greed, ignorance, indifference, and failure

[WhiskeyGirl]

Maybe Congress can insert a provision that broadly insists on the principle of oversight and leaves the particulars to be worked out later. But it would be unconscionable for Congress to absolve a bunch of wealthy financiers of the consequences of their bad decisions and not do the same for homeowners who showed similarly poor judgment. Paulson has indicated his awareness that this is, indeed, an election year -- and that members of Congress are not eager to go home to their districts and explain why Wall Street's pooh-bahs get to keep their mansions and their yachts while working-class families lose their modest homes.

The more contentious issue is the idea, supported thus far mostly by Democrats on Capitol Hill, that there should be salary caps for executives of companies that take advantage of the government bailout. Paulson complains that this will provide a disincentive for companies to participate in the program -- whatever the program turns out to be -- but it seems to me to be a reasonable idea, and a winner politically.

Why shouldn't the executives who put their companies at risk by making unwise investments pay a price for their lack of prudence?

We can't just let the system collapse -- nobody wins in that event. But I thought one of the fundamental tenets of capitalism was a direct relationship between risk and reward. The Masters of the Universe who created this mess ought to share the pain of cleaning it up.

eugenerobinson@washpost.com

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/22/AR2008092202582.html?nav=emailpage

In the recent tragedy in China, the baby milk scandal, I recall that one 'leader' has resigned.  Perhaps out of shame?

Is anyone at these companies ashamed of what they have done? 

Was anyone ashamed at Enron, the dot.com's, etc.?  How many Americans risked their 401Ks and lost of these investments that seemed to good to be true to many investors?  I think a lot of American's learned their lesson with the Enron era.

How many American's stand to lose money in their 401K with the recent mess?  Did they learn any lessons over the past twenty to thirty years?

Is there any golden egg that is just to good to be true?  Or, should the government continue to ensure that corporate America gets paid for their greed, ignorance, indifference, and failure? 

I think any investigation will show that these executives claim to know nothing about why their companies failed...they were ignorant. 

Sarbanes-Oxley doesn't seem to fix everything.  What chance does conservative common sense have against greed?  I think the new international account rules replacing the existing framework of rules, will give birth to the next scandal/financial mess.  No rules, just many theories and suggestions.  No accountability.

I also have to wonder how many of these mortgages in default were scams.  Mortgages taken out by people (scam artists) who collected the money and abandoned the property.  How many by homeless people? 

just my humble opinions

[WhiskeyGirl]

A political ‘solution’

By Thomas Sowell

Who was it who said, "crack-brained meddling by the authorities" can "aggravate an existing crisis"? Ronald Reagan? Milton Friedman? Adam Smith? Not even close. It was Karl Marx. Unlike most leftists today, Marx studied economics.

Is the current financial crisis going to lead to crack-brained meddling or to some rational actions? Predicting what politicians are going to do is risky business. We will have to wait and see.

Saints are no more common on Capitol Hill than they are on Wall Street. We can only hope that the political "solution" does not turn out to be worse than the problem.

There are times when government intervention can make things better. But that is no guarantee that it won't make things worse. As they say, "the devil is in the details"— and we don't know the details yet.

I think terrorists study economics as well as Karl Marx.

Ninety percent of the people on this planet would exchange their economic situation for ours in a minute.

Why then is there such a mess in the financial markets? Much of that mess is due to the very people we are now turning to for solutions— members of Congress.

Such institutions— exempt from laws that apply to other financial institutions and backed by the implicit promise of government support with the taxpayers' money— are an open invitation to risky behavior. When these risks blew up in their faces, Fannie Mae and Freddie Mac were taken over by the government, costing the taxpayers billions of dollars.

For years the Wall Street Journal has been warning that Fannie Mae and Freddie Mac were taking reckless chances but liberal Democrats especially have pooh-poohed the dangers.

Back in 2002, the Wall Street Journal said: "The time for the political system to focus on Fannie and Fred isn't when we have a housing crisis; by then it will be too late." The hybrid public-and-private nature of these financial giants amounts to "privatizing profit and socializing risk," since taxpayers get stuck with the tab when high-risk finances don't work out.

Similar concerns were expressed in 2003 by N. Gregory Mankiw, then Chairman of the Council of Economic Advisers to President Bush. But liberal Democratic Congressman Barney Frank criticized Professor Mankiw, citing "concern for housing" as his reason for supporting Fannie Mae. Barney Frank said that fears about the riskiness of Fannie Mae were "overblown."

Maxine Waters and other members of the Congressional Black Caucus have also been among the liberal Democrats defending Fannie Mae. Just last year, Senator Charles Schumer advocated legislation to allow Fannie Mae and Freddie Mac to increase their already huge role in the mortgage market. Republican Congressman Mike Oxley has also defended these hybrid financial giants.

This is certainly part of "the mess in Washington" that Barack Obama talks about. But don't expect him to clean it up. Franklin Raines, who made mega-millions for himself while mismanaging Fannie Mae into a financial disaster, is one of Obama's advisers.

http://www.jewishworldreview.com/cols/sowell1.asp

I've read about the national debt and the drag it causes the economy.  When the economy is burdened by debt, it means fewer jobs.  The economy was in trouble before Fannie/Freddie and the investment banks.  I believe that tax cuts during the Bush administration, the 'stimulus' package, and continued spending added to the debt burden. 

I haven't seen either candidate address how the national debt would be paid down.

I still see new spending programs and blank checks being promoted by politicians. 

How are you going to pay for all those new spending programs?

How are you going to pay for this new debt? 

Are you expecting the executives of these companies to dig deep into their pockets and put money into the companies they run?  Perhaps, they can finance this cash infusion with a government backed loan, so that their personal finances are not at risk?

There are a lot of people that don't talk about the $75,000 they lost in their 401K or retirement plan.  They didn't have $75,000 to lose.

I would conclude that there is no free market.  When is the market fair?  Where do moral and ethical values fit in?

[WhiskeyGirl]

I remember the good old days when credit card companies turned people down.  Today, they send out many pre-approved card offers.  Sometimes half a dozen or more a week. 

If you have a credit card, they probably send out a weekly sheet of checks to help you manage your finances and enable the consumer to use their credit wisely.  I remember in the past, many years ago, credit card checks were a novel idea.  They sent them out around the holidays.  Not no more.

It used to be a tough thing for young folks to qualify for a Sears card.  Those days are gone.

I remember when realtors helped people with guidelines regarding the amount of money they could afford.  Banks expected to be paid back and mortgage lenders told you that and turned people down.  Sometimes, they said you couldn't afford the houses you were looking at.

Over the past decade, I've known people who got loans with payments that were more than the money left over each month after automatic withdrawals from their checking accounts.

It is a simple thing, but apparently not simple enough for all concerned.  The money goes in, the child support and car payment are taken out automatically.  Boom.  The mortgage payment comes for the first time and it's more than is left over.  No money for food, utilities, and every day cost of living.  Did anyone in this group look to what the person could afford?  In my mind this is a simple math problem.

I have to wonder how many people were put in this position.  Never  had the opportunity to make the first mortgage payment - not enough money left after deductions.

Where did the good old days go?