(no subject)

[steuard]

I've had trouble looking away from the turmoil in the financial markets this week. Between the possibility that the economy could plunge down a cliff and the possibility that we're going to be collectively saddled with a trillion dollars of new debt, it's awfully likely that something tremendously significant is happening. Unfortunately, I don't know nearly enough about the underlying issues to have any good sense of what the "right" response might be, individually or as a society. A couple of thoughts, in no particular order:

• I am surprisingly bothered by the notion that when the dust settles, some people will have gotten rich off of these subprime loans. I can accept that the government may have to step in and bail out the economy in this situation, but if the corporate executives who made these high stakes gambles waltz off into happy retirements with golden parachutes I know that I'll resent it. Perhaps the right way to handle that is to combine extreme government spending with extreme government enforcement: have federal, state, and local law enforcement go over every aspect of the subprime mess with a fine toothed comb and throw the book at people for every little infraction that contributed to the disaster. I'm a little disturbed to realize that I'd feel better about those golden parachutes if the profiteering executives and predatory lenders had to enjoy them from prison.


• This is sort of situation is precisely why I've long been skeptical of extreme privatization and deregulation. The government is going to stick its nose into issues like banking and retirement, we just have a choice of when and how. If we leave markets entirely free without regulation, we'll get occasional major busts when competition for the highest immediate profit leads to erosion of standards and collective stupidity, and the government will be politically forced to step in to bail the rest of us out. If we privatize retirement investing, there will come a time when a major market drop leaves half a generation of the elderly destitute, and the government will be forced to step in to make sure the elderly don't have to live on cat food. The alternative is to set up some level of government involvement in advance, in the hopes of making government involvement more predictable and more fair. It's a tough balancing act to do that without stifling the positive effects of free markets, but I think it's still a better choice.

Comments

[ukelele.livejournal.com]

The media have been totally sloppy about it. Annoying.

And I share your frustration about the banks. I get that average people might not 100% understand all this stuff, especially if you're being lied to, but you'd think financial companies would have both the incentive and ability to manage risk appropriately.

As for "nobody would be that nuts", certainly the media narrative around here echoes the "people believed housing prices would always go up" theme; of course, as already stated, the media are sloppy, but certainly the housing market around here was incredibly overheated and a lot of people took out loans that only made sense under the assumption that their property values would always go up. Again, it seems like *lenders* ought to be smarter than that, but who knows.

If it's any consolation, everyone has now gone completely overboard the other way :P. We had to actually drop me from our refi application last week because my credit (700+) wasn't high enough. Yeah.