Two narratives seem to be forming to describe the underlying causes of the financial crisis. One, as outlined in a New York Times front-page story on December 21, 2008, is that President Bush excessively promoted growth in homeownership without sufficiently regulating the banks and other mortgage lenders that made the bad loans. The result was a banking system suffused with junk mortgages, the continuing losses on which are dragging down the banks and the economy. The other narrative is that government policy over many years–particularly the use of the CRA and Fannie Mae and Freddie Mac to distort the housing credit system–underlies the current crisis. The stakes in the competing narratives are high. The diagnosis determines the prescription. If the Times diagnosis prevails, the prescription is more regulation of the financial system; if government policy is to blame instead, the prescription is to terminate those government policies that distort mortgage lending.
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Archive for February, 2009
The True Origins of This Financial Crisis
A rebellious Marc Jacobs smirks at economic crisis
American designer Marc Jacobs has poked fun at the economic crisis with extravagance and irony, unveiling in New York a fall 2009 collection where retro meets futurism.
While the city’s fashionistas thronged the catwalk to watch ex-Spice Girl Victoria Beckham, the wife of football star David Beckham, or singer Justin Timberlake and his ready-to-wear line, Louis Vuitton’s artistic director gathered a smaller crowd where professionals outnumbered celebrities.
Casting off the grim mood of the times, the cult designer showed off 60 models — more than double the average 25 at this year’s toned down “Fashion Week” — to a more exclusive crowd of 700 (down from the usual 2,000) at the stately 69th Regiment Armory in southern Manhattan.
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Financial crisis bigger threat than Al Qaeda
The plunging global economy is an even bigger threat to the United States’ national security than the al Qaeda terrorist network or proliferation of weapons of mass destruction, according to America’s new intelligence czar.
Retired Admiral Dennis Blair, the Obama administration’s Director of National Intelligence, in his first appearance before the US Congress, stated, “The primary near-term security concern of the United States is the global economic crisis and its geopolitical implications.”
Traditionally, US intelligence chiefs always preface their opening remarks with either terrorist or nuclear proliferation threats, but Blair’s first sentences in his testimony before the US Senate Select Committee on Intelligence was about the economy.
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Paulson, Bernanke Blamed for Economic Meltdown in PBS Special
Former U.S. Treasury Secretary Henry Paulson is the designated goat in Frontline’s “Inside the Meltdown,” which airs tonight on PBS at 9 p.m. New York time. Also taking heat are Federal Reserve Chairman Ben Bernanke, a few chief executive officers and a confederacy of right-wingers.
There’s no major surprises here — Paulson is already a favorite punching bag — but the show does explain how personality clashes and ideological passions probably made a bad situation worse. Of course, that won’t make Americans who’ve lost a big chunk of their savings and seen the price of their homes plummet feel any better. Maybe what the country needs more than a bailout is a purge.
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