William Greider: Wall Street's Great Deflation

[marmar]

from The Nation:



Wall Street's Great Deflation
posted by William Greider on 07/14/2008 @ 12:38pm




Phil Gramm, the senator-banker who until recently advised John McCain's campaign, did get it right about a "nation of whiners," but he misidentified the faint-hearted. It's not the people or even the politicians. It is Wall Street--the financial titans and big-money bankers, the most important investors and worldwide creditors who are scared witless by events. These folks are in full-flight panic and screaming for mercy from Washington, Their cries were answered by the massive federal bailout of Fannie Mae and Freddy Mac, the endangered mortgage companies.

When the monied interests whined, they made themselves heard by dumping the stocks of these two quasi-public private corporations, threatening to collapse the two financial firms like the investor "run" that wiped out Bear Stearns in March. The real distress of the banks and brokerages and major investors is that they cannot unload the rotten mortgage securities packaged by Fannie Mae and banks sold worldwide. Wall Street's preferred solution: dump the bad paper on the rest of us, the unwitting American taxpayers.

The Bush crowd, always so reluctant to support federal aid for mere people, stepped up to the challenge and did as it was told. Treasury Secretary Paulson (ex-Goldman Sachs) and his sidekick, Federal Reserve Chairman Ben Bernanke, announced their bailout plan on Sunday to prevent another disastrous selloff on Monday when markets opened. Like the first-stage rescue of Wall Street's largest investment firms in March, this bold stroke was said to benefit all of us. The whole kingdom of American high finance would tumble down if government failed to act or made the financial guys pay for their own reckless delusions. Instead, dump the losses on the people.

Democrats who imagine they may find some partisan advantage in these events are deeply mistaken. The Democratic party was co-author of the disaster we are experiencing and its leaders fell in line swiftly. House banking chair, Rep. Barney Frank, announced he could have the bailout bill on President Bush's desk next week. No need to confuse citizens by dwelling on the details. Save Wall Street first. Maybe lowbrow citizens won't notice it's their money. ......(more)

The complete piece is at: http://www.thenation.com/blogs/notion/336722

[kentuck]

1. As usual, Greider hits the nail on the head.

i respect his opinions and writings a lot.

[glitch]

2. Me too. K & R nt

[kentuck]

3. K & R !

Good to read.

[robertpaulsen]

4. I'm about 200 pages into his book, Secrets of the Temple.

So far I'm very impressed with his thoroughness and insight. The book deals in general with the history of the Federal Reserve and how they run the country, but specifically deals with the chairmanship of Paul Volcker. Carter appointed him mostly because he was the favorite of bankers and Carter was hoping the selection would bolster their confidence and thus bolster the economy. He did have a couple of aides warn him that Volcker was too conservative, that he was not a team player, that his attempts to reduce inflation would create a recession, which would be a recipe for disaster for Carter during an election year. The naysayers proved to be correct.

[glitch]

5. Interesting! nt