Guest Comment: Thoughts on the economic crisis

Financial markets are dominated by two emotions: fear and greed. When greed is dominant, the result is a bull market; with fear, there is a bear market. Most of the time the market activities reflect varying swings and balances between the two extremes as multitudes of economic reports and rumors course through the media and the behind-the-scenes channels.

While a majority of people working in the multi-layered economic and financial “worlds” may be honest, the fundamental dimensions and dynamics of any systems that operates within the parameters of greed and fear is—by its very nature—subject to dishonest dealings, even by people who consider themselves to be basically honest.

It is a basic fact of human existence that most people, most of the time, in the course of their daily lives place personal gain above the public good. Humans probably would not have evolved and survived if this characteristic were not in the human makeup. Powerfully, it permits humans to rationalize small and large deviations from their self-pictures, from what they know to be, basically, right and wrong. In short, it allows them to live with themselves in spite of minor and major transgressions, whether on a one-time or a continuing basis, sometimes over years.

This is no pathology in a basic sense; it is surviving in a world of finite resources and in a world that is filled with the dangers to individual and group survival. It is the largest and deepest “way” to think about and to frame, the incredible lengthy and complex “history” of the current economic crises and, by implication, the political crises it has spawned. Note that “crises” is plural.

Life is full of ironies. This is one of them: The irony is that honest, well-meaning people, over time, in doing what they perceive to be “good for themselves” or “necessary” to keep their jobs, self-esteem, whatever, (when this is totaled up on a vast scale) leads to the kind of chaos that is now gripping the economics (and politics) of the world and thus, has advanced to center stage, so to speak.

Because of the political and economic power of the individuals, companies and institutions involved, a full accounting of the untruthful and illegal activities of the vast majority of those, over many years and millions of transactions, responsible for the major dynamics of the housing and financial meltdowns will never come to light.

Such an accounting would take years, millions of person-hours and resources beyond the ability of the political and legal institutions to pursue and bring to fruition. Such a “witch hunt” might actually make a bad situation worse; it would certainly dampen efforts to right the housing and financial sectors.

That leaves constructing and putting into place those laws, policies and procedures most likely to effectively deal with and end the crises as the necessary (if not the sufficient) focus for the administration, the Congress and all other naturally involved entities. This does not mean that a hasty and unwise approach is required. It does mean that measured, comprehensive, fair and equitable laws, policies and procedures will best serve the majority (as should almost always be the case).

It is ironic that two of the least qualified people among the Republican contenders for the offices of president and vice president of the United States are on the Republican ticket. John McCain has said that he does not understand economics. And, can a man who did not even know how many houses he owns really deal with the complexities of these national crises?

His choice for running mate, if indeed it was his “free choice,” (Something I doubt very much.) is clearly the least qualified among those who reasonably could have been considered for the position. She has no foreign affairs experience or expertise and little, if any, knowledge of the complexities of modern economics and finance. There is no stretch of the imagination that qualifies her as the “best choice” to be vice president. And, in these troubled times, do we really need a “pit bull with lipstick” a heartbeat away from the presidency? Ludicrous.

Compared to the McCain/Palin ticket, Obama/Biden fare very well, based on their individual and collective intellects, educations, positions previous to entering the political arena and the offices they have held since then. That is not to say that Obama/Biden will be successful. It only means that, at least on “paper,” they have the best chance, the highest probability.

My understanding is that while McCain was essentially silent during the White House meeting, Obama asked cogent, tough questions of Paulson. This suggests that McCain did not know or care what to ask and that Obama both knew and cared. He felt the situation “required” tough, meaningful questions and reasonable, accurate answers. One reason the meeting “fell apart,” according to some of those present, was because the answers were not given or were unsatisfactory, especially to the conservative Republicans.

What would such laws, policies and procedures look like, in the main? First of all, they cannot, must not and should not be perceived by the majority of constituents (voters, homeowners, those who have lost their homes, those who have lost their money in the financial panic and its subsequent meltdown through no fault of their own and those who have been responsible in their finances, investments, home ownership and the like) to be unfair to the taxpayers.

A $700 billion bailout that allows any of those involved in creating or maintaining the practices leading to the housing and financial institution debacles must not be permitted to have “golden parachutes” or any equivalents; nor should obviously guilty of ethics violations and outright fraud be allowed to escape proper accounting.

The taxpayers must be protected to the maximum extent possible within the law and within the parameters set up in the policies and the procedures that are put in place to deal with the present crises and to prevent future, similar occurrences.

Any legislation that ignores the role that non-productive financial activities, such as certain hedge practices, arbitrage and security “bundling,” have had in the development of the subprime problems and the subsequent financial institution meltdown will not be entirely effective. These issues must be addressed. These practices must be brought under SEC supervision, control and oversight.

These are fundaments. They are first-order considerations. It is interesting to note that they were not given full consideration in the so-called Bush/Paulson package. In fact, the Golden Parachute provision was not even a part of that “hasty pudding.”

Full accountability for those empowered to deal with solving the problem is a must, as is - to the extent possible - full payback to the United States Treasury for monies expended. That is what the taxpayer is demanding and deserves.

As with all massive legislation, the “devil” will be in the details. Lobbyists for every imaginable special interest will try to get something in the laws, in the policy statements and in the procedural documents and programs that will enhance and enrich their clients and interests. Legislative oversight will be essential.

In writing new banking and securities laws and regulations, only careful attention to the details and only careful and responsible oversight and accounting follow-up will keep transgressions at a minimum.

It is not only that there are crises. It is also that wrong solutions will be worse than no solutions. It is not only that years of transgressions have occurred. It is also that the “vultures” are gazing down from their perches, just waiting to pounce on the unwary and to take full advantage of the situations as they “play out.” Haste will make much waste and provide ample opportunity for the “scavengers” to “feed.” Who will pay for this? The innocent and the taxpayers (not necessarily co-tangent groups) will emerge as the losers or foot the bill, a hefty $700+ billion).

Green Valley resident Harold Mansfield is a retired college professor from Durango, Colo. The views expressed are the writer’s own and do not necessarily reflect those of this newspaper.