Blame It on the Bankers

Nothing new but I spoke to someone yesterday who explained that the bank/economy melt down was all brought on by greed. I spoke to him at the gym. He's a doctor so you would think that he would know better. This time he is saying it is the greed of Lehman Brothers executives that started it all. He saw it on a Canadian Broadcasting program. I asked him a few questions but I am not up for such arguments as I have had them so often. I thought later that I should have asked him when they will be broadcasting the rebuttal. Surely they should give both sides a fair chance. If Canadian Broadcasting is anything like Public Broadcasting in the USA, there's not a chance. I am sure my friend would not care and understand. He would say that there can be no rebuttal. (See my W. F. Buckley quotation.)

I wanted to tell him that Lehman Brothers and the mortgage bankers were just doing what congress told them to do. They were supplying mortgages and securities to the public, Fannie May, Freddie Mac, and to other banks that the regulators in government wanted them to provide. Everyone knew they were junk. That's why everyone wanted default swaps as insurance. (The guru's computer models said there wasn't much risk in those derivatives and the rating agencies gave them triple A's) It had nothing to do with Glass Steigal or the free market run amuck, or greedy executives. The free market was not free; it was confused and mislead by government mandates to reduce lending standards and other rules. Glass Steigal was irrelevant, since Lehman and other firms were making deals that would not have been disallowed with or without the regulations under Glass Steigal. Lastly, the executives were no more greedy than they had ever been or ever will be.

By the way, they are doing it again. They are making too many low interest mortgage loans and selling them to Fannie May and Freddy Mack just as BHO tells them to do. They would make more business loans as he asks too, if business wanted any loans right now. (What happens when rates go up and banks are caught holding 30 year 5% loans and their cost of funds is more like 10%? They will need to be bailed out and they will be told they were greedy.)

My rebuttal to him was necessarily brief. I told him that the problem was government involvement in the economy. That is what I firmly believe but how can that be explained in a few minutes to a thoroughly indoctrinated drone? I told him to look at Von Mises Institute.com and chickenshitnewworld. He accused me of being a Republican.

When will they ever learn?