Barack Obama still not shooting straight on the economy

June 21, 2009 | By | 6 Replies More

In the June 19 edition of The Nation,  William Greider, a political journalist, argues (in “Obama’s False Financial Reform“) that Barack Obama needs to stop running interference for politicians and Wall Street.  The proper parties to blame for the economic meltdown and a legitimate long-term fix are two sides of the same coin.  Greider argues that Obama’s “reform” is merely “kicking the can down the road.”  Greider pulls no punches:

The most disturbing thing about Barack Obama’s call for financial reform was the way in which the president falsified our predicament. He tried to make it sound as though everyone was implicated in the financial breakdown and therefore no one was really to blame . . .  That is not what happened, to put it charitably. Unlike some other presidents, Obama is much too intelligent not to know this. The regulatory system was not overwhelmed by historic forces. It was systematically gutted and dismantled by the government in Washington at the behest of the banking interests.

If you want specifics, Greider’s article has lots of them.  Consider what to do about Obama’s false solution to unregulated mortgage securitization.  As Greider explains, Obama’s proposed solution is clearly bogus, yet there is a real solution:

Obama’s answer is to require the originating lender to retain a 5 percent interest in the mortgage and pass on the rest. That seems ludicrous and innocent of how that cutthroat world actually works. The financial geniuses who created the subprime mortgage scandal could hide 5 percent of the mortgage value with a couple of keystrokes–adding fees, closing costs or other dodges. To hold lenders genuinely responsible, they should be made to hold onto something like 50 percent of liability for the original loan with perhaps the other 50 percent assigned to whatever bank or investment house packages the mortgage security and sells it to financial markets. That would be “responsibility” with old-fashioned force.


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Category: Economy, Politics

About the Author ()

Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich lives in the Shaw Neighborhood of St. Louis, Missouri, where he lives half-time with his two extraordinary daughters.

Comments (6)

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  1. Erich Vieth says:

    From Douglas Rushkoff:

    We must stop perpetuating the fiction that existence itself is dictated by the immutable laws of economics. These so-called laws are, in actuality, the economic mechanisms of 13th Century monarchs. Some of us analyzing digital culture and its impact on business must reveal economics as the artificial construction it really is. Although it may be subjected to the scientific method and mathematical scrutiny, it is not a natural science; it is game theory, with a set of underlying assumptions that have little to do with anything resembling genetics, neurology, evolution, or natural systems.

  2. Jay Fraz says:

    Erich : Great Link! I've been saying for a while that 'economics is not a science' as solid predictions and reproducibility are absent from all the economic 'think tank PR', a distinct lack of real science if you will. Rushkoff actually flushed out this concept far better than myself and now I realize I must expand my understandings of game theory to a greater level. Great Link.

    • Erich Vieth says:

      Game theory is correct, Jay. That article reminds that you can't get good data out unless you have good data going in, and many economists generously substitute assumptions for messy real-world evidence. It is striking that the economists rarely if ever predict cataclysmic events with any sort of precision. I do realize that the necessary data-in that would be required to forecast with confidence would be daunting, if not impossible.

      The solution at this point is for economists to be willing to state more clearly what they know and what they don't know, especially when they appear on TV as talking heads. This is a problem with many types of "experts," of course (e.g., doctors) who are called on to make predictions with confidence in the face of many unknowns. As tempting as it is to act as though one knows more than one does, all experts should be careful to state their confidence levels and admit their limitations when opining.

  3. Jay Fraz says:

    Erich : I agree fully, to expand on your statement regarding talking heads. I believe the biggest problem has been coming from libertarian think tanks such as Cato and AEI, Manhatten Int. etc., they go onto TV with their economist and then spout ideology that would benefit the wealthiest companies and screw the little guy by stating 'THE MARKET' determines all like their saying a religious leaders name with the confidence that any intelligent man wouldn't say about ANYTHING.

    The truly amazing thing is they go and convince the libertarian crowd that the only reason these companies run wild is because of regulation, and thus by 'deregulating' them they will allow the market to determine their ethical behavior which will be morally acceptable and won't hurt the consumer(or anyone else because of the consumer). It amazes me that most libertarians actually believe their philosophy is 'anti-corporate'. We are not pro-business, were pro-market! mentality, bad corporations will lose if we deregulate! thought pattern. The only good business survives in a truly free market gospel. That crap.

    As I like to toy with turning rhetoric in on itself here is a link to an old article that I recently posted in the comments of in trying to turn libertarian rhetoric against itself. This has some flaws but it was off the cuff and cut to the point quickly as I am seeking easy, fast, effective frames.

    I am still looking for ways to frame libertarian's corporate bitchness as the followers are convinced that only the noble survive and that their approach will crush the evil corporations and allow the good to flourish.(that they will unleash, its like they never read Aesop's fables). Or at least a way to phrase it that doesn't require an entire novel on the history of labor and business.

  4. Niklaus Pfirsig says:

    Economics comprises several soft sciences applied in attempts to understand the dynamics of trade at all levels.

    The laws of economics hold true, but only under very restricted sets of conditions which rarely exist in real world scenarios.

    Furthermore, these economic "laws" are derived from a base assumption: The medium of exchange, what most think of as money. has value by being a globally limited resource.

    The problem is that our economy has not been based on money for several decades, but on debt, which can be created arbitrarily.

    Furthermore the commoditization of debt has the same effect as flooding the economy with counterfeit money.

    Jay, the illogic of the ticket master piece reminds me of this old joke

    A new marshall rides into a small western town. He notices there are small bulls-eye targets painted everywhere arung the town, each with a single bullet hole dead centered in the target.

    Suddenly, a drunken cowboy staggers out of the saloon, pulls his pistol and fires a shot at the livery stable, wobbles over to the livery stable, searches the stable wall until he finds the bullet hole, then pulls a small jar of paint and a brush from his coat pocket and proceeds to paint a small bulls-eye around the hole.

  5. Jay Fraz says:

    Niklaus : I have studied how money enters our system through debt and the federal reserve. I suppose I'm at an impasse on this one as I oppose the gold standard and I oppose the government borrowing from the fed to pay for services. The Fed needs nationalized frankly and the government should be paying directly for services IMO. Of course that would require the sort of movement I can not see in my lifetime.

    Love the cowboy example btw, it really is a great example of 'economics'.

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