Jeff Madrick introduces the Epilogue in his book Age of Greed (NY, Knopf, 20011) with a quote by Shiela Bair,Republican-appointed chairwoman of the FDIC. Bair acknowledged that Wall Street had channeled hundreds of billions of dollars of capital into foolish speculation in the housing market. “The bust that followed” she claimed, “is clear evidence that capital was misallocated and could have been put to better use in areas such as energy, infrastructure, or the industrial base.”
Madrick’s expose, Age of Greed, details four decades of records revealing how a select Wall Street CEOs and Executives became fabulously rich while channeling hundreds of billions of dollars into wasteful investments via sub-quality bonds packaged and sold deceptively. The question, he says, was not whether they contributed “enough to the economy to warrant their compensations, but how much they cost the economy in the damage done” (399). He shares further costs, which I have not listed here.
To challenge such practices is in the minds of some unthinkable: socialism and liberal politics. To deny such a discussion is to fail to get to the truth, which may not be on either side of the political aisle. I like what Randy wrote on my Facebook page,
“I agree with you about extremes. Capitalism without morals is exploitive. Socialism without incentive makes everyone poorer. Democracy without a bill of rights results in the tyranny of the majority. A representative republic without effective accountability results in corruption. Reasonable regulations and checks and balances are necessary for a healthy nation and economy. Workers without protection can be manipulated by their employers. Unions without constraint can be just as greedy as their employers. A well operating society requires a fine balance of freedom and responsibility.”
The CEO at Caterpillar Corp in Peoria told CBS News recently that the primary thing lacking today is “honesty.” I agree and I suggest that many liberals and conservatives have supported an economic free-market gone to the extremes of individualism and greed. It became increasingly so in the 1970’s, progressed through the Reagan Administration until the White House appearance of Barak Obama. Today we are caught on the horns of the dilemma of the past 40 years and we don’t know which horn is most damaging, the left or the right. Truth seems lacking from both directions.
To begin with, I challenge the right of the Financial Industry to behave like a hand-full of Roman Gladiators killing Christians in a free-for-all survival of the fittest. That is the free market of Milton Friedman, Ronald Reagan, and George Bush et Company. That free for all intensified until Wall Street was on the verge of Collapse, and we have all heard news reports of unregulated and irregular practices making a few people filthy rich while whole companies were on the verge of self-destruction.
In one instance, George Bush’s Admin backed a TARP bailout of $700 “B” billion, which free-marketers do not like to acknowledge because it admits to the truth that a free market economy does not self-adjust nor does self-policing (assisted by lobbied legislation) work adequately. Both Bush-43 and Clinton became exceedingly wealthy in such instances but that is a political aside.
Madrick reports the financial industry paid back the TARP loans, except the loans went to pay for executive benefits et al and the banks continued withholding on loans, slowing both the economy and jobs, thereby hurting ALL OF US.
Adds Madrick: "the largest cost of the crisis was the steepest recession since the 1930s. GDP fell sharply. Eight million jobs were lost. And recovery in the subsequent year and a half beginning in mid-2009 was slow, and will likely stay slow, resulting in considerably higher unemployment and lower national income for many years than otherwise could have been realized. Federal tax revenues were and will continue to be reduced accordingly and the budget deficit will be much higher as a result. None of this counts the several trillion dollars of debt or loan guarantees made by the Federal Reserve, whose future costs cannot yet be computed”
While this was going on, “Average compensation per employee at financial firms started growing far faster by 1978 than the average of other U.S. business, and was well more than double the average compensation elsewhere by 2008.”
In other words, the financial industry was “making money” by selling paper back and forth (stuff like sub-prime mortgages on my daughter’s house, which re-sold several times), while the labor force was losing income but paying more taxes, and the top 1% was increasing 400 times while paying a lower rate of taxes. This is what many have not yet comprehended.
“Harvard Law School researchers found that the top five executives at each firm (in recent bank collapse) drew out cash and stock of $1.4 billion from Bear and $1 billion from Lehman. It is fair to estimate that both Cayne and Fuld had put away $300-400 million each” (before their banks crashed--p. 397).
Jeff Madrick concludes Age of Greed with this 4-liner:
“The crash of 2008 was not a systematic failure. It was a function of the unchecked greed of a handful of individuals, the culmination of forty years of growing power and weakened government. And the same individuals were essentially still in charge. The age of greed continued” (italics mine).
Back to what Randy commented on my Facebook page: I could not agree more, Randy: “ We need to model integrity, fiscal responsibility, justice, industry, wisdom and generosity in the public sphere. The answers to the multiple woes of our time are fundamentally spiritual.”
From Warner’s World,
Let’s stop parallel-talking each other (conservatives vs liberals) and filter our conversations as Christians through the words of Jesus
- walkingwithwarner.blogspot.com - there is truth to be found in between our extremes!