the post about banking regulation that gets angry for a while and then ends in a big group hug

I thought Paul Krugman made some good points on the current investment banking situation in today’s “New York Times.” Here’s a clip:

…Traditional, deposit-taking banks have been regulated since the 1930s, because the experience of the Great Depression showed how bank failures can threaten the whole economy. Supposedly, however, “non-depository” institutions like Bear (Sterns) didn’t have to be regulated, because “market discipline” would ensure that they were run responsibly.

When push came to shove, however, the Federal Reserve didn’t dare let market discipline run its course. Instead, it rushed to Bear’s rescue, risking billions of taxpayer dollars, because it feared that the collapse of a major financial institution would endanger the financial system as a whole.

And if financial players like Bear are going to receive the kind of rescue previously limited to deposit-taking banks, the implication seems obvious: they should be regulated like banks, too…

The Bush administration, however, has spent the last seven years trying to do away with government oversight of the financial industry…

For example, there was a 2003 photo-op in which officials from multiple agencies used pruning shears and chainsaws to chop up stacks of banking regulations. The occasion symbolized the shared determination of Bush appointees to suspend adult supervision just as the financial industry was starting to run wild…

Just how fucking long is it going to take for us to put our country back together again, if it’s even possible? 20 years? 50 years? I wouldn’t have thought it possible to so thoroughly bankrupt our nation in 8 short years, but we’ve done it, and we’ve done it on every level — from economic to moral. But, I guess that’s what happens when two branches of government get scared shitless in the face of magnetized yellow ribbons and refuse to do the checking and balancing that they’ve sworn to do. I’m sorry, but I’m pissed off tonight. 4,000 dead Americans in Iraq, countless Iraqi lives ruined, financial collapse at our doorstep, soured international relations on every level, and for what? Higher dividends at Exxon and Haliburton?

I’ve said it before, but what really eats at me is the fact that it could have played out so much differently. If Gore were in power when the 9/11 attacks had taken place, he could have brought the nation together around an equally ambitious plan, but one that would have put our nation on a path to a better future. He could have taken the global goodwill that was extended to us, and used it to build a real international coalition to strike back at the Taliban and al-Qaeda. He could have taken the willingness to sacrifice for the greater good that all Americans were feeling, and channeled it into energy conservation and community building. Instead of spending billions on a misguided war in Iraq, he could have invested in solar projects here at home, creating hundred of thousands of new jobs in the process, and putting us on the path to energy independence. Instead, we squandered everything on a pitiful grab for what’s left of the earth’s oil. And, as if that weren’t enough, in the process, we abdicated our role as the moral leaders of the free world by disregarding our once sacrosanct constitution and embracing torture.

So, it’s not just that I detest Bush – it’s that I think about what might have been. That’s the part that really kills me. But, there is hope. Just now, I watched video of high school kids in the South Bronx talking about Barack Obama, and I feel optimistic. In spite of all the shit. Even with all the missteps. I look at these kids talking about how they feel that they can contribute to making our world a better place, and I can’t help but think there’s hope for us yet. We’ve got an unbelievable amount of work to do, but maybe we’ll make it.

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  1. egpenet
    Posted March 31, 2008 at 10:22 pm | Permalink

    Huzza! A very excellent rant! What vigor! What perspicacious fortitude! I am left with little else than to gleefully second your opinions in toto! For he’s a jolly good fellow … for he’s a jolly good …

    Neither the dollar, the housing market, nor the woes in the financial sector will bottom anytime soon. We’re heading into 1st quarter earnings reporting … and the news at Citi, Lehman, Goldman, Merrill and many regional banks we all know and love around here have all lost money (foreclosures, rate spreads, lost business, etc.)

    Thank you Mr. President and our do-nothing Congress … which includes our entire Michigan delegation. Thank you all.

  2. mark
    Posted March 31, 2008 at 10:25 pm | Permalink

    I was too embarrassed to say so in the post, but the video of the kids talking about Obama almost got me crying. Luckily, I was able to fight it off, though.

    (If you want to see me cry, just get me to watch something like Ghost or Terms of Endearment. It happens every time. There are probably ten movies that have that power. Someday I’ll post a complete list. Ghost is the silliest.)

  3. mark
    Posted March 31, 2008 at 10:27 pm | Permalink

    What about a game called Make Mark Cry, where you could show me stuff and see if I’ll cry? Like you could come over with a VHS tape of the last Golden Girls episode and make me watch it. People could bet online. Bookies could give odds. It could be bigger than arena soccer!

  4. Brackache
    Posted March 31, 2008 at 11:12 pm | Permalink

    Are you SURE more centralized banking regulation of the free market will fix the problems caused by centralized banking regulation of the free market? The Federal Reserve was created to keep things like the Great Depression from happening, and according to Ben Bernanke at least, the Federal Reserve caused it. Giving them more power seems to me to be the exact wrong move. It’s like curing the withdrawal caused by developing a tolerance for crack, by smoking more crack. Madness, I say!!!

  5. egpenet
    Posted March 31, 2008 at 11:46 pm | Permalink

    Sheer folly!

    (It’ll be fun to watch, though.)

  6. Posted April 1, 2008 at 2:51 am | Permalink

    Great post Mark :) I might need to re-post this, I couldn’t say it better myself.

  7. Posted April 1, 2008 at 6:30 am | Permalink

    We as a people have the power to rise up and we will.

  8. Ol' E Cross
    Posted April 1, 2008 at 8:30 am | Permalink

    I know you miss Al Gore, Mark, but there is one thing he wants you to know.

  9. Thoreau
    Posted April 1, 2008 at 9:10 am | Permalink

    The last ten minutes of “Rudy” always makes me babble like a baby.

    Roo-d, Roo-d, Roo-d…

  10. Thoreau
    Posted April 1, 2008 at 9:15 am | Permalink

  11. jules
    Posted April 1, 2008 at 9:27 am | Permalink

    I saw that video of the high school students yesterday and I had to stop it a couple of times because it kept making me cry. Well, I cry easily these day, it drives me nuts but those kids were so optimistic and sweet, I had a hard time taking it in. And what a wonderful teacher. It made me very sad to realize how cynical this society has become. I really don’t want those kids to lose that optmism about their lives.

  12. jules
    Posted April 1, 2008 at 9:34 am | Permalink

    Oops, spelling freak that I am, I do know that optimism is misspelled. Yes, I’m weird. I’m in good company.

  13. Ol' E Cross
    Posted April 1, 2008 at 10:32 am | Permalink

    Well, as long as we’re making corrections, I put in the wrong link. I meant to copy this one where you can actually hear dialogue.

  14. Paw
    Posted April 1, 2008 at 11:56 am | Permalink

    I’ve been Ghost-Rolled!!!!


  15. Posted April 1, 2008 at 11:57 am | Permalink

    Things that make me cry: Train Man, MASH, Jersey Girl and my government.

    Oh and my mortgage company. They made me cry today. Bastards.

  16. Paw
    Posted April 1, 2008 at 11:59 am | Permalink

    Glass shards in the eyes always does it for me. I guess I’m sentimental about that time my own dear father threw glass shards in my eyes.

  17. Brackache
    Posted April 1, 2008 at 12:59 pm | Permalink

    When Dumbo visits his mom in the cage vardo (sp?). Shit, I can’t even think about it.

    And being snapped at verbally by anyone.

  18. Anonymatt
    Posted April 1, 2008 at 2:04 pm | Permalink

    The only time I can remember seeing Mark cry while watching a movie was back in the early 1990s when he played the scene in Three Men and a Baby that purportedly shows a ghost in the window. (Which he was playing because I had never heard about the scene with the ghost, nor had I ever watched the movie.) Mark got hysterical/sad when the purported ghost image was clearly seen in the window. He really freaked out for a few minutes.

    Too bad there was no Snopes in the early 90s:

  19. oliva
    Posted April 1, 2008 at 3:56 pm | Permalink

    Does anyone remember the (last?) Natalie Woods film set in NC, scenes at the Wright Bros. Memorial . . . Nurse Ratchet (sp?) actor in it too? There was a device that let you feel another’s pure feelings. Anyway, that one might make you cry, Mark.

    Oh, video on YouTube of golden retriever named Rookie and woman performing to “You’re the One That I Want” MIGHT make some of you cry in the best way. Love to see such mutual and eager love–very end is swell too:

  20. Mark H.
    Posted April 1, 2008 at 4:42 pm | Permalink

    The repeal of the Glass-Stegall Act, done in 1999 by a republic an congress and signed by President Clinton, was enough to make me cry. It started the process of repealing the very sensible regulations of the financial markets that the New Deal created in the 1930s during the Great Depression…..and it cast the path direct forward to the crisis of today.

    Thanks for the rant, Mark, a perfect and well justified rant. Our do nothing government indeed. Those who say the market’s problems are due the government are ideologues, not well informed observers. Regularions, sensibly drawn up, are mere law and order for the capitalist system. Without them, the short term goals of the profit seekers will sink the whole capitalist econmy…as FDR understood 7 decades ago.

  21. Brackache
    Posted April 1, 2008 at 7:56 pm | Permalink

    And anti-murder regulations are mere law and order for killers.

  22. Dirtgrain
    Posted April 1, 2008 at 8:08 pm | Permalink

    Brackache asks why more regulation of the free market when this regulation didn’t work. But “this regulation” had been corrupted (by agents of the “free” market). Clearly, any calls for more regulation come with the qualifier that this should be uncorrupted regulation (relatively so, to the best of our ability). If only we could have some public-serving politicians who prevent the loopholes from cutting through the regulation–then we might heal and prevent.

    Wait. April Fools? Let the free market fix itself? Ha.

  23. egpenet
    Posted April 1, 2008 at 8:21 pm | Permalink

    The market was “up” today because “the numbers release by the ISM and housing industry wre not as bad as we thought they would be.”

    Holy equities, Batman!

  24. Brackache
    Posted April 1, 2008 at 8:43 pm | Permalink

    1913: Wall evil. Bang head against wall.
    1929: Skull cracks open, proving wall evil. Mom screams and cries.
    1933-present: Write stricter and stricter helmet regulations, necessitated by evil wall.

  25. mark
    Posted April 1, 2008 at 9:26 pm | Permalink

    The thing that gets me is the hypocrisy. If they really believe so much in the free market, why not let Bear sink? Why bail them out? I don’t have a problem if there’s an even playing field and everyone knows the rules. Unfortunately, that’s not what’s happening. Just as it was 20 years ago during the S&L scandal, those responsible are walking away scott free, when they should be in prison for what they’ve done.

  26. Thoreau
    Posted April 1, 2008 at 9:33 pm | Permalink

    I think Paul O’Neil says it pretty good here…

  27. egpenet
    Posted April 1, 2008 at 10:18 pm | Permalink

    Every bank in the world bought those CDOs and other junk from us. They are all greedy. And now the banks in Europe are puking losses.

    The regulations written since FDR for banks did NOT apply to the investment houses and were NOT FDIC insured nor otherwise regulated, except by their own investment community rules. This was mainly because they did not take in public cash deposits and offer savings accounts, etc.

    Credit relies on trust. If so-called investment banks at the center of the universe are allowed to fail, it’s not the money, it’s the trust that deflates the entire system.

    In a truly free market, your house, for instance, if you have to sell it, is only worth what someone ELSE says it’s worth, NOT what YOU or your mortgage lender’s numbers say. Same with Bear-Stearns. That “marking to market.”

    If we let Bear fail absolutely … it’s similar to having a neighbor being foreclosed in your neighborhood. Kiss YOUR equity goodbye.

    The fun will be seeing what ELSE comes out of the Fed’s Pandora Box in the next few weeks. Take these bear rallies as opportunities to dump and raise cash. You’ll need it.

  28. Brackache
    Posted April 1, 2008 at 10:21 pm | Permalink

    mark, I totally agree. It was a collossal blasphemy against the principles of free market capitalism to bail out Bear. It’s like if the keepers of a natural wildlife preserve directly intervened in the ecosystem by swooping in in their jeeps and choppers and saving all the prey animals from preditors and natural environmental hazards. Eventually all survival instinct is replaced by dependancy, and the ecosystem collapses into a big boring zoo wherein all the animals just sit around with no freedom or purpose in life. Then they start bad punk bands.

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