But I was under the impression that you love deregulated free markets. How are "we" supposed to reign in the actions of profit-centric credit-lending corporations, if the government is to keep its hands off markets?
Well, first, I never said that. I think deregulation has caused more problems than it's solved. Look at Enron as the prime example.
I'm all about carrot-and-stick. And, for that, I think you need government oversight.
I think structured bonuses are one of the many ways for employers to attempt to hide what they are really paying executives. All you have to do is look at a 10K (which most people don't) to see what principals are really getting.
I'm all for taxing bonuses at a separate, higher rate. I'm also for longterm contingencies on those bonuses (e.g., they have to give the money back if the company subsequently fails). Huge bonuses mean that companies are overcharging for whatever product they are offering, whether it's health insurance or groceries or widgets...
I actually like the "not-for-profit" model of business, not rampant free markets. We went through the
laissez faire phase of this country in the early 20th century (something I've talked about before on this forum) and you ended-up with Rockefellers and Waltons and a bunch of other people who were rewarded well beyond their actual contribution to society invoking many cutthroat, predatory, deceptive business practices. Monopolies and oligopolies will drive up prices. There need to be rules and regulations mandating what are fair rules of engagement. Otherwise, even a cost-effective upstart will get squeezed out of the game.
Having said that, free market tends to make for more innovation and better products available at better prices. Government's role is to incentivize and protect small business from the behemoth predators. If that involves some sort of regulation to prevent the powerful few from dictating the market, then I'm all for it.
So, don't get my position wrong. I'm firmly against the "Wal-Mart-ing" of America.
There's no dispute that there are homeowners who should have put more planning into the situation before taking out a loan. But there are companies that, besides aggressively pushing these loans, committed outright fradulent practices (e.g. manipulating numbers to reduce down payments) in being able to provide them. It's not good when lesser-educated, low-income lendees meet aggressive, fraudulent lenders with a lot of credit to hand out. I put more blame on the lenders than the lendees, but the most blame on free markets with little oversight.
Agreed. But, I probably put a little more equal blame on the the lendees. They were
greedy. And, when you overstep your own ability to
safely manage anything, you're eventually going to get burned.
What I have a problem with is, essentially, absolving the players in the ordeal by bailing them out. More carrot, no stick. And, I have a huge problem with the government being what is tantamount to an insurance company. Sure, they're supposed to insure
some things (that is, protecting the common good, providing safe borders, ensuring "fair play" in the open market, etc.), but they should not be there to continually bail out the mistakes of the free market.
Carrot and stick. You make it clear that, when something is not adding up financially or logically, you enact steps to make those people engaging in that behavior personally accountable if it fails. Not saying "don't" engage in the behavior, but definitely saying that you will be responsible for the outcome. We just don't have that now. We have all risk and no consequence. And, this housing bubble is something that people have been talking about for the past
several years. Everyone knew it was going to burst eventually. Why no one did anything about it, starting with Clinton, is beyond me.
We'll survive this. But, it's going to be painful. We need more rules - not re-regulation necessarily - but a clear set of guidelines that says if you put your pen to paper and sign your name, it means something. And, if that's something like debtor's prison (a
very big stick), then I'm all for it. I assure you that many people will think twice before they engage in such risky practices - especially those issuing the loans, which are usually otherwise intelligent and educated people who got blinded by their own greed... and no foresesable downside to acting on that greed.
-copro
