Great Paul Krugman piece on alleged financial reorg

[OmahaBlueDog]

http://www.nytimes.com/2008/03/31/opinion/31krugman.html?ref=opinion


<<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 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. >>

[Larkspur]

1. Krugman speaks for me!

Bloggers should get that picture Krugman was talking about -- the one where deregulators where using chainsaws to cut through banking regulations -- and use it along with pictures for people losing their homes to show what neoconservative philosophy leads to.

[OmahaBlueDog]

7. Ronald Reagan conned a generation into believing

that "Government is the problem"

To be sure, the government of the 70s was bloated, and needed trimming. But Reagan took a chainsaw to government and ushered in an era of decreasing regulation. Part of the message that we need to send is that a variety of seemingly disconnected issues -- Enron, Abu Graib, Bear Stearns, Blackwater, the rolling blackouts in California a few years back, the housing meltdown, no-bid Iraq contracts, and others all have, at their central root, a lack of government oversight, or a lack of oversight by theoretically independent private entities who fell down on the job, or a combination of both. We don't just need a new President or a new party in power -- we need a change in attitudes over the balance point between a free market economy versus the reach of government to prevent expedient or greedy behavior. In short, "Greedy businesses are now the problem."

[Warpy]

2. He's right, the rescue of Bear Stearns

was the final nail in the coffin of deregulation, laissez faire economics, mercantilism, monetarism, neoclassical economics, or whatever the wealthy want to call a system that should benefit them at the expense of the rest of us but always takes them down eventually when it fails. It was a tacit admission, once again, that GOP fiscal dogma has never worked, is not working, will never work in the future. It was an admission that financial markets need to be regulated more than business needs to be relieved of onerous rules that cost them money.

The good news is that it happened on their watch. The bad news is that they will write the new regulations.

Undoubtedly there will be regulations written that will control the thieves and snake oil salesmen in the short term, but you can bet all the isms will be back again once the market is well regulated for a couple of generations.

There will always come a new generation that is untaught and who will be complete suckers for the scam all over again.

[shain from kane]

3. Yes, but what about my social security. Should it be invested in the stock market?

[Warpy]

4. Are you NUTS?

Social Security is a pay as you go insurance program, insuring us against destitution when we are too old and/or sick to work any longer. It is not and never has been an investment.

Unfortunately, thanks to Reagan, we are paying double premiums and having half of them robbed to transfer wealth to the rich.

You want to invest in the stock market, go do it. Just don't pretend that your OASDI premium should be used for any part of it.

[OmahaBlueDog]

6. Insurance programs have to invest in assets or debt to make money

That said, I don't think Social Security should be invested in equities.

High quality mortgages, perhaps. Muni bonds, foreign bonds from responsible nations. Agagin, perhaps. There is room for improvement on the investment side, but the fund should me run like a conservative life insurance fund, not a mutual fund. I'm against individual SS accounts on any level.

[Warpy]

8. You're assuming there is a surplus

but the one we have now is illusory. After all, we Boomers are assured that all our OASDI overpayments went into T-bills, right?

Just wait until we try to redeem them.

The only real crisis in Social Security is that Congress won't be able to raid it for money to hand to the rich once we all retire, if we're all too mean to die quietly first.

[Supersedeas]

5. think the television powdered faces would dare do this type of analysis