The collection of ne’er do wells, clueless dolts, political hacks, and oh, let’s just be blunt and call them what they are — total Idiots — expands into an ever larger circle.

While the Republic burns due to the unsavory combination of incompetence, ideological rigidity, and crony capitalism, the fools and assclowns seem ever more determined to avoid any personal responsibility for the damages they have wrought. Instead, they flail about blindly, blaming everything and everyone — except their own horrific negligence.

This is financial incompetence writ on a scale far grander than anything seen for centuries.

As a nation, our institutions have failed us: Under Alan Greenspan, the Federal Reserve slept through the most reckless and irresponsible expansion of bank lending in history for reasons of ideological purity. His opposition to the Fed’s regulatory role
reached the point of malfeasance long ago.  History is unlikely to be kind to the Maestro.

There is a choice to be made: Either we regulate the Banks, or leave it to the vagaries of the free markets to punish those who trade with, or place their assets in the wrong institutions. But for God’s sake, do not give us the worst of both worlds — do not allow banks the freedom to make horrific but preventable mistakes (i.e., only lending money to those who can pay it back), but then expect the taxpayers to foot the trillion dollar bill.

That’s not capitalism, its not socialism, its not regulation, and
its sure as hell isn’t what free markets are. Our language is
insufficient to describe this hodge-podge system, other than to call it a random patchwork of quasi-capitalism, quadrennial-socialism, and politics as usual. Ideological idiocy is the only phrase I can muster that has any resonance with the daily insanity.

We have entered into a fit of Orwellian madness: The American
Capitalists, long the globe’s leading advocates for free markets, have
become near Socialists. Halfway around the world, the Chinese Communists
have picked up the baton, and are moving rapidly towards a form of Capitalism. Ironically, it is the once largest communist nations — the Chinese and the Russians — who holds much of Fannie and Freddie’s paper.

Hey comrades, who’s selling the rope to whom?

Perhaps the rescue of "Phony and Fraudy" are not so much a bail out of American homeowners as it is a desperate attempt to stay in the good graces of our friendly global bankers. We are the world’s largest debtor nation, and as such, we depend upon the kindness of strangers — be they Japanese or Europeans or Abu Dhabians — or even former communists.

Back in the States, something beyond cognitive dissonance is occurring — this is full blown case of dementia unfolding in the public sphere. When this era of excess and absurdity is treated by historians in the future, the question I expect to be asked most is not why many of these people weren’t jailed for their financial felonies. Rather, I expect them to wonder why so many of these folk weren’t placed in protective custody, and heavily medicated, for the only rational explanation for their statements and behaviors is that they have gone so far beyond the bend as to be completely and totally insane.

Massively over-leveraged companies? Blame short sellers.

Wildly under-capitalized financial firms? Blame rumors.

Heinously poor corporate management? Blame a Senator.

It is as if someone is running around Washington D.C. with a
ball-peen hammer, smacking senior government officials on their skulls. If you find the
standard finger pointing hard to fathom, perhaps blunt head trauma is a better explanations for the absurdities proferred.

Books will be written about this period of time, and our descendants will
wonder in awe as to how this was allowed to happen. Tulips got nothing on us! Its not just the
total dollar value of the losses that have exceeded all other global
fits of financial madness combined, but rather, how so many warning signs were
so blithely ignored by so many and for so long. What was wrong with these people,
the authors and historians will wonder. Did the antibiotics in the food
supply drive them mad? Did the High Fructose Corn Syrup compromise their ability to think? Some form of viral plague? Roid rage?
What else could have created such a mass delusion amongst not just the
populace, but their leadership and institutions?

Indy Mac goes belly up, having lost $900 million this year alone. Its shares fell 87% in 2007 and then its value dropped (on top of last year’s collapse) another 95% this year-to-date. The stock fell to 28 cents yesterday. Some estimates of the total bad loans made by this somewhere in the neighborhood of $30 billion dollars — and the Office of Thrift Supervision blames a senator who is investigating how much of the FDIC’s $53 Billion this is going to eat up, with Wall Street estimates ranging from 15% to 30%. The towering incompetence of OTS is incomprehendable, but it is their colossal gall that is truly stupefying.

From beyond the grave, Adam Smith does not know whether to weep or retch. 


About Those Companies Brought Down by Rumors . . .  (July 11, 2008)

5 Stages of Market Grief  (January 2008)

Book Review: The Bush Boom (April 2008)

SEC Moves to Curb Short-Selling
July 16, 2008; Page A1

SEC Enhances Investor Protections Against Naked Short Selling
Release 2008-143
July 15, 2008

SEC’s new red herring
Spreading false info is against the law, but is chasing down rumors the best use of an already overwhelmed SEC?
Roddy Boyd
Fortune, JULY 14, 2008: 2:22 PM EDT

IndyMac Seized by U.S. Regulators; Schumer Blamed for Failure
Ari Levy and David Mildenberg
Bloomberg, July 12 2008

How Chuck Schumer Caused the Second Largest Bank Failure in US History
Jerry Bowyer, 12 Jul 2008


Category: Credit, Derivatives, Federal Reserve, Politics, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

152 Responses to “Idiots Fiddle While Rome Burns”

  1. Vermont Trader says:

    It’s the baby boomers fault.

  2. yoganmahew says:

    Great post Baz. It’s about time people started getting angry.

    But you think you got it bad? You wanna see the bubble that’s been blown here in Ireland. You want village idiots? We’ve got a parliament building full of them, falling over each other to come up with the most hare-brained scheme.

    We are skirting the line between tragedy and farce. We may have both at the same time.

    PS It’s ‘retch’ not ‘wretch’ ;-)

  3. jmf says:

    Amen from Germany!

  4. dougChampion says:

    He’s puking……

  5. Tony Shifflett says:

    Couldn’t agree more. Greenspan, like President Coolidge, got out just in time. History will not judge Greenspan well.

    This is gonna double the national debt.

  6. Jim Haygood says:

    I call this system “managed democratic socialism,” but pick any name you want. It’s a foul, squalid dog’s breakfast, and it ain’t working.

    “Books will be written about this period of time, and our descendants will wonder in awe as to how this was allowed to happen.” — Barry R.

    The Onion had a spoof yesterday about looking for the next unsustainable Bubble. But in all seriousness, once the dollar was completely delinked from gold on 15 Aug 1971, serial Bubbles are the only game in town.

    In the twilight years of Bretton Woods II, global reserves and the Fed’s custody account (which is part of those reserves) are growing at near 20% rates to recycle the U.S. trade deficit, as it spews paper dollars across the globe. Naturally, this has set off developing world inflation, as well as spectacular stock market Bubbles and crashes (India, China, etc.).

    Until Bretton Woods II finally flies apart, and the U.S. dollar is no longer a convertible currency, the only answer the authorities have is to create another Bubble. Think about it — if we could flip a switch and have 10% annual inflation in salaries and house prices for the next three years, the housing crisis would go away. Without admitting to it, this is exactly what they will attempt.

    Bottom line: until the prevailing fiat currency orthodoxy is repudiated (an extremely remote prospect), serial Bubbles will be the investment theme of the rest of our blighted Boomer lives. The definition of investment is identifying a Bubble, and speculating with extreme leverage till it pops. Then buy the next one. And watch your country sink into Third World status, as malinvestment systematically impoverishes it. You paid for it; you got it. Thank you, Alan Greenspan, toxic Pied Piper of ‘financial innovation’!

  7. nk says:


    Leardership is top down. This is the problem in a nutshell. If it is ok for the government to behave in this fashion, well then it surely is acceptable for corporate america, and it’s citizens. We reap what we sow.

    Where did this concept of spending beyond our means come take hold? What did people think will happen over a period of time. Why do schools not teach the devastating effects of the paying of compound interest? We now have not 1 but 2 generations to deprogram. And no one steps up to be accountable and take the blame. It is someone else’s fault, let’s hold hearing or file suit!

    Still the greatest nation on earth but, sad times indeed.

  8. Gregor says:

    Wow, you made my day!

  9. BR,

    CNBC and Fox Business News are in desparate need of competition.

    as Wallstrip, and others, shows, there’s a Demand for Financial ‘Video’/IPTV.

    W$W w/ Louis Rukeyser is no longer with us, and Gens X&Y need more than YouTube for their N90s, and their well-being..

  10. Patrick says:

    The moral: Its a lot more cost-effective to regulate than it is to rescue.

    This situation is truly ridiculous. If an institution can be in practice “too big to fail,” then there needs to be regulation preventing it from crossing the threshold whereby the harsh consequences of failing in a free market are avoided through taxpayer largess simply because they are so bad. The government should protect a corporation’s ability to fail miserably, rather than protecting the market from its failure.

    In the absence of regulation and enforcement, and with our strong preference for economic and political stability we get, as Barry said, the worst of both ideologies: socialization of losses and an incentive for reckless capitalism. This is completely unsustainable.

    I don’t see how its possible for us to be any dumber.

  11. MK says:

    Best explanation i have ever read.
    Gratulations from Germany too.

  12. rodeo says:

    Hell of an inspired post, BR.

  13. Jim Haygood says:

    And by the way, according to Bloomberg, the consensus estimate for core CPI in today’s report is … wait for it … +0.2%. SAME AS IT ALWAYS WAS.

    Zombie statistics for zombie citizens.

  14. Roman says:

    Slightly OT:

    Although I agree that the policy makers have been idiots, I can’t help but recall your critique of the Efficient Market Hypothesis. You essentially stated that markets can behave irrationally at times and need policy makers to set them in the right direction. Yet, your argument is based on a huge fallacy. That policymakers will be more rational than the market. Something that is wrong about 90% of the time.

  15. austincompany says:

    I’m sure my next door neighbor would disagree – you see this was a wonderful time for him. He lived in the land of Oz (Southern California) and bought a small three bedroom home in the late 90′s for $300k. But then, in ’06, he sold this small home for $1.3 million and moved to Texas. He is now a millionaire – thanks to Alan, Ben and all his friends.

    Makes me sick – he isn’t a very good neighbor at that.

  16. blin says:

    Brilliant commentary Barry.

    Did you really write that piece?

    I have a feeling that your commentary will be picked up by the MSM. The truth is finally out.

    The rose colored glasses have finally been removed and it just ain’t rosy anymore.

  17. bluestatedon says:

    When you consider the vast amounts of profit made by the politically connected over the last 25 years, of which KBR and Halliburton are only the most obvious and recent examples, the old but still applicable term of crony capitalism comes to mind. Which in turn brings to mind one of my two favorite Presidents, Teddy Roosevelt, who dealt with the negative consequences of crony capitalism a century ago:

    “When they call the roll in the Senate, the Senators do not know whether to answer “Present” or “Not guilty.”

    “A man who has never gone to school may steal from a freight car; but if he has a university education, he may steal the whole railroad. ”

    “The things that will destroy America are prosperity-at-any-price, peace-at-any-price, safety-first instead of duty-first, the love of soft living, and the get-rich-quick theory of life.”

  18. Arrogance and greed, just old fashioned arrogance and greed.

  19. zell says:

    “Bubble, bubble; toil and trouble.” A perfect witch’s brew. Go Barry!!

  20. John Thompson says:

    Looks like more government checks on the way. Hyper inflate until the dollar crashes even further? Is this all that can be done at this point, save dwindling assets?

    I guess what I’m saying is, why don’t we get any media on the dump Freddie, Fannie and asset values to save the dollar and restore regulation? Oh yeah, rich people run things. . . .

  21. Maldoror says:

    Fuckin’ A Right!

  22. jim says:

    So far only 200 low level people arrested in cunjuntion for this mess. Where is Mozilo, not one bad company but two. I think a couple of town square hangings would send a message also.

  23. EDF says:

    Well put. Thank you, Barry.

  24. Dervin says:

    Wow, what a post.

    In the But do you think there’s any way of protecting the stupid without bailing out the greedy?

  25. slognarth says:

    Hopefully you’ll get lucky and the future historians will miss this post. Unless maybe you can think of a better way out of this mess. Until then… continue the “I told you so banter.” Government has morons? Check. People who ignore warning signs of market bubbles are morons? Check. I don’t think anyone would argue with such insight. We get it. So now what? Unless I missed it, what’s your plan again? Should I start rounding up some historians?

  26. Renting in Mass says:

    Great post! Hopefully our descendants will find this blog and realize that we weren’t all blind to what was happening.

  27. cinefoz says:

    SarbOx did a radical job of cleaning up the absolute mess created by corporate thieves.
    Now, the US needs a law as broad and bold as SarbOx that will keep the financial community clean.

    Anyone who thinks that people with access to oceans of capital won’t and/or don’t manipulate the markets is an idiot or a thief who is trolling for gullible idiots. The oil markets and the price of oil are the result of fraudulent manipulation, I am sure. Rumor mongering short sellers are an interesting phenomena, until their success causes the US taxpayer to expend assets in order to clean up the mess they created and profited from.

    Perhaps one or more large investment banks will eventually, or maybe soon, be charged with violations of the RICO Act, being named as a corrupt enterprise. I suppose their defense will be that, if you look at the laws in a certain way, their manipulations were not only legal, they were embraced by Republicans who think that markets will and should regulate themselves.

    Just as free speech does not allow someone to yell ‘Fire’ in a crowded theater, free markets should not allow thieves to ruin the world economy. Since so many can and will steal anything they want if they have the resources to make it look legit, new laws are needed to stop the crooks and idiots who are making the investment markets take on the appearance of a criminal enterprise.

    The stock market is looking more and more like organized fraud every day now. Risk is being redefined as being able to figure out what the crooks will do next, and bet on their success or failure.

    Congress need stop introducing laws that plan to stop oil price manipulation and begin voting on them BEFORE the August recess begins. the DOJ need to speed up it’s investigations of crooked markets and announce a few indictments. Then, Congress needs to think about laws that prohibit investments that are too complicated for normal people to understand.

  28. s.gates says:

    on the spot post:
    although, im trying to hate the “sins” and not the “sinners” but that precept just aint working right now.

    what a mess, oh the horror, the horror!

  29. John says:

    What was that your Olberman moment? There’s no doubt a lax regulatory regime and other economic asinities by the administration combined with the cheap money policies of Greenspan’s fed are responsible for this mess. Unfortunately, pointing to the culprits who will likely never be brought to justice, doesn’t make the mess go away. In that sense it’s exactly like the situation in the middle east. Bernanke and Paulson have no alternative but to practice state “socialism” to mitigate this mess. In fact ideology is still stopping them from embracing it entirely and taking more aggressive and effective steps like the outright nationalisation of F/F and the proactive seizure of the shakiest banks on their hit lists. Paulson and Bernanke are responding in the best way they know how given the political realities of a totally incompetent president with zero cred and his army of ideological flickering luminaries in congress who are not going to sign off on any really dramatic measures to contain the crisis. So stop shooting the pianists. They are doing the best they can.

  30. Southside says:

    Its not really Barry’s position to have a plan, that’s for the people in charge such as Bernanke. He just calling them all on what has worked out miserably up to this time. Its commentary. If and when Barry decides to run for office, well, we can then demand a plan from him.
    Take it for what it is, an excellent commentary on the state of our economy. More people like Barry need to be speaking out, and doing it so eloquently.
    One of your best yet Barry.

  31. jkw says:

    It isn’t socialism, it’s fascism/corporatism. The very important difference is that in socialism, the government helps the people, while in fascism/corporatism, the government helps the corporations. The difference between fascism and corporatism is that in a fascist state, the government also restricts individual freedom, tortures/kills people they don’t like, and spies on their own citizens.

    Please do not give socialism a bad name by calling things socialism when they are not. Serial bubbles are an expected phenomenon in both fascism/corporatism and capitalism, but not in socialism. Moving more towards socialism is one of the few things the US could do right now to actually clean up the mess without making things worse.

  32. lurker says:

    Right on! Tru Dat! Thank Heaven you mentioned CRONY CAPITALISM. Anyone remember when we were so critical of Malaysia for the same, from our high horse???? From whom do you think they learned it????!

  33. jim says:

    You know back in the old days there would actually be some accountability for this mess, these CEO’s would be kicked down the street end up homeless or something. Now they get the golden chute. Until that goes away nothing changes.

  34. wally says:

    Writing before you had that first cup of coffee, I see.
    Actually, I feel as you do. I wonder if the looting will stop when we get a new administration in 2009 or if it will stop becasue they run out of money to loot first?
    Really, there are not words to express the disgust, but yours do come close.

  35. ReturnFreeRisk says:

    I could not have said it better. Barry, there is a great need for people who understand the situation and can articulate it like you do.

  36. HCF says:

    Why don’t the blame-mongers kill two birds with one stone?

    Just start calling short-sellers “financial terrorists.” They could even tap their phones w/o cause and then do a pre-emptive strike…

  37. MeanGene says:

    Wonder how many traders watched the Bernanke-Paulson-Cox testimony yesterday and had the same hallucinogenic experience I did. I mean, it was like far out.

    The psychedelic part when Paulson was explaining his idea for saving Fannie Mae and Freddie Mac. He wants a blank check, to spend an undetermined amount, at an undetermined time, under an undetermined set of circumstances. If he gets it, he’s pretty sure he’ll never need to use it.
    But he needs it to save an institution that’s doing just fine and doesn’t need any help at all. And if he does need to use it, he would consult with the people he’s trying to save, or maybe not. He was clear that they might not even recognize that they need to be saved.
    Paulson would also consult with the movers and shakers in congress, if he has time, and it’s convenient.
    And there can’t be any limitations on the action taken, or the evil speculators would know the limits and have no fear about destroying those same institutions that are fine and don’t really need any help. The idea there seems to be that if the evil speculators know you only have a squirt gun in you pants, they would not be afraid, and would wreak havoc and otherwise victimize poor Fannie and Freddie. But if they believed he had a bazooka in his pants, then they would cower in fear. That’s a whole phallic image I myself fear to even contemplate.

    And by the way, let’s ban shorting those institutions that are explicitly not backed by the government, just in case the government would have to back their share price and debt.

    Cox announced the plan to keep the evil shorts at bay. I think he wants to make it illegal to naked short those two stocks. My impression has been that’s it’s always been against the rule to short if you didn’t have the ability to deliver the stock. So apparently what the real plan is… wait for it, to enforce the existing rules on naked shorts, but only for prime brokers and the GSEs. I mean, that’s far out man!

    All this talk about naked shorts, and bazookas in your pants, a human unit just has to wonder what these guys are feeding their heads.

    When the men on the chessboard
    Get up and tell you where to go
    And you’ve just had some kind of mushroom
    And your mind is moving low.
    Go ask Hank
    I think he’ll know.
    When logic and proportion
    Have fallen softly dead,
    And the White Knight is talking backwards
    And the Red Queen’s “off with her head!”
    Remember what the dormouse said:
    “Feed your head.”

  38. carlwied says:


  39. BobC says:

    Now that was a nice rant. Nicely sums up what I’ve been thinking.

    Sadly, all I can do is tie my lifeline to the mast and ride out the storm. If the ship goes down, maybe I can grab on to a piece of flotsam.

  40. Chief Tomahawk says:

    Damn, BR!

    You make me want to build an arc and head for The Galapagos…

    Got to do a little Bush bashing…

    He was the guy who strode to the lectern and told the U.S. we were in imminent danger post-9/11 and had to go on the offensive. Yet this financial crisis has grown and developed and he hasn’t brought to the nation the severity of the problem. Why such an absence of leadership?!? He ran with the statement “We will LEAD!” Also “We’ll bring dignity & honor back to the White House”. Instead what we’ll have to remember him by is his flysuit on the deck of an aircraft carrier under the banner “Mission Accomplished”.

  41. HR says:

    This is why I read you every day. I think there’s a cultural component to this too — the WH under Clinton and Bush encouraged the belief that $$ come to Americans because they have moved beyond being merely workers — we are an investor nation (remember day traders?) and a nation of intellectual workers — and thus we can all live in BIG houses with brushed steel appliances and granite countertops. Work and working and sweat was something that illegal immigrants and women in Singapore and India did. We reaped the benefits of being an EVOLVED country. Housing prices and Qualcomm stock was our reward for being Americans, and we were going to spend it on flat-screen teevees and BIG cars and tiled bathrooms (built by guatemalans) if it killed us. And it has.

  42. michael schumacher says:

    “do not allow banks the freedom to make horrific but preventable mistakes (i.e., only lending money to those who can pay it back), but then expect the taxpayers to foot the trillion dollar bill. ”

    How about a rant on those banks that compounded the mistakes by leveraging their portfolios (in many cases more than 30:1) with all of that debt.???

    I do not disagree with the essence of the post but please dig a little deeper and you’ll see why the bailout crowd is so adamant about continuing the mistakes.

    It’s not just about the home loans and you know it….


  43. michange says:

    Best book ever about US economic ideology 1958-2008 :

  44. s0mebody says:

    I say wind down Fannie and Freddie. Don’t bail them out, and let the market price in the risk of default. Rates go up and housing prices plunge. People lose “money” but the dollar bottoms and has value. The banks actually have a job again lending to consumers for homes at a rate of interest they make money on.

    Option 2, “the Paulson plan” gives the GSEs a blank check. The dollar prices in the unlimited power of Paulson’s plan by never strengthening appreciably because the hyperinflation risk always exists. And the housing market never reaches a market clearing price again. If the government is always willing to underwrite a loan up to $750,000 for a house, underwriting will be lax and money will be loose. Since defaulted loans never have a negative impact on anyone but a blank check company, the dollar slides…

  45. cinefoz says:

    I wrote this above, but it is so profound that I decided to repeat it:

    The stock market is looking more and more like organized fraud every day now. Risk is being redefined as being able to figure out what the crooks will do next, and bet on their success or failure.

  46. Jeff says:

    Does anyone (I mean ANYONE) take Jerry Bowyer seriously? Good grief. If they do, they deserve everything they get.

  47. Anders says:

    “Ideological idiocy” – you’re wrong. There is no ideology that advocates the creation of financial bubbles, yet it keeps happening over and over again throughout history.

    It’s pointless to ask a banker to lend responsibly, if he getting a huge bonus for doing the opposite.

    It’s pointless to ask Greenspan/Bernanke to fight inflation or to regulate the banks, because they got the job by promising to support growth with easy money.

    Its pointless to expect congress to balance a budget, or fix social security because they got elected by promising to spend money freely.

    Bubbles are created because short term thinking is they way to rise in any organization. It’s simply POLITICS AS USUAL.

  48. Stav says:

    Clean it up, keep the indignant emotion in it and send it to the Times. A great piece like this need broad readership.

  49. Robert B says:

    Don’t sugar coat it, tell us what you really think! ;-)

    Well, maybe you did “sugar-coat” it a little. It’s hard to place into words the utter outrage and helplessness that we all feel over this lending fiasco. It all boils down to:
    How could you make such loans without making any effort to ensure that you could be repaid?
    How could you throw out 100 years of proven lending standards?

  50. InvestmentBanker says:

    Well Said! It seems that you also agree with this guy:

    “If once [the people] become inattentive to the public affairs, you and I, and Congress and Assemblies, Judges and Governors, shall all become wolves. It seems to be the law of our general nature, in spite of individual exceptions.” –Thomas Jefferson to Edward Carrington, 1787. ME 6:58

  51. Anonymouse says:

    Ever wonder how Rome fell? Was it that the Visigoths were so strong or Rome merely lost the will to fight back?

    This is bad and is going to get worse, but so long as it stays an economic crisis, I believe we’ll get through it in the end. The thought that really scares me is that we may be the Wiemar republic of the 21st century. That if the pain becomes truly widespread we might start casting about for someone to blame and it’s not going to be multimillionaire CEOs. I think saying “It can’t happen here” is right up there with “This time it’s different” in terms of hubris.

  52. ceo says:

    Great one. Did this get kicked out before coffee or after?

  53. MM says:

    We have to be bullish otherwise it will be politcally incorrect and will be blamed by Larry and Dennis! I am not going to wave my white-flag! Be optimistic! Think long-term! And we saw the capitualation last week!

  54. H Salmon says:

    Well said.

    I am so surprised that it was not a great idea to put the banks in charge of the banking industry, the oil companies in charge of the oil industry, the loggers in charge of our environment, etc.

    The truly scary thing is the rumor that Bernanke just ordered a huge banner that says “Mission Accomplished”. He will display it on the next day that all indexes finish in the green.

    I feel like I am in the alternate reality (Earth 2?) from those old Superman comic books.

  55. Tony says:

    What was wrong with these people, the authors and historians will wonder. Did the antibiotics in the food supply drive them mad? Did the High Fructose Corn Syrup compromise their ability to think? Some form of viral plague? Roid rage? What else could have created such a mass delusion amongst not just the populace, but their leadership and institutions?

    It’s the Prozac, dude. Do you know how many people are on SSRI’s of one sort or another? Ask your money manager, accountant, neighbor, Congressman, etc. which one he/she is on. We have become a nation comfortably numb.

  56. JH says:

    Great post. The proper term for this mess is “fascism”. The textbook definition was on fully display in CONgress yesterday.


  57. Ivo says:


    I have been waiting for so long to read such a truth-revealing post!!!

    Keep up the good work

  58. John says:


    “People lose “money” but the dollar bottoms and has value.”

    Where do you get the idea that a major recession brought about by a systemic financial failure and housing collapse does no harm to the dollar. It would bottom alright, but at around 2.50Euro.

  59. dmc says:

    “Where did this concept of spending beyond our means come take hold? What did people think will happen over a period of time. Why do schools not teach the devastating effects of the paying of compound interest?”

    50 years of the mental disorder known as liberalism. dmc.

  60. JH says:

    Great post. The proper term for this mess is “fascism”. The textbook definition was on fully display in CONgress yesterday.


  61. MM says:

    And one more thing, the reliable benckmark VIX did spike above 30 yesterday, surely we see the worst had been through, another good reason to buy. Cheers and have fun!

  62. rj says:

    “Paulson and Bernanke are responding in the best way they know how given the political realities of a totally incompetent president with zero cred and his army of ideological flickering luminaries in congress who are not going to sign off on any really dramatic measures to contain the crisis.”

    Exhibit A in the growing public perception that democracy is a failure.

    “These people are idiots…yet we voted them in.”

    “Democracy is the theory that the common man knows what he wants and deserves to get it well and hard.” – H.L. Mencken

  63. surferdude says:

    right on brother barry…”The towering incompetence of OTS is incomprehendable, but it is their colossal gall that is truly stupefying.”
    however, i think instead of singling out OTS, all of the banking regulators need to be called out for their dereliction of duties. they were asleep while the greatest real estate exposure ever was being put on the balance sheet. they ignored warnings from a minority of analysts/economists that started as early as 2003 on the looming disaster. even worse, they proactively silenced the voices issuing the warnings and continued cheerleading for the industry.
    sadly, none of them have been questioned let alone held accountable for their malfeasance. IMB failed without being under formal enforcement action. moreover, the fdic sat back and agreed with the ots; they did exercise their back-up exam authority, did not disagree with the rating assigned by ots, and they allowed IMB to pay the best rate for its deposit insurance.
    look at how the fdic is running the IMB bridge bank. talk about a way to destroy franchise value. bair wants to experiment with her idea that every mortgage loan should be modified. also, she placed the fdic coo in as the ceo of the bridge bank. exactly what experience does this person have running such a large thrift with this type of exposure? normally, the fdic hires competent, professional management to run the bridge. i guess by placing a sycophant in the position is the only way bair gets to run her experiment. by these moves, it looks like the high end of the loss estimate will be hit.

  64. Alfred says:

    Barry, this deserves the Pulitzer! You absolutely hit the nail on the hat. I hope you bring that up next time when you are on LK’s show.

  65. Average Joe says:

    Great work. Can we get rid of Ben and put you in charge?

  66. Average Joe says:

    Great work. Can we get rid of Ben and put you in charge?

  67. Average Joe says:

    Great work. Can we get rid of Ben and put you in charge?

  68. larster says:

    Great rant! Spot on, I must say. I’d like to see McCain read this, undedrstand it (his biggest challenge, I’m afraid) and then spout off that Islamofacism is our biggest threat. We’re selling our conuntry via the bond market. We don’t need no friggin’ war.

  69. Ed Miller says:

    Thank you. Thank you. Thank you.

    Your best comments ever in my opinion. I was so excited about emailing a link to others I almost forgot to comment here.

    The current corruption is the greatest challenge we will face in this generation, and the public must start taking actions that force changes to occur before the taxpayers are already on the hook for all the damage. If it was only possible to awake the media before it is too late.

  70. Great stuff, Barry. All we want is our leaders to tell us the truth. And if they can’t do it, then we want someone else to man up and do it.

    The citizens of this great country can handle it. We can handle it! And we are willing to help and to do our part. But for the love of God, tell us the truth. No more BS. Let’s start from there.

  71. sanderson says:

    This is admirably the best reading I’ve tasted in a long time, deserving the ears of so many. Truly, ‘The Big Picture’.

  72. Peter Davis says:

    Finally a genuine, pissed off rant about the Greek comedy that is now unfolding before our eyes. These guys – Bernanke, Paulson, Bush, Congress and all of the banking top execs – represent incompetence, ignorance and, in many cases, flat-out corruption. They are now running our country into the ground for the simple reason that they have no idea of what personal responsibility is. Instead, they want to continue to ignore the underlying problems while vainly and stupidly hoping they’ll just go away. Anything to prolong the Eternal Bubble, right?

    I really think this is just sickening. I know a guy who actually thinks Sen. Schumer caused the failure of IndyMac. That opinion is just so stupid that there are no words to form a justifiable response. This guy actually believes that all the market has to do is to see Bernanke’s point of view (whatever the hell that is) and then all will be fine. Seriously, what an ass clown. Again, I just do not have the words.

    The Fed, Treasury and Congress are now throwing the kitchen sink at this market. Soon, they will begin emptying the pantry, the laundry room, the garage and the neighbor’s attic. At which point, our country will be totally broke.

    I agree. What the hell happened to capitalism, and why the hell do we continue to bail out reckless, PRIVATE companies who have only endangered the economy? So they can do it again? So they can all walk away with their million-dollar bonuses? It is just flat-out disgusting.

    One other interesting tidbit: last week, Paulson and Bernanke testified in front of Congress that Fannie and Freddie were well-capitalized. Except that Paulson had been planning a rescue since the beginning of June. Which means that he knew they were not adequately capitalize and effectively lied to Congress about it. Where the hell are the reprecussions? Why is nobody calling him out for deliberately obfuscating what he knew to be the truth? Then this a-hole has the audacity to ask Congress for a blank check? The sheer incompetence of these jerks is just beyond comprehension. I am so angry I really may have to go steal candy from a little kid.

  73. Jim Walker says:

    Short sellers – The witch-hunt begins

    During today’s Senate hearing Mr Bernanke was asked about uptick rules and how to tackle short-sellers. Little wonder that the Sith (sorry, politicians), are getting animated about short sellers and their ability to manipulate stock prices through rumours and innuendos. After all, that bastion of market supervision, the SEC, has just announced an investigation into market manipulation by short sellers. Thankfully, Mr Bernanke’s economics was too good to be drawn into condemnation of the only people that have seen that the emperor is as naked as the day he was born (although much uglier).

    We have just finished reading David Einhorn’s book on his short-selling experience of Allied Capital (Fooling Some of the People All of the Time). We hasten to add that Greenlight Capital is not a client and that we do not know David Einhorn. However, his documented account of the shortcomings of SEC oversight into the companies that it is responsible for makes for compelling reading. The SEC’s totally ineffective oversight of investment banks and broker dealers – one of the reasons we are all in this mess – was demonstrated by the collapse of Bear Stearns.

    Just like the Big Lie, the guilty often react to their capture (in this instance, in the spotlight) by going on the attack. Instead of investigating short sellers the US Congress would be much better served by investigating the Securities Exchange Commission and the other clowns that it has had in charge of regulation and supervision in this country. Short sellers could not have made up rumours that were anywhere near as appalling as the reality. In fact, the only proper supervision of flawed business models in the US marketplace has been undertaken by the very people that are now being accused of manipulating the market. But politicians would rather back up incompetent bureaucrats than admit that market self-policing is working. That is the nature of the Sith. It is also why P/E multiples in the US and elsewhere are just way too high at present. When the regulation hawks have finished with this process economic growth and corporate earnings will be below the trend mean for a decade.

  74. SR says:

    As viewed from the past…From Mark Twain

    “All you need in this life is ignorance and confidence; then success is sure.”


    “Always acknowledge a fault. This will throw those in authority off their guard and give you an opportunity to commit more. ”

  75. Jeff Spofford says:

    Lets look at the bright side: Atleast my kids will have really cool “I grew up during the Second Great Depression” stories like my grandparents did!

  76. OkieLawyer says:

    It is difficult to get a man to understand
    something when his salary depends upon his
    not understanding it.

    - Upton Sinclair

  77. Scott says:

    Banana Republic style crony capitalism is what a lot of it is, with Einhorn’s privatized gains, socialized losses a big part of it.

    From the get go, for the last eight years, from Iraq run for the benefit of the rebuilding companies—remember how other nations were excluded from the bidding, and how more recently the oil contracts were handed out on a no-bid basis?—to the market, it’s all of a piece. Programs to benefit and protect the wealthy and connected, at the expense, or with zero consideration for, the common good and long term health of the nation.

    It’s enough to turn me into a liberal.

  78. Steve Barry says:


    Your writing about it may help…but you can do more too. Two days ago I challenged the board to come up with a panel of real experts for a summit to try and help. Of course, it was met with near crickets. You could host a panel on your blog or help set one up and moderate it…I proposed Roubini, Volcker, Shiller, Bogle. Let’s go before they really screw things up.

  79. malabar says:

    Barry, this is not incompetence or stupidity. These folks are not idiots either.

    Dude, this is the key feature of the system called Crony Capitalism. This is kleptocracy at its finest.

    Think about it. Between the executives of the financial firms and our political leaders in DC they have looted the American people’s treasury in broad daylight. Middle class Americans whose wages have been stagnant for years get to pay for all these billionaires yachts, jets and Hamptons homes.

    What a great system for the Crony Capitalists!

  80. optimzmo says:

    Anyone acting surprised now has had there had up their butts for years.

    The Republicans stated goal upon taking over control of the federal govt. was to “make it so small it could be drowned in a bathtub”.

    They are ruining all our institutions because they believe it is best for their class – the rich and super-rich.

    I have been saying for years on political blogs that this will end in bloodshed.

  81. We have legislation that should have stopped this epic crisis many years ago. The problem is a lack of enforcement! There are undeniable connections to the Bush administration (executive branch)and this crisis.

    As the evidence continues to surface this crisis appears to have been orchestrated versus recklessness.

    I have contacted the fraud divisions of numerous FBI offices and they were all told NOT to investigate fraud for housing. Fraud for profit was acceptable, but only a fraction of the fraud recently perpetrated.

    Bush and Co are hard core gangsters and should be treated accordingly.

    It is time to wake up and demand action!

    No jail…NO BAIL.

  82. TM says:

    Thanks Barry, great post.
    Now, honestly, how do build and ark (IE save my wealth) during this coming mess.

  83. TM says:

    Thanks Barry, great post.
    Now, honestly, how do build and ark (IE save my wealth) during this coming mess.

  84. dukeb says:

    Beautiful! Just when I was questioning my visits here, too. I don’t care whether I agree with your posts or not, as much as I care that you write them with a strong voice. Bravo.

  85. Becky says:

    YAY BARRY!!! You speak for so many of us!!

    Next time you get air time on TV, please mention these points!

  86. constantnormal says:


    … would that I could put words to paper/pixels like this …

  87. Justin says:

    Well said, Barry. This really should be an op-ed somewhere.

  88. JoJo says:

    Leardership is top down. This is the problem in a nutshell. If it is ok for the government to behave in this fashion, well then it surely is acceptable for corporate america, and it’s citizens. We reap what we sow.”

    Actually in a democracy it starts from the bottom – that is “the people”. Those who put these clowns into power for the past 7 years are very much to blame (yes, the Democrats are culpable but the end responsibility lies with the Bush administration).

  89. Martin Qualters says:

    Great post. Now how about one on the outright fraud perpetrated by the so- called monolines and those who “securitized” the crappy mortgages. They knew what they were doing. Martin

  90. I would call it a political stall. This is a peak of populism, when nobody can do anything. No moving forward. No thinking forward. It began not yesterday, but a few decades ago. Simply everyone get used to delusional good living. Oh, I am sure that a lot of people had seen it coming in years, but election is today so you had to guarantee a good living today, so let’s borrow from the future. And borrow more and more. Do you expect any action today? No. Any “official” warnings? No. Nobody is going to move a finger about it. Because media and marketing power is stronger than logical thinking. Nobody want’s to hear bad news. Logically thinkg population is clearly the minority today. It is nature’s way to teach us a lesson. It will change by everyone watching the collapse and starting to move the ass because you are hungry and not to afford more and more fancy imports. Is it a time to exchange my euro loan to usd or should I wait a couple of months?

    Greetings from Lithuania

  91. mhm says:

    The “print as much money as needed” plan from Paulson is not idiotic. It is like a zen koan, clear, direct Truth that says Fractional Reserve does not work.

  92. Francois says:

    Very nice post.

    Expect Freedom Watch, Rush Limbaugh and all these brain-dead asshats to take aim at you. But you’re a grownup and I’m sure writing this blog has given you a rather thick skin by now.

    Give’em Hell Barry!

    P.S. Don’t be surprised if one of Obama’s advisor pay you a visit soon.


    (just kidding man!)

  93. anon says:

    2% interest rates; pdcf; unregulated futures markets; no-naked-shorting allowed being enforced…those are the symptoms of a very strong lobby.

  94. oddlots says:

    Hey Barry,

    I think if we combined your rant with these three we might have a sort of “super rant” which might work kinda like the Monty Python “Funniest Joke in the World.”

    For a reminder:

    1) Roubini does a good job of pointing out that a housing bubble is not just any bubble, but a bubble in the most un-productive, self-destructive sense: “the existence of GSEs….is a major part of the overall U.S. subsidization of housing capital that will eventually lead to the bankruptcy of the U.S. economy. For the last 70 years investment in housing – the most unproductive form of accumulation of capital – has been heavily subsidized in 100 different ways in the U.S…. The reality is that the U.S. has invested too much – especially in the last eight years – in building its stock of wasteful housing capital (whose effect on the productivity of labor is zero)…” From:

    2) Buiter in the FT: “There are many forms of socialism. The version practiced in the US is the most deceitful one I know. An honest, courageous socialist government would say: this is a worthwhile social purpose (financing home ownership, helping my friends on Wall Street); therefore I am going to subsidize it; and here are the additional taxes (or cuts in other public spending) to finance it. Instead the dishonest, spineless socialist policy makers in successive Democratic and Republican admininstrations have systematically tried to hide both the subsidies and size and distribution of the incremental fiscal burden associated with the provision of these subsidies, behind an endless array of opaque arrangements and institutions. Off-balance-sheet vehicles and
    off-budget financing were the bread and butter of the US federal government long before they became popular in Wall Street and the City of London.” From:

    3) And my favourite, Michael Hudson in Counterpunch: “Given a choice between more affordable housing and better public service on the one hand, or “wealth creation” in the form of higher-priced housing (along with its higher carrying charges), Americans have voted overwhelmingly for the latter – that is, for housing so priced it forces buyers deeply into debt, paying bankers.”

  95. Scott says:

    This may be a small point (though I think not). The Chinese are STILL communists, and the Russians are at best Fascist (by the traditional definition). Calling both former communists is, in a sense, defining our reliance on them for capital as rosier than it is. Not to say you were being rosy.

    Oh, and yeah, that’s a secondary email address, Barry ;)

  96. RPB says:

    I’m sure leaking a document to the public that sparked a bank run was a proper method. During the depression people who did that were publicly strung up and had charges brought against them. IndyMac was running itself into the ground, that was their fault. But Chuck Schumer made an egregious error in leaking the news to the public. He wasn’t the guy who called 911. . . he was the guy that poured gasoline onto the fire.

  97. Barry is mad as hell and he isn’t going to take this anymore–bravo! What a great post. Nice to see some emotion from a normally suave, collected analyst (Kudlow and Co better watch out).

  98. SteveC says:

    Tremendous post, Barry. I’m not sure you had for breakfast this morning that inspired this, but please keep it up. You hit the assclowns right between the eyes.

  99. Francois says:

    “Does anyone (I mean ANYONE) take Jerry Bowyer seriously? Good grief. If they do, they deserve everything they get.”

    For anyone wondering why is the First Amendment under constant assault, well, wonder no more: just read Jerry Bowyer.

    For anyone wondering if there is a crisis in American Media, well, wonder no more: just look…Jerry Bowyer is there.

    No one with more that one functioning brain cell can take this fuckhead seriously.

    Which makes me wonder about the number of remaining brain cells in function in the Land of the F(r)ee.

  100. Anger becomes you.
    And well said.