Friday, September 26, 2008

Professor Stein on the Financial Crisis

The darkness is finally starting to lift -- from my mind, not the economic landscape.

Click here for an article by Ben Stein on the financial crisis. Thank you to regular correspondent -- and now Check with Chip caller -- OmaSteak for steering me to the Stein analysis.

Now I have to try to get my brain around "derivatives" called "credit default swaps." All I know for sure is that left-leaning politically correct pressure (see: Barney Frank) drove the housing market toward the mortgage crisis that touched off the larger calamity. I do not want that mindset determining the response to the problem.

1 comment:

OmaSteak said...

It wasn't just left-leaning PC political pressure that produced the current crisis, it was outright corruption in the case of many "leading" Dems in both the House and Senate. However, you can't ignore the role played by the "bright boys" on Wall Street in fashioning these "creative" derivative contracts and then using them in coordination with short selling of financial company stocks to produce a $1 trillion "crisis". When some sort of bailout plan is passed and the Treasury starts buying "toxic loans", the cash will immediately flow through the companies selling the loans right to private equity and hedge funds who hold the majority of these now enforceable derivative contracts. The cash will then reside with these companies just waiting for short selling ban to expire...then the cycle starts again...and the Treasury will be back asking for even more money. As much as I dislike the socialism practiced in Sweden, they had a similar crisis in the early 1990s and they were very successful in taking a non-bailout approach to resolve it. We should study and adopt the best portions of that plan for this current situation. This really goes against my basic core principles. If I was calling the shots, I'd let the "financial system" fail and use it as a means to completely restructure government at all levels since the current government structure would likely collapse along with financial system.