Perhaps the most disingenuous claim that Charlie makes in his WSJ piece is that the United States government was a “co-conspirator” with “the greed merchants.” As I listened to him on his CNBC spots, it seemed clear to me that he viewed the government as bearing primary responsibility as if Wall Street had been duped into generating all those toxic loans and securities. This of course plays perfectly into the conservative thesis that the solution to the problem is to have the government do less to regulate activities on Wall Street. Like the rest of Charlie’s theory, any relationship to reality is coincidental at best.
The government was not a co-conspirator with the greed merchants. The government was the hireling of the greed merchants. It wasn’t some member of Congress who came up with the idea that the country would be better off if Glass-Steagall Act were repealed and then went out to persuade banks to engage in securities underwriting. It was the banks who lobbied the government. It wasn’t the SEC that talked the investment banks into adopting irrationally risky capital ratios. It was the investment banks led by Hank Paulson of Goldman Sachs who lobbied Christopher Cox for the rule change that allowed them to take on more risk.
The government failed not because it induced Wall Street to do things it did not want it to do. It failed because it did whatever Wall Street wanted it to do. The government was the flunky in this conspiracy, not the mastermind. The government was the night watchman who gets a few bucks to leave the door unlocked while the thieves rifle the vault. Like all good flunkies, Charlie figures it should take the fall while the masterminds waltz away with the loot.
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Let me preface this by saying I have not read his book, so I could be wrong, however it feels like you are splitting hairs here. From what I've read about the book and heard him say it seems to me that Gasparino is blasting all the responsible parties (which does include the Clinton administration) for the meltdown, and beating the drum for meaningful financial regulations that will help prevent this from happening again. Which I think is something you would agree with?
ReplyDeleteI haven't read his book either, but several things bothered about the spots he had that day on
ReplyDeleteCNBC: (1) He kept suggesting that the focus on the compensation packages is misplaced. I think he is dead wrong. I think it is precisely the incentives that those packages created that led to the risky behavior. (2) He repeats the nonsense about the CRA and the FHA pushing the banks into making loans that weren't in their interests. (3) He kept suggesting everyone else was missing the government's role in this mess and that he was the only one telling the true story. I think that's bullshit. I think that many people have understood and explained the connection between the regulators and the regulated much better than Charlie.
You're right I missed that theme, I just found this quote from Chuck: "But what you will also find in my book, which I guarantee is absent from most of the others, is the root cause of the risk taking, which I believe begins and ends with the policy makers." (http://www.realclearmarkets.com/articles/2009/11/02/an_interview_with_charlie_gasparino_97480.html)
ReplyDeleteHowever, I do still think it is splitting hairs. We all know the government and wall street were/are in bed together, right? By making a big deal trying to prove who was on top you run the risk of obscuring the fact that we (the taxpayers) were the ones that got boned...
Also your view of government as the dopey accomplice is probably closer to the truth than Charlie's view of them as the root of all evil. However, that does not help me sleep any better at night with those same dopes now working on solving my health care needs...
I wish I could tell you that your fears were anything other than justified Dan. The only thing that makes me hopeful is that it is not the same dopes. The current administration does not seem to be dedicated to vindicating the belief that government cannot do anything right by filling key positions with doofuses like “Heckofajob” Brownie and Monica Goodling. My biggest fear is legislators who will never vote for a bill that doesn’t obscenely reward the corporations that bankroll their campaigns.
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