On Wall Street

In today’s NYTimes, Ben Stein goes on a wonderful rampage against Paulson and Bernanke, whom he holds responsible for the “rapidly disintegrating United States of America.”

In what is surely no co-incidence, AMC has been screening Wall Street all week. Here’s the notorious greed-is-good speech, for those of you who don’t have it memorized:

http://www.youtube.com/watch?v=JaKkuJVy2YA




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On Wall Street

  1. Rule # 1 of Keeping One’s Credibility on Matters Pertaining to Economics:

    Never, ever take seriously anything that Ben Stein says.

  2. When you entertain whores, be prepared to deal with your offspring:

    “Who is the wise man? He who sees what’s going to be born.”
    –Solomon

  3. Oh, and I want to repeat this over and over to those who would want to elect John McCain and Stephen Harper…

    “Who is the wise man? He who sees what’s going to be born.”

  4. Well said Stein. Some righteous fury is exactly what we need more of. What’s happening in the U.S. is what normally happens here, a few people get together – make decisions – and than tell the rest of us what’s to be done, but this is entirely odd in the American context.

    I still can’t quite believe that Congress is going along with this without hearing from other economists about different options that are available. Right now, it’s bankers helping out bankers with other people’s money.

    And why wasn’t there more of a fuss made when Paulson wanted to make this deal above the rule of law. The Dems seem fine with that but thankfully some House repubs are fighting back and yelling ‘Stop’.

    Greed is neither good or bad, it just depends on how its directed.

  5. In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

    The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

    Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

    In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.

    ”Fannie Mae has expanded home ownership for millions of families in the 1990′s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”

    In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980′s.

    The above was from a NY Times article in September 1999.

    Will Clinton ever wear a speck of blame for the current woes in the financial markets? Probably not, as long as everyone’s favourite whipping boy is still around…

  6. Sorry, emphasis added in the above quoted passage was mine.

  7. Fair enough, john g., but for goodness aake, isn’t there a statute of limitations on blaming the last guy?

  8. Sean S,

    Sure there is, but it depends entirely on the issue. The longer-reaching the implications of a policy are, the longer the statute of limitations should be when evaluating it. Fair?

    America has been in an economic boom since 2002. These mortgages were structured such that they were a time bomb that were set to detonate years in the future after they were consummated. They were clearly aware that an economic downturn could well require a government-funded rescue package.

  9. “They were clearly aware that an economic downturn could well require a government-funded rescue package.”

    As were the Republicans. Bush gained plenty of political capital through citing and encouraging increased levels of home ownership over the last eight years.

    But at the core of it all, I think the American public are amazingly unreflective and unable to take personal responsibility with regard to their assumption of personal debt. (Mortgage interest as a tax deduction doesn’t help!).

    At some point, individuals do need to start taking responsibility for their own finances (It drives me nuts when Layton prattles on about ATM fees, for the same reason.) If I were to indulge in the full extent of credit my bank has offered me through lines of credit, credit cards, and leveraging my house, I’d be bankrupt within a few years.

    Comparisons between 1929 and today miss one important thing: the general public genuinely suffered hardship in 1929. The current bailout seems designed to avoid the consequences of recent economic practices on the part of individuals – at least for this generation.

  10. Sean S I agree fully with your statements.

    My point is that I can almost guarantee that the capital market collapse will be another albatross hung on Bush’s legacy. And that is fair, he’s been there for 8 years.

    But I doubt there will ever be a single media mention of Clinton’s role in getting the ball rolling on this disaster.

    Especially in an election year when there is a media narrative that the Democrats in general (and Clinton in particular) have been the more able fiscal policy managers.

  11. Clinton does share some of the blame but there is plenty to go around. I am amazed that Greenspan and his time at Fed Reserve are not being scrutinized more.

    In 1996, Greenspan said “Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets.

    We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past.

    But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?”

    From 1997 onward, he forgot his ’96 speech and did as much any to enable what we are seeing now. Greenspan set fed fund rates at 1% and he didn’t use his ‘supervisory and regulatory authority over a wide range of financial institutions and activities’.

  12. But, jwl, Greenspan is famously an Ayn Rand acolyte.

    And, john g, not to worry. The cable news guys are dragging Clinton into the gabble early and often.

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