Monthly Archives: September 2008

Bailout vote: Actual democracy at work? Wall Street: Throwing a fit?

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I’m rather stunned at most of the media coverage of the coverage of the bailout vote that I’ve encountered so far. For example, this morning I’m listening to Steve Inskeep ask questions that appear to mostly be premised on the belief that this vote should have passed. Phrases like “deliver your share of the votes” (describing what I know are fairly normal negotiations on Capitol Hill) go unchallenged, are even adopted, as if democracy didn’t more or less actually work yesterday, in spite of back room negotiations and fear mongering.

Inskeep at one point does mention that “we’ve had our share of critics” (ah, yes, “one’s share” again — meeting some minimum obligation to defer to the minority view that doesn’t fit conveniently in the two sided volley that they’d prefer, I guess) in questioning the Republican guest who voted against the bill.

But the critiques Inskeep has apparently been informed of (I am most familiar with those of Dean Baker, not sure if he was a guest) do not seem to inform the questions. Shouldn’t they? Shouldn’t Inskeep ditch the verbage that defers to Capitol Hill back rooms and actively try to reconsile all the assertions, including those beyond the default false dichotomy?

If there is a bias, shouldn’t it be towards those who don’t have a vested interest in the power structure and who have a track record of getting things right? Shouldn’t there be less deference for those who have been repeatedly wrong or massively inconsistent without rationale?

Instead Inskeep sounds like he is play-acting sounding puzzled that the two party machines could not keep the game playing the way the normally do and making little effort to go much further. Backroom tactics can be news but they should either be equal or second to routing out the facts of the issue, reconsiling the assertions about the public policy and the problems.

That most Americans opposed the bailout seems to be a footnote: often mentioned as an aside, never explained in as many words are given to all the tactical explanations.

Much emphasis has also been given to Wall Street’s reaction to the vote — but what do we expect? It is the trader’s own industry that is affected, whatever the real meaning for the rest of us is. I know so many have their futures tied-up in mortgages and investments, and this is real for a lot of regular Americans, but it seems like the casino of Wall Street is prone to manic behavior. Perhaps Wall Street isn’t unlike a three year old who just ate all the cake, is sick, wants more cake still, and is throwing a tantrum of impatience because typically capitulating parents can’t come to any other agreement as to how to handle the infantile beast.

A rough metaphor perhaps. But what I mean to say is that Wall Street is not a purely rational actor in this case (if it ever is), as it is not remotely observing other parts of the system and then making projections based on it. Its own profits, treasure, is at stake, and whether or not things could work without a bailout of this sort, the analysts and traders seem to have an incentive for the market to behave “badly” at worst and little perspective to be level-headed at best. The stock market cannot be relied upon — again — this is problematic for a lot of people who are tied up in it as other guaranteed benefits have been stripped away (by bought lawmakers and Wall Street lobbyists). If help should get to anyone, perhaps to them.

But let the traders thrash about a bit more. For all those who need real help, let us consider other ways for the State to spend $700 billion, so long as it can be done and we still have this state around to cajole into helping the people it allegedly exists to serve.

Let the loan sharks do the auditing

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With the weekend news of banks that had survived even The Great Depression going under or being bought out, NPR aired several stories about the financial crises during Morning Edition.

One was a report by David Kestenbaum about the tricky politics of inviting the International Monetary Fund (IMF) to perform a “check-up” on U.S. government economic policies and practices.

The ostensible rationale behind such an inspection seemed sensible to me, a layperson. There is merit in the idea of collaboration to facilitate the implied goal of transparency for stability and accountability. But that would be granting too much on the face of things, and there is cause for skepticism (though likely not the same flavor of skepticism and resistance that might come from Bush’s economic advisers).

The IMF is not known for being at the vanguard of sustainable development. The report cites Argentina as an example where the IMF has come to “help,” and, well — that appears to have been a complete failure until Argentina rejected IMF policies.

The IMF’s most influential practices are not that far away from those that helped cause the housing bubble and the credit crunch in the U.S. to begin with. In fact, there seems to be significant overlap in the global private institutions that have exploited the domestic situation and who also invest in IMF-led “development.” Additionally, the U.S. is a major influence on the governance of the Bretton Woods institutions (it gets more explicit control over the IMF’s sister institution, the World Bank).

If your general understanding doesn’t extend that far, then you might not have laughed until you heard the end of the report. Someone is quoted, summing up how simple it would be for someone to spot the impending housing crisis, as saying my 6 year old daughter knows you don’t lend money to people who can’t pay you back.

This is exactly what the World Bank and the IMF are infamous for: lending money to dictators of poor nations, or muscling its way into vulnerable economies, and then as some see it, extorting payback at the expense of sovereignty and development of resources essential to human rights in favor of projects that involved multinational corporations cosy to the largest investors in the WB/IMF regime. Not too much unlike a family feeling forced to pay back a loan shark at the expense of medicine or food.

The funny thing is, this is all tacitly acknowledged earlier in the piece when Kestenbaum refers to the IMF as a global loan shark.

Again, this is not to disparage the entire rank and file of these organizations, of which I know little about, and among which — I presume — there are those who are passionate about solving real problems. But these are for-profit institutions, and the associations of their power brokers along with the general record of these organizations are so conflicted as to not warrant placing faith in them, and to highlight the irony when it is suggested they advise the U.S.