A Smart Straight Shooter

Dean Baker, co-director of the Center for Economic and Policy Research and publisher of the Beat the Press blog (one of my favorites), is a rare breed. Aside from the fact that he is one of the few economists who seems to know what is really going on (and who has been ahead of the curve as far as the current crisis is concerned), he is an articulate commentator who cuts straight through the B.S. and calls it like it is. I have to admit that when he writes post like the following, "'The Swelling Tide of Toxic Home Loans Is Proving to Be Even More Worrisome than Initially Feared,'" I really lap it up.

It would be nice if some of the people who get paid big dollars because they supposedly have high skills could acknowledge that they messed up. It would also be nice if the national media did not consider it part of their job to cover up for powerful people who messed up on their job.

Yes, that headline is a a direct quote. It also is the sort of statement that has no place in a serious news article. The swelling tide of toxic loans is not proving to be more worrisome than feared. The problem is that the people who were supposed to be regulating the financial system did not know what they were doling.

The people who did understand the economy knew that an unprecedented run-up in house prices, with no remotely plausible explanation based on fundamentals, with no corresponding increase in rents, was a bubble. We also knew that bubbles burst. And, we knew that when bubbles in a highly leveraged asset like housing burst, that lots of debts go bad and that banks then take really big hits.

The NYT should be exposing the incompetence of people who were paid big dollars to know the housing and financial markets (this includes both bankers at place like Citigroup, Merill Lynch, Bear Stearns, Fannie Mae and Freddie Mac, as well as the top regulators) and completely failed in their responsibilities.

It should not try to tell readers that the housing crash was somehow an unforeseeable event that came out of the blue. It was an entirely predictable event and it was only incompetence that prevented these people from seeing it. Unfortunately, unlike dishwashers and custodians, bank executives and regulators are not held accountable for their performance. Instead, the media covers it up for them.

Comments

[roger]

Divorcing reality from appearances.
This is the appearance:(The swelling tide of toxic home loans is proving to be more worrisome than initially feared.)
This is the reality (It was an entirely predictable event and it was only INCOMPETENCE that prevented these people from seeing it)
Dean Baker is a thinking man hats off to him

[nevket240]

Hank P was given the Treasury job because he knew, as an insider, what a mess had been concocted with "funny money". He, along with many others, took massive bonuses as a result of fraud. Why isn't he being pursued for those bonuses?? Because the US is the most corrupt country on earth. Morally & intellectually the US has plunged into a cesspit of deceit. Haven't your readers noticed that scum always settles over the top of a dam of water where it can bask in sunlight and starve the organisms underneath??
regards.

[Black Star Ranch]

....lets face it. If you mix the results of 30-years of "dumbing down" together with the national fruition of what used to be described as the "Peter Principle", then include a bigger percentage of management with no conscience and a propensity towards nefarious business behavior, you have the new millenium workforce. Combine with that a big brother corporate mentality lavishing bigger and better rewards for questionable ethical business decisions, and you now have an ever increasing percentage of corporate America. Add to that the regulators, lobbyists, and legislators with the same skill sets (as above) making and enforcing the rules un-uniformly, and you will ultimately have chaos - I'd guess that to be about 2015. Then we'll have to let everything die that isn't already dead, turn it all under, and start out anew. It's not so much different than my garden. The only unanswered question is, "Have you stored enough away for the Winter"? I'm sure management has.........

[Steve]

I think those highly paid professionals in fact DID KNOW what they were doing, at least to a large extent. That was how they made $$$. There is little real productive enterprise in the US economy anymore. Housing, and its related businesses kept the economy going for the the last 8 years. If the inflation index was calculated the same as it was in the '70's, we would have been in recession for much of the last 8 years. Home equity withdraws provided a large amount of the spending for the period of 2000-2006. The choice for regulators might have been motivated by political and economic pressure, but the big boyz in the banking business and on Wall Street had a good idea of what they were doing.

The article is "dead on" in the fact those big shots are not held accountable for what they have done, and the media is being disingenuous at best, in their coverage of the nefarious (or negligent if you believe the article) actions.

[Lady From Middle America]

I have not liked what I've been seeing in the US economy (meaning, from what I see from the trenches, not what I see in charts) for several years. Whenever I questioned anything, I was always told "Look at all the new housing starts. Look at the employment figures. Look at real estate prices. Look at consumer spending. The economy is booming."

I could only conclude that easy credit and the accompanying housing bubble was encouraged in order to inflate all of the numbers.

[roger]

most of theses articles posted here seem to imply that incompetence was not the only culprit but that dishonesty, lies & calculated morbid greed where at play I must say that I agree.

[Thomas Shawn]

"Because the US is the most corrupt country on earth"

Ugh, you obviously have not been around much. When you spew this vile please also post what country you feel is the least corrupt. I have a hunch you're pushing Cuba but I'll let you speak for yourself.

[Makes you wonder]

The fact that there are no bankers being investigated tells me that they "lobbied" better than ENRON executives