We have everyone all fired up now. Some financial giants have been struck down while others have been offered a helping hand. And just like the Oil Crisis, too many people act surprised this is happening. I'm just a dumass and I saw trouble and inconsistencies in our financial world back many years with the junk bond debacle and the S&L stupidity. There is something fundamentally wrong with a system that has allowed greedy people to topple it so easily and send the rest of us into a panic.
All this is happening way above my pay grade and brain grade. People supposedly smarter than I have allowed this stupidity to unfold. And now they ask for help. As much as I would like to tell them to pound sand, we have to step in to some degree to try and keep this from snow balling into something worse than it already is. AIG allowed to go belly up would have possibly made the situation worse. The fact that the "bail out" is a loan and not a giveaway indicates that no money will come out of my pocket in the long run. The pay back history of these type loans is good.
What I do not want to see happen as a result of this is knee jerk responses from our law makers. Stop gap measures maybe, but no changes should be made in the regulatory system without considering an overhaul of the whole system.
I read an interesting opinion from one Tyler Cowen. A kind of libertarian but not really, he contends that what we have now is not because of not enough regulation nor because of too much regulation, but more of a matter of not the right kind of regulation. He feels that over the years financial institutions have been regulated by a hodge podge group of rules coming from a hodge podge group of regulatory agencies. He goes on to say that some of the blame can be laid to the very regulations we have right now.
And then I read a comment by El Cerdo Ignatius while he visited another blog. It is very apparent this man has a better handle on all this than I do. So instead of reworking his words of how we could have avoided our recent stupidity, I will poach them and post them here -
"1) Loose or missing regulations in the financial industry. A few rules about how high a loan-to-value ratio can be when writing mortgages, related limits on mortgage insurance from Freddie and Fannie, and a prohibition on the resale of uninsured or sub prime loans to third parties (like AIG, Lehman Bros., etc.) would have avoided this entire bloody mess.
2) A culture that values consumption above all else. When the hell did it become the overriding goal to buy as much as possible, carry as much debt as you can handle, and forget about the goal of owning your home free and clear?"
I can't see anything wrong here. He places the blame where it belongs. In my lap. In your lap. In our lap. That these regulations were not in place makes his comments hindsight. But important hindsight for the future. Until we change our habits, we can expect no different from those who lead us or handle our money.
But what about the politics of all this? Seems to me both parties have much blame to eat here. Rather than focus on a financial system everyone knew had huge loopholes and dark pits in the future, these two sit on each side of the aisle tossing spitballs at each other these last 25 years. But that is what they do best. Sit on their hands until situations get to the point they have to do something. And as is most often the case, they over react and come up with badly designed solutions. And those decisions often favor a specific platform over the general welfare of the nation.
And to those who would continue to place all the blame in one party's lap or the other, get a fucking clue. It took all of us to reach this point. It will take all of us to truly correct it. Or you can continue to blame the "Obama-ites (aka the leftist liberal Democrats)" or the McCainicans and watch as more ineffectual and partisan leaning regulations come down. You can continue wasting more time venting your spleen in the direction of the guys on the other side. And in the meantime, our leaders will do the same as they figure out what to do that will position themselves the best for that next election.