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mises
Joined: 05 Nov 2007
Location: retired
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 Posted: Mon Apr 20, 2009 10:58 am Post subject: Why We Should Banish Larry Summers From Public Life |
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I was going to put this in the depression thread...
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Why We Should Banish Larry Summers From Public Life
By Naomi Klein
Sunday, April 19, 2009
I vote to banish Larry Summers. Not from the planet. That wouldn't be nice. Just from public life.
The criticisms of President Obama's chief economic adviser are well known. He's too close to Wall Street. And he's a frightful bully, of both people and countries. Still, we're told we shouldn't care about such minor infractions. Why? Because Summers is brilliant, and the world needs his big brain.
And this brings us to a central and often overlooked cause of the global financial crisis: Brain Bubbles. This is the process wherein the intelligence of an inarguably intelligent person is inflated and valued beyond all reason, creating a dangerous accumulation of unhedged risk. Larry Summers is the biggest Brain Bubble we've got.
Brain Bubbles start with an innocuous "whiz kid" moniker in undergrad, which later escalates to "wunderkind." Next comes the requisite foray as an economic adviser to a small crisis-wracked country, where the kid is declared a "savior." By 30, our Bubble Boy is tenured and officially a "genius." By 40, he's a "guru," by 50 an "oracle." After a few drinks: "messiah."
The superhuman powers bestowed upon these men -- and yes, they are all men -- shield them from the scrutiny that might have prevented the current crisis. Alan Greenspan's Brain Bubble allowed him to put the economy at great risk: When he made no sense, people assumed that it was their own fault. Brain Bubbles also formed the key argument Greenspan and Summers used to explain why lawmakers couldn't regulate the derivatives market: The wizards on Wall Street were too brilliant, their models too complex, for mere mortals to understand.
Back in 1991, Summers argued that the subject of economics was no longer up for debate: The answers had all been found by men like him. "The laws of economics are like the laws of engineering," he said. "One set of laws works everywhere." Summers subsequently laid out those laws as the three "-ations": privatization, stabilization and liberalization. Some "kinds of ideas," he explained a few years later in a PBS interview, have already become too "pass�" for discussion. Like "the idea that a huge spending program is the way to stimulate the economy."
And that's the problem with Larry. For all his appeals to absolute truths, he has been spectacularly wrong again and again. He was wrong about not regulating derivatives. Wrong when he helped kill Depression-era banking laws, turning banks into too-big-to-fail welfare monsters. And as he helps devise ever more complex tricks and spends ever more taxpayer dollars to keep the financial casino running, he remains wrong today.
Word is that Summers's current post may be a pit stop on the way to the big prize, Federal Reserve chairman. That means he could actually make "maestro."
Mr. President, please: Pop this bubble before it's too late. |
http://www.washingtonpost.com/wp-dyn/content/article/2009/04/16/AR2009041603244_pf.html
She's soft on him. But I agree.
Summers as Fed chairman would mean the whole system is broken beyond repair. |
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postfundie
Joined: 28 May 2004
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| Posted: Tue Apr 21, 2009 9:15 am Post subject: |
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| . For all his appeals to absolute truths, he has been spectacularly wrong again and again |
She should write this about her damn self.
The derivatives were not necessarily the problem. Mortgage brokers telling big fat whopper lies was probably more damaging than anything. I don't blame the machine totally. Put the blame on those who put the sugar in the gas tank. |
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superacidjax
Joined: 17 Oct 2006
Location: Seoul
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| Posted: Tue Apr 21, 2009 11:07 am Post subject: |
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| postfundie wrote: |
| Mortgage brokers telling big fat whopper lies was probably more damaging than anything. I don't blame the machine totally. Put the blame on those who put the sugar in the gas tank. |
The Community Reinvestment Act was probably the most damaging. The CRA was passed by congress during the Carter administration in 1977. The CRA was inacted to provide credit, including home ownership opportunities to underserved populations and commercial loans to small businesses. Basically poor folks who in the past could not get loans because they were a credit risk.
It was re-interpreted by the Clinton administration in 1995. They reinterpreted the CRA to politicize lending practices. Under the CRA, the feds forced banks to prove they weren't redlining by approving loans to minorities and various community groups, bad risks or not. Franklin Raines, the Clinton appointed head of Fannie Mae from 1998 to 2004, made it his top priority to make mortgages easier to get for people with poor credit, few assets and little money for a down payment.
In 2005 the Bush administration pushed for reforms. Those reforms were rebuffed by Democrats in congress led by Christopher Dodd and Barny Franks.
Also in 2005, John McCain sponsored legislation to thwart what he later called "the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole."
In a nut shell the Democrats trying to do what they thought was the right thing ended up causing the current banking crisis. |
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Trevor
Joined: 16 Nov 2005
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RJjr
Joined: 17 Aug 2006
Location: Turning on a Lamp
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| Posted: Sun May 03, 2009 3:23 pm Post subject: |
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| It's a good thing Larry Summers was sleeping instead of fucking more things up. When he wakes up, he should resign and take Timmay Geithner and Rahm "Freddie Mac" Emanuel with him. |
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mises
Joined: 05 Nov 2007
Location: retired
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