Even before the financial crisis plays fully out -- it may yet be a huge disaster where our banks cannot clear our checks -- it is important to assess what has happened and why.
To that end NPR and The New York Times are doing a great job.
To understand the situation, go read and listen to the streams here. In particular the Times' coverage is Pulitzer stuff ...
"The Reckoning: Agency's '04 Ruling Let Banks Pile Up New Debt" | Stephen Labaton | The New York Times | 2 Oct 2008
(Definitely play the slideshow here and hear the nervous laughter among the SEC staff when they make the decision to let The Big Five increase their leverage potential and note the hopefulness as they discuss the difficulties facing the agency in monitoring the firms. 'Fateful' is the best word for this decision.)
See all articles in The Reckoning series.
"Another Freightening Show About the Economy" | Alex Blumberg and NPR's Adam Davidson | This American Life | 3 Oct 2008
(Here they offer easy to understand explanations about why the commercial paper market froze last week and how the 65 trillion-dollar CDS ("Credit Default Swaps") market grew past good sense into a house of cards.)
If blame is necessary -- and it's always part of a constructive approach to coping with assessment and work-out -- it is already clear where the blame lies.
No one was driving the bus!
President George W. Bush and his administration -- led by Dick Cheney -- established on the heels of faith rooted in Reganomics the extreme laissez-faire atmosphere in which Wall Street was set off in 2004 to police itself, in which it became socially unacceptable, unpopular, to regulate; and in which the SEC avoided doing its job.
To a lesser degree Christopher Cox, the SEC Chairman, is to blame for non-performance, but these things are always composed of a series of multiple, cascading failures.
Another Bush disaster.
Interestingly, Labaton makes the point that the motivation to increase the freedom of the investment banks originated in the feeling that it was necessary in order to allow the American firms to compete in the new, flatter global arena. It seems we were heading down already.
Nor are we consumers blameless. Drunk on home-equity credit.
Thanks to my info-guardian-angel -- Lee Folger -- for the NYT links.
UPDATE (10/19/2008):
Here -- thanks to O'Reilly's Nat Torkington -- is a deck from none other than the (Mike) Milken Institute (the once & always Junk Bond King, founder of Drexel Burnham Lambert, who knows about debt markets and how they break) explaining with numbers and charts how preditory lending practises provided the catalyst to purge our global debt-binge.
Thanks for posting on the topic. We tried to help explain it to kids (and most adults)here:
http://www.youtube.com/watch?v=h4Ns4ltUvfw
If you think it might be useful, please feel free to share it.
Posted by: Jordan | October 06, 2008 at 07:16 PM