10.20.2009 2:50 pm
Let’s talk about how to make the economy better
St. Louis Post-Dispatch
I didn’t find your piece on “The Un-recovery” either very helpful in understanding our current economic problems or very balanced in coverage of the crisis. As credit disappeared due to the unconscionable acts of the mortgage bankers and insurers of those assets, lots of businesses began to lose sales and, in order to stay in business, reduce costs which meant reducing jobs. This resulted in large losses in stock value which hit a bottom in March of this year. Since then we have had the same phenomena in both the jobs market, housing, and the value placed on companies as reflected in their stock price: Things are still getting worse, but they are getting worse slower. Many companies are still short of revenue due to the collapse of consumer buying and credit, but they have managed to stay afloat by reducing costs (firing people). Some of those companies are viewed as having a reasonable expectation of returning to profitability in the relatively near term, and this expectation is raising the price people are willing to pay for their stock.
In the financial markets, therefore, the people who are making money are the traders and the Merger and Acquisition specialists. Most of those that have exposure to consumer or commercial credit are losing money on those operations and the stock prices reflect these facts. Goldman Sachs, in particular, is not exposed to the credit side very much, didn’t need TARP money, got it anyway, and has paid it back. It has created value in other companies through its M&A activity, has made a ton of money, and has increased the value of anyone who bought their stock, including the mutual funds owned by many of us “common men”. And, by the way, as a private company with no obligation to the government, is entitled to pay their employees whatever they want (or have you forgotten we’re supposed to be a capitalist country?).
As far as who the SEC hires as their CFO, would you rather it be someone who understands the way the financial system operates, or Joe the plumber. I have great confidence in Joe to fix my sink, but less confidence in his ability to detect insider trading or identify a ponzi scheme. Cheap shot at Mr. Storch.
Dow 10,000 is about half way back to the Dow peak last year, and if the expectations regarding profitability don’t pan out, we may be back at the 6,500 level quicker than you can blink. In the meantime maybe we ought to be happy that anybody in the country is making a profit. Instead of assigning blame and inciting people in a meaningless manner, perhaps we ought to have reasoned discussion of issues including how we can make credit available, make businesses profitable, and get people back to work.
Miles T. Barnett
High Ridge
“Instead of assigning blame and inciting people in a meaningless manner, perhaps we ought to have reasoned discussion of issues including how we can make credit available, make businesses profitable, and get people back to work.” - Miles T. Barnett
Those are very worthy goals, Mr. Barnett. Unfortunately they are in conflict with the collectivist social agenda of the Left. The government worshipers in the USA finally have the powers they have sought for generations. Their social model includes dependence, conformance, and growth of government. The discussion we all desire will probably be somewhat one-sided.
Avoid assigning blame?
If the system is broke and needs fixing, such as what led to the collapse of the market, how do you fix it without assigning blame? I do not believe we should be doing a witch hunt. When I was assigned a problem in the work force I first took steps to stop it from getting any worst. Then I did research to find out who or what did something that should not have been done. I am sorry but that is assigning blame. Once you understand how the problem occurred and who or what did something wrong then you can design a fix to ensure that it does not happen in the future.
Miles stated, “As credit disappeared due to the unconscionable acts of the mortgage bankers and insurers of those assets, lots of businesses began to lose sales and, in order to stay in business, reduce costs which meant reducing jobs.”
I note you place no blame on the government. The Community Reinvestment Act played a significant role in lax lending standards that fueled the housing bubble.
“The FDIC put the heat on banks which were not making risky loans by giving them “needs to improve” ratings.” U.S. News & World Report at http://www.usnews.com/money/blogs/capital-commerce/2009/03/17/yes-the-community-reinvestment-act-really-did-help-cause-the-housing-crisis.html
Here is how the FDIC puts it: “There are no apparent financial or legal impediments that would limit the bank’s ability to help meet the credit needs of its assessment area. The FDIC examiners also faulted East Bridgewater “for not advertising and marketing its loan products enough. The bank, which does not have a Web site, offers fixed-rate mortgages.”
Is the government to be blamed by itself? Of course not but besides the government, Wall Street, mortgage companies, and banks we have the home buyers who knowingly bought homes they couldn’t afford.
For a change I agree with Bob, we need to identify the problem before we can fix the problem.
–Let’s talk about whether the economic downturn was a result of “Chaos Theory”, or a result of something more sinister?
–Was the artificial expansion of the real estate market, whose bursting resulted in the economic collapse, just a result of the “Law of Unintended Consequence”, or perhaps a desired goal of leftists to bring about a planned event?
–Are legislators really that clueless about basic economic principles, or are they just marionettes, dancing on the strings of their puppet-masters?
–If so, who are the Puppet-masters, and what are their desired goals?
–The answer to these questions, and more will be forthcoming, when you join us on the next episode of “As The Pearl Yearns”.
When are ALL YOU PEOPLE going to place the blame were it belongs, THE CONSUMERS. Yeah, it’s the consumers who are buying the foreign tv’s, shoes, cars and shoping at COMMUNIST China Mart. How is this the politicans and bankers fault???
John,
As soon as we start making TV’s, shoes, and affordable cars in this country again I’ll be right behind you making the purchase.
How many of you remember the Stimulus of February 2008? Did you forget the check you got? That was a diversion to keep everyone from running to the hills before the ‘real money’ was successfully taken off the table.
TARP was a power and money-grab. Paulsen went right back to Goldman Sachs just as soon as the last check was written.
New data, released on the government-run Web site Recovery.gov on Oct. 14, show the stimulus program has created or saved at least 30,383 jobs. Let’s see $780 billion divided by 30,383 =$26 million per job saved.