Cheney/Bush/McCain and Alan G(ekko)reenspan - Con Artists of the First Rank

Now that we realize how thoroughly we've been sold down the river of real fraud, waste and abuse, let's go back a moment in time (before we take a hard last look at the perpetrators) and consider how far we've come. Gekko: "It's all about bucks, kid. The rest is conversation" (hissed by Gordon Gekko (Michael Douglas) at Bud Fox (Charlie Sheen) in the movie Wall Street). Greenspan (the revered Maestro of Wall Street)'s critics are finally brave enough to declare what everyone has known for some time now:

Economist Jeff Sachs said "To a large extent, the US crisis was actually made by the Fed, helped by the wishful thinking of the Bush administration. One main culprit was none other than Alan Greenspan." On October 24, the Seattle Times ran a piece on "Former hero Greenspan blamed for the credit crisis." He "found himself likened to one of the great goats of baseball." Called one of "three Bill Buckners." Referring to the 1986 Red Sox first baseman who let an easy ground ball through his legs that cost Boston the World Series as it turned out. The Financial Times ran critical responses to a Greenspan article titled "We will never have a perfect model of risk" in which he argued for the inability to anticipate "all discontinuities in financial markets." Economics professor Paul de Grauwe called it "a smokescreen to hide his own responsibility in making the financial crisis possible." Economist Michael Hudson challenged Greenspan's logic and misuse of empirical real estate data. Specifically land values. By spring 2006, "bankers knew there was a bubble." He wrote a Harpers cover story on it. But Fed officials compounded bad policy with more of it. Hudson added that "The financial system is now at a turning point. Bankers have shown that they can't regulate themselves when they're making so much money by feeding off (Fed-created) bubbles."

They couldn't have done it without each other (and without a whole lot of help from across the aisle). The resulting economic collapse and world-dominance collapse are twin monuments to their rank obliviousness. The now infamous "Alan G(ekko)" who was practically stealing the lines from the movie Wall Street reveals an economic status that couldn't have been truer then than it is today:

"The richest one percent of this country owns half our country's wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It's bullshit. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own. We make the rules, pal. The news, war, peace, famine, upheaval, the price per paper clip. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it. Now you're not naive enough to think we're living in a democracy, are you buddy? It's the free market. And you're a part of it. You've got that killer instinct. Stick around pal, I've still got a lot to teach you."

And Marx was certainly right:

He's on a "winning streak" others admitted, so it's worth noting what he wrote to Friedrich Engels: "The American Crash is a delight to behold and it's far from over." He referred to the Panic of 1857. An earlier banking crisis and recession that spread to Europe, South America and Asia. Marx condemned "free-market" capitalism as "anarchic" and ungovernable. Because it alienates the masses. Prevents the creation of a humane society. Produces class struggle between the "haves" and "have-nots." The bourgeoisie (capitalists) and proletariat (workers). The destructive contradictions of the system. Exploited masses so a few can profit. He predicted what's clear today. Competition over time produces a handful of winners. Powerful monopolies controlling nearly all production and commerce. Finance capitalism as well. Exploitation increases. Successive crises erupt, and ultimately fed up workers react. Recognizing their collective power and bringing down the system. Replacing it with a self-managed one. Ending exploitation and alienation. In his view, an inevitable socialist revolution. His letter to Engels wasn't wrong. Just early, and perhaps by how change will evolve. Not the outcome. Just the method. With a whimper, not a bang. Not by workers. From the system's own corrosiveness. Internal contradictions. So unworkable. Crisis-prone. Fractured by inequities. So self-destructive it can't endure. So it won't. It will crumble on its own.

But have the people of the U.S. (and the rest of the world) learned the lessons of unfettered deregulation of markets? Not likely. Greed reigns. Gordon Gekko had it right for the history-ignorant: "Greed (for want of a better word) is good."

Much to Greenspan's approval. He sweet-talked Congress and said "There is a very fundamental trade-off of what type of economy you wish to have. You can have huge amounts of regulation and I will guarantee nothing will go wrong, but nothing will go right either." He added that Wall Street had tamed risk and "many of the larger (ones) are dramatically hedged." Legislators bought it or at least didn't object. The New York Times is less convinced. Better late than never but don't expect it to become a trend. As Greenspan championed derivatives as a way of sharing risks, The Times said: "Shared risk has evolved from a source of comfort into a virus. As the housing crisis grew and mortgages went bad, derivatives actually magnified the downturn. In recent months, the financial crisis gathered momentum." Mr. Greenspan stayed conspicuously out of sight. Until October 23. With the crisis unfolding, he wrote an epilogue to the paperback version of his memoir. Said "Risk management can never achieve perfection. Governments and central banks could not have altered the course of the boom." He has no regrets.

Nouriel Roubini enlightens us:

Global deleveraging is in play as well. According to Fitch Ratings, world credit growth peaked at almost 16% in 2007. By yearend, it will be 7% and lower still at 5% in 2009. Hardest hit will be "emerging Europe but (it) will spread to all regions." World recession is setting in. Most likely to be deeper, longer and worse than most predict. In America, credit market debt as a percent of GDP began rising in the early 1980s and peaked at 350% in 2008. Comparable to its 1930s level. Money manager Jeremy Grantham's research shows that all markets revert to their means and generally way overshoot in the process. We're currently well into a massive repricing of risk and asset values. It may take years to play out. It will affect all over-valued markets. Stocks, bonds, commodities and leveraged debt. The cost will be in the trillions. The wreckage unimaginable. The result of monetary and fiscal irresponsibility with Greenspan deserving more blame than anyone. In 1987, he was chosen to serve financial community interests. Largely Wall and major banks. He bailed them out on October 1987's black Monday. Again in 1998 after Long Term Capital Management's collapse. He flooded the market with easy money. Kept interest rates low. He could do no wrong, and even now, says he has "no regrets on any of the Federal Reserve's policies that we initiated." An astonishing statement given the gravity of today's crisis. The result of rampant speculation and fraud made possible by easy money. With Greenspan supplying it to all takers. The Fed's job (or what it should be) is to promote stability. Smooth out the business cycle. Maintain a steady, healthy sustainable growth rate. Create price stability. Control inflation, and grow opportunities for everyone. Instead Greenspan fueled bubbles, and all he could say was that "irrational exuberance" may have "unduly escalated asset values" in a December 1996 speech. He did nothing to curb it. Claimed bubbles are hard to identify in real time, and the Fed is unable to diffuse them. He infamously said that it's "easier to clean up the mess after an asset bubble pops than to try and deflate (one) on the way up." In fact, the Fed's job is to spot and moderate them. Not let them get out of hand. By raising interest rates. Margin requirements. Jawboning. Reducing the money supply to cool speculation and enhance stability. "Taking away the punch bowl," as former Fed chairman William McChesney Martin put it. Available tools Greenspan eschewed that would have worked if used. They weren't, and he denied all responsibility. The result is where we are today. Greenspan still avoiding a mea culpa and only expressing "shock" and "disbelief." But no regrets, and why not. His job was to transfer wealth from the public to the rich. In that he succeeded mightily but look at the cost. - markets crashing; - the economy sinking; in secular decline; - record budget and current account deficits; - a soaring national debt and federal obligations; $5 trillion alone in one day for the Fannie and Freddie takeover; hundreds of billions more so far and trillions more to come; taxpayers on the hook for it all; - rising personal and corporate bankruptcies; - mortgage loan delinquencies and defaults in the millions before this ends; the latest Realty Trac foreclosure filings survey reported default notices up 71% from third quarter 2007 and said figures likely were underestimated; - an unprecedented wealth gap; - record household debt and debt service levels as a percent of disposable income; around 25% of annual income to credit card companies alone; - the greatest housing crisis since the Great Depression; - flat wages; - high prices on basic items like food, fuel and health care; - rising unemployment; a wave of corporate-announced layoffs; across the board in nearly all sectors; biotech as well as banking; aerospace as well as autos; - conditions overall the worst in decades; maybe ever as things get more dire; how economist Paul Krugman (on October 26) described them in the words of a "guy who was told, 'Cheer up - things could be worse!' So he cheered up, and sure enough, things got worse." The result of reckless and irresponsible policy. With lots of blame to go around. But none more than to the "maestro" of misery. Now 82 and unapologetic to the end.

Arlo Guthrie suggests one way to deal with the coming Depression is that you change your "name to Fannie Mae." And since we're on this page, wouldn't you enjoy hearing the "City of New Orleans" one more time as we find out exactly what the new plans are for saving that one-of-a-kind historic American city? After that unbelievable election eve (not to mention the days after when N.C. was hanging in the balance), I'm still sentimentally remembering that time when we thought we could change the world simply because there was plenty to go around if we just cared about the welfare of the others. (See end of essay.) And on one more bittersweet note: Could this possibly be true?

Suzan _____________________