How can “free-market” enthusiasts continue to deny that we need more government oversight in the marketplace?
From the stock market crash of the 20’s to our current subprime-mortgage mess it’s a lack of government oversight and regulation that allows over-sized greedy corporate egos to continually screw things up.
Free-market enthusiasts like to equate the competition we see in our sports-dominated culture with competition in the marketplace. While sports teams and individual athletes desire to compete against the best, companies don’t. Well-paid and connected lobbyists constantly seek government welfare for private business, either through tax breaks or by passing laws that limit competition, thereby driving up costs for consumers.
The sole purpose of capitalism is to take money out of your pocket; regardless of the value provided in return.
Government’s job is to make the playing field as level and fair as possible. The constitution (of which the word capitalism is conspicuously absent) doesn’t say “we’re created unequal” and “those with the most money play by a different set of rules” yet that’s exactly the direction we’re headed. Income inequality in the United States is at third world levels (furthermore, it’s inequality, not poverty per se that ultimately leads to violence).
So how many developed countries have no laws requiring paid vacations? Exactly one: the United States. Is this what workers want, or what corporations want so they can make more profit? In addition, workers here in the U.S. have far less vacation time than do workers in other countries.
Family values? Why is the U.S. one of the few countries that doesn’t provide paid-time off for new mothers (or fathers for that matter)? Does this benefit the family, or companies that focus solely on profits?
Why do we spend far more per capita on health care than any other country, yet receive so little in return? Is it because insurance companies put profits first?
Top hedge fund managers make more in ten minutes than the average worker makes in an entire year, yet pay taxes at less than half the 35 percent rate on ordinary income.
Top business executives have no limit on the pay they can defer into special accounts that compound tax free, while the average American can only defer $15,500 (if they’re lucky to save anything at all) via their 401 (K) plan.
Corporate propaganda has done such an excellent job in indoctrinating people to the capitalist “success” story, that it’s now a given that their interests come before ours.
The corporate motto of “gain wealth, forgetting all but self” brings us closer to Thomas Jefferson’s fear in 1816 that “the country was moving toward a single and splendid government of an aristocracy founded on banking institutions and monied incorporations.” If the trend continued, he said “it would be the end of democracy and freedom. The few would be riding and ruling over the plundered plowman and the beggared yeomanry.”
So can the newly unemployed
So can the newly unemployed government workers from Metro Parks now join in the "Regulation Revolution"?
just sayin'
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"Wow, That's Fantastic!" - WTF
First off let me just way in
First off let me just way in here and tell you that the subprime mess has nothing to do with a lack of over government oversight. I have been in the business for the past 5 years. Personally I think the government does everything possible to protect its citizens. There are TILs, GFEs, and 3 day recissions put in place to protect borrowers. Any of which will tell you exactly what you are getting yourself into. but who has time to read, you have to buy a TV bigger then Mr Jones!
This problem in my opinion actually stems from a government push to get people out of apartments (sect 8) and into houses. To do that credit requirements had to ease, and thus the risk increased. With risk comes rewards, and rewards in this case were in the form of higher rates. And when you can get a high rate of return then wall street wants in on the action. So you have a huge influx of money.
But when it goes south it goes south fast, rates rise and people who have never been good savers or managers of their credit are pinched.
So what happens now? The government will likely be forced to get involved and our tax dollars will go to bail out the mortgage industry, just like the air lines. And if you travel you see just how well that bail out has worked out.
subsidized mortgages...get your subsidizied mortgages here!
I do agree with you Don that
I do agree with you Don that corporate greed has a lot to do with our current problems. I look at our parents generation they worked till they had their 30 years in and retired to draw a pension. But when was the last time you heard of a pension? Companies scrapped that idea years ago and left you holding the bag on your own retirement. But that creates its own problems cause now you got to get the highest return possible. And that means investing in sketchy foreign economies, or in mortgages for people who have never shown good credit handling skills :o
A CEO of now barely in business mortgage company sold 40 million in company stock, right before the collapse. It was all legal and above board. Shortly after the company closed 40+ branches with little or no advanced notice to its employees!
Sean, That is an
Sean, That is an interesting point you bring up about the Section 8 issue. Never thought about that but you are probably right.
IMHO, the root of the sub-prime mess lies in the creation of CDO's whereby very national banks hold any mortgages. Anyone that is an LO for one of them was ever questioned about the quality of the application as long as it passed the automated underwriter test--because it was sold the day after it closed. I have heard from several locals in the industry that the local/regional banks are in fine shape because they didn't really lower their standards during the "boom times". Unfortunately, they are very conscious of the industry woes and have raised there already high standards to an even higher level. And thus the cycle of real estate continues.
If only there were Utopia I am sure it would be socialist.
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"Wow, That's Fantastic!" - WTF
Ocguy, You are hearing
Ocguy,
You are hearing correctly banks and credit unions are not really feeling to pinch on this. They generally shy away from risky loans.
I am reasonably sure that subprime will come back. Afterall not every person falls into a conforming loan. Self employed borrowers simply don't show enough income due to qualify. But we all know they make the money its just deducted, hidden, or stashed in safes.
So there will always be a need, and consequently an investor to fund questionable loans. Maybe not Wall Street but somebody will be there!
Sunday’s Courier-Journal
Sunday’s Courier-Journal had an excellent article by Paul Krugman which helps to explain the sub-prime housing mess.
Edward M. Gramlich, a former Federal Reserve official tried to get Alan Greenspan to provide additional oversight on sub-prime lending way back in 2000, but Greenspan, one of the leaders of Washington’s “laissez-faire ideologues” would have none of it. Greenspan, and others like him, supported virtually no regulation/oversight for independent lenders. Their assertion that unregulated financial markets were self sufficient and self correcting have been proven false.
This experiment of radical deregulation has brought us to the point that, by some estimates, there will be 2 million foreclosures by the end of next year.
Gramlich (who recently died of cancer) asked “Why are the most risky loan products sold to the least sophisticated borrowers?” Furthermore, many of these loans offered low initial “teaser” rates that jumped after two years, and to make matters worse, often included prepayment penalties preventing the borrower from correcting their mistakes at a later date.
Investors are also at a loss. Assured that they were buying AAA rated assets (by rating agencies eager to push product) they’re just now discovering many of their investments are worthless. Our current sub-prime mess brings to mind the tech-bubble of a few years ago, when rating agencies issued buy ratings on over 90% of the stocks in the market place (even though many were actually worthless).
In conclusion, huge amounts of money plus little government oversight usually results in a mess!
Hot off the press, Merrill
Hot off the press, Merrill Lynch’s CEO just resigned, due in large part for his willingness to gamble in the risky sub-prime market.
Despite Merrill Lynch’s recent posting of a quarterly loss of over 2 billion, whoever takes over still has to deal with over 4 billion dollars in bad investments still on the books.
As for the outgoing CEO, he doesn’t get any severance package (poor fella) but I’m sure he’ll get by just fine with an estimated 160 million dollars in retirement benefits and stock options (not to mention that his 06 salary was estimated at close to 50 million).