Financial crisis: What you see depends on where you stand

September 19, 2008

lehman.jpgDepending on where you stand, the financial crisis has been catastrophic or brought a much needed shake out in the financial sector; it has been disastrous for home owners or proved the folly of lending to people with poor credit histories; it has rightly rolled back the clock on naked capitalism or undermined a system that, in essence, functions perfectly well; it has punished bankers’ hubris or thrown many talented individuals out of work.

What you see depends on where you stand.

According to Italy’s economy minister,  Giulio Tremonti, the current economic crisis was the inevitable consequence of policies championed by former Federal Reserve chief Alan Greenspan.

“The mastery turned out to be madness. Alan Greenspan was considered a master. Now it should be asked whether, after Bin Laden, is it not he who has done the most harm to America?”, Tremonti was quoted as saying in an interview with Corriere della Sera newspaper this week.

In an interview with the Wall Street Journal in April, Greenspan hit back at his detractors. “I was praised for things I didn’t do,” he said. “I am now being blamed for things that I didn’t do.”

The debate over what happened and why, who is to blame and where we go from here has sent bloggers and columnists into overdrive. Here are links to some on the UK economy, the Paulson doctrine and AIG and Lehman. There is an argument that the United States’ response to the crisis is evidence of its waning financial power.

Who has got it right?
 

38 comments

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The fed is welfare for the rich and always has been. They bail out the rich, oil goes up and here I am worrying about heating my house. Wonderful system. It’s class warfare and guess who’s winning. Why doesn’t anyone talk about the various syndicate boys who are really running things?

I have been saying since 1998 the US Constitution will be dead by 2050. The actions of the Fed, unregulated by lawmakes, at massive cost to tax payers in the form of additional taxes and inflation to our currency will lead to the destruction of the middle class and loss of personal property rights. This is beyond socialism, it smacks of communism. To bail out the Wall Street risk takers is like paying someone who stole from you to stop stealing. Except those paying the bill had no say in the process.

Posted by T. Nitrified | Report as abusive

I believe the problem to be the fault of both Democrats and Republicans. I do not think we are in an economic position as a government or a people to borrow more money from another country or the American people to bail out these banks. We all take risks and their risks have stacked against them. Now who is going to bail out the future American generations. Their debt is soaring. Is the Government going to bail out the people next? I think Democrats and Republicans need to wake up and stop putting bandaides on America.

Posted by Raymond | Report as abusive

The ‘where you stand’ issue is about how one might rationalize or justify the central banks’ decision. It is not about what you think the consequences are likely to be. Governments traditionally tax citizens and corporations to generate funds for socially significant activities that the normal processes of commerce will not support – free healthcare, education, defense and so forth. The bailout is effectively reverse-taxation, giving funds to those whose activities should normally provide them. Regrettably these funds are being provided to the anti-social activities that piled up the huge mountain of debt that these funds have now nationalized. The winners, of course, are those executives who have pulled this once-in-a-generation trick of privatizing massive amounts of the public’s property and product of the public’s efforts. In any just political environment these people would be regarded as criminal, anti-social elements. Perhaps the most interesting thing here, aside from the massive reversal of national fortune and the relative decline of the global standing of those countries, notably the US, that allowed these people to do this, is the way Russia is dealing with these failures of capitalism. We may be seeing the future – but will it work?

Given that there’ll no doubt be excessive bonuses at the end of the year for all the banks that survive, I’d be happier if the intervention included some sort of windfall tax on Wall Street bonuses to pay back to the mere-mortal tax payer who is bailing out the parasitic profiting paper pushers.

Posted by Nic Fulton | Report as abusive

Who’s to blame? Both parties. The ideology behind deregulation belongs to both parties–Clinton signed the biggest deregulation bill in history. These irresponsible and unaccountable politicians and corporate heads should all be prosecuted! They won’t spare a dime for healthcare or worker’s minimum wage, but are just fine with massive bailouts for the rich! I am disgusted with both parties.

Posted by Donna | Report as abusive

No way! Why don’t Gov tell Greenspan to pay for his mistake?

Posted by bigdog | Report as abusive

So we are moving from a capitalist society to a capitalist-when-times-are-god but socalized-risk-when-bad society. This is the second time in recent history that the US public has bailed out criminal and near-criminal activity in the financial markets. Each time with the Republicans in office.

Posted by John in Indiana | Report as abusive

Great Reuters finally catching up, Finance news happens every other seconds. With instant news and Blog Reuters finally join the interaction world

Posted by bigdog | Report as abusive

Great! Now we are ONE TRILLION short. What else can Wall Street bring to us?
It will happen no matter what Gov. do! If not fast down it will sloooooooowly boil this frog!

Posted by bigdog | Report as abusive

Nice to see the Republicans publicly betray every free market principle they supposedly stand for. Even better to see them in practice doing exactly what they always deny,that is, shoveling buckets of money at the rich and their businesses/banks. Do you think there will be any rescue for the struggling small business owner? No but there will be for GM, probably the airlines and who knows what other badly run but rich and powerful businesses. Finally, you the taxpayer will be the ultimate bag holder. Where will this money come from? There are only two possibilities. Your taxes go way up or they run the presses overtime and inflate the entire problem like Zimbabwe.

Posted by Paul See | Report as abusive

Socialized medicine = BAD
Socialized banking = GOOD
(Personally, I don’t get it~!)

Posted by Jarrett Smith | Report as abusive

The problem is that free enterprise is just that. And you must be free to fail. It isn’t just the outrageous greed…which there is. It isn’t the come-uppence of those who lived higher lives than those who are now forced to bail them out…which is happening.
ALL OR NOTHING in this case…unless there is a way to hold the institutions FINACIALLY responsible to the average taxpayer…
LET THEM FAIL!

Posted by Sarah | Report as abusive

I want to be tossing nickels into the tin the cups of the former executives of these failed financial institutions.

My question to Paulson is: Housing still 1/3 overpriced(Average house price is 4.5 times of household earning compare to historical 3 times household earning as of Sept. 08). Who will pay for the losses if average house price lose another 1/3 of it’s value? Both at 1929 and 1980 Gov. only brought all the bad debts after but not in the middle of the down term! So this action can only help the market in short not a long term solution. At the end, We the people will be leaving with no job, no money, no house, no health insurance!

Posted by bigdog | Report as abusive

For most of this decade a gang of Jesse Jameses ran openly amok on Wall Street, violating the sacred honor and trust so necessary in banking operations. These transgressions were well known and most likely encouraged by Paulson and his ilk as they reaped obscene bonuses for their deficient character. To dump their detritius on the citizenry compounds their crimes by degrees.

Face it, had Reagan not been in such a big hurry to destroy the banking laws of 1933-34 which were there to prevent this kind of malfeasance we wouldn’t be a financial pariah.

Posted by Bill | Report as abusive

I say NO to any federal bailout….Let the chips fall where they must…This shakedown is long overdue…Let the ignorant perish…

Posted by Lucian McLeod | Report as abusive

You have to be kidding me. I am so tired of Americans being so lame as to think the government has to bail them out of everything. It is a major problem with most American’s and I am sick of it. Responsibility is a personal trait, not something to be shrugged off onto a failing government. Wake up America. Take responsibility.

I live just outside dc and I can smell the smoke from the money printing machines working overtime. Keep printing it and it will be worth NOTHING you idiots.

No one is “removing” bad debt from the system: taxpayers are paying debts that weren’t paid off, so that the corporations and individuals who profited from making bad deals can profit some more. We are paying so that our largest financial organizations can continue to live beyond their means. Our congress should insist that not a dime be appropriated for this scheme of socializing a financial mess until we have universal, single-payer health care and a policy of investing in our energy and transportation infrastructure — which would stabilize our economy, enable consumers to send again, and would help us in the long term.

Posted by Joel Davis | Report as abusive

True, but we’re all stakeholders in this system and on balance all better off in the long term w/ this recent market reconciliation.

Posted by Bryan Petersen | Report as abusive

Please, this has to be the most insidious moment in politics, you need to report or ask better questions. Wall Street is being bailed out by Washington, so LAS VEGAS, NV realtors and investors are not hurt by their actions/risks, what?!? And the tax payer gets the bill. What stays in VEGAS doesn’t or didn’t after this FED WEEKEND, it smells bad and it needs to be reported. Are we seriously wrapping this up as a contention for business and conditions to improve our economy?

Research the prices of Las Vegas and other parts of this country under real property, tell me we are not only bailing out local politics, politicians, investors, and their financial institutions. Holding up their inflated lifestyles with tax dollars? Please.

I believe you have been smoothed-over on this subject. So the property-taxes will be paid by the Government bailout to escrow the loans paid by the Government bailout, who is printing this money : ) I believe it is time for the wall street segments to drop their lifestyles down a world notch to that of at least Africa standards until they rethink their business plan.

Posted by Stewart Gwyn | Report as abusive

Let me make sure I understand current events. The doubling and tripling of home values, easy credit and bad mortgages, which has repeatedly been blamed for the credit crunch, is now my responsibility to make good on. I run a small business which has had layoffs and severe cutbacks to keep business going. My customers are also suffering and on average have laid off ½ their employees due to current economic woes. So, even though I didn’t jump on the high stakes band wagon; I’m responsible for the decision makers who live in their mansions in Greenwich, Connecticut and elsewhere? Is this correct?

Posted by Ron | Report as abusive

So now the Republicans clamor for government regulation, government intervention, now after years of supply side flim flam shoving billions of dollars into the pockets of the wealthy on the hopes they would have pity on the American worker, forgo their predatory worldwide profit hunt and create some jobs here in the U.S. Well they haven’t seen fit to do that but supply side theory makes no demand on them (Let the markets decide!)only on the taxpayers, the working stiff. So now we see the real truth of privatizing profits and socializing risks. Ante up, taxpayers, don’t want any of those Wall Street CEO’s to miss their million dollar paydays.

Posted by Bob Malone | Report as abusive

The bankers want to skate and load my grandkids with their debts. We know the game. The “Fed” will pump billions of bucks into the system and collapse the dollar -we know that too. Let things collapse now. It’ll only get more painful if we wait.

Posted by Grandpa | Report as abusive

Let the markets collapse. Don’t load my grandkids with these bogus debts.

Posted by Grandpa | Report as abusive

Let the markets collapse.

Posted by Grandpa | Report as abusive

let the markets collapse. Why should we the people pay the banker’s bills ?

Posted by Grandpa | Report as abusive

Let the banks collapse.

Posted by Grandpa | Report as abusive

let the banks collapse

Posted by Grandpa | Report as abusive

the economy will be better off bailing the failing company devoured by their greed after they have abandoned and released all their assets to shore up the company that they built safeguarded by the government. The people of this great nation excluding the rich and powerful will again bail out this great nation the the social class will spread even further as we put these debt to our children. The executives, rich, and the government have seen this coming since the war bill was passed putting in $450 billion to the war and it has been 6 years from the start of the war totaling $2.7 Trillion spent on war. The war is a major factor deregulating the credit worthiness of banks to shore financial fortitude to support the war. During this election, taxpayers are again put on the pedestal as the saving grace of this country as our financial institution rise and spin to profit from this sweeping decision to rescue them after they have pocketed the profits. The vicious cycle to end the war and have no place to put the $450 Billion was carefully planned to use to give it to the rich.

If this doesn’t get the average working American (whose earnings are plundered to save the rich brads) into the street demonstrating, well, then nothing ever will – and in that case they SHOULD fork over their savings to the rich and incompetent.

Posted by Alex | Report as abusive

check Halliburton stocks.

This general bail out as every other bailouts before this will just postpone the problem with one month or two maximum, but this will depend on the consumption rate by big financial markets or the demand.
Every time we injects easy money they just go as easy as they were produced and create even a bigger and scary crisis to come.

S.O.S we are going down..

Posted by doni | Report as abusive

I guess if your standing at a cookout in the backyard of the Rothchilds it doesn’t seem too bad. Love the headline.

Posted by jason | Report as abusive

The dollar is devaluing everyday that another is printed. The government needs reform of the banking system. Face it, The average family doesn’t make enough money to pay monthly bills, they used their credit cards to get through, then they used home equity loans to pay their credit cards, now they are declaring bankruptcy. Isn’t it obvious?? The high interest rates of credit are demolishing the lives of citizens and families, our children and their values and hopes for life. Stop the maddness: We need back Usury laws and banking regulation, Fair and definitely Higher wages for citizens, Universal health care, and companies and jobs come back to America or face penalties and tariffs, perhaps loss of Americas finance and protection….. We are America and Americans need to protect their own, My children and Yours AMEN

Posted by Darla Tesch | Report as abusive

For $700 billion dollars, each and every man, woman and child in the United States, legal and otherwise, could be given $1 million dollars each and pay off their own damn mortgages. That’s what – $500 million dollars more or less? Then the rest of the money could be used to bail out these corporations from their criminally negligent behaviors.

The credit default swaps, derivative instruments can be nullified and made illegal where the losses would be spread across those foolish enough to have bought them, traded in them and used them as an asset class. The defaulted mortgages already foreclosed are covered by Fannie Mae and Freddie Mac as well as by the “housing bill” already passed and the US Treasury could go back to doing the more sane things they are qualified to do.

These options do not destroy the foundations of our economic system in principle the way that nationalizing a publicly traded insurance company, AIG has done. They are cheaper in the short term and in the long run as well. They make better sense and overall, shore up our democratic representative republic instead of decimating it as their proposal will do.

The time to fear a market collapse has passed. The confidence game is over. This opportunity for change will not wait for the new president to pick out the drapes to be resolved sometime next year. But, since the government believes it is well within their sense of normalcy to spend another trillion plus dollars – they may as well give everyone whose feet are standing in this country, a million dollars each to solve the problem where they stand. At least something would get done.

Written by Cricket Diane C “Sparky” Phillips, 09-21-08, USA

Let the system crash. Let them throw their gold and money into the streets. Soon! Nothing will be worth anything anymore.
And if you think gold is safe, the time is coming when that will be confiscated by our Government for more war.

Posted by Robert | Report as abusive

we are all worried about money but i have a good idea. why dont we take 350million dollars of the bail out money and give every american a milion dolars and give the rest to the bail out that way when it fails again we really will be safe, its our money any way.

Posted by connie | Report as abusive