Deregulation and the Financial Crisis

from HuffPost:




Robert Weissman
Deregulation and the Financial Crisis
Posted January 22, 2008 | 10:40 AM (EST)



It would be nice to write off the current crisis on Wall Street and global financial markets as something that only matters to the investor class.

Unfortunately, the effects are already being felt in lower-income communities around the United States. Worst-case scenarios for what spins out from the U.S. mortgage meltdown are truly frightening -- a severe world recession is a distinct possibility.

Whether such worst-case scenarios can be averted, or softened -- and preventing the recurrence of similar crises in the future -- depends on abandoning the laissez-faire financial regulatory regime entrenched over the last decade.

The current crisis is the predictable (and predicted) result of a massive U.S. housing bubble, which itself can be traced in part to global economic imbalances that could have been prevented.

At least five distinct regulatory failures led to the current crisis.

Regulatory Failure Number One: Failure to Manage the U.S. Trade Deficit. The housing bubble (as well as the surge in leveraged buyouts of publicly traded companies ("private equity")) was fueled by cheap credit -- low interest rates. One reason for the cheap credit was an influx of capital into the United States from China. China's capital surplus was the mirror image of the U.S. trade deficit -- U.S. corporations were sending lots of dollars to China in exchange for the cheap stuff sold to U.S. consumers. .......(more)

The complete piece is at: http://www.huffingtonpost.com/robert-weissman/deregulation-and-the-fina_b_82639.html

The bursting of the housing bubble is affecting people across the board. People who could typically afford a house (decent income, good credit) are being denied, and there are millions more on the verge of ending up on the streets. Property values are going up in smoke. Construction workers are screwed, because there's no work. And there are many unscrupulous landlords who are taking advantage of people by hiking rents.

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yet the disaster continued to go unchecked.

K&R--everyone needs to see this.

It's called, Public Beware. The corps hold all the cards.

Thank you Marmar, your posts are always thought-provoking ( and I'm sure to some, challenging...). The canaries have done died, I think we'd better get outta the mine....

Administration's own analysis suggests spiraling deficits, job losses

February 16, 2000

http://www.epi.org/content.cfm/issuebriefs_ib137

by Robert E. Scott

"No one can predict the future. But the Clinton Administration is confidently forecasting that the huge U.S. trade deficit with China will improve if Congress accords China permanent normal trade relations (PNTR) in order to accommodate Beijing's membership in the World Trade Organization (WTO). President Clinton claims that the recently signed trade agreement with China "creates a win-win result for both countries" (Clinton 2000, 9)...

...These claims are misleading. The Administration has proposed to facilitate China's entry into the WTO at a time when the U.S. already has a massive trade deficit with China. In 1999, the U.S. imported approximately $81 billion in goods from China and exported $13 billion - a six-to-one ratio of imports to exports that represents the most unbalanced relationship in the history of U.S. trade. 2 While exports generated about 170,000 jobs in the United States in 1999, imports eliminated almost 1.1 million domestic job opportunities, for a net loss of 880,000 high-wage manufacturing jobs. 3

China's entry into the WTO, under PNTR with the U.S., will lock this relationship into place, setting the stage for rapidly rising trade deficits in the future that would severely depress employment in manufacturing, the sector most directly affected by trade. China's accession to the WTO would also increase income inequality in the U.S. 4

Despite the Administration's rhetoric, its own analysis suggests that, after China enters the WTO, the U.S. trade deficit with China will expand, not contract. The contradiction between the Administration's claims and its own economic analysis makes it impossible to take seriously its economic argument for giving China permanent trade concessions..."

Regulatory Failure Number Five: No Controls Over Predatory Lenders.

IMHO, this should have been #1. Predatory lending in the extreme has been around since the 90s.