I have few thoughts on the collapse of the big investment banks and the roller coaster on Wall Street and around the world. I am waiting to see what happens, if and/or how the proposed rescue attempt by the Fed and Treasure passes and plays out, and if it is at all possible to have an honest discussion about what has led us to this point. I realize there are all sorts of important things to talk about in a Presidential campaign - lipstick on pigs, "respect" and "deference" to candidates, and all the other crap that's swirled around - but it might just be important for someone, somewhere with a louder voice and larger audience than my own to say, "You know, the government does stuff that's important, that impacts our lives, and while some of it is difficult to understand, most of it isn't, but it isn't talked about because some 'expert' somewhere says that people are too stupid to understand it." It might even be true that, on average, the details of the financial disruption this week are beyond the public as a whole. Yet, since it effects most people in some way or other (people have pensions, 401(k)'s; shoot, I've been buying a share of my company's stock a week through their employee stock purchase plan) the issue of whether or not some reader will write in and complain about how difficult it is to understand all the arcana of investment banking and financial instruments, I think an enterprising editor might just feel it important to get some information out there.
As for the proposed bailout (remember, it isn't a done deal, Congress holds the purse strings and even the Republicans in Congress, who loathe Bush now and are not too keen on McCain, either, are more than miffed at the way the proposed AIG bailout was handled), and all the talk of firms being "too big to fail", all I can say is, "bunk". No business is so large that it shouldn't be allowed to collapse, especially if it made poor investment choices, worked under a shoddy business model, or simply ignored prudence and financial wisdom and sought ever greater returns on more and more marginal investments. With the attempt to pump hundreds of billions of dollars to companies that have already proven themselves unable to manage these sums of money wisely before us, a good question might be, "Why are we tossing good taxpayer money after bad private money?" Of course, the answer usually is, "Because they're too big to fail!" I don't know about you, but I wouldn't want my investment adviser telling me to invest in a company about to tank in order to keep it from tanking.
Other than re-imposing Glass-Steagall, buffing up the SEC and reinvigorating the Anti-Trust division of the Justice Department, I really have few thoughts on what should be an on-going response to our current financial woes. In respect to Glass-Steagall, it should be noted that this Depression-era limitation on banking and investment was long hated by many in the Republican Party, although most banks and financial institutions not only learned to live with it but welcomed the security it provided. It was essentially repealed in 1999 by the Gramm-Leach Act (yes, that's right, Phil "Whiners" Gramm, who not only authored this bill, but a whole series of corporate and financial bills that led to Enron and other disasters; as Gramm has a Ph. D. in economics, he is a poster child for why I am not impressed with someone who has an advanced degree; he is still just as stupid as a dead snake). The financial markets were pretty stable and investment houses were quite solid for decades. It took only nine years for them to piss it all away once Glass-Steagall was gone.
Think about that.
