Trying to understand the US Economic Crisis- simply put Greed + Deregulation = Economic Crisis
McCain has been involved in some shady deals.
McCain a reformed crook backsliding
Rachel Maddow: Matt Welch on the Keating Five
MCCain says " I'm not a crook " just have bad luck
Sept. 25,2008
The Deal That Blew Up by robert L. Borosage at Huffington Post Sept. 26,2008
also see:
Top Wall Street Executives Made More Than $ 3 Billion Before Financial Crisis By Tom Randall & Jamie McGee at Huffington Post Sept. 27, 2008
Wall Street's five biggest firms paid more than $3 billion in the last five years to their top executives, while they presided over the packaging and sale of loans that helped bring down the investment-banking system.
Merrill Lynch & Co. paid its chief executives the most, with Stanley O'Neal taking in $172 million from 2003 to 2007 and John Thain getting $86 million, including a signing bonus, after beginning work in December. The company agreed to be acquired by Bank of America Corp. for about $50 billion on Sept. 15. Bear Stearns Cos.'s James ``Jimmy'' Cayne made $161 million before the company collapsed and was sold to JPMorgan Chase & Co. in June.
and how incredible self-regulation doesn't work , You don't say :
S.E.C. Chairman : Oversight Failures Fueled Collapse by StephenLabaton New York Times Sept. 26, 2008
The chairman of the Securities and Exchange Commission, a longtime proponent of deregulation, acknowledged on Friday that failures in a voluntary supervision program for Wall Street's largest investment banks had contributed to the global financial crisis, and he abruptly shut the program down.
The S.E.C.'s oversight responsibilities will largely shift to the Federal Reserve, though the commission will continue to oversee the brokerage units of investment banks.
Also Friday, the S.E.C.’s inspector general released a report strongly criticizing the agency’s performance in monitoring Bear Stearns before it collapsed in March. Christopher Cox, the commission chairman, said he agreed that the oversight program was “fundamentally flawed from the beginning.”
“The last six months have made it abundantly clear that voluntary regulation does not work,” he said in a statement. The program “was fundamentally flawed from the beginning, because investment banks could opt in or out of supervision voluntarily. The fact that investment bank holding companies could withdraw from this voluntary supervision at their discretion diminished the perceived mandate” of the program, and “weakened its effectiveness,” he added
Keating Five Ring A Bell? 25 September 2008 by: Rosa Brooks, The Los Angeles Times
McCain's past collides with the present Wall Street debacle.
Once upon a time, a politician took campaign contributions and favors from a friendly constituent who happened to run a savings and loan association. The contributions were generous: They came to about $200,000 in today's dollars, and on top of that there were several free vacations for the politician and his family, along with private jet trips and other perks. The politician voted repeatedly against congressional efforts to tighten regulation of S&Ls, and in 1987, when he learned that his constituent's S&L was the target of a federal investigation, he met with regulators in an effort to get them to back off.
That politician was John McCain, and his generous friend was Charles Keating, head of Lincoln Savings & Loan. While he was courting McCain and other senators and urging them to oppose tougher regulation of S&Ls, Keating was also investing his depositors' federally insured savings in risky ventures. When those lost money, Keating tried to hide the losses from regulators by inducing his customers to switch from insured accounts to uninsured (and worthless) bonds issued by Lincoln's near-bankrupt parent company. In 1989, it went belly up - and more than 20,000 Lincoln customers saw their savings vanish.
Keating went to prison, and McCain's Senate career almost ended. Together with the rest of the so-called Keating Five - Sens. Alan Cranston (D-Calif.), John Glenn (D-Ohio), Don Riegle (D-Mich.) and Dennis DeConcini (D-Ariz.), all of whom had also accepted large donations from Keating and intervened on his behalf - McCain was investigated by the Senate Ethics Committee and ultimately reprimanded for "poor judgment."
But the savings and loan crisis mushroomed. Eventually, the government spent about $125 billion in taxpayer dollars to bail out hundreds of failed S&Ls that, like Keating's, fell victim to a combination of private-sector greed and the "poor judgment" of politicians like McCain.
The $125 billion seems like small change compared to the $700-billion price tag for the Bush administration's proposed Wall Street bailout. But the root causes of both crises are the same: a lethal mix of deregulation and greed.
Today's meltdown began when unscrupulous mortgage lenders pushed naive borrowers to sign up for loans they couldn't afford to pay back. The original lenders didn't care: They pocketed the upfront fees and quickly sold the loans to others, who sold them to others still. With the government MIA, soon mortgage-backed securities were zipping around the globe. But by the time many ordinary people began to struggle to make their mortgage payments, the numerous "good" loans (held by borrowers able to pay) had gotten hopelessly mixed up with the bad loans. Investors and banks started to panic about being left with the hot potato - securities backed mainly by worthless loans. And so began the downward spiral of a credit crunch, short-selling, stock sell-offs and bankruptcies.
Could all this have been prevented? Sure. It's not rocket science: A sensible package of regulatory reforms - like those Barack Obama has been pushing since well before the current meltdown began - could have kept this most recent crisis from escalating, just as maintaining reasonable regulatory regimes for S&Ls in the '80s could have prevented that crisis (McCain learned this the hard way).
But, despite his political near-death experience as a member of the Keating Five, McCain continued to champion deregulation, voting in 2000, for instance, against federal regulation of the kind of financial derivatives at the heart of today's crisis
also see: The Great Switch : Banks Rob People/Wednesday 24 September 2008 by: Jim Crotty, t r u t h o u t
...In response to the collapse of unregulated financial markets in the early 1930s, the American people decided to tightly regulate the financial system so that it could never again threaten the US economy. The Depression-era regulations worked effectively until the late 1970s, helping to create the best economic performance in US history. When our financial system was buffeted by high inflation in the late 1970s, it became necessary to reform the regulatory process so it would be effective in the new economic era. But instead of reform, the rise to power of anti-government, right wing forces - reflected in the election of President Reagan in 1980s - led to a radical deregulation process. By the end of the Clinton presidency, radical deregulation was completed.
Deregulation - in concert with rapid financial innovation that made complex financial products such as derivatives and mortgage-backed securities possible - created a volatile pattern of financial booms and crises. Each crash led to bailouts by affected governments, which only increased incentives to financial firms to expand further and take greater risks, since there were massive profits to be made in the upturn while the public paid to limit their losses in the downturn. The new era thus saw an explosion in the size and profits of financial firms. Financial assets were less than five times the size of the US gross domestic product (GDP) in 1980, but over ten times as large in 2007. In the US, the share of total corporate profits generated in the financial sector grew from 10 percent in the early 1980s to 40 percent in 2006. As financial markets grew larger and thus more dangerous, the pressure on governments to bail them out increased proportionately.
The Rainmakers make a killing while corporations go under
...Why did so many large financial institutions borrow so much money to invest in such risky securities? The answer lies in the way their top people are paid. Financial firm "rainmakers" get most of their compensation in the form of bonuses tied to the profits of their enterprise. When markets are booming, profits and bonuses are maximized by borrowing lots of money - investment banks borrowed $32 for every $33 of assets they owned in 2007 - and taking high risks with it. For example, in 2006, Goldman Sachs had a banner profit year and the average bonus for its 25,000 employees was $650,000. But most of this money was paid to those at the top, with key traders taking home $50 million. Everyone knew that such risk-taking would eventually lead to disaster when markets turned down, but they would not have to give back the big bonuses from the boom.
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I have always been skeptical of the notion of Positive Thinking which is Hallmark of Americanmentality. Claiming that thinking positively will change or better one's circumstances is not really a way to practically run one's life or a country's economy. If someone is dying of a horrible disease like cancer thinking positively will not make the cancer go away. Even if there were some exceptions of people surviving and even thriving after being diagnosed as being terminally ill this does not mean it will happen to you. Most people just die anyway no matter how positive or negative their thinking is.
It is like the way the Bush Regime approached the War in Iraq- they would greet Americans as liberators, it will be a cake-walk, there's just a few dead-wenders fighting, the surge will work miracles- well over one million Iraqis are dead ; three million have left the county as refugees, two million are desplaced persons within Iraq- the infrastructure is still in a mess including roads, highways, schools , hospitals, police stations, water treatment plants & sewage treatment plants etc. But somehow Bush & McCain see progress because fewer Americans were killed last month . The country is in ruin. Much the same can be said about Aghanistan but one should add that Drug Warlords & Taliban and other thugs control a large part of the country.
Positive Thinking is merely Wishful Thinking and Magical Thinking in other words a form of delusional thinking & behavior. The attitude has been that the profits will keep rising , housing prices will keep rising , The Economy will continue to grow- Industries, Investment Companies and individuals should be permitted to regulate themselves because then everything will work out for the best. Economic policy has been based upon a positive mental attitude with little concern for reality. The fundamentals of the economy are strong according to Chancellor Bush & soon to be Chancelors Palin & McCain.
How Positive Thinking Wrecked the Economy by By Barbara Ehrenreich.com Sept. 26, 2008 at AlterNet.org
.Greed -- and its crafty sibling, speculation -- are the designated culprits for the ongoing financial crisis, but another, much admired, habit of mind should get its share of the blame: the delusional optimism of mainstream, all-American, positive thinking. As promoted by Oprah, scores of megachurch pastors, and an endless flow of self-help bestsellers, the idea is to firmly belief that you will get what you want, not only because it will make you feel better to do so, but because thinking things, "visualizing" them -- ardently and with concentration -- actually makes them happen. You will be able to pay that adjustable rate mortgage or, at the other end of the transaction, turn thousands of bad mortgages into giga-profits, the reasoning goes, if only you truly believe that you can.
Positive thinking is endemic to American culture -- from weight loss programs to cancer support groups -- and in the last two decades it put down deep roots in the corporate world as well. Everyone knows that you won't get a job paying more than $15 an hour unless you're a "positive person" -- doubt-free, uncritical, and smiling -- and no one becomes a CEO by issuing warnings of possible disaster.
According to a rare skeptic, a Washington-based crisis management consultant I interviewed on the eve of the credit meltdown in 2007, even the magical idea that you can have whatever you truly want has been "viral" in the business culture. All the tomes in airport bookstores' business sections scream out against "negativity" and advise the reader to be at all times upbeat, optimistic and brimming with confidence -- a message companies relentlessly reinforced by treating their white collar employees to manic motivational speakers and revival-like motivational events. The top guys, meanwhile, would go off to get pumped up in exotic locales with the likes of success guru Tony Robbins. Those who still failed to get with the program could be subjected to personal "coaching" or of course, shown to the door.
The same frothy wave of mandatory optimism swept through the once-sober finance industry. On their websites, scores of motivational speakers proudly list companies like Lehman Brothers and Merrill Lynch among their clients. Angelo Mozilo, the former CEO of Countrywide Mortgage whose subprime ventures precipitated the entire crisis, was known for his congenital optimism and described in the Guardian earlier this year as "absurdly upbeat" even as his industry unraveled. No one was psychologically prepared for hard times, when they hit, because, according to the tenets of positive thinking, even to think of trouble is to bring it on. In May, the New York Times reported that Merrill, caught up short, was suddenly trying to "temper the Pollyannas in its ranks," and force its analysts to occasionally say the word "sell."
Americans did not start out as deluded optimists. The original ethos, at least of white Protestant settlers and their descendents, was a grim Calvinism that offered wealth only through hard work and savings, and even then made no promises at all. You might work hard and still fail; you certainly wouldn't get anywhere by adjusting your attitude or dreamily "visualizing" success. Calvinists thought "negatively" as we would say today, carrying a weight of guilt and foreboding that sometimes broke their spirits. It was in response to this harsh ethos that positive thinking arose -- among mystics, lay healers, and transcendentalists -- in the 19th century, with its crowd-pleasing message that God, or the universe, is really on your side, that you can actually have whatever you want, if the wanting is focused enough
Economic Fascism Coming to America/By Robert Scheer,Truthdig Sept. 25, 2008
Does it really matter which party is in charge when it comes to bailing out the Wall Street hustlers whose shenanigans have bankrupted so many ordinary folks? Not if the Democrats roll over and cede power to the former head of Goldman Sachs, the investment bank at the center of our economic meltdown.
What arrogance for Treasury Secretary Henry Paulson -- who the year before President Bush appointed him Treasury secretary was paid $16.4 million for heading the company that did as much as any to engineer this financial travesty -- to now insist we must blindly trust him to solve the problem. Paulson is demanding the power to act with "absolute impunity," said Sen. Christopher Dodd, D-Conn., who admonished the Treasury chief: "After reading this proposal, it is not only our economy that is at risk, Mr. Secretary, but our Constitution as well."
also see A Wall Street Bailout Wouldn't Help Anyone But Rich Investors/ByTerrence McNally, AlterNet,Sept. 27, 2008
Interview of Thomas Frank in which Frank basically argues that conservative notions of deregulation and self-regulation has led to disaster. But it is not a diaster for these big corporations & investment companies since they will still make money through the bail-out.
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and so it goes,
GORD.
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