Friday, September 26, 2008

Krauthammer On The Subprime Crisis: Time For A Return To Public Executions

Krauthammer is being a bit ironic this morning, but his point is well taken. America is livid over this fiscal crisis and wants a pound of flesh to satiate its cravings before beginning the job of putting our financial house back in order. Unfortunately, we can either punish the wrong-doers or we can rehabilite Wall St. Doing both simultaneously will not work.

This from Charles Krauthammer:

. . . Congress has every duty to be careful with taxpayers' money and to suggest improvements in the administration plan. But part of Congress's reaction has nothing to do with improving the proposal and everything to do with assuaging the rage of constituents -- even if it jeopardizes the package's chances of success, either by weakening it or by larding it up with useless complicating provisions designed solely to give the appearance of sticking it to the rich.

Window dressing such as capping pay packages, which the Bush administration has already caved in to. I've got nothing against withholding golden parachutes from failed executives. But artificially capping the pay of people brought in to lead these wobbly companies back to health is a fine way to tell talented executives to look elsewhere for a job. In the demagogic parlance of this election year, it is a prescription for outsourcing our best financial minds to London and Dubai.

The mob is agitated but hardly blameless. While the punch bowl -- Alan Greenspan's extremely low post-Sept. 11 interest rates -- was being held out, few complained about cheap loans and doubling home values. Now all of a sudden everything is the fault of Wall Street malfeasance.

I have little doubt that some, if not many, cases of malfeasance will emerge. But what we conveniently neglect is the fact that much of this crisis was brought upon us by the good intentions of good people.

For decades, starting with Jimmy Carter's Community Reinvestment Act of 1977, there has been bipartisan agreement to use government power to expand homeownership to people who had been shut out for economic reasons or, sometimes, because of racial and ethnic discrimination. What could be a more worthy cause? But it led to tremendous pressure on Fannie Mae and Freddie Mac -- which in turn pressured banks and other lenders -- to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity.

Were there some predatory lenders? Of course. But only a fool or a demagogue -- i.e., a presidential candidate -- would suggest that this is a major part of the problem.

Was there misbehavior on Wall Street? The wheels of justice will grind. But why wait for justice? If a really good catharsis will allow a return of rationality to Capitol Hill -- yielding a clean rescue package that will actually save the economy -- go for it.

Capping executive pay is piffle. What we need are a few exemplary hangings. Public hangings. On television. Pick a few failed investment firms, lead their CEOs in chains through the canyons of Manhattan and give the mob satisfaction. Better still, precede the auto-da-fe -- fire is highly telegenic -- with 24-hour reality-TV coverage of their recantations, lamentations and final visits with the soon-to-be widowed. The ratings would dwarf "American Idol," and the ad revenue alone would make the perfect down payment on the $700 billion.

Whatever it takes to clear our heads.

Read the entire article.

Krauthammer may in fact be correct that the crowd wants the blood of Wall St. CEO's before rationality can be returned. But the people who at the root cause of this crisis reside in Washington. I agree wholly with his conclusion - though I would choose different criminals to be consumed in the auto de fe. Chris Dodd and Barney Frank would be leading the list of the condemned, followed shortly by Chuck Schumer and Harry Reid. Then we would have a bit of justice with our retribution.

Other posts related to Subprime Crisis (from oldest to newest):

McCain, The Fannie and Freddie Crisis, and Obamafuscation - Obama and the entire Democratic Party are trying to blame Republicans for the subprime crisis. But this crisis was created by Bill Clinton and protected against Republican efforts to reign it in over a decade – until it failed, nearly pulling out entire economic system into a depression.

A Washington Post Front Page Hack Job - The Washington Post does a hit job on McCain, grossly distorting his record on regulatory matters and ignoring his cosponsoring of legislation to establish much stronger regulation of Fannie Mae and Freddie Mac.

Dodging a Depression - The NYT and WSJ document just how serious is the subprime crisis. Quite literally it brought us to the point of a complete and catastrophic stoppage of our financial systems as institutions lost confidence in their fellow institutions. This was not a stock market crash, it was a lending and credit crash. The WSJ describes the events of the week leading up to the crisis point.

Obama & The "Family" Of Fannie Mae - Documenting Obama’s relationship to Fannie Mae.

The Origins – And Foreseeability – Of the Subprime Crisis - A 1999 article in the NYT describes the Clinton Administration forcing subprime loans onto America and also forecasts that this will create a house of cards that will fall apart in a down market.

Covering The Left’s Fannie - The NYT tries to play up old ties of a McCain campaign worker with Fannie Mae while minimizing the fact that McCain himself, in 2005, co-sponsored legislation that may well have prevented the fiscal crisis we are in now.

The Left’s Subprime Meltdown - A post by the Anchoress discusses this subprime crisis as a creation of the left and a system that was protected to the end by the left. She adds additional sites, quotes and links to explain the mosaic.

Fannie & Freddie, McCain & Obama, Subprime & Wall St.The WSJ discusses both how the subprime loan market came about and how Democrats, including Obama, were both the cause of the problem and the roadblock to a solution that would have averted this catastrophe. Dafydd at Big Lizard's explains how Mortgage Backed Securities worked on Wall Street.

A Doddering Fool & Charlatan - Chris Dodd is up to his ears in the subprime crisis. With our economy teetering on an actual depression due to the Fannie/Freddie/subprime loan crisis, it was not merely surreal to watch Senator Chris Dodd chair an emergency hearing of the Senate Banking Committee to evaluate the Treasury's proposed rescue plan, it was obscene.

Finally – Oversight - The FBI has finally announced criminal investigations at Fannie and Freddie.

When Will They File As A 527 – The NYT continues its wholly biased reporting on the subprime crisis, refusing to report on the genesis of the crisis and instead, reporting on the relationship between Fannie Mae and Rick Davis of McCain’s campaign team.

McCain The Chessmaster - Opining on the potential risks and rewards of McCain's decision to cancel campaigning, return to Washington to take part in negotiations over a response to the subprime crisis, and tentatively cancel the Friday debate.

The President Addresses The Nation - Bush explains the stakes involved for America with the subprime crisis.

McCain The Chessmaster Part II - McCain was responding to a 3 a.m. phone call in returning to Washington. He is given political cover and support by Bill Clinton.

A Spotlight On The Left's Subprime Crisis - A video summary of the origins of the subprime crisis with lots of footage of Rep. Barney Frank and others protecting Fannie Mae from regulation by the Bush Administration and McCain.

WaMu Swallowed Up In The Left's Subprime Swamp - Washington Mutual goes under because of toxic mortgage debt.

Great Moments In Leadership - Obama phones it in on the subprime crisis.

The "No Deal" - McCain Responds - The left is blaiming McCain for failure of a deal on the subprime crisis. McCain answers in a memo.

Dodd, ACORN, and the Penultimate Screwing of the Taxpayers - The left, the people responsible for the subprime crisis, proposed a deal that would have used the return on rehabilitated investments not for the benefit of taxpayers but to fund progressive advocacy organizations that are fundamentally corrupt.

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