Lafayette, April 1 at 8:00 am:

... 
‘Anar: We don’t need a coup; we need new institutions, built from the ground up, on a different basis than the present ones.

Agreed, which is why I support and advance the concept of not only a Progressive Agenda but the establishment of a Social Democrat Party (“Third-way”) that (might) capture the aspirations of the American people. ...’

It seems to me that any normal political party would be subject to the same forces as existing political parties and would go the same route.  That is, its leadership would soon find that in order to get the money, attention and influence it would need to succeed, it would have to make deals.  These deals would pull it away from any principles it might have originally espoused and towards the same behaviors we observe in the existing major parties, that is, service to the established order and its ruling class.

However, saying ‘We must, as a nation, shift mentalities away from the accumulation of wealth’ suggests not the construction of yet another political party but a radical change in culture—one in which the difference between the accumulation of wealth and power, on the one hand, and general well-being, are not only given lip service but lived out and acted upon.

G.O.E. CRONYISM

Yet another verified fact of cronyism at the top. See here

Excerpt from the NYT article by Gretchen Morgenstern:

The companies [Freddie May & Fannie Mac], whose fates are to be decided by Congress this year, paid a combined $17 million to their chief executives in 2009 and 2010, the two full years when Fannie Mae and Freddie Mac were wards of the state, the report found. The top six executives at the companies received $35.4 million over the two years. Since Fannie Mae and Freddie Mac were taken over in September 2008, the companies’ mounting mortgage losses have required a $153 billion infusion from taxpayers. Total losses may reach $363 billion through 2013, according to government estimates.

One must presume that, due to their highly effective management prowess, the gentlemen in question indubitably “earned” their salaries.

NOTA BENE

Both of the “companies” cited above are GOEs - that is, Government Owned Enterprises.

MAXIMUM ECONOMIC UTILITY

Anar: We don’t need a coup; we need new institutions, built from the ground up, on a different basis than the present ones.

Agreed, which is why I support and advance the concept of not only a Progressive Agenda but the establishment of a Social Democrat Party (“Third-way”) that (might) capture the aspirations of the American people.

This two-party system, based upon lobbyist manipulation of a Crony Congress must stop. Even if it takes a national referendum to undo the Supreme Court decision to open the electoral money floodgates for BigBusiness and its plutocrats.

A Progressive Agenda is conceptually easy. But, I fear, the challenge is to get the American people to think elsewhere beyond the present mind-numbing two-party electoral system that is rotten with gerrymandering, which keeps established partisan groups in power at both state and federal levels.

We need not betray our precepts of a market-economy based upon capitalism. It works, even if it works badly. We just have to learn how to modify it such that it works its magic not just for a select group of families but for the most citizens possible.

We must, as a nation, shift mentalities away from the accumulation of wealth, with all its celebrity fixation, as a medal of success. Showing the world how the the filthy rich distinguish their lifestyle from the simply rich is NOT a meaningful social objective.

And who cares what Madonna had for lunch when many of our fellow citizens are starved of bona fide nutrition and suffer from bad health?

MY POINT

We need to place our focus upon maximizing economic utility for most people - and only a Progressive Agenda can do so. Yes, that means using taxation to “level the fiscal playing field”, which has been anathema in America since Reckless Ronnie came to the Oval Office in 1980.

No that does not mean giving people “hand-outs”, but giving them a “hand-up”. That is, seeding the economy in ways that allow people to live decently, educate themselves to their fullest potential, work and earn decently - and, yes,  practice whatever entrepreneurial skills they may possess in order to better their lives. But, within limits defined by taxation policy.

The notion of Maximum Economic Utility was one that 19th century philosophers of political economy espoused. More than a century later, Uncle Sam is still wandering in the wilderness of free-for-all beggar-thy-neighbor capital accumulation. Why?

Because America refuses to believe that government regulation to obtain certain societal policy objectives is not contrary to the principle of “free enterprise”.

The handwriting-on-the-wall of Income Unfairness is well known, the facts are here.

POST SCRIPTUM

Anyone wishing to challenge the facts (in the article linked above) or the methodology employed to develop them is free to do so. I’m still waiting for that challenge many years after having first posted the above site on many a public forum ...

As the saying goes, “You can bring a horse to water, but you can’t make it drink”. It seems that Americans still want to believe that theirs remains the best of all possible worlds, warts and all.

AlmaRose—You are correct in saying that the financial crisis should have been dealt with differently—from the point of view of most people.  The interests of the ruling class were different, however, and the regulators were of the same class as the regulated.  We don’t need a coup; we need new institutions, built from the ground up, on a different basis than the present ones.

AR: Those foreign investors (Deutschebank, etc.) should also have know that the insurance on their worthless mortgages was not “AAA” rated as the rating agencies fraudulently claimed.

How should they have known? The credit-rating agencies were in cahoots with the Investment Bankers. The CRAs were not doing due-diligence work.

The foreclosure history was showing clearly, going into 2008, that the trend line was significantly higher. See here.

The data shown in that info-graphic should have had everybody on edge at the beginning of 2008. The foreclosure rate in 2007 was twice that of 2006 and by the time it got to the fall of 2008 it was three times the trend-line of 2006.

The handwriting was on the wall. And nobody said anything until the whole house of cards came tumbling down around our ears?

We need some perp-walks from those agencies ...

Hey, Laf, I disagree….

The head Insurance regulators responsible for overseeing AIG should have all lost their jobs.  AIG and all others who printed the worthless credit default “insurance” on these sure to fail mortgages should have all gone bankrupt.  Those foreign investors (Deutschebank, etc.) should also have know that the insurance on their worthless mortgages was not “AAA” rated as the rating agencies fraudulently claimed. 

New banks would have started up to fill the void.  The short term “depression” would not now end up being the long term recession and sure to be even deeper depression in the future.  These idiots should not be rewarded!  Unfortunately we have the best Congress money can buy so unless we have our own “coup” nothing will ever get done to correct the erroneous path the US is now on.

THE MIND IS WILLING BUT THE HAND IS WEAK

There is factual evidence that the Main Street banks are doing not much to help prevent foreclosures. Why should they? The mortgagee walks away from a foreclosure with the property whilst the mortgagor walks away both broke and with no house.

Which is Darwinian survival-of-the-fittest economics at its worst, because the US Treasury and the Fed did not know how to lean on local each and every local bank or credit institution with a heavy foreclosure portfolio with measurement questions like “How many foreclosing mortgages did you renegotiate at lower rates last week?”

Followed up by a Treasury Agent who walks in with a BigStick when the response is too few.

Better yet, to compensate for the TARP payments, banks should have been required to turn over to the Feds the Toxic Waste portfolios, who would then manage their renegotiation at lower rates to accommodate the incomes of house-buyers on a case-by-case basis.

MY POINT

It was all in the execution and, yet again, LaLaLand on the Potomac (the Fed and the Treasury) demonstrated its ineptness at regulatory micro-management for banking.

People in LaLaLand think that because a regulation is posted everyone in banking kowtows?

If interested in the ongoing-nowhere debate about Bank Regulation, the tussle between the US and Europe is getting headier. Meanwhile, nothing gets done.

See here .

TBTF

AM: The nauseating thing about the RE crisis is how the profiteers (AIG, et al) got bailed out.

You don’t like this hard-core fact, neither do I, nor does anyone.

But the fact of the matter is that the Credit Mechanism had become seized by the build-up of Toxic Waste (defaulted packaged subprime loans and their derivatives). It stopped dead in its tracks. Banks were not lending to one another over-night and therefore could not close their books. Why not?

Because they could not trust that other banks were loaded with Toxic Waste, so why lend to them and have them go bankrupt the next day?

When banks no longer lend to one another, they no longer lend either to consumers. From what sources would they lend money? A bank needs money in order to lend it out as credit to both consumers and investors. Which is why it is Too Big To Fail (TBTF).

So, the bailout was necessary - absolutely necessary. Had it not been done, we’d have seen Great Depression unemployment rates of anywhere between 15 and 25%. Would that have been better?

Besides, all that money has been repaid with interest. The bailout made money for the taxpayer.

THE HURT

Yes, the “perps” walked away, happier than a pig-in-sh*t. THAT is what we don’t like and which hurts any decent human being most.

Rob a bank and you go to jail. Commit financial management negligence (or fraud) and you don’t walk-the-walk. (But the investigations are ongoing and indictments will be made.)

WHAT NEXT?

when the Finance Industry comes around crowing yet again that “regulations make business uncompetitive”, ask them what regulations would have prevented the debacle of the Fall of 2008 that produced the Great Recession of 2009?

[Answer: The ones in place, more than likely. Reserve requirements now are much higher than they were then, for instance.]

Next time you shake a bankster’s hand, count your fingers ...

The nauseating thing about the RE crisis is how the profiteers (AIG, et al) got bailed out.  These jerks should have lost their homes (multimillion dollar ones, no doubt) and also landed in jail.  A person with a 3rd grade education could figure out that a person making minimum wage should not be lent $500k!  FRAUD FRAUD FRAUD

BINGING

Americans, in their binging phase of the past decade, thought that house equity-values were a neat way to print money. The asset-price bubble was not contained to America, just exaggerated there. We’ve known it in many European countries as well.

Those who entered the asset-price bubbles in America and Europe, eyes wide shut, are now paying the price of that folly in a fierce realty-price devaluation. A realty bubble is a realty bubble is a realty bubble - easy to start (cheap money) and hard to stop (when exacerbated by an economic morass as well).

Every generation will go through a bubble, some worse than others, until they begin to learn the economic lessons of the previous generation.

Consumers wanted cheap-money, they were given cheap-money by a Finance Industry eager to please them. They went on a binge, both in housing and other consumer expenditures. Consumers went also deeply into debt, which they are now paying off.

When one pays-off debt, one does not do much else in the way of consuming - which is why the economy is so morose.

MY POINT

A product or a service being inexpensive is not a viably good value-estimate if there exists also an unjustified expectation that its value can only increase.

Investors don’t see the Ponzi-Scheme effect, which is the indigenous nature of all bubbles: 
* By entering a market consumers bid up market prices.
* Which attracts others into the market.
* Which attracts yet others to sell their equity-value to those entering the market always at higher prices than they paid.
* Which creates even further impetus, by word of mouth, to enter the market. (The “too good to be true” factor.)
* Meaning those who got onto the escalator first did indeed make a profit if they diversified their investment elsewhere.
* But those who got on the escalator last paid the piper.

If housing is getting cheaper, more people should be able to buy or rent.  Why is this ‘the wrong direction’?

Boy, if the economy keeps going the way it’s going, folks are soon going to be faced with some tough choices. Like when you’re going out to do the weekly shopping:

‘Honey, should we buy a week’s-worth of groceries, or another house?’