| Wednesday, December 03, 2008 |
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Alan Greenspan vs. Ayn Rand and Freedom
By Diana Hsieh @ 12:01 AM   
If you haven't yet read Alan Greenspan vs. Ayn Rand and Freedom by Harry Binswanger, published in Capitalism Magazine, I strongly recommend that you do so. It's a great article to send to people to who claim -- whether honestly or not -- that Alan Greenspan's actions over the last 25 years or so represent Ayn Rand's philosophy in any way, shape, or form.
Consider Dr. Binswanger's list of Alan Greenspan's betrayals of Ayn Rand's principles:
I can't say I knew Alan Greenspan, though, being an associate of Ayn Rand, I met him a few times in the 1960s. But by 1970--almost 40 years ago--I and a couple of other Objectivists in that circle already realized that Greenspan was compromising on her philosophy. Little did we know how far his anti-Rand journey would take him. As the years rolled on,
- he was hailed as the man who "saved" Social Security--by extending its confiscatory power,
- when Bill Clinton's State of the Union address called for socialized medicine, he rose to his feet, standing next to Hillary Clinton in giving a standing ovation to that proposal,
- he became head of the mammothly anti-capitalist Federal Reserve, directing the government's manipulation of money and credit,
- he provided a laudatory dust-jacket blurb for a book attacking Ayn Rand (by a woman he had "irrevocably" condemned in print in 1968). Yet he repeatedly refused to contribute to or lend his name to the Ayn Rand Institute,
- he wrote, in 1995, that government central banking is a necessity: "Only a central bank, with unlimited power to create money can guarantee that such a process ["a cascading sequence of defaults"] will be thwarted before it becomes destructive." (Note that we just witnessed this "cascading sequence of defaults" despite --or, actually, caused by --our central bank.),
- he wrote in his autobiography about coming to reject Objectivism: "as contradictions inherent in my new notions began to emerge . . . the fervor receded",
- and now he has blamed free markets (as if we had them!) for his failures at the Fed. In conceding that his "ideology" was wrong, he was understood to be saying Ayn Rand was wrong--even though he had long ago forgotten or evaded every essential of what Ayn Rand stood for.
Can it get any worse than that? Yes, it can -- and Dr. Binswanger lays out the case clearly. In essence, "a man who betrays Ayn Rand, and who wrecks the economy of the U.S. in carrying out that betrayal, then succeeds in shifting the blame onto Ayn Rand and capitalism." Lovely, no?
Go read the whole thing. And then post a link to it in the comments of every annoying blogger who claims that the current financial crisis is a refutation of Ayn Rand's ideas.Labels: Activism, False Friends of Objectivism, Finance
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| Tuesday, November 25, 2008 |
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Absent a Moral Defense of Capitalism
By Gina Liggett @ 12:01 AM
On a Nov. 20th NPR radio interview, David Wessel, Pulitzer-prize-winning Economics Editor of the Wall Street Journal sounded rather optimistic. Despite calling our present economy "as fragile as at anytime since Roosevelt took over," he predicted that the Obama team would get right to work even before inauguration to hold off another Great Depression.
He said the challenge for Obama will be basically threefold: 1. like Roosevelt during the Depression, Obama will have to reassure the American people, that is "make us feel better," by whom he appoints and how he describes the economic situation; 2. put together a huge fiscal stimulus package consisting of tax cuts and increase in government spending; and 3. deal directly with the housing crisis by helping people whose mortgages are worth more than the value of their home.
He summed up his personal reaction to the economic crisis by saying he was "quite impressed by the diligence of the people in the government who are charged with this and how creative they've been and inventive in trying to respond to it."
In an October panel discussion at his alma mater Haverford College he explained the causes of the present crisis -- that complicated interplay of Federal Reserve interest rates, the across-the-spectrum failure of economic checks and balances by rating agencies and regulators, the "democratization of credit" for homeownership, the "morally criminal" predatory lending practices, faulty assumptions about ever-increasing housing prices and unsecured lending by investment banks, and the under-appreciated connection between the housing market and banking system.
He then describes the timeline of the government's reaction to each emerging crisis: a huge Fed rate cut in January, the historic loan to Bear Stearns (a non-Federal Reserve bank), the quick and efficient nationalization of Freddie and Fannie, Treasury Secretary Paulson's sweeping authority granted by Congress, the $700 billion bailout legislated by Congress in a 400-page bill, Barney Frank, Democrat chairman of the House Financial Services Committee, being unable to refute the argument that "if you help Wall Street, why can't you help Main Street," and the spill-over protectionist reaction by central governments in Europe and Asia.
Mr. Wessel's comment about the historic economic crisis: "I don't think this was a problem caused by government, but government permitted it to happen."
Despite a couple of disparaging remarks Mr. Wessel made about businessmen and choosing a career on Wall Street, maybe I can't explain Mr. Wessel's reaction to the crisis on the fact that he's worked his entire career as a journalist and never as a businessman who has had to meet payroll, answer to shareholders, negotiate with unions, comply with regulations, pay ever-rising costs of employee health care, pay taxes, pay Worker's Compensation taxes, hold the line on production costs, etc. etc. ... and still survive.
I also can't necessarily explain it by the fact that the college economics department co-sponsored the talk with the college's Center for Peace and Global Citizenship, which:
"...exists to expose all members of the Haverford community, but especially students, to the key global issues of the day so that they can better equip themselves to help solve these problems after they leave Haverford's campus. In this regard, the CPGC is one of the most visible examples of the College's Quaker ethos, grounded in testimonies of peace, lives of service, and a concern for the world at large." (emphasis mine) Regardless, what I can say is that one of society's best-recognized experts on the American economy makes absolutely no defense of capitalism in anyway whatsoever. He not only credits government in "creatively" tackling the crisis, he tacitly accepts the premise that government bureaucrats, regulators and legislators should play a fundamental and sweeping role in managing the economy. Furthermore, he flagrantly denies that government is the problem.
Yaron Brook, executive director of the Ayn Rand Institute , has spoken a lot about the economic crisis lately. He correctly explains that if capitalism is to survive, it needs moral sanction to counter the altruist ethics that infects our society today. As Objectivists know, Ayn Rand provided that philosophic moral justification for the total separation of state and economics: the morality of rational egoism.
We have a separation of church and state that is explicitly spelled out in the Constitution, and yet we still are fighting tooth-and-nail against the Religious Right to uphold it.
And we don't even have that much of an explicit defense of capitalism. How then is capitalism to survive in an environment when leading knowledgeable and educated intellectuals like Wessel can look the facts straight in the eye, and be blind to the conclusions?
As Dr. Brook states in his talks, obviously the fact about capitalism's success is simply not enough; the fact that government interference in the economy wrecks havoc is simply not enough. We must make the moral argument that laissez-faire capitalism is not only practical, it is morally right.Labels: Economics, Finance, Politics
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| Monday, November 17, 2008 |
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The Loss of Values Due to Contradiction
By Gina Liggett @ 12:01 PM
Two current events I have selected have nothing in common, except for being in the news. Well, they also pertain to underlying rational values that are at risk of being destroyed by their own best advocates. Why? Because their champions are trying to operate under contradiction.
On the heels of the joyously-resounding defeat of Colorado's "personhood" amendment comes another threat to abortion in Colorado. This time a private citizen, Mark Hotaling, is suing Planned Parenthood of the Rocky Mountains and Boulder Valley Women's Health center for violating the state's constitution. He claims that federal dollars received by these clinics are illegally being used to perform abortions. Hotaling says he's just standing up "for the will of the people and the constitution." For this, he's getting moral support from Ms. stand-up-for-the-people Kristi Burton, the evangelical who got Amendment 48 on the ballot "to empower the citizens to have a choice" about when life begins. And he's getting financial and legal support from the influential Religious Right group, the Alliance Defense Fund.
In the other story, Treasury Secretary Henry Paulson said the $700 billion bailout plan won't include the purchase of troubled assets from banks after all, a turn-around from the original plan. And unlike the rescued financial sector, the American auto industry might not get the additional help it's been asking for. Stock exchanges revolt in their roller-coaster tumble with daily bad news about the economy and over worries of how governments will fix it.
What values are at stake here?
In the first story, the value is the right to abortion. As writers on this blog and on Politics without God have argued, abortion is an absolute, inviolable right. Ayn Rand explains the right to abortion in her famously clear and pithy way: "An embryo has no rights. Rights do not pertain to a potential, only to an actual being."
In the second story, the value is free trade. Free trade is the unencumbered right for free individuals and companies to voluntarily exchange goods or services with each other to their own mutual benefit on terms they both agree on. Because humans must create what they need to survive and thrive, and because they can't individually make everything they need, a market for such exchange is required. It reflects the sum of "all the economic choices and decisions made by all the participants," thereby creating wealth.
In a society based on rational principles, it is possible to protect the right to abortion under any and all circumstances; and it is possible for free trade to proceed to any degree of wealth that can be created by human ingenuity. But not so in a society where contradiction is introduced and enforced.
In the first story, the women's health and abortion clinics vociferously defend a woman's legal right to abortion as granted by the Supreme Court in Roe v Wade. Yet they are willing to accept the expropriated earnings of wealth from others in society in the form of government grants in order to survive. While the clinics in the lawsuit deny directly using federal funds for abortion, they still must play by the arbitrary and ever-changing rules of those who hold the monopoly on force (i.e., the government). In the end, the right to abortion becomes conditional.
In the second story, the biggest intervention in the marketplace in American history has just happened. But decades of regulation, restrictions and biased preferences haven't led businesses to rise up and crusade for their right to free trade. It's led to just the opposite: the despairing cry for help using the expropriated earnings of others in society in the form of bailouts. Business are boldly proud and assertive when things are going well; but when things are not, they crumble under pressure and want a quick fix by any means from those who hold the monopoly on force (i.e., the government). In the end, the right of free trade becomes conditional.
It is a contradiction that we can uphold and pursue rational values that require freedom while accepting the conditions set by those who hold the monopoly on force. We have nobody to blame but ourselves: American citizens, with their endless special-interest appeals to their legislators, have allowed this untenable situation to unfold.
You can't be free and sleep with the devil. Or, as Ayn Rand more eloquently puts it: "a contradiction cannot be achieved in reality and... the attempt to achieve it can lead only to disaster and destruction."
Abortion rights are being chipped away every year. And we are in a worsening financial crisis of unprecedented proportions. The only way out is to eliminate the contradiction. The only way out is to hold government to its proper, non-contradictory function of protecting individual rights. And it is the citizens who must take this corrective action.Labels: Abortion, Finance, Politics
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| Monday, November 10, 2008 |
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John Allison Lecture at Duke
By Diana Hsieh @ 11:45 AM
From John Lewis:
Spread the word, please! Announcing a very special event:
A Lecture by Mr. John Allison, President and CEO of BB&T Corporation: "Financial Trauma: Causes and Possible Cures"
November 19, 2008, 3:30 PM
Griffith Theatre, at the Bryan Center, Duke University (Directions)
As the world struggles with the current financial crisis, we should listen to the executives of successful financial institutions. BB&T is such an institution.
Mr. Allison will outline the causes of today's financial chaos, including the errors that led to the crisis. He will discuss the broader implications for the economy, including the effects on the housing and mortgage industries, and offer economic and political suggestions for both short-term and long-term cures.
John A. Allison became CEO of BB&T on July 7, 1989. At the end of 1989, BB&T was ranked 96th largest bank in the nation with $4.8 billion in assets. After 60 bank and thrift acquisitions, and the implementation of innovative training and measurement programs, the former eastern North Carolina farm bank has grown to become the nation's 14th largest financial holding company. Assets have increased from $4.8 billion, when Allison began his tenure as CEO, to $137 billion today.
Sponsor: The Program on Values and Ethics in the Marketplace, Duke University
Contact: John Lewis, john.d.lewis (at) duke.edu Wow, now that's a lecture I wish I could attend!Labels: Announcements, Finance
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| Friday, November 07, 2008 |
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Alan Greenspan Is Not John Galt
By Diana Hsieh @ 5:23 PM
John Lewis published an excellent letter to the editor on Alan Greenspan and Ayn Rand in the News & Observer yesterday:
Wrong Analogy
In Ayn Rand's novel "Atlas Shrugged," her hero, John Galt, refuses to accept the position of economic dictator. Alan Greenspan accepted such a position as head of the government's central bank, and his dictates were enforced over an economy burdened with thousands of pages of regulations.
Greenspan's own flawed ideas have nothing in common with Rand's philosophy. Nor was the U.S. economy ever set free of government control. Had Froma Harrop (Other Opinion, Oct. 30) discussed the content of Rand's philosophy along with the actual state of business regulation, this would have been clear.
John David Lewis, Durham Great letter, John!Labels: Activism, Finance
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| Friday, October 24, 2008 |
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Mr. Greenspan = Dr. Stadler
By Diana Hsieh @ 6:38 PM
Gun Van Horn gives Alan Greenspan a much-needed ass-kicking for his repudiation of free markets. And here's the Ayn Rand Institute's press release on it:
Greenspan Has No Free Market Philosophy
October 24, 2008
Washington, D.C. --Opponents of the free market are giddy at Alan Greenspan's declaration that the financial crisis has exposed a "flaw" in his "free market ideology." Greenspan says he is "in a state of shocked disbelief" because he "looked to the self-interest of lending institutions to protect shareholder's equity"--and it didn't.
But according to Dr. Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, "any belief Greenspan ever had in truly free markets was abandoned long ago. While Greenspan long ago wrote in favor of a truly free market in banking, including the gold standard that such markets always adopt, he then proceeded to work for two decades as leader and chief advocate of the Federal Reserve, which continually inflates the money supply and manipulates interest rates. Advocates of free banking understand that when the government inflates the currency, it artificially increases prices and causes booms in certain sectors of the economy, followed by inevitable busts. But not only did Greenspan lead the inflation behind the .com bubble and the real estate boom, he blamed the market for their treacherous collapses. Greenspan should have recognized that what he wrote in 1966 of the boom preceding the 1929 crash applied here: 'The excess credit which the Fed pumped into the economy spilled over into the stock market--triggering a fantastic speculative boom.' Instead, he superficially blamed 'infectious greed.'
"Should it be any shock that Greenspan now blames the free market for today's meltdown--rather than the Fed's policies, which fueled an inflationary housing boom, which rewarded reckless lenders and borrowers from Wall Street to Main Street? Greenspan didn't mention the word 'inflation' once in his testimony.
"Whatever Greenspan's economic philosophy is, it is not anything resembling a free market." I can't possibly express the depth of my disgust at Alan Greenspan. Well, let me try. By continuing to associate himself with the free market ideas of his former mentor, even while thoroughly contradicting them in word and deed as Fed Chairman, and then publicly repudiating them based on a government-created financial crisis, the man has done more damage to Objectivism than Barbara and Nathaniel Branden.
Way to go, Alan. You've done what I thought impossible. Dr. Stadler has nothing on you.Labels: False Friends of Objectivism, Finance, Politics
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Hey, Did You Know Libertarians Run the Government?
By Paula Hall @ 1:40 PM
Yes! It's true! Libertarians have been running the country for years. How do I know?
I know because Jacob Weisberg, the Chairman and Editor-in-Chief of Slate Group (which publishes the online magazine), has just penned an article describing for us immature Ayn Rand naifs how it is that the financial collapse killed libertarianism.
A source of mild entertainment amid the financial carnage has been watching libertarians scurrying to explain how the global financial crisis is the result of too much government intervention rather than too little...
Utopians of the right, libertarians are... convinced that their ideas have yet to be tried, and that they would work beautifully if we could only just have a do-over of human history. Like all true ideologues, they find a way to interpret mounting evidence of error as proof that they were right all along.
To which the rest of us can only respond, Haven't you people done enough harm already? We have narrowly avoided a global depression and are mercifully pointed toward merely the worst recession in a long while. This is thanks to a global economic meltdown made possible by libertarian ideas.
[Emphasis in original.] That's all by way of introduction. He follows with a bunch of haphazard facts strung together in a string of non sequiturs that I've become bored with, they're so ubiquitously offered as proof the financial crisis was caused by the "free market." So forgive me if I don't quote here the "facts" the article supposedly marshals in support of its conclusions (check out the full article if you're not easily nauseated). Weisberg concludes with slap at, of all people, Ayn Rand:
The worst thing you can say about libertarians is that they are intellectually immature, frozen in the worldview many of them absorbed from reading Ayn Rand novels in high school. This article is yet another gob-smacking exercise in tortured rationalization of the avoidance of uncomfortable facts by someone steeped in the rhetorical method not of thrust-and-parry, but avoid-and-slime. Weisberg first avoids the facts that 1) Libertarians have never run the American government, 2) it's a non sequitur to declare that financiers and corporate-welfare statists who run to the government for a bailout believe in the free market (!) and 3) Libertarianism has been rejected wholesale, outright, and damn near shrilly by Ayn Rand and the philosophy of Objectivism. Weisberg then slimes principled Objectivists as "immature" and "ideologues," and by playing on the flat ignorance of most of the public of the tenets of Objectivism. (Not to mention trotting out that tired when-are-you-going-to-grow-out-of-it smear.)
I would label this a serious example of the pot calling the kettle black except that there is no "kettle." There's definitely a "pot" -- Weisberg's beloved regulatory state has failed. There is no "kettle"; there has never been a free market upon which to blame the current financial crisis or any so-called "market failure," and I defy Weisberg and his ilk to identify when that state of affairs has subsisted.
I'm not up for reinventing the wheel this morning, so I'll just send everyone to the new Repeal The Bailout site for an excellent compilation of Objectivist thought leadership on the current economic situation and offer some closing thoughts on Weisberg's article.
Perhaps the biggest thing Weisberg evades is that we Objectivists who advocate for a truly free market are entirely principled on this: we hold that if you regulate any aspect of the economy, to any degree, it is not free. (I mean, really -- you'd think that someone calling Objectivists "ideologues" would jump at the chance to point out how just how "utopian" we are about what we're saying.) He seems to pay lip service to this fact but then proceeds brazenly to avoid even the most elementary logical implications of the principled consistency of Objectivism.
If she could, I'm sure Ayn Rand would be rolling over in her grave at the willful ignorance of those who persist in equating Libertarianism, which has rightly been repeatedly discredited, with a philosophy so diametrically opposed to it. But let's accept for a fleeting moment and for the sake of Weisberg's "argument" his nonsensical conflation of Objectivism and its true free market principles with Libertarianism. Weisberg must nevertheless be charged with his unapologetic evasion of the fact that he's celebrating the demise of a Libertarian hegemony that has never existed.
The man is deliriously dancing on an empty grave.Labels: Finance, Politics
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| Wednesday, October 22, 2008 |
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Mackerel Economics
By Paul Hsieh @ 12:10 AM
According to the October 2, 2008 Wall Street Journal, the unofficial prison currency in the US is no longer the cigarette, but rather the mackerel:There's been a mackerel economy in federal prisons since about 2004, former inmates and some prison consultants say. That's when federal prisons prohibited smoking and, by default, the cigarette pack, which was the earlier gold standard.
Prisoners need a proxy for the dollar because they're not allowed to possess cash. Money they get from prison jobs (which pay a maximum of 40 cents an hour, according to the Federal Bureau of Prisons) or family members goes into commissary accounts that let them buy things such as food and toiletries. After the smokes disappeared, inmates turned to other items on the commissary menu to use as currency.
...[T]he mack is a good stand-in for the greenback because each can (or pouch) costs about $1 and few -- other than weight-lifters craving protein -- want to eat it. It's interesting that these prisoners understand the need for a stable objective medium of economic exchange far better than the US government which is incarcerating them, even though few of those prisoners have studied articles such as, "Gold and Economic Freedom" in Capitalism: The Unknown Ideal which explain the importance of a gold standard.
In light of the recent Wall Street bailout inflicted on us by government officials based on bad economic theories, here are a couple of conclusions one might draw:1) Perhaps it's the US economy that is based "fishy" premises, not the prison economy.
2) Perhaps more US government officials need to spend some time in a federal penitentiary -- they may learn an important lesson about sound money (as well as some well-deserved lessons on other subjects.) (Via Marginal Revolution.)Labels: Economics, Finance
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| Monday, October 20, 2008 |
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Getting Rand Wrong
By Brandon Byrd @ 12:01 AM
As someone who takes ideas seriously, I've always found it frustrating when philosophers take it upon themselves to offer judgments on subjects they haven't bothered to devote serious time and attention to studying. The charge that philosophers (academic or otherwise) sometimes judge where the epistemically virtuous would fear to comment isn't new. (For instance, it isn't rare to hear someone claim that speculation from the philosophical armchair is a poor method of settling some contentious issue.) What makes this phenomenon -- the venturing of unwarranted opinions -- especially pernicious in the case of philosophers is that philosophers are supposed to be the guardians of rationality, revering the mind by sacrificing hasty conclusions at the altar of the well-formed argument. Philosophers are supposed to love wisdom and shun mere belief; when they make assertions that betray culpable ignorance, they sin against their profession as well as the truth.
I don't know what it is about Ayn Rand that makes many philosophers think they can get away with saying whatever they damn well please about her without having studied her work carefully and honestly. I suspect that the real explanation has less to do with Rand and more to do with personal biases on the part of her critics. But whatever the cause, the phenomenon is nevertheless real. It isn't just that many philosophers dislike Rand. We philosophers are an opinionated bunch; we dislike all sorts of things. Rather it's that many philosophers will attribute all sorts of nonsense to Rand without actually considering what she has to say.
To offer an example, below is a passage from Rosalind Hursthouse's On Virtue Ethics. This work, published relatively recently by Oxford University Press, is intended to be used as a textbook on, unsurprisingly, virtue ethics.
"We can interpret Thrasymachus, and more obviously Nietzsche and Rand, as saying that, rather like hive bees, human beings fall, by nature, into two distinct groups, the weak and the strong (or the especially clever or talented or 'chosen by destiny'), whose members must be evaluated differently, as worker bees and the drones or queens are." Um... what? Anyone with even a cursory familiarity with Rand's ideas will realize that she believes no such thing. Rand's philosophical anthropology -- her theory of human nature -- does not recognize a distinction between types of human beings. Her ethical theory evaluates individuals on the basis of their choices, not their unchosen attributes, and she appeals to a univocal standard of moral evaluation -- not to distinct standards for distinct types.
Hursthouse does not provide any sources that might justify her 'obvious' interpretation of Rand's philosophy. But this totally wrongheaded interpretation of Rand was good enough for her editors and peer reviewers at OUP (as well as the numerous philosophers who gave her editorial comments on the final manuscript). Apparently that group of distinguished professors found nothing objectionable in Hursthouse's characterization of Rand. Of course, realizing Hursthouse's error would have required reading Rand.
(On a grimly ironic note, the above passage comes from chapter 11 of On Virtue Ethics. The chapter title? "Objectivity.")
Hursthouse isn't the only person who presents Rand's views incorrectly in a way that betrays ignorance. Chandran Kukathas's entry on Rand in the otherwise excellent Routledge Encyclopedia of Philosophy is another example. No, Kukathas... Rand didn't think that integrity was "at the root of the idea of freedom," her "real concerns" were not "the defence of the value of integrity (to the point of self-sacrifice) in the face of evil and moral despair," and The Virtue of Selfishness was not a novel.
So far, we've seen a philosopher attribute views to Rand that she 'obviously' didn't hold, and we've seen another philosopher misunderstand the fundamentals of Rand's politics and misconstrue her central concerns. But Gerald Dworkin, a professor of philosophy at UC Davis, has recently exemplified yet another way of getting Rand wrong: saying that her ideas lead to catastrophe.
The forum in which Dworkin makes this charge is Leiter Reports: A Philosophy Blog -- a blog featuring "news and views about philosophy, the academic profession, academic freedom, intellectual culture... and a bit of poetry." The blog is run by Brian Leiter, currently John Wilson Professor of Law at the University of Chicago, and Director of Chicago's Center for Law, Philosophy, and Human Values. Leiter is also the editor of The Philosophical Gourmet, which ranks the top philosophy departments in the English-speaking world. I read Leiter Reports semi-regularly, as it is a good source of professional news related to academic philosophy (faculty hires, moves, deaths, retirements and whatnot). In addition to this valuable material, the blog also features occasional leftist cultural commentary of more dubious value. Of extremely dubious value is Dworkin's post "Blame it on Ayn Rand" in which he claims Rand is a cause of our economic troubles. Dworkin doesn't really provide much of an argument for this claim, so I'll attempt to provide him with a charitable reconstruction (a courtesy I'm not so sure he deserves... but for the sake of argument...).
Dworkin quotes a recent New York Times article on Greenspan's involvement in the current financial crisis. (That article seems to get Rand wrong too; Rand didn't have "a resolute faith that those participating in financial markets would act responsibly" but that's beside the point.) The article implies that Greenspan's positions on regulation -- specifically the regulation of derivatives markets -- were causally relevant factors in producing the recent financial crisis. Why did Greenspan hold his positions on regulation? Here, Dworkin invokes Keynes:
"...the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back." (I can't resist noting that Rand held a similar view to Keynes about the importance of philosophy in history, though her insight was deeper than Keynes. Rather than viewing history as being primarily driven by political philosophy, Rand viewed metaphysics and epistemology as being much more influential. For more on Rand's insights here, consult the title essay of For the New Intellectual, as well as the title essay of Philosophy: Who Needs It. Peikoff develops Rand's insights on the philosophical motor of history in Ominous Parallels, the epilogue to Objectivism: The Philosophy of Ayn Rand, and in his forthcoming book on how epistemology shapes society.)
Greenspan was a student of Rand, and Rand argued for the principled separation of the state and economics, and thus for an absence of government interference in voluntary economic exchanges. She was a categorical opponent of governmental regulation in financial markets. Greenspan opposed regulation of derivatives markets. The current financial crisis was supposedly brought on by an absence of regulation in these markets. Thus Dworkin claims that Rand is "an important cause of the catastrophe we are in."
Let us examine this argument.
This argument gets its force from the claim that Greenspan was practicing what Rand preached. In an update to Dworkin's post, Leiter snarkily remarks that "Greenspan was not only a friend of Rand's, but a lifelong devotee of her ideas and her 'philosophy,' such as it is." While it is true that Rand and Greenspan were friendly toward one another, it is demonstrably false that Greenspan was "a lifelong devotee of her ideas." It doesn't take a hell of a lot of legwork to discover this; thanks to Google, I didn't even have to leave my armchair.
In The Age of Turbulence, Greenspan's recent autobiography, Greenspan discusses the important formative influence Rand had on his intellectual development. In his discussion, he talks about how Rand encouraged him to look beyond mere economic data and more deeply into the values and ideas that move history and influence human action (including economic action). She was credited with broadening his perspective on the world and helping him reject logical positivism. He even describes himself as "writing spirited commentary for [Rand's] newsletter with the fervor of a young acolyte...". But this enthusiasm was not to last; Greenspan's autobiography claims that Rand's philosophy has inherent contradictions, and that his "fervor receded."
So Greenspan isn't an Objectivist. His policies, as we shall see, reflect this fact.
We're in the midst of a recession, teetering (some might say) on the precipice of a depression. What were Rand's views about recessions and depressions? Well, Dworkin doesn't say. His blog post doesn't even bother to discuss which of Rand's ideas were supposed to get us into this mess. He doesn't explicitly discuss her ideas at all. If one consults Rand's Capitalism: The Unknown Ideal to discover her views on the causes of recessions and depressions, one is directed to the works of Ludwig von Mises. It is important (for getting Rand right) to recognize that while Rand found Mises's economic analyses convincing, she had substantial philosophical and methodological disagreements with him. Mises was a Kantian who viewed economics as a primarily deductive enterprise (and thus was inclined toward epistemological rationalism). He also attempted to do economics in an ethical vacuum, divorcing economic analysis from any underlying normative framework. Rand, of course, rejected Kantianism, rationalism, and a strict division between morality and economics. But despite his errors, Rand thought that Mises's economic theories represented a significant achievement.
At this point, I don't want to provide a lengthy, detailed summary of Mises's views on the business cycle. I may write something in the near future about the causes of our current economic woes, but I'll hold off for now. The following short summary should provide a general indication of the economic views Rand found most convincing.
The most salient aspect of the Austrian theory of the business cycle is that implicates central banks as the fundamental cause of depressions and recessions. Ah! The plot thickens! Wasn't Greenspan the head of our central bank? He was indeed. How do central banks cause recessions?
In a free market, the interest rate (the price of money) is determined by the law of supply and demand. Roughly, the supply of loanable funds that banks have (our savings) determines the interest rate, when taken in conjunction with the overall demand for money and the riskiness of potential debtors. Central banks, such as the Federal Reserve, distort this market mechanism by setting artificially low interest rates (interest rates below the market rate). What happens next? I defer to Wikipedia:
Low interest rates tend to stimulate borrowing from the banking system. This expansion of credit causes an expansion of the supply of money, through the money creation process in a fractional reserve banking system. This in turn leads to an unsustainable "monetary boom" during which the "artificially stimulated" borrowing seeks out diminishing investment opportunities. This boom results in widespread malinvestments, causing capital resources to be misallocated into areas which would not attract investment if the money supply remained stable. A correction or "credit crunch" -- commonly called a "recession" or "bust" -- occurs when credit creation cannot be sustained. Loose monetary policy by central banks leads to people taking on more debt than they otherwise would. Artificially low interest rates allow more credit to be extended to risky borrowers. In our current case this lead to skyrocketing real estate values, since there was an increased demand for houses (made possible by banks extending credit to more and riskier debtors). This effect is obvious enough in the case of commercial banks, which more than doubled the amount of real estate loans they made (thus allocating large amounts of resources into the real estate market -- allocations that wouldn't have occurred in a free market for money and credit.
And then there's the welfare state. Don't let's forget about Fannie and Freddy. The former is a holdover from the New Deal; the latter is a "government sponsored enterprise" created by the Emergency Home Finance Act of 1976, and designed to increase home ownership. Both of which did their part to screw us all by spurring on the housing bubble... and they were able to borrow money at a (de facto, if not de jure) subsidized rate in the marketplace because the public viewed them as being low risk (since the state would presumably bail them out, should the need arise).
All of a sudden, everyone's in debt and no one wants to lend. Small wonder. Small wonder that risky investors are defaulting on their mortgage payments. Small wonder that the derivatives markets are screwing up (I'd argue that we can only make sense of the kerfuffle in the derivatives market in light of monetary policy). Small wonders that major financial institutions are losing their credit rating because they took on too many risky debtors.
We frequently hear that that the market got drunk. What was it drunk on? Cheap credit. Who was the man behind the bar? You can probably guess.
In May of 2000, the Fed Funds rate was 6.5%. By June of 2003, Greenspan had slashed it to 1%, and it stayed there for more than a year (and remained ridiculously low for much longer). Would Rand have found this type of monetary policy commendable (or even tolerable)? Of course not. She'd read her Mises. Moreover, she regarded central banking as morally repugnant and politically unnecessary.
There's much more to be said about our current credit crunch and how to evaluate it in light of Rand's moral and political philosophy. But it should now be evident that Dworkin (and Leiter) are wrong on all counts. They were wrong about Greenspan; they were wrong about Rand. Their errors on these subjects betray a culpable ignorance. One needn't do much research to figure out Greenspan's real views on Rand, or Rand's views on economics. Twenty minutes with Google and Wikipedia would probably have gotten the job done. If a philosopher is going to assert, in a public forum, that another philosopher's ideas lead to disaster, then they have an obligation to carefully consider that thinker's ideas, to understand them, and to show how (in practice) they would result in catastrophe. When a philosopher fails to do that, they do a disservice not only to the thinker they criticize, but also to the truth, to their profession, and to themselves.
Academic philosophers often get Rand wrong. They often have only themselves to blame.Labels: Academia, Economics, Ethics, Finance, Objectivism, Politics
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| Thursday, October 16, 2008 |
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New Web Site: Repeal the Bailout
By Diana Hsieh @ 1:17 PM
A most welcome message from Tony Donadio, posted to OActivists last week:
In response to last week's passage of the financial bailout legislation, I've taken the liberty of acquiring the domain name repealthebailout.net and creating a rudimentary website. It can be found here:
www.repealthebailout.net
Right now, it's more or less just a skeleton, consisting mainly of links to various articles on the subject. However, I have a strong suspicion that last week's bailout isn't the last one we're going to be facing, and that the website may continue to be relevant for some time to come. I plan to try to update it steadily as my (unfortunately limited) time allows, both with original material and with new and timely links.
I'm interested in feedback and thoughts on what I've (hastily) thrown together so far, so please feel free to respond to me (preferably directly, so as not to clutter the list) if you have any. I'm also interested in new and useful links as well as original contributions if you have any to offer or suggest.
Thanks -- Tony Donadio Tony has done a fantastic job with Repeal the Bailout. Kudos to him! Please do point people to it in any writing you do about the financial crisis, e.g. in e-mail discussions, comments on news stories, comments on blogs, and the like.
Such small sites focused on some current issue -- like my even smaller Vote No on 59 -- are relatively easy to create, maintain, and promote. They can get a steady stream of search traffic, as shown by the stats of No on 59. (See the visits and referrals.) They're an effective and enduring form of activism for just a few hours of your time.
Notably, because of Vote No on 59, Ari Armstrong was interviewed by the local news for a segment on Amendment 59 on Tuesday. It was shown at 5:30 and again at 9:00; you can watch it here. (The reporter called me due to the web site, and I pointed her to Ari, as he's more knowledgeable than me.) That's an unusually good result, but certainly possible in a busy election season! In the meantime, over 100 interested Colorado voters each day are reading why they should vote "No" on this permanent tax hike.
You can make a difference -- if you speak out!Labels: Activism, Economics, Finance, Politics
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| Tuesday, October 14, 2008 |
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A Slender Silver Lining to the Bailout?
By Paul Hsieh @ 2:02 PM
Although the economic crisis and subsequent bailout are going to be painful for our country, there may be a very slender silver lining -- namely that the loss of money will likely derail some plans for more big government programs.
Here are a two recent examples, one in health care and the other in "green" legislation:"After Bailout, What Will Health Reform Look Like?"
A growing number of experts have abandoned all hopes of major health reform. "The bailout makes it that much tougher, because health care will be crowded out by other issues," said Drew Altman, president and CEO of Kaiser Family Foundation... And,"Efforts on global warming chilled by economic woes"
The economic free fall gripping the nation may bring down one of the main environmental objectives: capping the greenhouse gases that are blamed for global warming. ...[T]he focus on stabilizing the economy probably will make it more difficult to pass a law to reduce carbon dioxide and other greenhouse gases. At the very least, it will push back when the reductions would have to start. These stories suggest that even if a President Obama and a Democratic-controlled Congress wanted to implement these bad ideas, they probably wouldn't be able to do so immediately, purely because of cost.
(It was similar economic constraints that stopped California from imposing "universal health care" at the state level last year, even though the Democratic state legislature and Republican Governor Schwarzenegger were both strongly in favor of it.)
Obviously, this would just be a temporary reprieve -- the liberals' underlying bad ideology has not changed. And I fully recognize that there are plenty of other bad laws that both the Left and the Right could propose (such as restrictions on free speech) that wouldn't require much money to implement.
But the economic downturn could buy us a little more time to continue the fight for good ideas. Let's not waste it...
Update: This New York Times column by David Brooks argues the opposite -- that an Obama admininistration would use the financial crisis as the pretext for massively increased government spending, despite the fact that the country will not be able to afford it.
Either way, I think we'll have our work cut out for us...Labels: Activism, Economics, Finance, Politics
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| Friday, October 10, 2008 |
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Three Press Releases
By Diana Hsieh @ 9:05 PM
The Ayn Rand Center published three great press releases on the financial crisis lately. First:
How Not to Defend Free Markets
October 3, 2008
Washington, D.C.--In response to the financial crisis, traditional defenders of free markets have criticized certain controls passed by U.S. regulatory agencies, but are not calling into question the legitimacy of the agencies themselves. But, argued Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, "It is insufficient and indeed counterproductive to criticize a few failed policies of the Fed and the SEC, without challenging the existence of these market-dictating agencies in the first place.
"As Exhibit A, consider the response to the SEC's recent war on short selling. The Wall Street Journal, regarded as a strong defender of free markets, wrote that '[T]he SEC first clamped down on so-called naked shorting--a reasonable move under any circumstances, even if there's no evidence of widespread naked shorting of financial stocks in this panic. But Mr. Cox didn't stop there. The SEC has also temporarily banned any short selling of hundreds of financial stocks, a list that has grown to include the likes of General Motors. Then, when the SEC was reminded that selling a stock short is a legitimate part of many unimpeachable hedging strategies, it relaxed the prohibition for certain types of sales while continuing to expand the list of "protected" stocks. . . . If the SEC wants to help restore calm, it would stop issuing new emergency rules in the dead of night and bring some transparency and calm to its own rule-making.'
"In praising some of the SEC's actions, while criticizing others, the Wall Street Journal is conceding a disastrous principle: that financial markets should be controlled by government at all.
"Under capitalism, the proper role of the government in financial markets is to protect individual rights by banning force and rooting out fraud. This requires objective laws that do not permit would-be central planners to tinker with markets when they don't like the results. But the SEC's regulatory authority allows it to coercively prevent individuals from engaging in voluntary transactions like short selling whenever it decides those transactions do not serve the 'public interest.'
"Since the 'public interest' is an indefinable standard compatible with any interpretation or rationalization, this means in practice that SEC goons can arbitrarily unleash their regulatory club on financial markets whenever they feel it's warranted. For example, see Chris Cox's blitzkrieg of contradictory emergency orders attacking short sellers.
"The basic principle behind regulation is that the government can use force, not to protect individual rights, but in an attempt to engineer 'socially desirable' outcomes, i.e., outcomes different from what would result from the voluntary choices of individuals on a free market. That is the same premise that underlies all disastrous attempts at central planning--from the Soviet Union to modern-day Venezuela.
"If the Wall Street Journal really wants to defend capitalism, this is the premise it must oppose. Instead of prodding government regulators to be better central planners, it should call for a complete end to government control of financial markets. This is the lesson all defenders of capitalism must learn: you cannot defend capitalism by conceding the legitimacy of its opposite." Second:
Ayn Rand Saw This Coming
October 9, 2008
Washington, D.C.-- "Despite overwhelming evidence that government policies caused the current financial crisis, Congress is blaming businessmen," said Yaron Brook, executive director of the Ayn Rand Center for Individual Rights. "What's worse, the capitalists who have been shackled with unprecedented regulatory burdens are unable to defend themselves morally. Though the events are different, this pattern of abuse and submission is straight out of Ayn Rand's Atlas Shrugged.
"The cycle starts with government intervening into the economy and imposing regulations and controls on business. This distorts the free market, leading to economic dislocations. When the problems caused by these distortions inevitably follow, everyone blames the free market and its greedy capitalists. The proposed solution? More government controls. Over the years, conservative critics of creeping government have repeatedly exposed this illogic but have always been helpless to explain why the cycle keeps repeating, decade after decade.
"The pattern keeps recurring because businessmen are willing to take the blame. From capitalism's inception, its defenders have been morally disarmed by the widespread view that self-interest is morally suspect, and disinterested service to others is a moral ideal. So each new spate of controls has been grudgingly accepted as a fair price to pay for society's toleration of the selfish pursuit of profit.
"Atlas Shrugged depicted a society in economic collapse due to this recurring cycle, and today's parallels are obvious. Government manipulation of money, credit, and lending standards over several decades caused the mess we're in. Now, the offered solution is more of the poison that sickened the economy--more bailouts, more cheap money, more government-guaranteed loans, and above all, more regulations.
"This chronic cycle will not end until businessmen accept that their production of profit is neither immoral nor amoral--it is the capstone of moral virtue. Once they shrug off the role of scapegoat, businessmen can demand with moral certitude that government punish fraud and enforce contracts but refrain from interfering with voluntary trades among consenting adults.
"When America's markets are finally free of all coercion--in other words, when laissez-faire is achieved--financial crises such as the one we're experiencing will never happen again." Third:
Are We All Socialists Now?
October 10, 2008
Washington, D.C. --The Treasury Department, as part of its ongoing assumption of control over the financial industry, is preparing to inject cash into U.S. banks in exchange for preferred shares of bank stock.
"Are we all socialists now?" said Yaron Brook, executive director of the Ayn Rand Center for Individual Rights. "Have we learned nothing from the devastation that socialist policies wrought worldwide in the twentieth century? Government intervention distorts markets and causes economic dislocations, no matter whether Uncle Sam controls private companies by regulation or assumes public ownership outright.
"A crisis doesn't transform poison into medicine. Over decades, government manipulation of money, credit, and mortgages poisoned this economy and left it dangerously weak. Now Hank Paulson and his comrades are hooking up IV tubes filled with more of the same poison--bailouts, loan guarantees, cheap money, and more burdensome regulations--and hoping we will lie still and trust in their cure.
"But the real cure is capitalism, not more doses of socialism. We should act quickly to put government in its place, by rolling back the interventionist measures that caused the present emergency. Government's proper role is to punish fraud and enforce contracts, not to own and manage the economy. We cannot achieve financial health unless we are willing to free the markets." Labels: Finance, Politics
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| Monday, October 06, 2008 |
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We Are All Venezuelans
By Gina Liggett @ 1:40 AM
There's a Barney Frank before, and a Barney Frank after. No, the pork-belly king hasn't gone on a diet. But Americans probably will have to go on one, now that the $700 billion bailout has been hastily rammed down the country's throat.
All I can say is, "Bad, Bush!" "Bad, Barney!" for taking such a hard left turn to the land of socialism when they were warned about the crisis in the housing markets years ago.
Furthermore, "Bad, Democrats!" for blaming the whole thing on the Republicans, when the Clinton administration helped stage the inevitable fallout by legislating irrational lending to facilitate home ownership among people who otherwise wouldn't qualify.
And "Bad, Bolivia!" "Bad, Brazil!" for blaming the whole financial crisis on capitalism.
Dr. Yaron Brook, director of the Ayn Rand Institute, provides a good explanation of the real underlying causes of the biggest financial threat to this country since the Great Depression. This whole greasy mess is a direct consequence of a conglomeration of governmental initiatives such as: artificially-low interest rates set by the central planners at the Federal Reserve; politically-motivated lending standards set by the social planners in Congress; and the artificial profit opportunities created by the financial planners at Freddie and Fannie and the SEC. It is a conspiracy of irrational market manipulations that preclude any corrective forces that would have kicked in long ago in a truely free-market.
At some point, the houses of cards had to fall down. And now we're stuck with a botched emergency Financectomy performed on Wall Street's bleeding wallet by a panic-stricken Treasury Secretary, President, and Congress.
And it doesn't matter who takes over the care of this patient in November because both candidates were right there in the operating room agreeing with the chief surgeon's basic care plan. And both blamed the crisis on some entrenched greediness of businessmen.
Hugo Chavez must feel vindicated. He even says that it's so bad over here, America needs a new Constitution to free itself of the tyranny of big banks and corporations.
Thanks for the advice, Hugo, but I think the Constitution--even with its flaws--is pretty good already. It's just that our leaders don't like to follow it. It's like they've missed the whole essence of it. Ayn Rand clarifies that the "Constitution is a limitation on the government...(it is) a charter of the citizens' protection against the government."
While Hugo confuses American political power with the economic power of our quasi-capitalist system, he hasn't missed the chance to enhance his own economic power by exercising his monopoly on political power in Venezuela. And America has been inexorably following suit.
This bailout is just the latest in a long string of Venezuelanesque growth in government: from Medicare/Medicaid/FDA...to public schooling... to Social Security...to limitations on abortion..to special programs this..to special programs that...to subsidized industries in agriculture/autos/airlines/Savings and Loans....and now to the big kahuna bailout of October 3. The greed of capitalism? I don't think so.
But if we did follow Hugo's advice and make a new Constitution, maybe it should start with, "We The People of the United States, who don't want our freedoms mucked up by a bunch of central planners in Washington, want a Constitution that really means it when we say limited government..."Labels: Economics, Finance, Politics
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| Friday, October 03, 2008 |
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Hsieh LTE on the Bailout
By Paul Hsieh @ 10:34 AM
The September 30, 2008 Denver Post did publish my LTE on the proposed bailout, but only in the online edition, not the print edition. (All of the LTE's on this topic were online-only.)
It's the second LTE on the page:The current financial mess is not the fault of the free market, but rather of government interference in the free market. It's clearly not in the interest of banks to loan money to people who can't pay it back. The government created artificial incentives (such as the Community Reinvestment Act) that rewarded lenders for doing so, with the implied promise that taxpayers would pick up the tab if anything went wrong. The current mess is exactly the result one would expect.
To blame the free market for problems caused by government interference in the free market is like blaming one’s automobile accident on the car, rather than the fact that one was driving while yakking on a cellphone while looking at the onboard GPS system while reaching for a stick of gum in the glove compartment...
Paul Hsieh, Sedalia For a longer discussion of this issue, see "The Long Road to Slack Lending Standards" by Steven Malanga. Here's an excerpt:Many defenders of the government's efforts to prompt banks to lend more to minorities have claimed that this effort had little to do with the present mortgage mess. Specifically they point out that many institutions that made subprime mortgages during the market bubble weren't even banks subject to the Community Reinvestment Act, the main vehicle that the feds used to cajole banks to loosen their lending.
But this defense misses the point. In order to push banks to lend more to minority borrowers, advocates like the Boston Fed put forward an entire new set of lending standards and explained to the industry just why loans based on these slacker standards were somehow safer than the industry previously thought. These justifications became the basis for a whole new set of values (or lack of values), as no-down payment loans and loans to people with poor credit history or to those who were already loaded up with debt became more common throughout the entire industry.
What happened in the mortgage industry is an example of how, in trying to eliminate discrimination from our society, we turned logic on its head. Instead of nobly trying to ensure equality of opportunity for everyone, many civil rights advocates tried to use the government to ensure equality of outcomes for everyone in the housing market. And so when faced with the idea that minorities weren't getting approved for enough mortgages because they didn't measure up as often to lending standards, the advocates told us that the standards must be discriminatory and needed to be junked. When lenders did that, we made heroes out of those who led the way, like Angelo Mozilo, before we made villains of them.
Now we all have to pay. A deliberate policy of elevating "lack of value" above value sounds almost like something from Atlas Shrugged. The end results certainly looks like it...Labels: Activism, Economics, Finance, Politics
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| Thursday, October 02, 2008 |
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Berton Braley on the Bailout
By Diana Hsieh @ 12:00 PM
Berton Braley was a very popular early 20th century poet; his writings often extolled the virtues of capitalism, industry, success, and the like. Here's a particularly apt poem, sent to me by Boaz Arad:
The Profits and Loss
By Berton Braley
From New Deal Ditties: or, Running in the Red with Roosevelt, 1936
When "planned economy" first began
It looked like a swell "idea" –
Until we learned it had no plan
And wasn't economee.
For the taxes rise and the budget's shot
And the New Deal costs are met
By spending money we haven't got
For things that we never get.
The Billions roll in mighty stream,
A regular tidal flood,
With the net result that each spending scheme
Bogs down in a sea of mud.
When plans and programs go all to pot
Do the New Deal planners fret?
Why no, they think up a brand new lot
Of schemes to spend what we haven't got
For things we will never get! The House is scheduled to vote on this new bailout plan on Friday. It might well pass this time, in part due to all the special-interest pork added to the bill. (UGH!) Please tell your representative that you still oppose the bailout. You might wish to mention that your vote in November will be influenced by their vote tomorrow.Labels: Economics, Finance, Poetry, Politics
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| Wednesday, October 01, 2008 |
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More Bailout-O-Rama
By Diana Hsieh @ 7:51 AM
The Senate has a new $700 billion bailout plan that they're voting on today:
Top lawmakers said the Senate proposal, worked out after a day of behind the scenes maneuvering, would include tax breaks for businesses and alternative energy and higher government insurance for bank deposits. We do need to speak up against this new bailout plan. The market crash after the defeat of the bill in the House caused some to think that a bailout would be a good idea:
Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Senate banking committee, said the Senate decided to move quickly, citing signs of regret from some House members after the markets plunged in response to their initial vote.
"I think their will is coming back having heard from their constituents," Mr. Dodd said.
Lawmakers said the stock market response to the rejection was a sobering experience that could enhance prospects for a revised plan. Some anxiety lifted on Tuesday, as the Dow Jones industrial average rose 485 points, regaining more than half of the 778 points it lost on Monday.
...
On the morning after the sell-off on Wall Street, Congressional offices reported a shift in angry calls from constituents, with some now demanding that lawmakers take some corrective action -- a distinct change from the outpouring of public opposition that contributed to the defeat of the plan.
"I started hearing from a lot of people who lost money on their investments thanks to the big drop on Wall Street yesterday," said Representative Steven C. LaTourette, Republican of Ohio, who voted against the plan. So even if you already wrote or called your Senators, contact them again to tell them that you still oppose the bailout.
Also, the Ayn Rand Center has created a page of great resources on the bailout:
http://www.aynrand.org/site/PageServer?pagename=arc_financial_crisis
Feel free to make good use of it in your activism on this issue -- not only by informing yourself but also by posting the link in comments on news articles, forwarding it to friends, including it in e-mails to representatives, and so on. Here's ARC's announcement:
The Ayn Rand Center Responds to the Financial Crisis
September 30, 2008
Americans are now facing an historic economic crisis. What was the cause? What is the cure? How do we prevent it from happening again?
While pundits and politicians blame the current housing and financial crisis on "greedy" businessmen and lax regulators, and are frantically urging the government to expand its control over our economic lives, the Ayn Rand Center for Individual Rights has launched a new Web page to defend a different view--that the actual cause of the crisis is government intervention, and the only cure, laissez-faire capitalism.
We invite you to check out our collection of essays, op-eds, lectures, and interviews arguing for a rational approach to this crisis--an approach you will not find anywhere else. Labels: Activism, Economics, Finance, Politics
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| Tuesday, September 30, 2008 |
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The Bailout Made Easy
By Paul Hsieh @ 6:03 PM
The cover from this week's edition of The Economist reduces the bailout to its essentials:
(Unfortunately, the article itself supports the bailout.)
In contrast, 8 years ago Howard Husock wrote the following about the Community Reinvestment Act in "The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities":...Even without a no-down-payment policy, the pressure on banks to make CRA-related loans may be leading to foreclosures. Though bankers generally cheerlead for CRA out of fear of being branded racists if they do not, the CEO of one midsize bank grumbles that 20 percent of his institution's CRA-related mortgages, which required only $500 down payments, were delinquent in their very first year, and probably 7 percent will end in foreclosure. "The problem with CRA," says an executive with a major national financial-services firm, "is that banks will simply throw money at things because they want that CRA rating." From the banks' point of view, CRA lending is simply a price of doing business—even if some of the mortgages must be written off.
...Looking into the future gives further cause for concern: "The bulk of these loans," notes a Federal Reserve economist, "have been made during a period in which we have not experienced an economic downturn." The Neighborhood Assistance Corporation of America's own success stories make you wonder how much CRA-related carnage will result when the economy cools. I think we're finding out exactly how much right now...Labels: Economics, Finance, Politics
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More Analysts Blaming Government For Economic Crisis
By Paul Hsieh @ 4:00 PM
Here are a couple more articles in which non-Objectivists are correctly putting the blame for the current mortgage crisis on government policies, not the free market.
In "Credit Crisis Not a Free-Market Failure", Thomas Sowell writes:...Since risky investments usually pay more than safer investments, the incentive is for a government-supported enterprise to take bigger risks, since they get more profit if the risks pay off and the taxpayers get stuck with the losses if not.
The government does not guarantee Fannie Mae or Freddie Mac, but the widespread assumption has been that the government would step in with a bailout to prevent chaos in financial markets.
... If Fannie Mae and Freddie Mac were free market institutions they could not have gotten away with their risky financial practices because no one would have bought their securities without the implicit assumption that the politicians would bail them out.
It would be better if no such government-supported enterprises had been created in the first place and mortgages were in fact left to the free market. This bailout creates the expectation of future bailouts. In "Reject bailout rush to socialism", David Littmann writes:...Washington does not want you to remember the four ways it has brought us to this unfortunate moment. Let's review:
* The Community Reinvestment Act (approved in 1977 during the Carter administration) compelled banks and other lenders to loan money and grant mortgages in areas where they would have never dreamed of making such loans because of the exceptional risks of default. Banks were denied charters for growth and geographical expansion if regulators found them to be out of compliance with these politically correct regulations, enforced by the Federal Reserve and others.
* Government-sponsored enterprises (such as Fannie Mae and Freddie Mac) received taxpayer subsidies to provide mortgages and are favored by politicians and regulators with the privilege of maintaining very thin capital reserves as buffers against losses that result from defaulting on delinquent mortgages.
* Insane accounting rules, the Sarbanes-Oxley regulatory regime and Securities and Exchange Commission rules have contributed to the mess, especially the devastating "mark-to-market" requirement. The financial reports of firms and financial organizations must carry assets on their ledgers as though they were forced to sell them immediately into distressed markets, rather than at book value...
* And the Federal Reserve spurred subprime lending by pursuing inflationary money policies that dropped bank-borrowing rates to 1 percent.
To avoid greater government involvement and messes in the future (think Medicare, Medicaid and Social Security), Washington must extricate itself from the market. As real estate prices become more affordable, credit-worthy firms and individuals throughout the nation and world are ready to pounce on bargains that will appreciate.
The government got America into this situation. The solution is simple: Government, get out. I'm heartened to see this idea in circulation. We should continue to stress this point when we discuss this issue with legislators as well as others.
To keep things simple and easy-to-understand, I've been using the three key points that Tony Donadio mentioned in his earlier comment:(1) The current crisis was created by government interference in the housing market.
(2) Further interference will only make things worse.
(3) It is unjust to make innocent people who did not make or take out irresponsible loans pay for the mistakes of those who did. Labels: Finance
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Bush Vs. Ott On The Bailout
By Paul Hsieh @ 1:15 PM
As one would expect, President Bush called for a massive financial bailout in his recent speech to America. So much for fiscally conservative Republicans.
I prefer this fictional Bush speech from satirist Scott Ott a lot better. Here are a few excerpts:Bush: Congress Must Act to Save Stupid People
..."To sustain this shining city on a hill," Mr. Bush said, "we need to rescue the ignorant, irresponsible folks -- from Wall Street to Capitol Hill to Main Street -- who got us to where we are today. We must guarantee that no American suffers the soft bigotry of being forced to live with the consequences of his bad decisions."
..."If these giant companies fail, then America will be left with nothing but thousands of small to mid-sized financial firms that made prudent investment decisions during the past 15 years."
..."It is a moral imperative that we guard the civil rights of these idiots," he said. "If we fail, then we face the specter of free market capitalism run amok, and millions of Americans will feel the painful lash of personal responsibility across their backs." Labels: Economics, Finance, Politics
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Correspondence on the Bailout
By Diana Hsieh @ 12:31 AM
Objectivist historian John Lewis recently sent his representative a terse note against the bailout. His representative responded with the pro-bailout crap. And Dr. Lewis wrote a lengthy, informative, and very pointed reply. He has given me permission to reproduce the whole correspondence, but you might just want to skip down to his reply. Then you might want to forward it to your representatives in Washington.
Here's the first letter:
From: John Lewis
Dear Speaker Pelosi and all US Representatives:
I oppose all bailouts of financial institutions by the US government.
Government regulation and meddling is solidly to blame for this crisis.
We must reduce government involvement in the economy now.
Sincerely;
Dr. John David Lewis
Visiting Associate Professor of Political Science, Duke University
Senior Reasearch Scholar, Social Philosophy and Policy Center Here's the reply from Representative David Price of North Carolina:
Date: September 29, 2008
From: Congressman David Price
To: Dr. John David Lewis
Subject: Reply from Congressman David Price
Dr. John Lewis
Durham, NC 27705
Dear Dr. Lewis:
Thank you for contacting me about our country's financial crisis and the proposed recovery legislation. Today the House defeated this legislation, the Emergency Economic Stabilization Act, by a vote of 205 to 228, despite my support.
Like you, I do not have any interest in "bailing out" Wall Street firms and business leaders who have speculated recklessly, endangered our country's consumers and homebuyers, and resisted regulation that would protect the public interest. My concern is for Main Street - for the people depending on a sound economy and the availability of credit to buy a house or car, to run their business and meet payroll, and to save for college and retirement.
Like it or not, we are all in this together, and the entire economy is threatened as we teeter on the edge of a 1929-style meltdown. Today Wachovia Bank, a North Carolina mainstay, collapsed. But this goes much deeper than bank failures. Last week, the City of Raleigh could not find a buyer for a $300 million bond, and Wake County cancelled its planned $472 million bond issue for school construction, Wake Tech, libraries, and open space acquisition. Both have AAA bond ratings.
Although President Bush lacks the credibility to be of much help, I take the dire warnings of economic analysts very seriously, particularly in light of everything that has happened in the last few weeks. But I could not support Secretary Paulson's request for a blank check for $700 billion to purchase mortgage-backed securities and stabilize the markets.
I thus became part of the intensive discussions over the last ten days to rewrite the Treasury plan in several critical respects. The legislation which came before us today would:
o Provide strict independent oversight and accountability for all activities undertaken by the US Treasury
o Release the $700 billion in installments, with multiple reviews along the way
o Make certain that the entire $700 billion is recaptured by the Treasury and thus by the American taxpayer, by requiring that taxpayers share in any profits resulting from the government's help and providing for assessment of the financial industry for any remaining losses
o Forbid "golden parachutes" and limit other compensation for executives of participating financial institutions.
o Require the government to work with participating institutions and loan servicers to help deserving homeowners negotiate reasonable repayment terms and stay in their homes
The defeat of the bill prolongs and perhaps deepens the crisis. Coordinating with the Senate, the House will need to return within days to try again. Perhaps the economic situation will then lead some members to reconsider. Perhaps the bill can be changed in ways that attract a majority; I certainly have a list of improvements I would like to see. But considering the members who voted "no," I will want to scrutinize carefully any changes designed to attract them.
I am committed over the next few days to continue working to avert financial collapse and get the best possible deal for America 's taxpayers and homeowners. I welcome and share your concern about this situation and will be glad to hear from you at any time.
Sincerely,
DAVID PRICE
Member of Congress Here's Dr. Lewis' stellar response:
Date: Monday, September 29, 2008
From: John Lewis
To: Congressman David Price of North Carolina
Subject: Reply from Congressman David Price
Dear Congressman Price;
Thank you for your frank and fast response. I should be clear. I am opposed to bailing out these firms. But what I am more opposed to is the entire political culture of regulation--including manipulation of interest rates, Sarbanes-Oxley, changes in accounting rules, the Community Reinvestment Act, and a scad of others--that has fostered this mess. Two weeks ago no politician in Washington knew this was coming. Suddenly, after several all-nighters, they have enough knowledge to grant a quarter of a trillion dollars to a government bureaucrat, to dole out as he sees fit--and to promise another half-trillion, should his actions make it worse.
Meanwhile, the country focuses on the allegedly evil CEOs, "speculators" (read "investors"), and loan initiators who were earlier damned for NOT making loan money available to high-risk borrowers. I remind you that the Community Reinvestment Act penalizes firms for not making such risky loans. Now, suddenly, those firms are villified for following the law. Well, that's government--it faces no penalties, except a periodic popularity contest, and can contradict itself with impunity.
Most of all, I resent the politicians and punditrs who are claiming, contrary to evidence, that it is now "impossible to get a loan" on Main Street. It is impossible to borrow millions on Wall Street, but regional banks that made prudent investors are not in danger--unless the government further coerces them.
The government is not saving Main Street--it is nationalizing it. Is it not true that, with the takeover of Fannie Mae and Freddie Mac, the government now holds paper on tens of millions of American mortgages? What does granting American citizens "equity positions" and "profits" in companies seized by the government mean, except communism? Don't we condemn Hugo Chavez for nationalizing oil companies?
I will also recall, as a student of economics, that the Great Depression was caused by a string of obnoxious legislation, and was then cruelly extended by massive government interference. Contrary to prevailing, but long-discredited, opinion, the government did not save us from that mess. It created, and prolonged, it. Twenty years earlier, JP Morgan ended the panic of 1908 in a few weeks--bankers in 1929 could not so act. Today, Morgan would have been jailed for the private pooling of assets he arranged. Is it not true that AIG was told by the Attorney General of New York that it would not be allowed to sell sound assets in order to save the holding company? Who is to blame for the collapse of a huge, and largely sound company, excpet those who forbhid its executives from acting?
You will forgive me if I have no respect for the likes of Senator Schumer, who started a run on a bank with his irresponsible statements and then claimed virtue for them, or Senator McCain, up to his neck in the Keating scandal, or Senator Dodd, whose reputation was on the rocks until this crisis saved him, or Senator Obama, who had not a clue at a White House meeting last week, and then went on-script before the press to cover his ignorance. You will please forgive me if promises of "oversight" by these PR men do not instill confidence.
I much more respect the CEOs who have spent their years in the business, and who face actual consequences for their errors. They do not have access to hundreds of billions of dollars of other people's money--and they do not expect their stockholders to approve busines plans that cannot foretell whether they will lose three-quarters of a trillion dollars, or get some of it back in five or twenty years. They do not have their hands in the pocket of every person who produces in this country.
The truly brave politicians are those who recognize that the government is largely to blame for this mess, and should start emergency repeal of regulations now. Only this can allow responsible CEOs to start making decisions based on sound economics, rather than fear of breaking a law.
Sincerely;
John Lewis
Dr. John David Lewis
Visiting Associate Professor of Political Science, Duke University Thank you, John!Labels: Economics, Finance, Politics
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| Monday, September 29, 2008 |
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Keep Up the Pressure
By Diana Hsieh @ 2:51 PM
The proposed bailout plan has failed in the House of Representatives.
The vote against the measure was 228 to 205, with 133 Republicans joining 95 Democrats in opposition. The bill was backed by 140 Democrats and 65 Republicans. HOORAY! As a result, the plan is stalled, at least for the moment:
Supporters vowed to try to bring the rescue package up for consideration again as soon as possible, perhaps late Wednesday or Thursday, but there were no definite plans to do so. That's great news. But I'm not terribly surprised, I must say. (I can't claim credit for the following insight, however. A friend suggested it to me last night.) Why not?
People are inundating their representatives with strong opposition to the bailout. Mark Udall, a representative from Colorado running for Senate reported: "People are mad. My calls are mixed, between people who say 'No' and people who say 'Hell no.'"
Members of the House of Representatives are vulnerable to political discontent. Unlike in the Senate, the whole bunch (except those retiring) is up for re-election in just over a month. So as this vote indicates, many do not wish to risk their seat by voting in favor of wildly unpopular legislation -- despite all the pressure from party leadership.
So what does that mean for us? It means: keep up the pressure. If you representative voted "no," call or e-mail him to give your moral support. If he voted "yes" (as mine did; he's retiring), then call or e-mail to tell him that you're upset with him. You can find out how your representative voted here.
Unfortunately, the web site for the House (including their contact form) seems to be down, as does Congress.org. Does anyone have a working link to suggest?
Update: Reading that NY Times article in full, I'm impressed by the seemingly principled opposition to the bailout. See these descriptions and quotes:
Jeb Hensarling, Republican of Texas, said he intended to vote against the package, which he said would put the nation on "the slippery slope to socialism." He said that he was afraid that it ultimately would not work, leaving the taxpayers responsible for "the mother of all debt."
Another Texas Republican, John Culberson, spoke scathingly about the unbridled power he said the bill would hand over to the Treasury secretary, Henry M. Paulson Jr., whom he called "King Henry."
A third Texan, Lloyd Doggett, a Democrat, said the negotiators had "never seriously considered any alternative" to the administration's plan, and had only barely modified what they were given. He criticized the plan for handing over sweeping new powers to an administration that he said was to blame for allowing the crisis to develop in the first place. In contrast, consider what the supporters of the bailout are saying:
When it comes to America's economy, [Representative Steny Hoyer of Maryland, Democratic Majority Leader] said, "none of us is an island."
Representative Maxine Waters, a Democrat, said the measure was vital to help financial institutions survive and keep people in their homes. "There's plenty of blame to go around," she said, and attaching blame should come later. Labels: Election, Finance, Politics
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Adopt an Investment Bank
By Diana Hsieh @ 2:43 PM
Via Bill, a funny column on the bailout from Joel Stein in the LA Times:
Even though I understand so little about economics that much of my long-term investments are tied up in Costco products, I feel pretty sure that letting Congress give Treasury Secretary Henry Paulson $700 billion to buy super-crappy mortgages is not the right call.
Sure, like any American, when I see a photo on the Internet of an adorable little investment bank and find out it's at risk of being put to sleep, I want to throw in $2,000 to $3,000 of my own money to adopt it. But instead of jacking up inflation, letting the dollar sink further and paying higher taxes so we can keep up cheap borrowing -- which is what this plan amounts to -- I think we need to let those who made bad loans get burned. We need to accept that credit will dry up and that maybe -- for just a bit -- we'll have to stop buying more than we can afford. And:
So let's not stop the short-selling of financial stocks -- the only brake on overindulgence -- as Paulson did last week. Let's not strip Congress of yet another power by giving the Treasury secretary the right to decide where to dole out a large portion of our budget. Let's not encourage more risky loans by making profits private and losses public. And let's not create some bastardized form of communism in which the new rule is, "From each according to his ability, to each according to the size of the investment bank he owns shares in." I don't agree with the whole column. He fails to recognize government regulation as the root problem of the current crisis, instead claiming that "we've got basically sound banking system that got a little under-regulated during the Clinton administration." However, I do appreciate his insistence that the people and corporations who took the risks assume the responsibility for their losses. And I liked his humor: it highlighted the absurdity of treating corporations as objects of government charity.Labels: Finance, Politics
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| Saturday, September 27, 2008 |
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Opposing the Bailout
By Paul Hsieh @ 3:00 PM
If you want to let your elected officials know that you oppose the $700 billion Bush Bailout of Wall Street, you can use this website to send them an e-mail.
For example, Rob Abiera has sent the following excellent letter to his elected officials:Dear *** SENATOR/REPRESENTATIVE XXX ***
I am writing as a constituent to ask you to oppose the Bush Administration's request for $700 billion to bail out Wall Street. The healthiest thing for our economy would be to allow the market to work and let those firms deal privately with the consequences of their own actions. I don't believe in accepting responsibility for other people's actions and I have no desire to see my taxes used to help some Wall Street firms out of a situation which they created, not me. The answer to the current economic situation is not handouts to Wall Street tied to more regulations. The answer is to get the government OUT of the economy.
I'm sure that I disagree with Senator DeMint of South Carolina on other issues, but on this issue I have seen no better statement of the truth about this situation than his recent press release.
In this instance, Senator DeMint speaks for me, as well.
*** YOUR NAME ***
*** YOUR ADDRESS *** Rob also included the text of Senator DeMint's Press release.
I liked Rob's letter a lot, and I've already sent similar e-mails to my own Senators and Representative.
BTW, Alex Epstein has a good piece on the bailout on the Fox News website, "The Bailout: Just a $700 Billion Hedge Fund?"
Update from Diana:
I send the following letter to my representatives, plus various other politicians and officials:
Dear So-And-So,
I'm writing to tell you that I strongly oppose any bailout of Wall Street.
The current crisis was created by government controls and regulations. The only rational solution is to allow the market to correct itself by allowing full freedom of trade. The ban on shorting financial stocks should be lifted now: the markets cannot function properly without shorting. The government should not bail out any Wall Street firms -- nor anyone else. Taxpayers should not be forced to pay for other people's irresponsibility.
Then, to preserve economic health in the long run, all of the myriad anti-capitalist controls on the markets must be repealed. Fannie Mae and Freddie Mac should be totally privatized. The Community Reinvestment Act must be repealed.
Do not blame the current crisis on the free markets. Such crises are the inevitable product of a dangerous hybrid of capitalist markets and government controls. More government meddling will only exacerbate the problem. The only real solution is to move to a fully free market in which the government upholds and protects the rights to property and contract. Only then will every person be free to act on his own rational judgment in pursuit of his own wealth, security, and happiness. That's what America should be all about. I sent that to:
You need not write anything so lengthy and detailed as my letter. Just a single line saying that you oppose the bailout -- and that you oppose government controls of the financial markets -- would be fantastic.Labels: Activism, Economics, Finance
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| Wednesday, September 24, 2008 |
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Who Wants a Bailout?
By Brandon Byrd @ 1:32 AM
As you have no doubt heard, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke recently presented a plan to Congress that seeks to buy as much as $700,000,000,000 in "troubled assets" from prominent financial institutions. But why should these firms be the only ones to get massive amounts of milk from the taxpayer teat? I don't know about you, but I've purchased plenty of assets of dubious future value in my day... why shouldn't the government help me out too?! If you're like me, I'm sure you're wondering why the government isn't doing more to help alienate you from the negative consequences of your poor decisions. After all, isn't that what the government's there for? Granted, they do a lot for us in that regard... but if they're bailing out Wall Street, why not bail out Main Street -- or MY Street?
I recently ran across a website (hat tip to BoingBoing) asking just this question: BuyMyShitPile.com. From their site's description:
With our economy in crisis, the US Government is scrambling to rescue our banks by purchasing their "distressed assets", i.e., assets that no one else wants to buy from them. We figured that instead of protesting this plan, we'd give regular Americans the same opportunity to sell their bad assets to the government. We need your help and you need the Government's help! Use the form below to submit bad assets you'd like the government to take off your hands. And remember, when estimating the value of your 1997 limited edition Hanson single CD "MMMbop", it's not what you can sell these items for that matters, it's what you think they are worth. The fact that you think they are worth more than anyone will buy them for is what makes them bad assets. So head on over and list whatever crap you'd like for whatever amount you think it's worth. If enough of us band together, maybe we can reap the rewards of the welfare state too!Labels: Finance, Politics
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| Tuesday, September 23, 2008 |
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Jim DeMint, Man of the Day
By Diana Hsieh @ 7:36 PM
While I'm sure that I'd have some mighty strong disagreements with South Carolina Senator Jim DeMint, he seems to be the only politician talking sense about the current financial crisis. Here's his press release:
DeMint Opposes Wall Street Bailout: Plan does not solve the problems that caused the current credit crunch, and could make them much worse
September 22, 2008 - Washington D.C. - Today, U.S. Senator Jim DeMint (R-South Carolina) announced his opposition to the $700 billion plan proposed by the Bush Administration to bailout Wall Street.
"After reviewing the Administration's proposed bailout plan, I believe it is completely unacceptable. This plan does nothing to address the misguided government policies that created this mess and it could make matters much worse by socializing an entire sector of the U.S. economy. This plan fails to oversee or regulate the government failures that led to this crisis. Instead it greatly increases the role for Secretary Paulson whose market predictions have been consistently wrong in the last year, and provides corporate welfare for investment firms on Wall Street that don't want to disclose their assets and sell them to private investors for market rates. Most Americans are paying their bills on time and investing responsibly and should not be forced to pay for the reckless actions of some on Wall Street, especially when no one can guarantee this will solve our current problems."
"This plan will not only cause our nation to fall off the debt cliff, it could send the value of the dollar into a free-fall as investors around the world question our ability to repay our debts. It's also very likely that this plan will extend the cycle of bailouts, encouraging other companies to behave in reckless ways that create the need for even more bailouts, triggering an endless run on our treasury. This plan may make things look better for Wall Street in the next couple months, but the long-term consequences to our economy could be disastrous.
"There are much better ways of dealing with this problem than forcing American taxpayers to pay for every asset some investor doesn't want anymore. We should start by reforming government policies and programs that created this mess, including the Federal Reserve's easy money policy, the congressional charters of Fannie Mae and Freddie Mac, and the Community Reinvestment Act. Then Congress should pass a number of permanent and proven pro-growth reforms to encourage capital formation and boost asset values. We need to make permanent reductions in the corporate tax and the capital gains tax rates. We have the second highest corporate tax rate in the world, which encourages companies to take jobs and investment overseas."
"It's a sad fact, but Americans can no longer trust the economic information they are getting from this Administration. The Administration said the bailout of Bear Stearns would stop the bleeding and solve the problem, but they were wrong. They said $150 billion in new government spending using rebate checks would solve the problem, but they were wrong again. They said new authority to bailout Fannie Mae and Freddie Mac would solve the problem without being used, but they were wrong again. Now they want us to trust them to spend nearly a trillion dollars on more government bailouts. It's completely irresponsible and I cannot support it." In response, a friend of mine who works in the financial markets said:
He puts the blame squarely where it belongs -- on govt policies. The programs he wants "reformed" are some of the real baddies -- (they should be abolished rather than reformed). He calls for tax cuts which is fine of course, but that needs to be paired with calls for spending cuts. Otherwise we will aggravate the inflation problem that he rightly points out will result from Pauslon's plan.
Most impressive was the absence of blaming things on 1) the use of leverage 2) bad decisions by private entities, 3) lack of regulation over the private sector 4) greedy fat cats on Wall street 5) speculators and short-sellers. Indeed.Labels: Finance, Politics
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| Monday, September 22, 2008 |
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Yaron Brook on the Economic Crisis
By Paul Hsieh @ 1:08 AM
The September 19, 2008 issue of Time magazine recently quoted Yaron Brook, executive director of the Ayn Rand Institute, in its recent article on the economic crisis:What Would Ayn Rand Have Done?
...But as the largest bailout in government history unfolded in almost dizzying waves over recent days, a very different view prevailed at the Ayn Rand Center for Individual Rights, an outpost of free-market, anti-government thinking located just a few blocks from the newly aggressive and highly interventionist Department of Treasury in downtown Washington.
"It's a complete disaster," said Yaron Brook, the executive director of the center. "Its a form of national socialism of the financial markets...This is socialism 101."
...Brook doesn't blame speculators, traders or financiers for the market's near-collapse, but instead blames government for having overregulated the markets in the first place. The business leaders bailed out by government this week "are victims," he said, "and the government set it up." Washington underreacted to previous crisis, let Fannie Mae and Freddie Mac spin wildly out of control as quasigovernment agencies while taxpayers piled up unsecured debt in their names. The crisis, he added, was "really fed throughout by government policies." He also notes that the current Republican administration is doing more harm in intervening in the marketplace than a Democratic administration likely could have.Labels: ARI, Economics, Finance
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