Hedgehog Party

Insanity

This Barron's piece is another summary of the steps to our current financial crisis.  The proposed bailout seems to involve the same politicians and methods that caused our continuing financial madness.  It is a cliche, but insanity is doing the same thing over and over...and expecting a different result.

The Road to Hell

This article by the Washington Post staff writers is a good summary of the route to the current FreddieMac/FannieMae debacle.   Most commentary has been focused on "Bush Policies" or "Greedy CEOs."  The Post article makes it pretty clear that the entire politcal process was involved.  Rats always gravitate to a big pile of cheese.  In my view, the key moment occurred when government regulators changed reserve requirements from 10 to 1 to 30 to 1 for Freddie and Fannie.  With that much leverage, greed had its way.

Charlie Rose (late nite talk show), has presented 2-3 hour long interviews with people knowledgeable on these financial matters.  I watched the Robert Rubin/Larry Summers interview.  Both of these men were (and are) at the center of the Wall Street world.  Both were Clinton Treasury secretaries.  Both are very smooth political operators.  It turns out that our financial problems were a "confluence of events" and a "perfect storm."  I thought the high point was Rubin's claim that he had no idea that the financial risk was as severe as it was. 

This all represents mile wide/mile deep conflicts of interest in our financial and political processes   The Federal Reserve, Treasury, Congress and Administrations from both parties are up to their neck in this mess.  They are standing on the shoulders of the taxpayers.   Kinda leaves you breathless doesn't it?