osewalrus (osewalrus) wrote,
osewalrus
osewalrus

I rather liked this piece on why it's not the fault of bankers.

http://www.dailyprincetonian.com/2008/09/22/21457/
(nb:sarcastic article blaming bankers)

Actually, I do not think it is the "fault" of bankers. I think it is the fault of people who like the happy story about rational investors and willing buyers and willing sellers and who conveniently ignore how these transactions impact the rest of us.

Mind you, I find the willful ignorance of the folks who follow talk radio appalling. Yes, I'm familiar with why this is so much better than the truth, blah blah. I didn't say I was surprised. I said it is appalling. The notion that banks were "required" to lend to "those people" (and y'all know who "they" are) because of "affirmative action loans" is so unsupported by anything vaguely like a factual basis that I almost wish I could give these people the world they deserve for making decisions on such theories.

Everyone loves the "free market" until it turns around and bites you in the patootie. Then where did all the rational actors go? The sad truth is that everyone in the chain of events behaved in an economically rational manner, including the "stupid borrowers" and the more stupid lenders. As the British Economist Paul Klemperer observed, policy needs to be sufficiently robust to handle real people. Any policy based on theory that does not take this into account will fail.

But it saddens me to see what a nation we have become. A small and frightened people who will turn on their neighbors rather than reach out to one another. But this is what happens in the absence of real leadership. What made FDR a great leader was not his economic theories (he didn't have any, he glommed onto Keynsian theory because he had advisors who used it to justify his basic desire to create jobs and took good ideas where he found them). It was his fireside chats and his ability to inspire confidence in a badly frightened people by appealing to their better selves. Countries with leaders like that avoided fascism and weathered the crisis. Countries with charismatic leaders who used fear to their advantage went fascist. Countries with weak leadership became prey.

We have a capacity for greatness. But who will inspire us? This is the potential tragedy of our age, as well as its potential triumph.
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