Always a Follower, Never a Leader
Rep. John Shimkus (IL-19) famously supports Pres. George Bush, his Commander Guy, without question. Everyone knows John lauds himself as a fiscal conservative supporting a free market (although it has always been something of an oxymoron). As of this week, the era of the unbridled free-market economy in the US has passed. The bill comes due.
Everyone is losing money by the buckets. Many have called it a recession. That was months ago. This county has been in a depression for several weeks, and Bear Stearns was the catalyst.
Presidents come and go. They mean nothing to Wall Street. Zero impact on the district. The impact to the middle- and low-income classes is beyond significant:
The beloved trader bar Bull Run was half empty, and many tables were free at fine-dining establishments like Cipriani, Mangia and Bobby Van's, which are normally booked days in advance.Commander Guy offered a more simple-minded explanation: Too many houses were built. Strangely enough, that sounds very similar to something the dubious IL-19 incumbent would say.
At the side entrance to Goldman Sachs on Pearl Street, limo chauffeurs sat waiting for their customers, still above in their office towers cowering over the accounts. If they go under, said Rashid Amal, who works as a chauffeur for a firm called Excelsior, then I will soon be out of a job, too.
Recently, Joseph E. Stiglitz, a Columbia University professor and 2001 Nobel Prize recipient for Economics, told CNN that he had foreseen the Wall Street crisis. It was an inevitability to him. All the signs were visible. It is a pattern -- with solutions:
1. We need first to correct incentives for executives, reducing the scope for conflicts of interest and improving shareholder information about dilution in share value as a result of stock options. We should mitigate the incentives for excessive risk-taking and the short-term focus that has so long prevailed, for instance, by requiring bonuses to be paid on the basis of, say, five-year returns, rather than annual returns.Obviously, nothing is a quick-fix with a guarantee. Yet, reading this list: laws, regulation, oversight, etc., is the typical Democratic legislation Republicans vote against. The operative word is most certainly irony and financial historian Ron Chernow agrees. In a New York Times interview, he stated, We have the irony of a free-market administration doing things that the most liberal Democratic administration would never have been doing in its wildest dreams. Without a veto-proof, Democratic Majority in Congress, quality of life for what is left of the middle class will cease to exist.
2. Secondly, we need to create a financial product safety commission, to make sure that products bought and sold by banks, pension funds, etc. are safe for human consumption. Consenting adults should be given great freedom to do whatever they want, but that does not mean they should gamble with other people's money. Some may worry that this may stifle innovation. But that may be a good thing considering the kind of innovation we had -- attempting to subvert accounting and regulations. What we need is more innovation addressing the needs of ordinary Americans, so they can stay in their homes when economic conditions change.
3. We need to create a financial systems stability commission to take an overview of the entire financial system, recognizing the interrelations among the various parts, and to prevent the excessive systemic leveraging that we have just experienced.
4. We need to impose other regulations to improve the safety and soundness of our financial system, such as speed bumps to limit borrowing. Historically, rapid expansion of lending has been responsible for a large fraction of crises and this crisis is no exception.
5. We need better consumer protection laws, including laws that prevent predatory lending.
6. We need better competition laws. The financial institutions have been able to prey on consumers through credit cards partly because of the absence of competition. But even more importantly, we should not be in situations where a firm is too big to fail. If it is that big, it should be broken up.
To MBAs like Commander Guy and John Shimkus, an ECON professor with a Nobel means nothing. It is just as well. The subject is completely beyond their comprehension, education notwithstanding.
IL-19 deserves better ---> the Democratic alternative: Daniel Davis!