Posts filed under “Taxes and Policy”
I have this image in my mind of an American cowboy: Rugged, independent, self-reliant. I picture him on a cattle drive, depending upon only his own wits, his horse, and his trusty Winchester to get by.
This vision of the American past is fast becoming a myth, rendered moot by the present day cowboys. The difference between the two — not the smell, which is surprisingly similar — is that the current cowboys have a different cavalry in their back pockets: Uncle Sam.
Indeed, as time goes on, we have become less independent, and more reliant upon the Federal Government — especially the Federal Reserve — for Bailouts.
I’ve been pondering this for some time now, and the longer I think about, the longer the list grows.
Consider the following:
- Great Depression
– Chrysler (1979)
- Steel Industry (date ?)
- National Flood Insurance
- Savings and Loan Crisis – RTC (1980s)
- 1987 Crash
- GSEs: Fannie, Freddie & Sallie
- Legislative Bailouts (SLRA, TCRA, CFMA, Med Part D)
- Long-Term Capital Management (1998)
- Farm Subsidies (run amuck)
- Airlines (post 9/11)
- Post "Dot Com" crash (2001)
- Hurricane Hugo, Andrew, Katrina, and other not-so natural disasters (1989, 1992, 2005)
- Housing (2007)
- Bear Stearns (2008)
- Sub Prime (continuing)
What other bailouts have I missed?
There must be dozens. I am particularly interested in those situations where the profits were private, but the assumption of risk is public.
What say ye?
Back in August of 2007, we looked at the The Ongoing Impact of the Housing Sector.
At the time, I had assigned blame for all of the problems in the credit
market to a variety of institutions and people. The blame went as follows:
* Federal Reserve (FOMC)
* Mortgage brokers
* Federal Government
* Fannie Mae
* Lending banks
* Wall Street firms
* CDO Managers
* Credit agencies
* Hedge funds
* Institutional Investors (pensions, insurance firms, banks, etc.)
* And back to regulatory role of the Federal Reserve
Today’s WSJ has a front page article looking at the same issue: Housing Bust Fuels Blame Game. However, they assess blame somewhat differently, with a bit of a political slant:
Democrats are quick to blame Republicans, who were in
power during the housing bubble and subprime lending frenzy. For years,
America’s leaders failed to restrain the markets, companies, investors
and consumers from the missteps that led to the most pervasive
financial crisis in decades.
But in hindsight, the failure stretches across
government and across party lines. At bottom are two strong currents.
From the Republican president to urban Democratic congressmen,
homeownership was pushed as an overriding and unquestioned goal. And
many significant attempts at regulation were obstructed by the
prevailing belief that the economy did best when financial markets
operated as freely as possible.
While the headline writer tries to call this a "Bipartisan Failure," the bulk of the actual article is find less kind to the GOP. The Journal blamed:
* The Bush administration for cheerleading homeownership and pressuring government-sponsored mortgage lenders
Fannie Mae and Freddie Mac to provide funding for riskier mortgages.
* Congress for allowing Fannie and Freddie to invest
heavily in securities backed by subprime loans.
* While Democratic congressmen
pushed federal law to restrain sub-prime lending practices Republicans (with some Democratic allies) blocked or countered with
* Federal Reserve, Chairman Alan Greenspan,
revered for not using the
Fed’s authority to more aggressively regulate lender behavior.
* California — where the country’s subprime lenders where — saw Democratic state lawmakers
refusing to impose tougher regulations on a
prized local industry.
Perhaps its bias on my part, but that list looks a little one sided to me . . .
graphic courtesy of the WSJ
Housing Bust Fuels Blame Game
Democrats Seize On Opponents’ Role;
GREG IP, JAMES R. HAGERTY and JONATHAN KARP
WSJ, February 27, 2008; Page A1