S/SW blog philosophy -

I credit favorite writers and public opinion makers.

A lifelong Democrat, my comments on Congress, the judiciary and the presidency are regular features.

My observations and commentary are on people and events in politics that affect the USA or the rest of the world, and stand for the interests of peace, security and justice.

Tuesday, October 21, 2008

Plenty of blame to go around

The economic meltdown is complex and difficult to understand. My head is now filled with technical economic jargon after listening to another of Rep./ Barney Franks' excellent Financial Services Committee hearings. Tomorrow, Oct. 22, Rep. Henry Waxman will hold a hearing on the "credit rating agencies and the financial crisis." Today's post is my attempt to provide a bit of information and a number of resources that are accessible and understandable.

Few people, according to a recent poll by USA Today/Gallup, are confident that either presidential candidate will be able to fix the economy. Barack Obama, however, seems to have the edge with potential voters on the economy. After the election is over President Bush is going to host a summit on the global financial crisis, Reuters reports.

The current focus of the bailout plan is to force nine major banks to accept partial nationalization, the WaPo explains. The government's plan to take ownership stakes in banks is a big step, but it has a basis in history, according to the NYT. When the government did it in the past, the seized entities were eventually returned to the private sector. And now the government is said to be urging new banking mergers. CNN reported that Congress has praised the bank equity acquisition move.

From what I can gather from watching a number of different hearings held by active House committee chairmen, Barney Franks and Henry Waxman, to name a couple of leaders, the following article pretty much hits the mark. It provides a bit of easy to understand history, going back to the Clinton administration, it explains the key role of lobbyists and regulators, and it discusses who holds responsibility for what, in a pretty even-handed way.

"How Congress set the stage for a fiscal meltdown," is from USA Today, 10/14/08. By not checking the explosion of risky financial derivatives, and by protecting Fannie Mae and Freddie Mac too long, Congress' actions on two key fronts became significant factors in the financial crisis. To quote:

It was a classic example of Washington finger-pointing. McCain and the GOP blame Fannie and Freddie — which were taken over by the government last month — because the troubled mortgage agencies' biggest backers were Democrats who said they wanted to increase access to homeownership. Meanwhile, Obama and other Democrats highlight Republicans' longtime focus on limiting regulations for the financial industry.

No single government decision sparked the crisis, but collectively the candidates had a point: Both parties in Congress played important roles in setting the stage for the ongoing financial meltdown. They did so in moves that reflected not just their ideological priorities, but also the wishes of special interests that have spent millions aggressively lobbying Washington and contributing to lawmakers' campaigns.

As for what Congress is thinking about doing besides investigations, there is talk of a second economic stimulus package to be introduced when legislators return for a "lame duck" session after the Nov. 4 election. House Republicans will object to the $150-300 billion level of spending to be proposed, and the White House , naturally, is pouring cold water on the idea, Reuters says. And the SEC Chairman has called for "legislation that would make credit default swaps more transparent," Reuters reports. The story reports that derivative market could be $55 trillion, but one of today's witnesses said there had been some double counting, resulting in what he claimed was more like $1 trillion.

And finally there is this. The F.B.I. is struggling to handle a large number of financial fraud cases. A focus on terrorism and intelligence has limited the bureau’s ability to pursue criminal wrongdoing related to the economic crisis, officials said, in a NYT story. We are just beginning to see the consequences of this mess. We will see more bad consequences for Republicans running for office who suffer defeat on election day. And most of us regular people, are already experiencing major consequences of this Bush debacle. The countdowns are: 14 days until the election and 90 days left for Bush in the White House. It is happening. I can feel it.

Samuel Johnson once said, ""Integrity without knowledge is weak and useless, and knowledge without integrity is dangerous and dreadful."

View my current slide show about the Bush years -- "Millennium" -- at the bottom of this column.

(Cross-posted at The Reaction.)

My “creativity and dreaming” post today is at Making Good Mondays.

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