Allen's Weblog

I am having the September 30, 1999 New York Times article predicting this crises as the result of the Clinton Administration pressure to give loans to the risky, framed.

The Times article will hang right next to Clinton’s signed admission of guilt to lying in a federal court, and accepting the fine and loss of his law license, over his personal signature.

Did the Bush administration do anything to stop the pending crises? No.

The Democratic Party is the Party of Social Engineering.

The Republican Party is the Party of Social Engineering, Lite.

Fewer Carbs, Same Terrible Taste.

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 “Redlining” was ended by federal interference with the banking industry pretty well, but the reason for redlining was both a dollop of pure racism, and a dollop of rationality from the assumption of risk.

Individuals, and institutions had proportions of each – racism and rationality.

It is similar to grocery stores, which for generations have been in short supply in poor neighborhoods and those that existed had high prices. The fact they were there at all belied the charge of racism, but the charge was made because of their high prices. It was not easy to explain the high prices were a result of “shrinkage” (called theft in nice neighborhoods) and high insurance rates. (See Watts, California.)

High risk, for whatever reason, means that SOMEONE must cover the risk. The government decided to do that.

Yes, there are a few middle class who borrowed against their equity for a Lexus and must default in a downward market, but the greater proportion of problems are those poor whose reach exceeded their grasp.

And the lending institutions, knowing their risks were backed by FM Squared, took the easy money.

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There is not sufficient information to properly analyze the Bailout, but that does not mean that we can’t discuss the general subject.

It is apparent that the final edition is better than what was proposed first, which was a Wall Street plum with sufficient pork to a particular segment of Special Interest Groups for the Democrats to jump on board.

The public screamed, so the pork was apparently reduced and a few safeguards were introduced to produce what can rightly be presented as a lipsticked pig to give the stock market a date for Monday.

Would the market have tanked? Who knows?

Markets are based on confidence, and confidence is impossible to predict.  It would have been an impossible situation, so I suppose doing something is better than doing nothing but the doing something did not include replacing Paulson, Cox, Frank, Dodd.

In the early 90s, I turned a computer company around for the federal Bankruptcy Court, and the second the Court released the company I resigned, saying to the President: “I can only do this once, but you will be back in bankruptcy because none of the top management has changed. Don’t call me again.”

Yes, they went into bankruptcy again. Managements do not change their style, but certain styles are more appropriate in different circumstances. There are probably 50 managers who could make this banking system whole, and none of them are part of the turnaround management package. The managers, and the overseers are all politicians who could not run a successful Dairy Queen, much less General Electric, and certainly not the national economy.

The names that brought us here, remain here. A new administration will permit changes but if you notice, new political administrations just bring in old political names.

The lawyers say “Hard cases make bad law” – and that is one thing I agree with them about: This is a hard case, and I suspect a bad law. Certainly one written hastily.

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We live Walter Middy lives in our minds, where we could play professional level sports, compete in F1 with the right car, and we would have gone to an elite Eastern college except our (brother)(mother)(father) got sick.

There are a very few first-rate economic minds, but those we have are not in Washington and are unlikely to be there because their minds work differently than being around political people.

My studies of WWII showed me that we won only because we made fewer mistakes than our enemies, and I now conclude that our economy is better than the rest of the world only because their economies are run from Paris, or London or Brussels with more mistakes than Washington makes, hard as that is to believe.

This entire crises was begun and fostered by selling homes to people who were never qualified to pay for them. When the smoke clears, we need to find out how that happened.

The economic crises was caused in Washington and on Wall Street – what makes us think either of them is the solution?

There are minds who can solve the problem – without concern for their political party: Jack Welsh, Warren Buffet, Bill Gates, Michael Dell, Mitt Romney…people who have demonstrated that they know how markets and industry work without printing money or demanding money from the taxpayers.

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