William Safire Quotes

The President, like most Americans, was outraged at the immoral, insensitive, and incompetent behavior of the financial industry in the Meltdown of 2008. However, the President learned how dependent the economy of the entire country was dependent on having solvent banks and how vulnerable the entire nation was to major failures of the investment and regular banks. So he was faced with very poor options. The government could have nationalized the banks, but that would produce an economic system which in the long run would not be very sound. Of the banks could be allowed to fail or risk failure in which case the entire population would suffer. Or he could lend money to the banks to stabilize and strengthen them while the bank executives were paying themselves huge bonuses even though they performed so poorly. He chose the latter and Warren was typical of criticism he received from many of his supporters. Even though the banks had broken the law and forged documents and committed perjury in tens of thousands of mortgage foreclosures, the President, as a practical matter, could not even prosecute the bank officials who were responsible because there were thousands of bank and other company officials who had committed the same crime. The guilty included almost every senior officer of the major banks, and jailing all these people was deemed impractical. So, to recover the economy, justice and fairness suffered.

The result was regulation of the banks and the creation of the SEC to regulate the stock market, However, over the years, the regulations were not able to keep up with the sophisticated development of new forms of investments and financial instruments and the financial industry were able to speculate with other people’s money in ways that FDR and his reformers never imagined. Finally, even the regulation that did exist was weakened by the policies of the George W. Bush administration and the combination brought about the Great Recession of 2008 where the profits from excess speculation were privatized and the losses, socialized with the taxpayer and the American worker bearing the brunt while most of the speculators were bailed out and made more money than ever. The Obama administration tried to reform the situation, but was unable to put an end to the legal speculation with other people’s money or of having institutions that were “too big to fail.”

While Stockman and some others believe that the Meltdown of 2008 would have “run its course” if the government didn’t bail out financial institutions, the very conservative Republican Secretary of the Treasure Paulson and the Chairman of the Federal Reserve told President Bush, Congress, and incoming President Obama that if there was not a quick bailout, the economy of the nation would crash with a depression resulting as bad if not worse of the Hoover Depression of 1929. Bush and Obama and the majority of Congress agreed and took action to avoid that. There is no way of knowing whether they were right or Stockman was. However, the people with the responsibility of governing and safeguarding the nation clearly did not want to take a chance that the advocates of no action might be wrong.

The Meltdown of 2008 came a year later and Citigroup, one of the largest banks in America, had massive liquidity problems and in order to stave off bankruptcy the taxpayers had to come up with $45 Billion. The bank executives, as this quotation demonstrates, knew that they were in a very risky situation and that if the subprime mortgages started to default, the “music would stop” and they and the other banks would have a massive liquidity problem. None the less, they kept on investing more and more of their bank customer’s money and making money in what they knew was a highly risky enterprise. The greed clouded their judgment and when the music stopped and many were no longer dancing, the Meltdown of 2008 almost destroyed the entire national economy and triggered the Great Recession where the overwhelming proportion of Americans had to suffer for the greed of those who could not “stop dancing” even as they knew it was very dangerous.

Greenspan accepted this as many other economists and financial regulators did. What they did not take into account was the incredible greed of many of the financial executive who were betting with their customers money, If the bet was right they, the shareholders and the customers all made out very well as they were highly leveraged. If the bet was wrong, the shareholders and customers lost a lot, and the financial executives only made their multimillion dollar salaries and bonuses (Many were actually were guaranteed their bonuses even if they put the company into bankruptcy.) Worse, they earned their money when they made their sales or earnings targets, but when the securities they bought went sour, even if the company had no funds left, the. It was “heads we all win and tails only I win.” The vested interests between the financial company executives, the shareholders, and the clients were divergent, and the customer was at the bottom of the money pole.

Greenspan and some others assumed that the shareholders and the executives who ran the financial institutions had the same vested interests. But the executives had disconnected themselves from the fate of the shareholders, by having Golden Parachutes to protect the executives even if the business failed and they were fired. And they got their bonuses immediately so by the time the authorities and the shareholders discovered that the profits the bonuses were paid for were illusory, the bonus money was safely stored in a secret offshore bank. But if things went wrong, there was always the play of getting a government bailout which would keep the executives getting their huge bonuses and keep the shareholders from losing their money as the taxpayers covered most of the losses.

She was the only major Federal Official who did not support the bailouts of the banks and their bondholders and shareholders. Not one of her insured bank depositors lost their insured funds in the financial crisis. She protected them all but would not protect the banks themselves. Other officials did that and the following year the bank executives took the bailout money and paid themselves and others in the bank huge bonuses when the banks lost billions.

He was referring to Fannie Mae, the government-created. private mortage guarantee company. It was heavily regulated, and in general it met the regulatory requirements. However, the requirements were insufficient, and in the 2008 Meltdown and the Great Recession that followed, Fannie Mae itself was in such bad financial condition, that the Federal Government had bail them out or have the entire home mortgage industry fall apart.

Sovereign credit substitution is where the government, one way or another, assumes and guarantees the debts of private corporations. This is an elegant way of saying: “taxpayer bailouts”

He was replying to Senator Grassley--{637990}. This quotation is one of the saddest admissions in American law enforcement and corporate regulatory history. A small group of very wealthy men, working for huge financial corporations caused the worst financial crisis since the Great Depression. The Government regulators were reined in by the Bush Presidential administration and were none to competent anyway. The Clinton Administration repealed the Glass Stiegel Act allowing banks to gamble with customer’s The Congress made matters worse by kowtowing to the housing and real estate special interests and overheating the housing market. But with all that some of the many of the financial executives committed crimes ranging from financial fraud to forgery of court documents. But they had put the country into such a poor economic state, that the Obama administration feared that prosecution of some of the leading financial executive criminals would spook the financial markets and cause an even greater economic situation. At least the Attorney General admitted the truth of Senator Grassley’s suspicion--{637990}.

At this time it was 6 years after the Home Financing Crisis and the Meltdown of 2008 and despite tens of thousands of law violations by the bank, the Justice Department was finally finishing their investigations and requiring some penalties. Other negotiations with other banks were in progress, but no bank executives were going to jail for the millions they handled fraudulently, whereas a burglar who stole household goods would do jail time.