’m going to have to give you an “atta boy”. While the concept of giving tax breaks to large corporations sounds good on paper, it just doesn’t work. Once the greed factor kicks in, the rest of us are left standing here saying what the hell happened? They aren’t generating new jobs, they aren’t using the extra income generated from these tax breaks to invest in new technology, they are just keeping it for their own greedy little hands. I still can’t believe that we don’t allow people to drive without taking a test, but we let them vote when they don’t even know who is running…let alone what they stand for. Preacher tells them who to vote for and off they go, like robots.
So, while I don’t always agree with you, Todd, I really do enjoy going to your website and hearing what you have to say.