Tale of Two Disasters

There’s no shortage of opinions on the causes of our current financial dilemma which fall clearly on separate sides of the political divide. The left, generally inhabited by Democrats cites, among other things, two wars, the Bush tax cuts, and subsidies of select industries.  On the right Republicans complain of high taxes, entitlements, and  the bailout of the financial community, the first part of which was requested and administered  by one of their guys named Bush.

The crux of the answer as I see it was spelled out simply for us by the Great Depression. The melody notes may differ slightly, but the harmony is identical. Loans were made with insufficient collateral. When the value of securities falls close to that of the loans they are meant to secure, a lot of people start wanting their money yesterday. To meet this demand these securities, in the recent case houses, are put on the market and good old supply and demand does its usual work on the price. The inescapable conclusion is that more supervision of these loans is in order, OK regulations. This is the official position of the Democratic Party and antithetical to that of Republicans, who respond to this reality with obfuscation reminiscent of Iran Contra.

One wrinkle in use is blaming new home owners for “living beyond their means” by agreeing to the unsound mortgages that created the home loan catastrophe. This reasoning assumes that a blue collar worker from Brooklyn, whose formal education ended with a high school diploma from Erasmus, is as knowledgeable on these matters as a bank loan official with a master’s degree in business and, most important, experience in the field of home loans. To put it another way, which party is supposed to know the territory? Regardless of who’s to blame regulation is still necessary. I guess some Republicans just have this thing about people poorer than them.

There are differences between the two depression/recessions. The Great Depression was the result of an insanity that swept much of the nation, even the fellow shining Joe Kennedy’s shoes. This time the nation didn’t lose its head. The public simply was not aware of what was happening while the culprits were, and are doing very well, thanks to the United States Treasury. In the 1930s many of their predecessors jumped out of tall buildings.

I never questioned the urgency of the TARP bailout. I believe it probably saved us from much worse than we’ve experienced. But I despair for the system that made it necessary. This not the system that kept us fiscally stable for nearly a century. It’s the product of a change effectively promoted by a president, sainted by many, who told us that the enemy is government, which includes the folks hired to keep our credit system on the up and up. With enemies like this, who needs friends?