Last night I started reading Joseph Stiglitz’s “Freefall”. Stiglitz is the Nobel-prize-winning Keynesian economist who wrote “Of the 1%, By the 1%, For the 1%.” The article was published in Vanity Fair in May of 2011 and helped to ignite the Occupy Wall Street Movement.
Stiglitz wrote Freefall in 2010 after correctly predicting the global financial crisis in 2008. The book is his critique of policy makers, decisions and the greed of Wall Street that caused the crisis.
I’m going to try to update each day with a quick post of quotes from the previous night of reading:
On the arguments for deregulation:
Those who argued for deregulation—and continue to do so in spite of the evident consequences—contend that the costs of regulation exceed the benefits. With the global budgetary and real costs of this crisis mounting into the trillions of dollars, it’s hard to see how its advocates can still maintain that position. They argue, however, that the real cost of regulation is the stifling of innovation. The sad truth is that in America’s financial markets, innovations were directed at circumventing regulations, accounting standards and taxation.
On blaming government largesse for the crisis:
In what might seem an outrageous act of ingratitude to those who rescued them from their deathbed, many bankers blame the government—biting the very hand that was feeding them—like the kid caught stealing from the candy store who blamed the storeowner or the cop for looking the other way, leading him to believe he could get away with his misdeed. Bu the argument is even more disingenuous because the financial markets had paid to get the cops off the beat. They successfully beat back attempts to regulate derivatives and restrict predatory lending. Their victory over America was total. Each victory gave them more money with which to influence the political process.
The “heroes” of deregulation socialize the economy:
This is but one of many ironies that have marked the crisis: in Greenspan and Bush’s attempt to minimize the role of government in the economy, the government has assumed an unprecedented role across a wide swath—becoming owner of the world’s largest automobile company, the largest insurance company, and… some of the largest banks. A country in which socialism is often treated as an anathema has socialized risk and intervened in markets in unprecedented ways.
There are bad outcomes that are the fault of no single individual. But this crisis was the result of actions, decisions, and arguments by those in the financial sector. The system that failed so miserably didn’t just happen. It was created. Indeed, many worked hard—and spent good money—to ensure that it took the shape that it did. Those who played a role in creating the system and in managing it—including those who were so well rewarded by it—must be held accountable.