Friday, October 17, 2008

Republican Free Market Failure: Why part 8

I decided to post as many explanations as to why we're in the economic mess we're in to document the collapse of the Republican free market ideology. Here's the word from another two sources:
Economic Policy Institute: EPI this week was glad to see the Treasury Department change its thinking about buying stakes in rescued banks and other financial institutions, rather than merely purchasing their troubled assets. Sounds complicated, but there is a simple logic to this: Most investors would rather own a piece of a functioning business rather than a bundle of securities whose value is unknowable.

The Globe: Henry Paulson has come closer than ever to a mea culpa for the country's worst financial mess since the Great Depression. “We're not proud of all the mistakes that were made by many different people, different parties, failures of our regulatory system, failures of market discipline that got us here,” he told Fox Business News.

And he said that as a firm believer in free markets, it was tough to spend $250-billion to buy a piece of nine of the country's largest banks, including Goldman Sachs, “It's always difficult when you come from a country like ours that's based on markets to be in a situation where intervention is necessary,” Mr. Paulson said.

Sydney Weintraub, a former U.S. assistant secretary of state for international finance, said buying into banks was always the right course. But Mr. Paulson's rigid free-market thinking caused him to get sidetracked on a deeply flawed plan to purchase soured mortgage loans and securities. “It was ideology that kept him from doing it,” said Mr. Weintraub.

Also yesterday, former U.S. Securities and Exchange Commission chairman Arthur Levitt said the agency was complicit in the financial meltdown. Mr. Levitt, who led the agency from 1993 to 2001, told the Senate banking committee that a resource-strapped SEC allowed confusion and reckless risk-taking to dominate financial markets. “As the markets grew larger and more complex – in scope and in products offered – the commission failed to keep pace. As the markets needed more transparency, the SEC allowed opacity to reign. As an overheated market needed a strong referee to rein in dangerously risky behaviour, the commission too often remained on the sidelines,” he said.

No comments:

Post a Comment