Don't forget however, that none of the leveraging would have been possible without Fannie and Freddie. Government intervention, while well-intentioned, rarely leads to a good outcome. I say get the government out of the car business, bank business, mortgage business, et al, and let's go back to basics. As for capitalism going wrong, there is no perfect economic system. There are seasons and we are approaching winter. All part of the deal. My, but we sure had a glorious summer, didn't we?
How was Fannie and Freddie not capitalistic organizations? Fannie Mae was not a government entity, they were an independent, publicly traded, private sector firm. They were allowed to borrow at better rates than banks as a GSE. They bought what they did in an attempt to grab share and profits. If they came under pressure from Congress -- or Angelo Mozilla, or hedge fund investors -- it was because they were trying to capture market share and profits and maintain an advantageous position in the marketplace. Also, the rest of the world had an increase in housing prices and they did not have a Fannie and Freddie, either.
I do not understand why people believe that a laissez-faire capitalism alone is the answer and that government intervention hinders capitalism. As a matter of fact, the greed and let's say capitalism, is what actually made many wealthy enough to lobby for their interests. We live in one of the most capitalistic countries in the world. Immigrants come here to open businesses. Without government intervention, we would not have small business SBA loans for minorities to start businesses. They drive a good portion of our economy. Statistics show that immigrants and minorities, including woman, are the most likely to start small businesses.
So, what economic model will work going forward? I don't think anyone knows for sure, but the dang Libra in me is always seeking balance and I agree with this essay in part which ends with...........................................
"It is possible to have an enlightened ruler that will direct policy for the good of society, but the chances are small, so the best way to design such new social structures is via democratic governance political mechanisms. There are no capitalist enterprises that are run democratically, even in the western democracies. They all are manged in a top-down fashion, by hand-picked managers and self-perpetuating boards of directors. The ability of the "owners" (the shareholders) to set policy is non-existent in reality, regardless of the nominal structure. New enterprises will have to be managed democratically and their goals will have to be part of the greater social good and not just to "maximize profits" for the shareholders."
"We have some models for these types of enterprises as well. In the past we have had mutual societies (banks, insurance, etc.) as well as cooperatives and employee owned enterprises. Variations on these arrangements need to be explored. It's the lack of imagination by economists, social scientists and politicians that is holding us back. Perhaps new ideas will have to come from the bottom up."
"When you have a patient dying of obesity the first thing to do is stop expanding his consumption. We have a sick planet and the old ways won't work in the future. Capitalism must die!"
Some excerpts from his essay which I felt were directly related to our discussion.....................................
Improper ideology, hypocrisy division. The most common example of this these days is in the area of
laissez faire economic policy. This includes both "free" trade and the removal of constraints on business activities of for-profit firms. Those who stand to gain preach an ideology which they don't follow in practice. Rather than pursuing unfettered competition they spend vast sums of money buying politicians so that policies are enacted which favor their interests explicitly. They are further aided by a large chorus of useful idiots who spout the ideology without looking at the real situation.
Imbalance of power. This is the "
liberal" school which thinks that excesses can be handled by proper regulation (especially by government and international agreements). They are reinforced in their view by the limited successes that have occurred in the past after similar disruptions. They posit that humans are prone to excess (hence the seven deadly sins), but think that social structures can be put in place to tame the excesses, especially of greed and the lust for power. Unfortunately such social structures are run by people who are also susceptible to the same forces. Recent events have shown the ease with which regulatory agencies can be rendered ineffective. As for those who become autocrats, societies have a hard time preventing their rise or wrenching power from them once they take command. Power shifts away from these autocrats usually involves armed conflict and social unrest.
http://robertdfeinman.com/society/capitalism_must_die.html
This whole bailout fiasco make me want to :boxing: or
