Don't ever trust your laissez-faire friend to be designated driver

In the midst of the greatest financial catastrophe since the great depression, already we are being bombarded with revisionist accounts of our collapse. The Bush administration will dismiss any notion that they are to bear blame, rather opting for the this has been brewing before I got here defense or shifting the blame to wall street greed--as if these Ayn Rand-ians ever had a problem with greed (see Greenspan's devotion to the ignominious author of pop-fiction spuriously christened as philosophy).

Mr. Bush claims that "wall street got drunk," but Naomi Klien quips that "Mr. Bush was serving the drinks."

Klien might be on to something; the NY Times reports that, at the very least, our laissez-faire protectors knew of the liberal servings of libations and rejected the possibility of our reckoning:

A soft-spoken Texan, Mr. Falcon ran the Office of Federal Housing Enterprise Oversight, a tiny government agency that oversaw Fannie Mae and Freddie Mac, two pillars of the American housing industry. In February 2003, he was finishing a blockbuster report that warned the pillars could crumble.

. . .

Mr. Falcon’s report outlined a worst-case situation in which Fannie and Freddie could default on debt, setting off “contagious illiquidity in the market” — in other words, a financial meltdown. He also raised red flags about the companies’ soaring use of derivatives, the complex financial instruments that economic experts now blame for spreading the housing collapse.

Today, the White House cites that report — and its subsequent effort to better regulate Fannie and Freddie — as evidence that it foresaw the crisis and tried to avert it. Bush officials recently wrote up a talking points memo headlined “G.S.E.’s — We Told You So.”

But the back story is more complicated. To begin with, on the day Mr. Falcon issued his report, the White House tried to fire him.

. . .

His warnings were buried in the next day’s news coverage, trumped by the White House announcement that Mr. Bush would replace Mr. Falcon, a Democrat appointed by Bill Clinton, with Mark C. Brickell, a leader in the derivatives industry that Mr. Falcon’s report had flagged.

Jason Thomas' unheeded warnings (same article):

Typically, as home prices increase, rental costs rise proportionally. But Mr. Thomas sent charts to top White House and Treasury officials showing that the monthly cost of owning far outpaced the cost to rent. To Mr. Thomas, it was a sign that housing prices were wildly inflated and bound to plunge, a condition that could set off a foreclosure crisis as conventional and subprime borrowers with little equity found they owed more than their houses were worth.

People must remember that the neo-conservatives in office are ideologically opposed to financial or housing regulations or any sort of corruption of the precarious free-market. So trapped are these economists in their dogmatic principles, much like the rigid Communists of old, that only if their purity is achieved will their plans work. The concessions made today do not mark an ideological shift, but they are the pathetic last life-lines of unimaginative clowns (it would indeed be a grand comedy if such veritable despair were not the result). There remains still opposition to the idea of moderation, regulations, worker's rights(see the ignoble attacks on blue-collar autoworkers), and what they might besmirch as banal Keynesian economics. The financial bailout is more-or-less a grand swindle with the cursory hope of restoring our confidence in inadequate casino-capitalism and not an attempt at restructuring the very fabric of what makes our economy so precarious, environmentally unsustainable, inequitable and subject to such arduous boom-bust cycles.

The grand swindle is becoming painfully obvious

Part of a letter sent to congress declaring over 100 prominent economists' reasons for disdaining the bailout:

1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries “systemic risk.” The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America’s dynamic and innovative private-capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

The AP on a lack of transparency:

The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what's the plan for the rest?

None of the banks provided specific answers.

. . .

There has been no accounting of how banks spend that money. Lawmakers summoned bank executives to Capitol Hill last month and implored them to lend the money — not to hoard it or spend it on corporate bonuses, junkets or to buy other banks. But there is no process in place to make sure that's happening and there are no consequences for banks that don't comply.

Naomi Klien draws parallels between the corporatist nature of the bailout and that of Iraqi reconstruction:

Still the original impulse underscores the many worrying parallels between the administration's approach to the financial crisis and its approach to the Iraq War. Under cover of an emergency, Treasury is rapidly turning into an economic Green Zone, overrun with private companies collecting lucrative contracts. Fittingly, one of the first to line up at the new trough was none other than the law firm of Bracewell & Giuliani — yes, that Giuliani. The firm's chairman, Patrick Oxford, could scarcely conceal his glee over the prospect of cashing in on the bailout. "This one," he told reporters, "is very, very big." At least four times bigger, in fact, than the post-9/11 homeland-security bubble, from which Giuliani and his various outfits have profited so extravagantly. Even bigger, potentially, than the price tag for the Iraq War itself.