Friday, March 20, 2009
More on the politics of financial crisis
Michael Lewis absolutely skewers the silliness of the political class over the AIG bonuses in the must-read column of the day. What he said (which is actually what I said, only better).
10 Comments:
By 
Escort81, at
Fri Mar 20, 05:32:00 PM:
This comment has been removed by the author.
By Escort81, at
Fri Mar 20, 05:38:00 PM:
Michael is a talented writer. I knew him slightly at PU; he was a year behind me and lived upstairs from me in Hamilton Hall when he was a freshman.
Michael has an interesting perspective: he has written about the beginning of the era of mortgage securitization on Wall Street at Salomon Bros., and he has written about "The End" of the Wall Street era caused by mortgage backed sercurites that were so crappy that even the old Solly traders would have blushed.
Michael is hardly an apologist for Wall Sreet., so if he is roasting D.C. for its silliness, then you can bet that it is really, really silly.
I applaud Michael's piece in the link TH provides, but if he keeps using lines such as:
Millions of people borrowed money they shouldn’t have borrowed and, not, typically, because they were duped or defrauded but because they were covetous and greedy: they wanted to own stuff they hadn’t earned the right to buy.
then he might stop getting invitations to the right parties, or the ability to schedule the best talk shows to promote his next book.
By TigerHawk, at
Fri Mar 20, 05:48:00 PM:
then he might stop getting invitations to the right parties
He'll start getting invitations to the right parties. But there's no way he gets invited to the left parties after this column.
By 
, at
Fri Mar 20, 09:14:00 PM:
Michael Lewis hits the nail on the head. Great article, great points, must reading for anyone who's wondering whether any elected official in Washington has a clue.
The Democrats are playing a dumb game. The American electorate is fickle and bi-polar, and I don't know for how long it will permit the Democrats to continue to blame George Bush and the Republicans before they realize that they're not much better off post-2008 elections. They're also acting cowardly by stirring up a mob mentality.
A big litmus test will be the New Jersey gubernatorial election in 2009. NJ, we all know, is the bluest of blue states. Incumbent Governor Jon Corzine is trailing likely Republican challenger Chris Christie by double digits in the polls. Taxes (as you point out in a subsequent post) are out of control, and someone who works for me and makes in the fifties (husband is a teacher at the bottom of the seniority list) told me her property taxes are going up 150%. It's bad in the Garden State.
And, if Corzine goes down in 2009, most Democrats (save those from very safe seats) will have something to worry about in 2010. The Republicans have to take back the mantle on decency in leadership and, more importantly, fiscal responsibility.
The Centrist
By Gary Rosen, at
Sat Mar 21, 04:16:00 AM:
"Millions of people borrowed money they shouldn’t have borrowed and, not, typically, because they were duped or defrauded but because they were covetous and greedy: they wanted to own stuff they hadn’t earned the right to buy."
As W. C. Fields said, you can't cheat an honest man .
By , at
Sat Mar 21, 09:14:00 AM:
if the government can arbitrarily break contracts made by firms in which it has taken a stake no one in his right mind will ever again make a contract with one of those firms.
...I find it richly ironic that while the Russians have adopted robber-baron capitalism, we move rapidly toward socialism, with nationalization of big banks and the government deciding pay rates for their executives. Dilemma: we know the govt does not run things well, but the mortgage bankers-who have lost their franchise--didn't either. Do we trust Jamie Dimond? After all, he outfoxed Sandy Weill.
By Elise, at
Sat Mar 21, 09:39:00 AM:
Do we trust Jamie Dimond?
Trust but verify. That's what regulation is for. Intelligent regulation - which sometimes means restrictions and requirements but sometimes simply means transparency.
By , at
Sat Mar 21, 11:32:00 AM:
Speaking of regulation, a few weeks back TH had a post questioning Obama's claim that "regulations were gutted."
Read this expose and tell me again regualtions were not gutted.
By Escort81, at
Sat Mar 21, 02:21:00 PM:
This comment has been removed by the author.
By Escort81, at
Sat Mar 21, 02:23:00 PM:
Anon 11:32 - Well, the difference between Matt Taibbi of Rolling Stone and Michael Lewis is that Michael operates from a significantly larger knowledge base with respect to Wall Street, having been inside the Belly of the Beast, as it were. Michael also does not have Taibbi's visceral cultural disdain of the people in the senior ranks of Wall Street, which might make the Rolling Stone reader feel good, but is not terribly constructive at this point.
One of the glaring omissions in the article you linked to is any discussion of the mortgage origination business, particularly in the context of Taibbi's argument that local, decentralized financial companies are inherently better or more stabilizing than behemoths. Some of the worst pieces of mortgage crap were written by one or two man shops who knew that they could flip it immediately to one of their contacts in the securitization food chain. Big or small makes no difference -- as TH has posted previously, nobody wants to be the party pooper during a bull or bubble market.
To your point about whether or not regulations were gutted, and Taibbi's critique of Phil Gramm, and the repeal of Glass-Steagall, it is hard to say that the specific regulation of CDS products were "gutted," since apparently there was never a great deal of regulation of that type of derivative to begin with. Should there have been? Sure.
If where you are headed is that there should be regulatory oversight, with teeth, such that major financial institutions have a cap on the notional amount of derivatives that they can be party to at a moment in time (relative to their balance sheet), then I would probably go along with that.
