ContrAttac™

Source:

Date de parution:
7 octobre 2008
Auteur:
Terence Corcoran


Put the blame where it belongs

We now must surely be past the point where this accelerating global financial turmoil can be ritually and conveniently pinned on the perennial hobgoblins of corporate greed, free-market capitalism and CEO compensation. Iceland is running out of cash, Holland is bailing out banks, half the world's energy prices are falling, stock markets are plunging and central banks and governments everywhere are pumping trillions into the global economy. How much longer is the burden for all this mayhem going to fall on the U. S. corporate sector? Quite a while, apparently.

Despite the mounting and obvious evidence of massive government failure -- brought by what now looks like runaway central bank policies, government housing and tax programs, botched regulation and failed political intervention -- the prevailing belief is that free markets and CEO malfeasance are responsible.

At hearings yesterday in Washington of the U. S. House committee on government oversight, assorted representatives more or less pinned the whole situation on the likes of Richard Fuld, CEO of Lehman, whose compensation over the years somehow led to the fall of his investment house, the U. S. housing mess, the mortgage debacle, the global credit crisis and yesterday's stock market plunge.

Committee chairman Henry Waxman lit into Mr. Fuld. "You walked away with $350-million, your shareholders got nothing and the taxpayers have a system now where we put up $700-billion, and the American people are looking to see -- are they gonna come out of this? This is another day with a deep loss on Wall Street. We are just completely battered by the failure of our economic system, that's showing up on the Dow and the ability to get credit."

There will be lots more where this came from as the blame game gets underway in Washington and around the world. Mr. Fuld and scores of other CEOs are going to hauled before Congress. The good news is that some big government fish, including former Fed Chairman Alan Greenspan, are also scheduled to answer for their roles in a financial crises that seems to get worse with each new government intervention, cash infusion, deposit guarantee and bailout package.

Evidence of U. S. government and political responsibility for global financial events continues to mount. The front page of last Sunday's New York Times carried a major feature on how a combination of lax management and political pressure led to the collapse of Fannie Mae, the U. S. government-sponsored mortgage packager that was at the heart of the U. S. subprime mortgage market.

Between 2005 and 2008, under pressure from politicians to promote lending to low-income home buyers, Fannie Mae purchased or guaranteed "at least $250-billion in loans to risky borrowers." As the Times reports, Fannie Mae processed loans with abandon. "We really didn't know what we were buying," said the former director of the company's loan servicing department. The story goes on from there to chronicle a maze of bad practices, corporate skulduggery and political failure.

Fannie Mae and many other elements of the U. S. housing disaster are direct products of U. S. government policy. But still the media, including the Times, continue to generate a flood of material blaming the disastrous consequences on corporate CEOs and the failure of capitalism.

"Is this the end of hypercapitalism?" asked a Times feature on the front page of its Week in Review section, a piece that regurgitates all the latest rumblings about the failure of free markets and the possible need for a fresh onslaught of regulation and government intervention.

Hypercapitalism? When did that happen? French President Nicolas Sarkozy has become something of a global champion of a new statism. "The idea that the markets are always right was a crazy idea." Not as crazy, however, as the idea that a government policy can fix the markets. In any case, nobody on the side of free markets ever said markets are always right. It's the regulators who came along and said markets are often wrong and here's a regulatory regime that will fix them. What regulators never tell anybody is that regulatory regimes, in practice, are always going to be wrong in the long run -- mainly because they undermine and destroy markets.

And that's where we are now. A global web of central bankers overseeing dozens of currencies and monetary policies is trying to correct a half-decade of mistaken monetary policies. After pumping too much money into the world economies over half a decade, they are now trying to rescue the system with another flood of money. And regulators and politicians, after having covered the U. S. and other economies with blankets of regulation, are now planning to save the system with an other blanket of regulations.

Nobody can rightly claim to fully understand what is happening to the financial system. In a free market, nobody ever does understand how the system works. The risk we all face, as citizens, is that the governments who cannot possibly understand the crisis are now charged with getting us out of it.

The longer governments continue to believe that business, corporations and CEOs -- the capitalists -- are the problem, the longer it will take to get us out of the crisis.