The Sub-Prime Crisis: My response to a response to a response
A friend of mine—an enthusiastic supporter of John McCain, or at least an enthusiastic opponent of Barack Obama, but otherwise a nice guy—forwarded a rather cute PowerPoint presentation that provided a rather snarky interpretation of the recent fallout from the subprime mortgage crisis. (I don't know if the PowerPoint is available online anyplace—if I can find it, I'll add a link to this post.) My friend added the following:
BLAME THIS ON BUSH TOO! CONGRESS HAD NOTHING TO DO WITH THIS, CLINTON HAD NOTHING TO DO WITH THIS... FANNY MAE $ FREDDY MAC HAD NOTHIG TO DO WITH THIS. RANGLE [sic] HAD NOTHING TO DO WITH THIS. IT WAS ALL CAUSED BY THAT GREEDY BUSH! NOW I HOPE ALL THE LIBERALS THAT VOTED FOR BUSH SEE THE RESULTS!!!
I responded to him—and everyone else on his distribution list, most of whom, I fully believe, had already written me off as some kind of communist, or at least something of a crank—as follows:
Well, considering that Clinton ceased to be President almost 8 years ago, I'd say he's fairly thoroughly off the hook. (As far as I'm aware, the whole "subprime" mortgage boom started years after Clinton left office.) I don't know what Charlie Rangel (who used to be my Congressman in my Upper West Side days twenty-something years ago) has to do with anything; if you're talking about regulations that encouraged banks to lend money to borrowers in less expensive neighborhoods in their districts, then you're off target considering that (A) the mortgages now going into default were almost entirely *not* generated by banks and thus had nothing to do with these regulations; and (B) these regulations have been in existence for something like 20 years, and didn't cause any major problems in all that time. So I suspect Rangel is off the hook as well, although I do wish he'd use less hair gel. (Is his hair still so greasy? It used to look like an oil slick.)
Basically, the Bush administration has been in charge for almost eight years; for much of that time the administration had a Republican-controlled Congress (including John McCain, until the last few days a dedicated fan of financial deregulation), and even now the Republicans have enough strength in Congress that the Democrats can't break a filibuster or override a veto. Of course, this doesn't mean that Bush is responsible for everything that happens on Wall Street, or even in Midtown. But the fact is that (A) the regulatory infrastructure is part of the Executive Branch of government, which Bush controls; (B) many experts as well as ordinary people have been predicting for the last few years something very like what's been happening over the last weeks; and yet (C) the Bush administration did nothing about this brewing mess, through either direct executive action, promotion of legislation, or any other form of leadership. Considering that - unlike most politicians - Bush is from an old Wall Street family and has been in business for himself (mostly drilling dry holes, I'll admit), I think it would not have been out of line to expect him to have a better handle on these issues; after all, if the Republicans have anything to recommend them, it's supposed to be that they understand business and economics. I know Bush puts on a folksy image and appears clueless, but that was all supposed to be a put-on, wasn't it?
Bush, of course, is not up for re-election; and John McCain has never specialized in economics and financial matters. (He doesn't have the background for it, and I don't think he's ever pretended to be an expert on the subject. And given some of the crazy-assed derivatives of derivatives that are a large part of the current crisis, even the "experts" have a lot of trouble coping with what's going on nowadays. I've read that it's become almost impossible to come up with meaningful book values for a lot of the corporations dealing in the new financial instruments, because even the professionals can't figure out what some of these pieces of paper are worth.) For that matter, Obama isn't an accountant or a finance geek either, although he's probably got better financial chops than McCain. Neither candidate seems to be offering any magic answers, and frankly at this stage I think it's too late for magic answers; the time to prevent this crisis was four or eight years ago. (Old Arab proverb: The best time to plant a tree is twenty years ago; the second-best time to plant a tree is today.)
Considering, however, that McCain has suggested privatizing Social Security, and that he very recently suggested deregulating healthcare in much the same way the financial markets had been deregulated, I think there are some legitimate grounds for worrying about his judgment in these matters. I certainly see nothing in his record to indicate that a McCain administration would be God's gift to American (or worldwide) financial markets or to the American healthcare system.
As you may be aware, Israel for the last several weeks has been buying 100 million U.S. dollars per business day, in an effort to help prop up the U.S. dollar and keep our own currency from becoming so expensive that we can't export anything. (This seems a bit surreal given Israel's financial past, but it's true - times have changed! Our central bank's target is to increase its U.S. dollar holdings by $10 billion, which is a fair chunk of change for a nation of our small size.) We do like to do our part, of course, even if we can't support you Americans to the degree the Chinese can. And we understand that you're too busy in Iraq to do much about Iran, even though we still can't quite figure out why you went into Iraq in the first place. (You certainly didn't ask us if it was a good idea!) So we'll probably have to deal with Iran for you as well. But we are *not* prepared to solve the subprime mortgage crisis for you! Maybe the Chinese have an extra trillion dollars lying around?