Stiglitz looks at five key moments on the road to financial disaster (thnx to FG for the link).

Greenspan is savaged. Glass-Steagall and ballooning debt-to-capital ratios are invoked. TARP and Paulson do not escape scrutiny.

Comments

[RBM]

I don't find much in life that is of 'or' logic. It's usually 'and' logic.

This piece probably gets a significant part of the story.

[Spag]

Finding a way to blame the "Bush tax cuts" - the same ones that Obama is likely to keep in place- for part of the crisis was a nice bit of sophistry. That kind of dishonest, ideological stretch undermines the credibility of the rest of the article.

[Beelzebubba]

Spag: If you read Rand's Hymn to Money in Atlas Shrugged you will know that Greenspan had long abandoned Rand's ideas on individualism and free markets and adopted Keynsianism as the cure for the what Keynes called a relic. The article does misinform and obfuscate events and facts. Can 10-15 guys in ties pull magical thinking tricks on millions of registered bildungsfilisters? VP proves they will try. This blog proves that someone will post the attempt. I thought I was the only one offended here. Rand asks a good question in the Hymn..".. if ..money is the root of all evil, what is the root of money?" Every writer has a slant but VF went parallel on this effort to confuse the reader. Thanx

[RecycleBill]

Funny, we had over seven years of Bushco telling us all was fine when actually everything was falling apart and still Sammy wants to take up for the Neocons.

I doubt the Bush tax cuts were all of the problem but to suggest in any way, shape or form that Bushco's cuts did anything to help this country is a farce and everyone knows it to be true.

And before any of you go blaming Democratic lawmakers don't forget that Bush never once used his veto power to prevent the economic disaster we all now face.

Remember: "The buck stops here."

[Thomas]

Spag - You don't see any difference between keeping something in place, in severly changed cicumstances, and initiating it in the first place?

To quote, that is a "dishonest, ideological stretch".

[Spag]

"Funny, we had over seven years of Bushco telling us all was fine when actually everything was falling apart and still Sammy wants to take up for the Neocons."

That is funny, accusing me of defending neocons. Lower taxes is not the exclusive province of the neocons.

Thomas, why keep it in place if it is such a bad thing? Your turn to be honest.

[cheripicker]

In the interest of balance, some differing viewpoints:
http://online.wsj.com/article/SB122895461803096429.html#printMode
http://freakonomics.blogs.nytimes.com/2008/09/22/john-steele-gordon-on-the-financial-mess-greed-stupidity-delusion-and-some-more-greed/

[Lex]

Hey, even Greenspan has said he screwed up and that his entire world view was wrong. (In recent congressional testimony.) Horse and barn and all that, but still. Not much surprises me anymore, but that did.

[Fred Gregory]

cheripicker,

Your WSJ thing is busted or incomplete. Hyperlinking makes it easier to use.

Thanks for the NY Times piece.

Here is your easy link for it
John Steele Gordon

For more balance I would suggest Lawrence H. White's essay

What Really Happened

[cheripicker]

Thanks for the White piece-most sensible-sounding thing I've heard yet. Let me try the WSJ piece again. No one's taught this newbie how to hyperlink
http://online.wsj.com/article/SB122895461803096429.html

[Thomas]

Spag, read my comment. The answer is there. Can't imagine why you didn't see it the first time.

[Fred Gregory]

Cheripicker,

You are truncating the url and thus it can't be copied.

Ed Cone taught me how to cool link and if I can learn that trick anyone can

Here.
Hyperlinks for Dummies

Preview your comment to see if the link is cool blue. If so you have got your wings and a bell will ring, Clarence.

[cheripicker]

Thank you!!!!!!!! In the meantime, here's the whole thing:

Whitewashing Fannie Mae
Congress begins its self-absolution campaign.

Henry Waxman's House Committee on Oversight and Government Reform met Tuesday to examine "The Role of Fannie Mae and Freddie Mac in the Financial Crisis." Alas, Mr. Waxman didn't come to bury Fan and Fred, but to bury the truth.
The two government-sponsored mortgage giants have long maintained they were merely unwitting victims of a financial act of God. That is, while the rest of the market went crazy over subprime and "liar" loans, Fan and Fred claimed to be the grownups of the mortgage market. There they were, the fable goes, quietly underwriting their 80% fixed-rate 30-year mortgages when -- Ka-Pow! -- they were blindsided by the greedy excesses of the subprime lenders who lacked their scruples.
But previously undisclosed internal documents that are now in Mr. Waxman's possession and that we've seen tell a different story. Memos and emails at the highest levels of Fannie and Freddie management in 2004 and 2005 paint a picture of two companies that saw their market share eroded by such products as option-ARMs and interest-only mortgages. The two companies were prepared to walk ever further out on the risk curve to maintain their market position.
The companies understood the risks they were running. But squeezed between the need to meet affordable-housing goals set by HUD and the desire to sustain their growth and profits, they took the leap anyway. As a result, by the middle of this year, the two companies were responsible for some $1.6 trillion worth of subprime credit of one form or another. The answer to Mr. Waxman's question about their role in the crisis, in other words, is that they were central players, if not the central players, in the creation of the housing boom and the credit bust. Mr. Waxman released some of these documents Tuesday but kept others under wraps.
In early 2004, Freddie's executive team was engaged in a heated debate over whether to start acquiring "stated income, stated assets" mortgages. And in April of that year, David Andrukonis, the head of risk management, wrote to his colleagues, "This is not an affordable product, as I understand it, but a product necessary to recapture [market] share. . . . In 1990 we called this product 'dangerous' and eliminated it from the marketplace." Freddie went ahead anyway.
At Tuesday's hearing, both Mr. Waxman and former Fannie CEO Franklin Raines argued that Fan and Fred were following the market, not leading it, as if this was exculpatory. The documents plainly show that people at both Fan and Fred clearly understood that these mortgages were risky, thought many homeowners didn't understand them and that they were putting their business at risk by buying up Alt-A and subprime mortgage-backed securities.
One Fannie Mae document from March 2005 notes dryly, "Although we invest almost exclusively in AAA-rated securities, there is a concern that the rating agencies may not be properly assessing the risk in these securities." But they bought them anyway, both to maintain their market share and to show people like Democrat Barney Frank that they were promoting affordable housing.
By April 2008, according to a document prepared for then-Fannie Mae CEO Daniel Mudd and marked "Confidential -- Highly Restricted," Fannie's $312 billion in Alt-A mortgages represented "12% of single-family credit exposure." This book of business, the document notes, "was originated to maintain relevance in market with customers -- main originators were Countrywide, Lehman, Indymac, Washington Mutual, Amtrust." The first four need no introduction; regulators ordered Ohio-based Amtrust to stop lending two weeks ago.
Remember that one of Fannie's roles was supposed to be to buy up mortgage-backed securities in the secondary market and keep that market "liquid." This was, they always argued, the rationale for their $1 trillion-plus MBS portfolios. By becoming buyers of private-label subprime and Alt-A-backed MBS, they did just that -- they liquified and helped legitimize products that they now claim others irresponsibly sold.
Mr. Raines even suggested that Fan and Fred's regulator was to blame for allowing them to get into trouble. "It is remarkable," he told the committee, "that during the period that Fannie Mae substantially increased its exposure to credit risk its regulator made no visible effort to enforce any limits."
What Mr. Raines failed to mention was that, all along, Fannie and Freddie were spending millions on lobbying to ensure that regulators did not get in their way. As the AP reported Sunday night, Freddie spent $11.7 million in lobbying in 2006 alone, with Newt Gingrich, for example, getting $300,000 that year for talking up the benefits of Freddie's business model. (Apologies welcome, Newt.)
Other Republicans on Freddie's payroll included former Senator Al D'Amato and Congressman Vin Weber, and then House Majority Leader Tom DeLay's former chief of staff, Susan Hirschmann. As we know by now, Fan and Fred tried to buy everybody in town from both political parties, and the companies did it well enough to make themselves immune from regulatory scrutiny.
Mr. Waxman calls it a "myth" that Fannie and Freddie were the originators of the crisis. That's a red herring. Mr. Waxman's documents prove beyond doubt that Fan and Fred turbocharged the housing mania with a taxpayer-backed, Congressionally protected business model that has cost America dearly.

[Fred Gregory]

Well thank you cheripicker!

Based upon that it is unanimously agreed that Mr. Waxman and Mr. Raines be awarded the Tommy Flanagan Pathological Liar Awatds for 2008. This coveted prize includes a night in the sack with Tommy's wife Morgan Fairchild who turns to Rosie O'Donnell in the morning.

[Fred Gregory]

OK , everybody pay attention:

The Bailout Explained