If the danger to our financial system is as serious as many of our most intelligent and most informed people fear, and if, as we have seen in the past few weeks, our political leaders are not up to the task, could the private sector step up, as as J. P. Morgan famously did in 1907?
Presumably, our ten biggest private equity/ hedge funds, plus our biggest pension plans (CALPERS, etc.), plus groups like TIAA-CREF could raise $200 billion, perhaps much more in a hurry. Moreover, their balance sheets would suffer if the market tanks and if we have a severe recession. Hence it would be in their interest to act.
If we want to show Americans that they need not look to government to solve their problems, what beter time than the present?
Step up????????? Of course, they are behind the whole thing and now they can ride in and get buy things up with pennies on the dollar and be called heroes for doing it.
Richard, you're assuming that those in charge of such institutions are devoted to the free market.
Wall Street is chock-a-block with lifestyle libs and those fond of governmental interventions. Of course there are significant numbers of free market devotees up there as well. But the idea that all of the major figures on Wall Street are strong free market types is nothing more than a caricature.
People who keep their nerve during all of this, and have the money to put out for some assets that are presently priced for chump change, are going to make an absolute killing within the next 5 years.
People, this isn't the time to dump, this is the time to buy.
Dan. It does not matter that Wall Street wants welfare capitalism. If they can't get it, they might find virtue in necessity. One can dream, at least. Laying out cash at the point of maximum panic might be a way of diong well and doing good.
Isn't capitalism what I got us here? No thanks. I'll take a more democratically controlled economy, please.
Matt. If we accept your premise that bad regulation did not help make things worse, for the time being, that leaves the question. What other model do you suggest? What form of regulation keeps nations from having such crises every now and then? Isn't freedom worth it?
Mr. Adams - If by "freedom", you mean some sort of atomistic economic individualism, then it's not worth it at all. When I think of economic "freedom", I think of a freedom from the brainless invisible hand of the free market, or from the profit-driven interests of the economic elite. I suppose that's not your kind of "freedom", though.
Bad regulation? Where are you living, sir? From Reagan on, we've seen a massive deregulation of corporations - not to mention a massive globalization effort with absolutely NO RULES attached for businesses willing to go overseas and stake out territory in their "free trade zones."
I'm no economic expert (which, apparently, you sort of have to be to be able to retire in the United States these days), but I'd suggest giving workers control over the profit derived from their labor (I know . . . what an idea . . . that workers should have complete control over all of the profit made from their sweat and blood) perhaps through a union-based, worker-friendly governmental structure like that endorsed by Edward Bellamy (the brother of Francis, author of the Pledge of Allegiance - except for that nasty "under God" part added later) in his book "Looking Backward." Or maybe we could even turn to Marx (please don't let your head explode) and attach a complete, collective brain to the market (and chop off its invisible hand, yes?).
Or, we could continue to allow the "free" market to work wonders, continually bolstering the gap between the uber-rich and everyone else. We could continue to base oil prices off of "speculators" and watch our businessmen oracles prophesize what that all-permeating substance (an almost Spinocizistic Substance, Zizek once said) which effects every facet of our lives will do. What a financially stable life we've all had up until now (please note the sarcasm) and will continue to have so long as we continue our love-affair with late capitalism.
Signing off. I'm sure no one agrees on this blog, but it was worth a go. You may now all commence in the name-calling, the over-the-top reactionism, the spectacularly over-used defenses of Locke and Smith (as if they're understanding of capitalism has much to do with the abstract market we have today), and the ethno-centric glorification of the concept of private property and the "American dream."
But thank you for your time.
Shoot! Not "they're"! I meant to type "their." I HATE it when people mix those up and look at me . . . *sigh*
If memory serves, Looking Backward is a utopian novel. Fitting.
Ah, yes. I forgot. Curing cancer, splitting the atom, destroying "terrorism", going to the moon (or Mars), cloning, the "American dream" of upward social mobility . . . These things are all realistic. Whereas "utopian" novels which advocate social justice, ending poverty, a more equal distribution of wealth, and people cooperating (instead of competing) for the betterment of their society . . . Well, those are just silly idealistic rants. Fitting, here at NLT.
I guess it is nice to know that the majority of US representatives are still idealistic about capitalism.
However, Asia stocks fall after US failure .
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LONDON -- European shares fell for the fourth session in five on Friday,
Our own stock market is now down 30% for the year. AIG is publicly traded. It is huge, too. Everyone, pension funds, mutual funds, all sorts of people own a piece of AIG. This was, maybe, not quite the right time to become idealistic about government involvement in business and finance. Oh well. I sure hope the US economy is just as strong as McCain says it is.
Finally, I prefer this explanation of today's vote: How Voter Fury Stopped Bailout
Matt is wrong.
Capitalism didn't get us to this point. An intrusive government forcing institutions to provide risky loans caused this problem, as the New York Times predicted would happen 10 years ago.
So praise a controlled economy all you want Matt, but it's that type of government meddling that got us in this situation in the first place.
As LeVar Burton said, "but you don't have to take my word for it." Link below.
Article here
Oh Judd. Capitalism DID get us to this point because it is that same capitalism Clinton's administration was relying on in your creepily accurate NYT article. The particular attempts of government pressure on the private sector will not fix the fundamental flaws in capitalism I mentioned above. The failings of Fannie Mae doesn't call into question the government's unwise intrusion so much as the risks which accompany our society's reliance on one privately owned business for its economic stability.
P.S. - I'm coming back to Ashland October 23-27. Any chance we might be able to hit the bar?
The problem here is the GSEs and the fact they are not playing by market rules but playing politics, this is what destorts the whole picture of the market. When all the rest of the market was regulated after Enron, not the SMEs they were excluded and we are now paying the price of paying off the Black Caucaus and the Lib Dems to get a bill passed back then. If there was no precieved gaurantee on the GSEs paper, that they were labled the junk they were, most market actors would have bought on to them and they would not have flooded the system as they did. The problem was not with sub-prime per se, but the large amount of bad loans that lending agents put into the market overall.
People said the whole thing would fail when they first saw the plan. Now we are going on the idea that some social engineers thought it would work? That forcing risky loans would work? I think it was always meant to fail. Start at that premise instead of politicians don't understand economics, lol. How do you manage all that PAC money without understanding economics. I like how I just heard Bush say that our personal savings will suffer if we don't get this plan. However, our personal savings will suffer if we do get this plan because it will cause inflation and cost us 30% of our savings overnight.