To the captains of finance and Congress and the administration:
The fact is that this crisis is no news to economists or financial observers . It has been coming for sometime as a result of the housing bubble and low Fed rates. To be honest with you it really is not greed or some unknown or unnamed moral failing at fault. The SEC was there the whole time, Congressional oversight was there the whole time.
It appears more likely that some sort of Gentleman’s Agreement was made where backs were scratched and favors made for convenience and mutual benefit. One example of such an agreement involved Connecticut Senator Christopher Dodd: “All of those companies had put substantial money behind Dodd: more than $200,000 from PACs and employees of AIG in the past six years. Another $200,000 from Bear Stearns. And six-figure donations from Lehman and other companies now struggling under bad mortgage debt.” Read the whole story for yourself and judge for yourself who else was in the same line as Dodd. The worst thing we can conclude is that things would have been better IF ONLY Congress had known.
Just don’t say BUSINESS WEEK didn’t warn us. This one has the Fed’s fingerprints all over it and now they think lowering interest rates will cure the addiction.
JULY 19, 2004 Is A Housing Bubble About To Burst? (Excerpt)
“As rising rates send mortgage payments higher, demand may cool. Today’s housing prices are predicated on an impossible combination: the strong growth in income and asset values of a strong economy, plus the ultra-low rates of a weak economy. Either the economy’s long-term prospects will get worse or rates will rise. In either scenario, housing will weaken. Caveat emptor. ”
THE WRECK OF THE HESPERUS (excerpts)
by Henry Wadsworth Longfellow
The Skipper he stood beside the helm,
His pipe was in his mouth,
And he watched how the veering flaw did blow
The smoke now West, now South.
Then up and spake an old Sailor,
Had sailed the Spanish Main,
“I pray thee, put into yonder port,
for I fear a hurricane.
“Last night the moon had a golden ring,
And to-night no moon we see!”
The skipper, he blew whiff from his pipe,
And a scornful laugh laughed he.
At daybreak, on the bleak sea-beach,
A fisherman stood aghast,
To see the form of a maiden fair,
Lashed close to a drifting mast.
The salt sea was frozen on her breast,
The salt tears in her eyes;
And he saw her hair, like the brown sea-weed,
On the billows fall and rise.
Such was the wreck of the Hesperus,
In the midnight and the snow!
Christ save us all from a death like this,
On the reef of Norman’s Woe!