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Paul Krugman on the ‘Conscience of a Liberal’

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Posted on Nov 16, 2007
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AP photo / Katsumi Kasahara

By James Harris

The New York Times columnist brings his liberal conscience and economic expertise to bear on the housing crisis and sheds light on the dirty secret behind many political victories by conservatives: “The consistent source of [Republican] success has been race.”

Click here to listen to this interview.

Transcript:

James Harris: This is Truthdig.  James Harris here in-studio with renowned New York Times columnist and author of the new book “The Conscience of a Liberal,” Paul Krugman joins us today.  Paul, how are you doing today?

Paul Krugman: I’m OK.

Harris: All right.  Well, you’ve been doing a lot of writing lately about the subprime mortgage crisis.  Everybody has.  It’s the talk of the town.  Here we had millions of people buying houses that they simply could not afford and we had a Fed chair that sat idly by while this was going on.  We had a corporate America that was happy to let it happen because their profits were through the roof.  Tell me, though: Where did Alan Greenspan miss on this?  Did he have not some responsibility in preventing this type of crisis?

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Krugman: Oh, sure, he did.  Members of his own board—Ned Gramlich, who died recently—were saying, “We’ve got a problem here.”  This was a new kind of lending.  It goes outside the normal banking channels, doesn’t have any of the safeguards.  I’m saying it shouldn’t happen, but false advertising, misleading borrowers, and then misleading investors who bought the loans off the lending banks—.  He basically said the market would take care of itself, and it didn’t.

Harris: The problem I have is that we talk about no oversight with regard to spending on military defense.

Krugman: Right.

Harris: No oversight with regard to FEMA spending.  Where’s the oversight here?  And why does Greenspan not have to pay for this major failure in communication?

Krugman: Yeah.  No oversight because, you’ve got to remember that Alan Greenspan is a devotee of Ayn Rand.  He thinks the less the government does, the better.  I don’t know how you make him pay except he should be at least verbally held accountable.  He screwed up.  He left us with a big mess that’s going to lead to probably millions of people losing their homes and might cause a recession.

Harris: At this point is there anything the new Fed chair, [Ben] Bernanke, can do?  Do you think he’s making the right steps now?

Krugman: So far he’s been doing most of the right thing.  You’ve got to try to prevent a panic on the markets.  He’s pushing money into the banks, although that’s not quite where the problem is.  But, still, it helps a bit.  But I think they should be getting together to do a real—.  I think the Fed—it doesn’t have direct authority but it could help to orchestrate a workout for a lot of the borrowers.  So I think the Fed is moving too slowly.

Harris: As an economist, and a respected economist at that, do you think it’s fair that people who responded to these social pressures—they needed a house ...

Krugman: Right.

Harris: ... whether it was half a million dollars, whether it was a million dollars.  Do they deserve to be bailed out?

Krugman: Yeah, they do, because, look, a lot of what happened was that there was deceptive advertising.  We don’t know quite how bad it was, but, as people pointed have out, there are simple mortgages and that it’s easy to understand.  Then there’s these complicated things: 2/28s, two-year concessional rates, blah, blah, blah.  And the 2/28s and all of that was marketed to the people least in a position to assess.  Hard-working, lower-income people.  A lot of minority-group home buyers.  The people who were most vulnerable were not given any of the oversight.  They are, in a large sense, victims.  It’s also in everybody’s interest.  Foreclosing on a house wastes a lot of money, aside from screwing up people’s lives.  If you can find a way for the person to stay in the house and not have to go through all of that, it’s much better, but it takes some coordination.  So, no, this is something we really ought to be doing.

Harris: I think the thing that you’re alluding to is that now we’re starting to see that perhaps some of these lenders were complicit in providing shady loans.  Angelo Mozilo over at Countrywide is now having to answer some questions about $57 million that he pocketed last year, Countrywide being one of the largest lenders, and in this case, one of the largest subprime lenders across the country.

Krugman: There’s some indication that Countrywide actually had a systematic policy of guiding less sophisticated borrowers into higher-cost mortgages.  He deserves to be put under the hot spotlight.

Harris: A little bit of hot water.  Moving to this question.  I was reading your column yesterday.  You write Mondays and ...

Krugman: And Fridays.


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By 2tonechaos, December 28, 2007 at 10:07 am Link to this comment

Amen! Preach on, brother DennisD! Hallelujah! that is a brilliant, relevant opening to a very concise and thoroughly defensible argument against any form of that odious form of utterly pretentious violation of basic personal rights that Liberalism most assuredly is. One could even, should such an inclination be felt, quite easily take the argument to its logical conclusion—namely that free-market anarchy is the only method of civil structuring that even approaches an ability to guarantee preservation of any/everyone’s rights on any semblance of a long term basis. (Note: though it must be stated that one would share such a conclusion with others at the cost of an inevitable drop in the defensibility factor…BUT only rhetorically—which element actually ultimately has no independent bearing on matters of fact since, exactly like the concept of politics, rhetoric deals not in logic and truth, but rather achieves its gains by exploiting/manipulating general public perceptions and subjective opinions/beliefs.)

This element (i.e., the coddling of anyone in distress, shielding everyone from the most ubiquitous of basic natural mechanisms for learning and becoming responsible/self-sufficient: experiencing the consequences of one’s actions, the thoroughly condescending ASSumption that everyone is incapable of leading a productive and fulfilling life of independence—or otherwise attempted justification for rounding everyone down to the lowest common denominator and piling on more insult/violation of essential rights by requiring by law that everyone participate in their disastrous and ineffectual shot(s) at playing Holy Savior of everyone…) is all the more poignant/useful in that it avoids having to become entangled in semantical arguments over whether or not the term ‘socialism’ is in fact an accurate description of the principals at the heart of such liberal strategic scourges (and oh yes, friends and neighbors—it very much is accurate), mainly by simply tip-toeing neatly around the concept altogether while still showcasing the dangerously misanthropic nature of such disingenuous acts of theft and coercion.

(And of course, having made such a point effectively, one can always, with their foot now in the door, go on to gingerly show how it really is socialism…then ultimately unleash the proverbial dogs of war by listing off the nearly countless other ways that socialism utterly destroys an entire society on all fronts and every level!)

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By DennisD, December 25, 2007 at 2:54 pm Link to this comment
(Unregistered commenter)

“Harris: ... whether it was half a million dollars, whether it was a million dollars.  Do they deserve to be bailed out?
Krugman: Yeah, they do, because, look, a lot of what happened was that there was deceptive advertising.”

Both of you let me know when my bail out is coming for buying what I could afford, making my payments and actually reading the f**king loan papers. 

This no one is responsible for their own screw ups has to end. Just where is the money coming from other than Mr./Mrs./Ms etc. taxpayer for this wonderful bailout of the unfortunates. For anyone that thinks we the taxpayer isn’t going to have to pay for this - what do you think dumping more confetti(dollars) into the system does to value of your current dollar.

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By voice of truth, December 11, 2007 at 5:38 am Link to this comment

Novista

I know exactly where my money is invested, including my self-directed 401(k) and IRA.  I’m not stupid enough to think that I can live off Social Security, or that it will even be there when I retire.

And yet, nowhere in your post do you even get to the point of the comment, that the liberal conscience states that no one has to be responsible for themselves!!

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By Novista, December 11, 2007 at 4:44 am Link to this comment

@ voice of truth

While you’re slagging off on people not as smart as you, I wonder if you know where and how your pension funds are invested? Or your money market investment, you know, that area which was supposed to be limited to low-risk areas?

Only they bent the rules, just like Fannie and Freddie.

And what of prime mortgage borrowers, who were responsible, except for a little major medical problem or loss of job? Maybe they should have known better, ya reckon?

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By voice of truth, December 4, 2007 at 1:26 pm Link to this comment

2tone, you actually described Algore and this band of blathering global warmers.  No gas or electricity for you, because I need to take my private jet to a conference in Bali!

Back to Krugman, who for an economics professor really has no idea of how one works.  I love his comment above, about the fatuous idiot who wants to buy a house, but doesn’t understand how the mortgage works.  And Krugman even goes so far as to intimate that they shouldn’t even have to know how it works (“2/28s, two-year concessional rates, blah, blah, blah”).  HOLY CRAP, if you can’t even listen or try to understand the parameters of the largest purchase you have ever made, it really doesn’t matter if the lender is being deceptive.

The point is these people are completely lacking in personaly responsibility and that, my friends, is the essence of ‘Conscience of a Liberal’.  Don’t worry about f’ing up, you’re too much of an idiot to have done it right anyway, and it’s not your fault, and the government will take someone else’s money to fix it.  La La-La La-la.  Isn’t life great??

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By Anthony Look, November 21, 2007 at 5:10 pm Link to this comment
(Unregistered commenter)

If I recall Carter took the opposite tack; interest rates when up and basically a tough love economic policy was put into play and the economy balanced out. This should prove interesting, but; personally I see it as throwing money at the same people that caused the problem to begin with; hmmm I guess we can trust them. Its amazing, Bush ruins everything he endeavors; and all the kings horses and all the kings men; could not stop this clown once again.

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By cyrena, November 20, 2007 at 12:11 am Link to this comment

#114531 by 2tonechaos

2tone…

Excellent post. I definitely get your point.

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By 2tonechaos, November 19, 2007 at 1:00 pm Link to this comment

Can I just mention, concerning a point made in this interview, that most liberals are fatuous idiots?(Don’t worry—liberals are far from being the only ones…they have the ample company of the vast majority of all mainstream political adherents, from Joe Schmoe to blathering pundits—hooray for bipartisanship!) I hate to resort to name-calling (note: I said “MOST liberals”). But if the shoe fits then, hell—try on the other one & take those suckers for a stroll around the store a few times! Do you half-wits ever look at the actions of people like Greenspan, or 99.9% of everyone claiming to be a Rand devotee (which is just the tip of the conservative iceberg regarding political claims that don’t square with actual policies/actions)? Go to any Republican meeting/function & you can’t even take a step without running into another hoard of disingenuous “conservatives” who still spout small government/free market rhetoric of traditional conservatism as they advocate interventionism & massive central planning via the wonders of bureaucracy such as the Fed, Department of Homeland Security, & literally hundreds of other invasions in our lives. (Reagan was the master of talking quite a boisterous amount of such talk, while increasing the size of the government & expanding its meddling in the market with every step he ever took.) Yet when everything goes sour, the face value of their undeniably false rhetoric is paraded around by every liberal commentator, used as some sort of justification for their own talking points & intentions…when what the facts indicate is rather that the actions of such faux “conservatives”, while disastrously destructive & ill-fated, prove the tone of their (true conservative) rhetoric to be quite likely true, since they acted opposite their words & failed. 

Let me put it in terms a liberal might more easily grasp…let’s say there was a person who was particularly well-known as an advocate of a natural lifestyle. They’ve published several books on the benefits that come from eating natural, unprocessed, fresh foods free of hormones, pesticides, preservatives, etc. They have traveled all over the world to conventions, speaking engagements, festivals—you name it—preaching the good word of the vastly beneficial effects of herbal medicine/dietary supplements, organic foods, etc., & the horrors of the ubiquitous scientifically-processed drugs & food additives. Now let’s say this person also quite openly eats McDonald’s every day, & has stock in the company as well. They’ve openly lobbied for legislation requiring all children be tested for things like ADHD & legally forcing all parents with children testing positive for such “ailments” to keep them on a regular regimen of every chemical contrivance the conglomerates can come up with to treat (never cure) all of everyone’s ills & keep them bound to their local pharmacy for life. What’s more, the person also endorses such drugs & takes a hefty handful of various cholesterol-lowering, mood-enhancing, restless limb-calming, herpes outbreak-suppressing monstrosities every single day. Now, dear Liberals, tell me this: when this person has a heart attack & is found, upon postmortem examination, to have been riddled with cancer & 37 other horrible diseases, how much grounds is there for a bunch of SUV-driving Christian busy-bodies to scream “See! I told you so! That’s what eating a natural organic diet & living a tree-hugging lifestyle will get you!”...? If you said “Absolutely none, whatsoever” then you & I are in agreement.

Now take that & apply it to the rhetoric/action-divide of the majority of contemporary “Conservatives”. Sure Greenspan talks a lot of libertarian free-market talk. But he has yet to ever walk the walk in any minute way, no matter how loud his words are. Take a look at someone’s actions & stop buying into the rhetoric on this stuff…‘cuz it makes you look like a fatuous idiot. Period.

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