Who Do We Blame for America's
Financial Mess?
Ronald R Cooke
The Cultural Economist
Oct 8, 2008
Time for a reality check
The traditional checks and
balances of America's financial system have been deliberately
bypassed. The Real Estate industry encouraged the production
of very high risk mortgage applications. With the full knowledge
and support of Congress, most of the Banking System ignored its
responsibility to monitor the credit worthiness of mortgage applicants.
Wall Street then sliced and diced these worthless loans into
$$ billions of highly questionable securities called Collateralized
Debt Obligations. In the process, everyone involved dipped their
hands into the cookie jar. Millions and billions of dollars.
Get rich selling worthless paper.
But our folly doesn't end with mortgage market insanity. We have
also created a colossal dog pile of derivative instruments tied
to thin air, slopped at the trough of greasy debt, and turned
Wall Street into a raucous gambling casino. Financial chicanery
has been promoted as "investment". Our banking system,
which only works if there is an environment of trust and institutional
integrity, must now deal with an overwhelming fear of deception.
Dare I ask. Are the we victims of fraud and misrepresentation?
Criminal conduct? Gonad driven hubris? Mindless greed? Or just
outright stupidity?
In theory, this financial mess should never have happened. The
Bush Administration should have provided the leadership and management
necessary to ensure America's federal agencies were doing their
job. And under our "system" of checks and balances,
if the cognizant federal agencies continued to screw up, then
Congressional oversight should have kicked in to fix any problems.
But the system is broken. Financial ruin is the norm. The stinking
sludge runs both wide and deep. Ordinary Americans are being
savaged by economic privation.
A Massive Failure Of Federal Governance
The Bush Administration
At first blush, it would appear the Bush Administration has been
in a state of bureaucratic stupor. This situation has been developing
for several years. One would think someone on the Federal payroll
would notice the smell of rotting value. Now mind you, I'm just
an old middle class American, but just what were America's Federal
agencies supposed to be doing? Well. Here is what they claim
...
The Securities and Exchange Commission
"The mission of the U.S. Securities and Exchange Commission
is to protect investors, maintain fair, orderly, and efficient
markets, and facilitate capital formation."
The Federal Reserve
"The mission of the Federal Reserve is to provide the United
States with a safe, flexible, and stable monetary and financial
system."
The Department of the Treasury
"Serve the American people and strengthen national security
by managing the U.S. Government's finances effectively, promoting
economic growth and stability, and ensuring the safety, soundness,
and security of the U.S. and international financial systems."
The Comptroller of the Currency, The Department of the Treasury
The Comptroller of the Currency is responsible for "ensuring
a safe and sound national banking system for all Americans."
Office of Thrift Supervision [OTS], The Department of the
Treasury
"To supervise savings associations and their holding companies
in order to maintain their safety and soundness and compliance
with consumer laws, and to encourage a competitive industry that
meets America's financial services needs..."
"The OTS examines each
savings association every 12-to-18 months to assess the institution's
safety and soundness, and compliance with consumer protection
laws and regulations. In addition, examiners monitor the condition
of thrifts through off-site analysis of regularly submitted financial
data and regular contact with thrift personnel. OTS examinations
and its ongoing supervisory oversight are tailored to the risk
profile of each institution."
The Justice Department
"To enforce the law ... to provide federal leadership in
preventing and controlling crime; to seek just punishment for
those guilty of unlawful behavior; and to ensure fair and impartial
administration of justice for all Americans."
Now then. Have these agencies done their job? Can we trust their
judgment?
You decide.
And what about Congress?
Who has ultimate oversight responsibility for America's Federal
Agencies? Who holds hearings on agency operations? Who has the
responsibility to enact regulatory legislation? Who determines
what these agencies are supposed to do and then monitors them
to be sure they are meeting their legislative objectives?
Congress. Republicans and Democrats. There are two key committees.
Let's look at how they define their responsibility.
House (of Representatives) Financial Services Committee
"The Committee oversees all components of the nation's housing
and financial services sectors including banking, insurance,
real estate, public and assisted housing, and securities. The
Committee continually reviews the laws and programs relating
to the U.S. Department of Housing and Urban Development, the
Federal Reserve Bank, the Federal Deposit Insurance Corporation,
Fannie Mae and Freddie Mac, and international development and
finance agencies such as the World Bank and the International
Monetary Fund. The Committee also ensures enforcement of housing
and consumer protection laws such as the U.S. Housing Act, the
Truth In Lending Act, the Housing and Community Development Act,
the Fair Credit Reporting Act, the Real Estate Settlement Procedures
Act, the Community Reinvestment Act, and financial privacy laws."
(The Senate) Committee on Banking, Housing and Urban Affairs
"(The) Committee on Banking, Housing and Urban Affairs,
... (has responsibility for) all proposed legislation, messages,
petitions, memorials and other matters relating to ...
- Banks, banking, and financial
institutions.
- Control of prices of commodities,
rents and services.
- Deposit insurance.
- Economic stabilization and
defense production.
- Federal monetary policy, including
the Federal Reserve System.
- Financial aid to commerce
and industry.
- Issuance and redemption of
notes.
- Money and credit, including
currency and coinage.
- Public and private housing
(including veterans housing).
Such Committee shall also study
and review on a comprehensive basis, matters relating to international
economic policy as it affects United States monetary affairs,
credit, and financial institutions; economic growth, urban affairs,
and credit, and report thereon from time to time."
Let us review the facts.
Do you believe Congress has
done its job?
Did these Congressional committees
perform their duties in a responsible manner?
Do you believe they should
have been aware of the financial mess Wall Street was creating?
The Real Story
Blame
The Democrats will obviously blame the Bush administration for
everything that has gone wrong. They conveniently forget that
Liberal Democrats have been in charge of Congress while this
mess was collecting in America's financial toilet. The Republicans,
bless their hearts, will continue to be totally confused by just
about everything. Let's face it. Neither the Democrats nor the
Republicans have enough intellectual depth to even know what
questions they should be asking. Even if they had the will. And
do you really think anyone in the Washington establishment will
take any responsibility for this massive failure of the Federal
regulatory system?
Every American should demand an answer to this one question:
Did the Federal bureaucracy fail because it did not have the
authority (which infers Congressional legislative failure), or
did it refuse to pursue its responsibility (which may infer massive
corruption)? Either way, the Federal Government has effectively
transformed $$ trillions of dollars of stinking paper into what
will become very suspect Treasury bonds. New mortgages purchased
by Fannie and Freddie will add to this dog pile of debt. Add
it all up. Current debt plus mortgage debt. America's total Federal
debt will exceed $12 trillion. That's $39,400 per American. Then
add unfunded Social Security and Medicare obligations. NO - we
can not afford it. The only recourse will be a devaluation of
the dollar - all accompanied by a sharp increase in inflation,
higher unemployment, declining "real" GDP, and the
worst personal economic misery our nation has ever seen.
Is it time for real change?
Change
We Americans know the "system" is not working. We know
it is incredibly corrupt. Incompetent. And totally dysfunctional.
The only question is: how long will this go on before we the
people are so fed up our nation explodes with anger?
Obama will talk about change. All political vapor. He will carefully
avoid mentioning our Democratic Congress had multiple opportunities
to avoid this mess. McCain will talk about change. But the Republicans
are far to confused to be an effective legislative counterparty.
House Speaker Pelosi and Senate Majority Leader Reid continue
to be models of vitriolic ideology. Don't expect them to pursue
a course of constructive leadership. And what about Senate Banking
chair Dodd? Or House Financial Services chair Frank? Did they
play a key role in creating this mess in the first place?
Are you confident the Washington Establishment will do its job?
Will these individuals put the welfare of the American people
before their own personal selfish best interest?
Conclusion
There is absolutely no excuse
for the financial carnage that has occurred. Members of the House
Financial Services Committee and Senate Banking Committee either
knew, or should have known, that America was headed for financial
disaster. But instead, our Federal system has failed the American
people. It is unlikely the Washington establishment will fix
our financial system because politics and ideology will be more
important than decisive action. That can only lead to ill conceived
legislation. Followed by the misappropriation of funds. Decisions
based on political expediency rather than virtue. And endless
corruption.
It's time for a radical change in the way we govern ourselves.
If we want effective government, we must establish a better system
of management with strong, positive, and constructive leadership.
Ron
Ronald R. Cooke
website: The Cultural Economist
email: tce@tce.name
About The
Cultural Economist - Ron graduated with an A.B. in Economics from
Bates College. He has been an auditor, line manager, computer
salesman, marketing manager, product planning manager, and V.
P. of Marketing. A management consultant by inclination, Ron
has a comprehensive background in business development, product
planning, market research, and industry analysis. He has authored
multiple market research reports, contracts, business plans and
operations research studies for corporate clients in 12 countries.
Prior experience includes technology assessment, the evaluation
of corporate financial performance, and the negotiation of corporate
acquisitions.
Ron is a former
instructor with UCSC, and developed the curriculum for a science
based approach to decision analysis. He has pursued the study
of Cultural Economics since 1969, and has authored "Oil,
Jihad and Destiny," [Amazon,] a thought-provoking
research report on oil depletion (Opportunity Analysis - 2004,
and revised in 2007), and "Detensive Nation," a book
that redefines the role of government in an Energy Detensive
EcoSystem (The Cultural Economist - 2007).
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