There is no question that the United States has experienced a deep and profound recession. Some economists argue that our nation was on the verge of a depression when decisive action by the Bush administration, albeit with some major gaffes and no small amount of good luck, halted the plunge and saved us from years of economic pain unlike anything this nation has ever seen.
A worldwide banking crisis caused by the bad behavior of some Wall Street bankers and mortgage loan originators and the interlocking mess of bad loans, collateralize debt obligations, and credit default swaps, was narrowly averted.
Credit markets locked up. Even healthy companies like General Electric and Boeing, that had nothing to do with the home loan bubble or those incredibly complex financial instruments that the “bankers” on Wall Street bought and sold as if they actually understood them, had great trouble obtaining financing for daily operations. Small companies like mine were completely shut out of the credit markets. No problem, it only cost me 16 years of my life and a lot of hard work.
The United States, indeed most of the free-market economies, were at the edge of the abyss. Most Americans did not realize it at the time, but this nation and its financial system were on the verge of a series of events that would have plunged us into a depression far more devastating than the Great Depression.
Greed ruled the day. All of this financial mayhem and pain was caused in no small part because some greedy executives and traders were more interested in earning big fees and enormous bonuses than doing what was right. Even when the supply of crappy mortgages ran out, these bankers created investment facilities out of whole cloth. They knew their behavior was risky, even in appropriate, but they took the money anyway and kept looking for more of the bad deals to do. Even when they knew what they did was wrong, there was no remorse.
Regulators, who had the power to stop or slow this crisis down, did nothing. After the carnage, with thousands upon thousands of innocents losing their jobs, their retirements and self-respect, the former Chairman of the Federal Reserve, Allan Greenspan, was quoted as saying, in effect, that he could not believe that capitalism’s famous “market forces” did not force bankers to do the right thing.
Angry Congressional leaders, who were asked to turnover billions of dollars of taxpayer money to the Treasury Department in an attempt to unlock the credit freeze, apparently were “surprised” that this whole mess happened.
As the smoke cleared, Congress reasserted itself. Determined not to let this type of crisis occur again, they created a wealth of new regulations in a major bill, Dodd-Frank Wall Street Reform and Consumer Protection Act. This is not a perfect bill but imperfect legislation often emerges when free-market capitalists behave badly. Over the next few years, it will need to be tweaked and revised to mitigate unintended consequences, which is a common quirk in many new laws.
I do not believe that government can provide all the answers to our national challenges, our problems or even unusual events. I do believe that government must provide moderate, even-keeled regulatory oversight to minimize any negative impact from those whose avarice propels them to irresponsible or illegal behavior – those who could care less about the “suckers on Main Street” who actually believe in following the rules.
Now, remarkably, some of the same bad-boy bankers who created this havoc, and who profited handsomely, are whining about excessive regulation, predicting all manner of dire consequences for the U.S. economy. These Wall Street leaders would have you forget their near miss and just trust them – again – to do the right thing.
Some members of Congress, well-intentioned small government conservatives who decry regulations, and others who are more interested in maintaining their political fundraising pipelines to the Wall Street titans, are clamoring for repeal of the entire bill – the good, the bad and the ugly.
As I watch this extraordinary mix of irony and hypocrisy, I am reminded of an ugly story of marital infidelity with a similar outcome.
A wife arrives home early from an out-of-town trip. She catches her husband in their marital bed with a neighbor’s wife. The shocked wife understandably explodes in anger, hurt and shame. She storms off into another part of their large home to regroup.
The neighbor’s wife beats a quick retreat out the side door. The offending husband calmly goes to his bathroom, takes a shower, and changes clothes. He retires to his study to smoke a cigar, drink a single malt Scotch and read his Wall Street Journal.
Meanwhile, his wife has been noisily cleaning the house. Her anger has driven her to the edge. She is stunned by her husband’s callous bad behavior. Cleaning the house, she reasons, is a safe and non-violent, stay-out-of-jail way to work off her rage. After several hours of work she finally barges into her husband’s study to complete her work. She loudly launches into vacuuming and dusting.
Her husband looks up from his paper, cigar in hand, takes a sip of scotch, and asks, “What are you so upset about?”
© 2011 John Gregory Self