April 6, 2009

Calculated dishonesty and a 'Green Collar' stimulus

A few days ago Bill Moyers interviewed economics professor William K. Black, who says that 'it was more than greed and incompetence that brought down the U.S. financial sector and plunged the economy in recession ... at the very center of mortgage collapse, creating triple-A rated bonds out of "liars' loans" — loans issued without verifying income, assets or employment — was a fraud, and the banks knew it.'

Black says the fraud had 3 stages: "the way that you do it is to make really bad loans, because they pay better. Then you grow extremely rapidly, in other words, you're a Ponzi-like scheme. And the third thing you do is we call it leverage. That just means borrowing a lot of money, and the combination creates a situation where you have guaranteed record profits in the early years. That makes you rich, through the bonuses that modern executive compensation has produced. It also makes it inevitable that there's going to be a disaster down the road."

Black also comments on the foxes guarding the hen house; see this excerpt or the entire QuickTime version at Moyers Journal:

And via Glenn Greenwald in his multisource summary "Larry Summers, Tim Geithner and Wall Street's ownership of government," is yet another cautionary view. Offered by Simon Johnson, a professor at MIT and former chief economist at the International Monetary Fund, is "The Quiet Coup" at The Atlantic monthly:

"The crash has laid bare many unpleasant truths about the United States. ...the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time."

<Update\: Elizabeth Warren's 8-minute video summary of a congressional panel report, via Mike Whitney /update end>

Despite the morass, there are plenty of options -- it's not like the country has been destroyed in a Mongol Invasion like medieval Baghdad. As noted earlier among other good news, SF Bay's Van Jones was appointed Special Advisor for Green Jobs, Enterprise and Innovation by the White House. Jones advocates another type of stimulus -- investments in people and green infrastructure rather than bailouts.

Amazon doesn't let you embed their video, so they won't be able to try to get you to buy the Van Jones book The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems. Here's 2 videos highlighting Jones' ideas:

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