It was my intention in today’s post to review James K. Galbraith’s new book, The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too. However, the events unfolding Monday on Wall Street make a book review somewhat silly and inappropriate. While Galbraith’s insights are apropos to today’s events, stay tuned for the review. In the mean time . . .
If we are to believe the pundits, today’s events represent the worst financial crisis since the market crash of 1929. Only time will tell. While the fallout from this recent event and its repercussions will play out in the coming weeks, months and years, more important questions must be addressed. First, can those accountable be held responsible? Second, what can be done to help the millions of people harmed in big and small ways by this and other recent screw-ups in thefinancial sector by the government?
On the accountability front, I suspect that the securities lawyers are already in high gear, filing complaints as we speak in any courthouse still open. This will, of course, put pennies in place of dollars lost by shareholders and bondholders in the affected companies. Great. I for one am underwhelmed by the outcome of this effort.
Undoubtedly, Congress will recover from the fallout suffered from their own ineptitude, clamoring to pass laws to prevent such misdeeds from ever happening again. Yes, I’m worried that there will be another sub-prime lending frenzy followed by the securitization of massive mortgage debt based on huge volumes of questionable loans dumped on the markets.
At the end of the day, the question in regard to accountability lies in seeing that justice is sought and served upon those within Lehman Brothers and at other financial institutions brought down by the greed created in the opportunities wrung dry in the mortgage markets. Fundamentally, the drive behind this latest catastrophe stems from personal greed and arrogance coupled with the notion that government should keep its hands off of the market, the “let the market regulate itself” lie. I would call this a fallacy if it weren’t for the fact that it was intentional rather than a misguided philosophical error in judgment.
Will the CEO of Lehman Brothers have to cut back on his domestic staff in the Hamptons? Will Lehman’s board of directors lose more than their directors’ fees as a result of this mess? Let’s hope that the regulators get let loose and do what needs to be done. Let’s hope too that Congress has a more than just a knee jerk reaction to these events and does more than just rearrange the deck chairs at the hanging.
Now that thouisands of well educated, highly paid employees are out of jobs, will we ever recover as a nation? I think so. I am sorry that those people are out of jobs. Losing one’s job is a drag. But, unlike those at the bottom of the economic ladder, jobless, without proper education or training and relegated to the position of the hopelessly unemployed, I’m not too worried for the long term prospects for most if not all Lehman Brothers former employees. However, I am concerned that these events and those that are sure to follow will result in much more harm for those people at the bottom. Will the recent victims of the various hurricanes be unnecessarily denied help because our government has diverted so many resources? I’m afraid this will be the case. Will consumer credit get tighter and more expensive? Yes. Will home loans for those who really need them become scarce? Probably. At the end of the day, the question remains: can government do what needs to be done so as to make the lives of all people – not just those who think and live like the current president – better? This is the question and I hope that the elections in November deliver the answer.
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