MrW, I have no doubt that there is a small degree of mortgage fraud, but that is not the cause of this crisis. If it was then why did FM and FM buy the loans? Very simply, it was the underwriting standards that were bad. FM and FM relaxed standards to such a degree that even welfare was counted as income, and credit scores were overlooked. The cause is as described by Harvard economist, Jeffrey A. Miron:



Commentary: Bankruptcy, not bailout, is the right answer

Lenders were encouraged by our federal government [Democrats] to relax standards and were allowed to sell such loans to FM and FM. When the housing market declined the value of those properties also declined, leaving the lenders holding greatly devalued paper.

The new manual put forth by the FED in 1992, relaxed standards and stated that "discrimination may be observed when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower–income minority applicants."

So what were some of the "outdated" criteria?

Credit History: Lack of credit history should not be seen as a negative factor.... In reviewing past credit problems, lenders should be willing to consider extenuating circumstances. For lower–income applicants in particular, unforeseen expenses can have a disproportionate effect on an otherwise positive credit record. In these instances, paying off past bad debts or establishing a regular repayment schedule with creditors may demonstrate a willingness and ability to resolve debts....

Down Payment and Closing Costs: Accumulating enough savings to cover the various costs associated with a mortgage loan is often a significant barrier to homeownership by lower-income applicants. Lenders may wish to allow gifts, grants, or loans from relatives, nonprofit organizations, or municipal agencies to cover part of these costs. . . .

Sources of Income: In addition to primary employment income, Fannie Mae and Freddie Mac will accept the following as valid income sources: overtime and part–time work, second jobs (including seasonal work), retirement and Social Security income, alimony, child support, Veterans Administration (VA) benefits, welfare payments, and unemployment benefits.


The FED warned their lenders:

"Did You Know? Failure to comply with the Equal Credit Opportunity Act or Regulation B can subject a financial institution to civil liability for actual and punitive damages in individual or class actions. Liability for punitive damages can be as much as $10,000 in individual actions and the lesser of $500,000 or 1 percent of the creditor’s net worth in class actions."


These lending practices were mandated by the FED and encouraged by Fannie Mae and Freddie Mac, resulting in the crisis we see today.

This article foretold the crisis EXACTLY in 1999:

New York Times, 1999 Fannie Mae Eases Credit To Aid Mortgage Lending


That is EXACTLY what happened. And when Republicans tried to stop the democrats, they were met with great resistance from democrats:

Wall Street Journal
REVIEW & OUTLOOK NOVEMBER 11, 2003 http://online.wsj.com/article/SB106851042414562400.html?mod=googlewsj

Sure, the Republicans should be blamed for not stopping this foolhardly policy put forth by democrats, but it is DEMOCRATS who foolishly relaxed the underwriting standards and pressured lenders to do the same. I fully blame the Republicans for not stoppng them when they had the chance. That is gross dereliction of duty. But what the democrats have done here is downright CRIMINAL. Heads need to roll over this.

Still an Interesting thread.

And YES, I still think that this video is racist, and not just a "blame the Democrats" rant.


This is the video I was describing. There are 70 members for the Financial Services Committee. 37 Dems and 33 Repubs.

And ONLY the Black Democratic Members of the committee were quoted. And Barney Frank, since he is from Mass. and gay. So they threw him in.

So, underlying that video is that "Blacks wanted it" and "kept the responsible "white people" from controlling it"

It was rather sickening. There were plenty of Dem's and Repub's flogging Franklin Raines in those hearings from 2004. Several committee's met and quized Raines and several other members of the exec suite at Fannie Mae. I was reading the stories closely. After all, it was "only" an accounting scandal at that time.

Believe what you want to believe. The purpose of that video wasn't to give a factual representation of the crisis. It was to skewer a portion of the American Public.

Marsh, I respect your opinion. And when you stated this:



They ONLY wanted you to see THAT Lacy Clay quote. And that's my point.

Any of us can watch this video, and then proceed to do much more research and find out more about the crisis. This thread is an excellent source for various points of view and good solid information. Hopefully, some enlightenment has occurred.

And rwinger: About this:

Ahhh, I don't really think so.... It might make a dent. But I don't think you could rebuild the INFRASTUCTURE of the US for $700B. Heck, it wouldn't even get a small part of Texas DONE.

And Marsh, your quote about the $700b paying off all those mortages? Not really. Citibank has over $700B in loans, itself. FM and FM had TRILLIONS. So, $700B is a REAL big number, but not as big as some of the stuff out there makes it seem.

This is still an interesting thread. Most folks are being respectful. This crisis has many, many fathers. And each wants to point to the others paternity as the REAL father.

The investment banks got to take the profits home, and the taxpayers got the losses. That was something that should have NEVER been allowed to happen.

LG

The problem is systemic--toxic tranched collateralized debt obligations (CDOs), credit default swaps on these sub-slime CDO's, mark to market against the closest index and a Federal Reserve acting as an enabler. Credit is frozen due to a lack of transparency, meaning banks fear each other's shakiness, consequently we have total paralysis.

Predictably, the rescue plan (with its incestuous ties to the investment houses) is myopic, but apparently, it's the only plan that is being seriously considered. Maybe the Republican sponsored delay will result in some good b/c there has to be a better plan out there other than one that kisses the investment communities...assets.

Hopefully there is a better plan. At least they have removed the earmarks for special interest groups, such as the radical left wing group, ACORN. I would add though, that the delay was not "Republican sponsored;" 95 democrats also voted against it. The democrats are in the majority and have enough votes to pass it without the GOP.

hahah - well perhaps that source meant 1930 dollars - who knows

but I hear ya.

I see what you are saying. I have no idea what was in the heart and mind of the person who put that video together. You might be right.

How about a written anaylsis from Fortune about it?

"Two weeks later Falcon and Raines faced off against each other in a hearing before the House subcommittee on capital markets, which was chaired by Baker. Consider the circumstances. Falcon was Fannie’s regulator and had leveled serious charges, amounting to fraud, against Fannie Mae. Most CEOs would have seen the wisdom of humility at this point, but Raines showed little. “These accounting standards are highly complex and require determinations on which experts often disagree,” he said, adding that “there were no facts” that supported OFHEO’s charge that Fannie executives had deferred an expense in 1998 to earn bonuses.

And most of the Democrats present agreed with him. “This hearing is about the political lynching of Franklin Raines,” said Congressman William Lacy Clay of Missouri. Massachusetts Congressman Barney Frank said, “I see nothing in here that suggests that safety and soundness are an issue.” Other Democrats complained that the mere fact of releasing the report could increase the cost of home-ownership.

“Is it possible that by casting all of these aspersions … you potentially are weakening this institution in the market, that you are potentially weakening the housing market in this country?” Congressman Artur Davis of Alabama demanded. When Falcon tried to answer, Davis acted like a prosecutor grilling a hostile witness. He wanted a one-word answer: yes or no. “Is that possible?” he asked again.

“I have never seen anyone treated as disrespectfully as Armando Falcon was by the Democrats and by Franklin Raines,” recalls one congressional aide. Adds Andrew Cuomo: “I credit him for not folding and not caving and not running, because he took a tremendous beating.”


LINK

I am left w/ the same basic information...including William Lacy Clay's smear.


The piece I quoted from was specifically talking about "owner occupied dwellings with first mortgages active".

"According to this 2006 pdf from the U.S. Census, there are 33 million owner occupied dwellings with first mortgages active."

LINK

Marsh:

I'm not picking on you. By no means. You have posted some good stuff, and some has been very thought provoking.

The wizbang spreadsheet link you posted? The math doesn't work.

For the $75,000 mortgage amount, the creater HALVED the number of outstanding loans. From 2,684 to 1,342. Don't know why. That gets the Mortgage $ amount to $201,300,000 for that line. Meaning that the grand total is over $800B.

Also, if you add up ALL the mortgages, from less than $10,000 in mortgage to over $300K in mortgage debt, you get 46,080,000 mortgaged properties in the US. Times the median mortgage amount of $92,607 gets to a Total Mortgage indebtedness in 2006 of $4,267,330,560. The mortgage numbers for 2008 are potentially larger.

$700B is 16% of that total mortgage. That means that the FED has determined that mortgages and house valuations are overstated by about 16%. And that is average amount of price deflation that we should see in the value of homes.

The wizbang article states that only "33 million" homes have mortgages. The original chart itself details that 46M mortgages exist. (The spreadsheet only details info for 20M mortgages) And in the beginning of the Census PDF (it's 616 pages long!) they state that there are over 127M households in the US.

So, taking that to its logical conclusion, less that 36% of all houses in the US actually have a mortgage. Seems kind of LOW to me. However, on the next page of the document, (pg 176) it states that 50,340,000 households have a second mortgage (HELOC). The average balance of that HELOC is $23,701. So thats another $1.2T in mortgage debt.

$700B to start fixing this problem may only be a drop in the bucket.


LG

Here's some disturbing revelations. The article is from 2006, so you can imagine just how bad off America truly is. From the debate, we know that China alone now holds over $600 billion in US Treasuries.

Our days as the leader of the financial market are numbered. You have Tokyo, Singapore and Shanghai foaming at the mouths to take our place. Financial hubs see an opening up at the top

The future does not look good for the US economy.


The Looming Dangers of American Debt
June 7, 2006 | From theTrumpet.com

America has become a nation of debtors. Increasingly, that debt is held by foreign nations—some of which are enemies.

What does the term serf bring to mind? Poor, indebted, landless, forced labor—perhaps even medieval. Shockingly, serfdom is a reality many Americans may face in the future. Here is why.

The U.S. national debt now stands at more than $8.3 trillion, of which more than $2 trillion is owned by foreigners. Since 2000, the percentage of U.S. public debt owed to foreigners has doubled.

Take China for example. As of March of this year, China held over $321 billion worth of U.S. Treasuries, up from the $60 billion it owned at the end of 2000. Similarly, Japan now owns $640 billion worth of U.S. Treasuries, up from $317.7 billion in December 2000. Lately, however, America has also borrowed heavily from oil exporter nations (as defined by the Department of the Treasury), which include many nations that despise America. Luminaries such as Venezuela, Ecuador, Iran, Libya, Algeria, Indonesia and Iraq, and several other primarily Middle Eastern nations, now own $98 billion worth of U.S. debt.

According to Brad Setser, director of research at Roubini Global Economics, “The irony is that the three countries in the world adding to reserves the fastest and thus buying the most U.S. debt now are China, Saudi Arabia and Russia, none of them democracies. … We are increasingly counting on a group of creditors who are not our closest friends but have a bigger and bigger stake in America,” he says.

So America’s debt is growing, and a greater amount is in less reliable hands.

This creates two problems.

First, the value of the dollar is increasingly dependent upon foreigners. This makes the U.S. vulnerable to coercion and blackmail.

In commenting on this radical shift in holders of U.S. debt, Frederick Kempe of the Wall Street Journal says, “The more closely economists study that data, the more they worry,” especially over America’s “decrease[d] influence over … the world’s largest market, the $2 trillion in foreign exchange that changes hands daily. The dollar forex market can increasingly be shifted by decisions that foreign governments make about selling dollar assets. What’s also at stake is leverage on matters as diverse as U.S. home mortgage rates and America’s global political clout” (May 9).

For example, remember what happened on June 23, 1997, when former Japanese Prime Minister Ryutaro Hashimoto wondered aloud about what would happen to the U.S. economy if Japan diversified and began to sell some of its, at that time, $300 billion in U.S. Treasury securities (remember Japan now owns more than $640 billion worth). Following Hashimoto’s remarks, the Dow Jones Industrial Average plunged by the largest single day amount (at that time) since the Crash of 1987. Aids to Hashimoto were quick to say that the comments were not intended as a threat. Since then, other foreigners have wondered aloud about dumping U.S. debt (Treasuries), also causing ripple effects through global markets (Moscow Times, May 11).

But what if, at some point, our debtors did want to influence American policy? In a potential conflict between China and Taiwan, would China stand idly by, holding $321 billion in U.S. debt, if the United States was to interfere to protect democratic Taiwan? Would Taiwan simply hold its $68.9 billion if China attacked it and America did not come to its aid?

What if China and Taiwan were to peacefully reunite? Together they would control $389.9 billion worth of U.S. debt. Since China also controls Hong Kong, you can add in an additional $46.6 billion worth of U.S. debt, for a grand total of $436.5 billion.

That is a huge chunk of potential economic or political influence. So much influence that if China even “reduces its Treasury purchases, the U.S. would run into difficulties” financing its debts, says the Nikkei Weekly. That same publication says Chinese leaders have boasted that because China is such an important lender to America, “Beijing is holding a dagger to Washington’s throat” (May 1).

The second problem with having foreigners hold so much U.S. debt is the risk that foreigners may choose to stop accumulating it and start spending it. As with any person, the more money you have, the greater the pull to spend. If foreign nations begin to spend their dollars, the increased supply of U.S. greenbacks in circulation would probably drive the value of the dollar down, making American possessions less expensive relative to assets in other currencies. Consequently, American corporations and businesses could increasingly become targets of foreign acquisitions.

There are signs that some of America’s top corporations are already being snapped up.

Last week, American-owned Engelhard Corporation, a strategic manufacturer of catalytic converters and precious metals processing, announced that it would succumb to German-owned basf’s $5.6 billion hostile takeover—the largest-ever hostile takeover of an American company by a German corporation. Engelhard employs approximately 7,000 people worldwide.

In April, France’s telecommunications giant Alcatel sa announced it would acquire American telecom equipment maker Lucent Technologies Inc. for $13.4 billion. Since then, thousands of American workers have been laid off.

In February, Japan’s Toshiba Corp announced that it had purchased Pennsylvania-based Westinghouse Electric, the manufacturer of nuclear reactor technology, for $5.4 billion (Chicago Sun Times, February 7). Westinghouse had previously been purchased by a British-owned company.

That same month, Dubai Ports World, a United Arab Emirates company, announced it was trying to purchase the right to manage six of America’s largest port complexes, including those of New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia, from another British company. That deal later fell through due to national security concerns and congressional resistance.

During 2005, congressional opposition blocked another high-profile foreign takeover when Chinese-owned oil company cnooc proposed to buy out U.S. oil company Unocal for $18.5 billion (Financial Times, London, February 9). Slightly more than a month prior to the attempted Unocal deal, China’s Lenovo Group bought ibm’s personal computer unit for $1.75 billion.

Unfortunately, American companies increasingly look like a smorgasbord ready to be gobbled up.

But what if Congress continues to block foreign acquisitions, as it did with cnooc and Dubai Ports World? Foreign investors might become less willing to lend money to the United States. If foreigners are prevented from spending their American dollars on American acquisitions, they might begin to ask themselves why they are purchasing and holding so many U.S. Treasuries—and decide to dump them. Not good news for an already weak dollar.

America’s indebtedness is endangering the nation. Edwin Truman, who directed the Federal Reserve System’s Division of International Finance for 20 years, is not a doomsayer, but even he is warning America that there is now a 10 to 15 percent probability of a “catastrophic collapse of the financial system.” Never mind about the regular-type collapses: He is warning about a “catastrophic” disaster on the scale of the Great Depression or worse (Wall Street Journal, op. cit.).

Overspending has indebted America to the rest of the world. We owe the world so much that the threat of other nations inducing a U.S. economic disaster by just refusing to lend us more money is now a reality. As such, as America’s indebtedness grows, America is less able to protect strategic industries from foreign takeovers.

Who is a serf? A serf is one whose destiny is owned by others. Someone else owns the land he slaves on. Someone else owns the profits and technology he develops. All the fruits of his labor flow to his owners.

Debt is turning America into a serfdom.

That's it, our government has finally went off the deep end. The brilliant people in Washington have now decided to attach tax cuts to the $700 billion bailout bill. So let me get this straight, your going to BORROW $700 billion to bailout greedy investors and then your going to finance it by giving tax CUTS!

LOL, LG, I humbly bow to your math.


They've already thrown $600B at it.

Can't wait to see the total bill on this screw up.

Tax cuts are ALWAYS a good idea. Especially now, when we want to stimulate growth.

I also understand they are going to suspend the mark-to-market.

The argument and it could very well be accurate - is that reducing corporate taxes - the flight of capital leaving the US will be reduced.

Currently the US has the 2nd highest corp tax rate in the industrialized world.

A corporation isnt a living thing. When you tax a business; the average folks will pay for it either through reduced dividends (in a 401k) or higher prices to offset the tax. The big shots dont pay the tax. To avoid the tax - these corporations move off shore like Bahamas etc.

I believe the tax cut was aimed to reduce the capital flight out of the country. This is another big issue that will rear its head. One of the perils of Free Trade.

Another note - I bet the printing presses at the Fed are being oiled and fixed up since they will be churning out dollars like never before. I wonder if sitting on cash is a good thing - inflation seems to help the debtors - like buy now and pay later with dollars with less value.

The SEC accounced last night that they were going to RELAX the mark to market rule so that should help considerably.

And of course, tax cuts are a good idea, they stimulate the economy and increase revenues.

I would add that any bill had better include the overhaul of Freddie Mac and Fannie Mae. If they continue buying up subprime loans based on their retarded politically correct underwriting standards, we will be doing this again next year.

http://voices.washingtonpost.com/li...of_mark-to-market_acco.html?hpid=topnews

SEC Clarification May Help Markets
Some economists are attributing much of the current financial crisis to something as mundane-seeming as accounting.

The Securities and Exchange Commission and the Financial Accounting Standards Board have just made an announcement that, dry as it sounds, may mean a great deal: "When an active market for a security does not exist, the use of management estimates that incorporate current market participant expectations of future cash flows, and include appropriate risk premiums, is acceptable."

The SEC is not telling holders of hard-hit mortgage-backed securities that they can willy-nilly slap any value on them they want.

What the SEC is saying is: You can take other factors into account when valuing them.

There is no market right now for the worthless mortgage-backed securities -- that's one of the reasons we're in this crisis. That means financial institutions that are holding them must value them well below their former value, sometimes near zero. That makes the institutions themselves worth much less.

Accounting is not something that ordinary taxpayers think about much, but it could hardly be more important to businesses: It's the value they place on what they own, what they owe and what they can sell.

An odd-sounding accounting phrase at the heart of this is something called "mark-to-market" accounting. Many think that if this requirement were ended, the crises could be eased.

article continued at: Washington Post

You would think that after seeing "Reaganomics" ... "Trickle Down" ... "Supply Side" (whatever you want to call it) economics FAIL miserably for 20 of the past 28 years, with the ONLY bright spot being the 8 years under a Democratic administration that this MYTH would no longer be spouted by anyone.

An economy has to be built from the bottom up, as "Trickly Down" doesn't take into account the inherent GREED that keeps those tax cuts from ever making an impact on the overall economy.

The ONLY thing that corporate tax cuts STIMULATE is GREED!!!

The reason folks still talk about how tax cuts stimulate growth is b/c they do.

Econ 101: How Do Tax Cuts Work?
Despite the media’s portrayal, tax cuts ‘for the rich’ aren’t bad – and they boost the economy.

By Gary Wolfram, Ph.D.
Business & Media Institute Adviser
Jan. 11, 2006


A Short History: Tax Cuts Work

If we look at the U.S. economy, three historical examples are the Harding-Coolidge tax cuts of the 1920s, the Kennedy-Johnson tax cuts of the 1960s, and the Reagan cuts of the 1980s. The U.S. federal income tax, established with the enactment of the 16th amendment in 1913, began with a top marginal rate of 7 percent. This quickly escalated to 77 percent by 1918. During the Harding-Coolidge administrations the top marginal rate was reduced to 25 percent by 1925. Economic output nearly doubled over the following four years, and unemployment fell sharply.

During the Depression and World War II tax rates rose steadily, with the top marginal rate reaching 94 percent by the end of the War and remaining at 90 percent or more well into Kennedy's term. Kennedy pushed for tax cuts, which were enacted in 1964 after his assassination. The top marginal tax rate was reduced from 91 percent to 70 percent by 1965. What followed was a major expansion in the economy. Real gross domestic product rose in the four years after the tax cut by an average of 5.1 percent per year. Unemployment averaged 3.9 percent, compared to a 5.8 percent average in the four years prior to the tax cut.

The Reagan tax cuts of 1981 dropped the top marginal rate from 70 percent to 50 percent, with additional cuts in the tax on capital gains. The top marginal rate was further reduced to 28 percent by 1988. The result was again an increase in growth in the economy. Real GDP grew by .9 percent per year between 1978 and 1982, and grew by 4.8 percent per year from 1983 to 1986. The unemployment rate was 9.7 percent in 1982. It fell to 7.0 percent by 1986, and was 5.3 percent in January of 1989.


Tax Cuts ‘for the Rich’?

This is a history of tax breaks “for the rich” resulting in economic growth for everyone, especially for the poor. Just as an example, in 1920, 26 percent of Americans owned automobiles. The Harding-Coolidge tax cuts were enacted and by 1930, 60 percent of Americans had a car. Electric lighting was in 35 percent of Americans’ homes in 1920 and 68 percent by 1930. When the top marginal tax rate was 91 percent in 1920, only one in five people lived in a household with a flush toilet. By 1930 more than half of Americans would have flush toilets.

Why does a reduction in the highest marginal tax rates improve the living standards of all of us? It does not occur due to some trickle-down theory that rich people will spend more money on goods and this will create jobs for the rest of us. There simply aren’t enough rich people for this to make sense. The real answer lies in an understanding of how markets work.

A market economy is based on voluntary exchange. I cannot force you to buy something that I produce, and you cannot force me to produce something for you. The only way you can get rich in a market economy is to produce something that others want and are willing to pay for. Since there are not a lot of rich people, you are more likely to get rich producing something for the poor and middle class that they will want and at a cost that they can and are willing to pay.

The marginal tax rate is the one that affects your incentive to do this. It tells you how much of the next dollar the government will take and how much of the next dollar you get to keep. Lowering the marginal tax rates creates a greater incentive for people to find a way to produce things for the poor. This is what happens in any market economy, be it the United States or Estonia (which is growing rapidly after reducing its top marginal tax rates). It also makes it easier for people who are poor to become rich, thus increasing their willingness to work hard and risk their assets to produce what others will want.

If the government taxes away 90 percent of each additional dollar you earn, there will be little incentive for you to risk your life's earnings in a new venture that has an uncertain payoff, and it will be very difficult for you to move from poverty to wealth. On the other hand, if you get to keep 75 percent of each dollar that you earn, you will have an incentive to risk your capital, work hard, and produce goods and services that others want at a cost they can afford.

Democrats try to chide Republicans for offering “tax breaks for the rich.” Republicans, unfortunately, seem not to be willing to claim credit for doing so. It is by creating tax breaks for the rich that the poor in America become wealthy. Today 60 percent of all poor households in America own their own car. Nearly half own their own home. This situation has occurred because of the workings of the market system of voluntary exchange and incentives that reward those who produce for others. Once the average person understands how the market system works, attempts to confuse voters through what Ludwig von Mises called the politics of envy will fail, and we will be able to maintain economic growth for all.

LINK

What caused the current crisis?

Government de-regulation, corporate greed, and consumer ignorance.

Small neighborhood banks and Credit unions are still sound, because they refused to follow the lax lending rules.

Something else that happened that they have not even taken into consideration in all of this, is, it's not just the bad mortgages, but also when the value of property increases, so do property taxes.

Most people have their property taxes paid through their mortgage company, so as the value of their property went up, their property taxes went up and thus their house payments went up astronomically.

I have friends whose property taxes went up over $2000 a year in the course of two years, because the value of their property went up. They started fighting over money, because they were spending more on the house payment, they were both working all the time just to try and keep up with the house payment and taxes, it got to the point they couldn't keep going and they ended up divorced and losing their home.

So while people love to see the value of their homes go up, they forget when that happens, so do the taxes on their home.

That is one area that no government bail out or bank can do anything about.

Well, in spite of my exhaustion from attempting due diligence and subjecting my poor beleaguered eyes to the writings of people from Ayn Rand, AEI, and Cato, I feel like contributing something.

There is this free market fundamentalism which seems to answer every man-made public crisis with the same declaration: the institutions involved were over-regulated by corrupt officials and if only the free market were allowed to prevail the system would have self-corrected. If I had a nickel for every time...

I believe this talk (which I consider frankly to be mostly bizarro world, up-is-down nuttery) is the death rattle of a failed philosophy that relies on an out-of-balance reverence for the world of commerce, and a weird, almost daddy-issue-like hostility towards government. In my judgment commerce has already overly dominated the affairs of our civilization for too many decades. I declare the experiment over, and not a success. This isn't hostility toward commerce, either. Commerce has its own great importance, and has to thrive. For it to carry on without interference is always preferable. Regulation should be a last resort.

The world of commerce and the world of "guardians" (governments, charities, political advocacy groups, IMO medicine) are both needed for civilization to thrive, and at the same time when they mingle too deeply with each other, the results tend to be undesirable. You get overregulation to the advantage of few, you get underregulation to the disadvantage of many, you get the guardians' work undermined by the influence of commercial interests; it's just bad all around.

I reckon too much mingling in both directions contributed to the current financial crisis, though I'm not the least bit convinced by these efforts to blame the crisis on social engineering. Ultimately, the originator of the crisis was an unaccountable investment industry, drunk on foreign cash, inflating demand for mortgages to sell as securities by enticing lenders to lower the bar. When the effort to push that demand occasionally dovetailed with the wishes of unwitting (at times) social engineers, then those people were useful to the industry, possibly exacerbating the problem.

I'm no economist and I'm sure my consumer's perspective is quaint, but it does trouble me that so much of our nation's economy is based on ultimately nothing. No good, no real service, just a trade in imaginary instruments.

I say we need a revolution in manufacturing that eliminates all waste and turns the production of goods into something that actually benefits the planet. And we need to create a new sustainable energy economy. And we need to reform the way we produce our food and the way we practice medicine. I wish those efforts dominated our economy, instead of credit default swaps and cruise missiles. Those changes I listed would all benefit and give power to a skilled and growing working class, whereas today we are ruled by moneyed elites, who no matter how many times they fail are somehow still invited to the table to "fix" problems they had a hand in creating.