Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktGood luck with that.
A number of folks have linked to Paul Krugman’s article praising the Occupy Wall Street protests. He titled it “Confronting the Malefactors”, though, assuming by “malefactors” he means Wall Street bankers, I have to ask: this is confronting them? Really?
Quoth the Krugman:
In the first act, bankers took advantage of deregulation to run wild (and pay themselves princely sums), inflating huge bubbles through reckless lending. In the second act, the bubbles burst — but bankers were bailed out by taxpayers, with remarkably few strings attached, even as ordinary workers continued to suffer the consequences of the bankers’ sins. And, in the third act, bankers showed their gratitude by turning on the people who had saved them, throwing their support — and the wealth they still possessed thanks to the bailouts — behind politicians who promised to keep their taxes low and dismantle the mild regulations erected in the aftermath of the crisis.
I highlighted the bit about reckless lending. Really, that’s what created the crisis? In the mortgage industry, didn’t Fannie Mae and Freddie Mac encourage reckless lending? And how does reckless lending auto-magically translate into AAA ratings for bundles of sure-to-default mortgages, or bundling them and reselling them in what (if I’m not mistaken) was a fairly opaque marketplace? And isn’t reckless borrowing an automatic corollary to reckless lending?
And as for the 3rd act—it was entirely predictable. Of course that’s how it worked out, as many people, both left and right, predicted. Numerous conservative pundits—Rush Limbaugh, to name one—characterized the bank bailout as being necessary to preserve the wealth of the friends and associates of Ben Bernanke and Timothy Geithner. It was such an emergency because if their friends had to lose their second (or 3rd) home in the Hamptons, Bernanke and Geithner’s names would have been mud (that was the Limbaugh theory, anyway).
Given this history, how can you not applaud the protesters for finally taking a stand?
I mean, yeah, sure. But in my experience, they’ll be applauding themselves with enough enthusiasm and vigor for all of us. And of all the things in their lives they could possibly have an actual positive influence on (albeit, a positive influence that does not stroke their egos nearly as effectively), they pick the “influence” equivalent of buying a dozen lottery tickets in order to make their first million. If they tried to start a movement to get folks to pick up litter around their own neighborhoods, they’d probably have a more positive influence. But I suspect Occupy Wall Street (and the attention it’s getting—visiting their grandparents at the nursing home would never get them TV coverage) makes them feel special, and like they are part of a movement, and while I was quite judgmental of that in my college years, I do understand it, and can’t blame them. If can evoke a lot of positive feelings about yourself and your friends, make you feel like you can make a difference (while, ironically, doing nothing that’s actually going to make a difference), releases endorphins, and I’m sure more than a few of those people have gotten laid where the otherwise would have spent their nights alone, commenting on blogs, like . . . well, never mind that. ; )
The people who ought to have taken a stand—our politicians, both left and right—either did not, or did very mildly, with input from their banker friends, lobbyists, and, of course, Wal-Mart (not a slam; you know I love me some Wal-Mart). The resulting legislation was mostly crafted by the winning oligarchs, not by thoughtful bureaucrats attempting to over-regulate the banking sector in order to prevent future financial devastation coming from the same stupid incentive system.
Bear in mind, too, that experience has made it painfully clear that men in suits not only don’t have any monopoly on wisdom, they have very little wisdom to offer.
Says the guy who I almost always see in a suit. Just an observation.
remember how many serious people assured us that there was no housing bubble
And who was yelling from the roof tops that not only was their a real estate bubble, but that a collapse was coming? Glenn Beck. Just noting, for the record.
And . . . here comes the co-option by serious-minded academics and policy people:
A better critique of the protests is the absence of specific policy demands. It would probably be helpful if protesters could agree on at least a few main policy changes they would like to see enacted. But we shouldn’t make too much of the lack of specifics. It’s clear what kinds of things the Occupy Wall Street demonstrators want, and it’s really the job of policy intellectuals and politicians to fill in the details.
You see what he’s doing there, right? Oh, these fine young people, they are so admirable. I love them so much. Now, that they’ve got your attention, let me tell you what we should do. It will be remarkably similar to what I personally advocate all the time, but it’s all about the young people. Occupy Wall Street!
Finally:
And if the protests goad some politicians into doing what they should have been doing all along, Occupy Wall Street will have been a smashing success.
That would be lovely, but I’m not going to hold my breath.
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All Things in Moderation 
Nothing really to add other than that I enjoy these sort of line by line rebuttals to columns. Oh and your points are pretty cogent to me other than that the OWS protestors will congratulate themselves enough for all of us. That seems awfully "hey you kids get off my lawn" of you.
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The magical bond ratings are part of the reckless lending formula. Sure, there was reckless borrowing too. But one reckless borrower doesn't take down the global financial system. One reckless lender, in the form of AIG, did. The system concocted by the 'smartest guys in the room' let it happen. It wasn't the borrowers who made risk disappear in the tranches, it was the finance whizzes.
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I think it's pretty comical that so many Krugman types are trying to define the protest and also steer them into some direction of their choosing. This isn't an easily defined movement and it will go where it wants to go. You can tell by the signs, some funny, some serious as a heart attack, that there's no persistent theme other than dissatisfaction and an intuition of being ripped off by the financial industry. That's the sentiment everyone should be paying attention to, IMO.Clearly, most legislators are not interested in speeding up the de-leveraging of mortgage, health care or student loan debt and so I doubt many solutions will be forthcoming. We're stuck working out way through, each of us, on our own. The aughts were a lost decade for the middle class and now it appears the 10's will be even worse.
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AShot–fair enough, that just comes from my own, admittedly limited, experience with modern American protest. My experience was that the protests tended to be very self-flattering and self-congratulatory—a fun activity for the local Mutual Admiration Society.That being said, who can blame them? Feeling like you're a part of something important is a very, very good feeling. Connecting with other people over a common cause is a very good feeling. bsimon: also, fair enough. Borrowers cannot borrow recklessly without lenders willing to lend recklessly (or even pushing borrowers towards much more reckless loans than perhaps they'd otherwise gravitate towards). I've related my own loan application story before: in each case, I was approved for a loan at a level much higher than I needed or, at that point, could afford to service. I still couldn't afford to service the $500k loan I was qualified for in 2003. I don't think I'll ever be able to service a mortgage loan of that level, even at 1% interest. Even at the lowest levels, those bank people are crazy. That 2nd load, BTW, was from a smaller independent bank that made a lot of mortgages, bundled them up, and resold them to Wells-Fargo.
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lmsinca- To steal a post from Tal over at the PL:Best sign seen at the protests: "Obama is not a brown-skinned anti-war socialist who gives away free healthcare… you're thinking of Jesus."
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Kw- same here. When we bought our current house in 2005 the banks were willing to loan us nearly 3x what we asked. We could've had a hell of a house – but it would be gone now.
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We borrowed against our home which was nearly paid off in 2006 to build our warehouse. We did a lot of homework first to uncover all the costs so that we borrowed just enough and not a penny more. When we finally went to the bank the loan officer looked at our assets and actually said, "You could borrow like a million dollars". And our phone rang off the hook for two years with all sorts of attractive refinancing schemes, if you bought their sales pitch, luckily we never did.
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Oh and that million dollars was so illusory that it would now be worth about $500K, lol.
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Sorry if this has been linked to before. I saw it over at Reason and found it to be a fascinating look at what's happening on the ground on Wall Street. http://erratasec.blogspot.com/2011/10/independent-reporting-of.html#moreThings pretty quiet over at freedom plaza in DC today. bigger signs but fewer people.
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bsimon and lms–same story here. When we bought our house in 2002 (the one I just sold) we sat down and figured out the highest payment that we could afford and still sleep at night. Then translated that into the mortgage amount. Then went to the bank and applied. . . and they approved us for a million dollars when all we wanted was $300K. Crazy!!!It'll be interesting to see what happens next year when I go to buy my next house. Somehow I'm betting they won't be offering me those ridiculous sums of money this time.Nice post, KW!
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"Somehow I'm betting they won't be offering me those ridiculous sums of money this time."I depends on your personal financial situation. There was a story in the Post real estate section (maybe business) a few weeks ago. lenders are competing for a smaller slice of the market — higher income, good credit — and throwing low interest rates and looser down payment requirements at them.
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Interesting, NoVA! I'm still planning on putting 20% down and going with a fixed rate on the smallest mortgage I need though.
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I've always done well with 15 year fixed mortgages. With regards to the Occupy Wall Street movement, I expect it will turn out a lot like the WTO Seattle protests in 1999 in terms of the effect on actual policy. http://en.wikipedia.org/wiki/World_Trade_Organization_Ministerial_Conference_of_1999_protest_activityPresident Obama's position on the State AG settlement with the banks is much more significant than OWS.http://www.rollingstone.com/politics/blogs/taibblog/attorneys-general-settlement-the-next-big-bank-bailout-20111005
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"Interesting, NoVA! I'm still planning on putting 20% down and going with a fixed rate on the smallest mortgage I need though."I'm not moving until the market wakes up a little. I wouldn't move until I could see my house, and houses aren't selling except at confiscatory rates (I mean, 75% or less of their pre-bubble value; some sell at prices that you couldn't pay for just the materials to build a cheap house at half the size). We bought well before the bubble peaked, but probably over paid a bit (just to ensure we got the house, and did have to keep searching). We didn't intend to get trapped in it, and would have moved by this point, if not for the market. So, I agree on putting 20% down, but, for me, that would come from selling the current house . . . which isn't going to happen. I'd need to sell it for something close to what I paid for it, and I just don't see that happening. I'm sure I could sell it and get out without owing anything . . . but that would leave me without any cash to use as a downpayment on a new house. And what's the point of that?
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but that would leave me without any cash to use as a downpayment on a new house. And what's the point of that?Exactly! That 20% is going to come from the $$$ that I walked away with once the divorce settlement was finalized and monthly savings over this coming year. We sold for ~25% more than we paid for the house in 2002, but if we'd sold at the peak of the market here it would have been priced at almost twice what we paid for it! Since we'd also been making overpayments on the mortgage every month we had plenty of equity in the house at the end (thank goodness!); I learned a lot during this most recent bout of home ownership!
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jnc4p: Your Rolling Stone link is also a post from Wednesday's ATiM (A Few Billion Here, a Half A Billion There)–I stole it from you when you linked it on PL. 🙂
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"Since we'd also been making overpayments on the mortgage every month we had plenty of equity in the house at the end "I've been trying. It always seems a new bill comes from somewhere just before it's time to write the mortgage check. I was originally planning to put an extra $100 in . . . then the Target bill came due, and it was more than I remembered spending. Ooops.
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Darn those Target trips!!
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