Million-Dollar Haircut; Ten-Cent Head

Matt Welch | January 3, 2008

Listening to Iowa almost-winner John Edwards' concession speech about how "corporate greed has got a stranglehold on America" reminded me of nothing so much as my first Ralph Nader press conference in 2000, when I covered him for a now-defunct lefty website called WorkingForChange.com. From that first dispatch:

"Hundreds of billions of dollars are stolen from Americans every year, as a result of corporate and white-collar fraud, and tens of thousands of Americans are injured or lose their lives each year, because of corporate negligence, or corporate criminality," said Nader, who used the words "corporate" or "corporation" at least 57 times in less than one hour.

It strikes me as a little-remarked phenomenon in this election that, for the first time since maybe 1988, the Democrats are running a serious candidate with an essentially Naderite worldview on the evils of Corporate Greed. I haven't paid much attention to the Blue Team so far -- the Red crack-up being so much more entertaining -- but whenever I do I hear some Democrat espousing economic-policy ideas (hatin' on corporations, hi-fivin' Lou Dobbs on trade) much further to the left of Howard Dean in 2004, Bill Bradley in 2000, and Bill Clinton in the 1990s.

With the one-day Hucka-BOO-yah on the GOP side, the big winner in Iowa tonight seems to be illiberal economic populism.

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Jesse Walker|1.3.08 @ 10:55PM|#

for the first time since maybe 1988, the Democrats are running a serious candidate with an essentially Naderite worldview on the evils of Corporate Greed

There was Harkin in 1992. But he didn't get very far.

Franklin Harris|1.3.08 @ 10:56PM|#

That's pretty much what we expect from the not-so-great state of ~~Iowa~~ Ethanol, isn't it?

Stephen The Goldberger|1.3.08 @ 11:00PM|#

This is the correct take on iowa. Not "Romney lost and i don't like him so that's good." This is truly a scary day for classically liberal economic policy.

|1.3.08 @ 11:06PM|#

Perhaps Nader should actually WORK at a corporation for a while before he spouts his bull-manure.

My corporation is so anal about safety that it drives the workers nuts. You can't change a light bulb without three safety reviews checked by half the managers in your division.
Any new product or process change is scrutinized until your eyes bleed for any possible way it could hypothetically harm anyone, anywhere, anyhow. And then we check it some more just to be sure. If anyone points out a safety issue, no matter how absurd, money will be found to "fix" it just to cover managerial butts, if for no other reason. Safety meetings occur every few weeks, emails are sent company wide for the most trivial incidents, and a mountain of safety statistics are compiled.

We put FAR more time into protecting our coworkers, our neighbors and our customers than they would ever do to protect themselves in their daily life. Not that this is a bad thing.

Bingo|1.3.08 @ 11:08PM|#

iowan isn't going to like me saying this but

Holding the first primary/caucus in Iowa is like holding it in a combination megachurch/welfare office. The state's economy is so heavily reliant on corn and all the delicious government subsidies that flow with it that getting money from the government matters above all else. The only reason why they ever vote Republican is because of abortion and Jesus, which is why Huckabee is the perfect candidate for the state.

Just a bunch of social conservatives with statist economic views.

|1.3.08 @ 11:08PM|#

Bill Clinton is more conservative than most Democrats, and the economy was good during the 2000 and 2004 races.

bachwards|1.3.08 @ 11:12PM|#

You're way off Matt. The biggest winner in Iowa tonight was clearly McCain.

|1.3.08 @ 11:13PM|#

Chad, got any suggestions for someone who was just moved into a safety position at a train-wreck of a manufacturing plant?

Left hand (safety): "We need to prepare for the hazardous chemicals due to come on site next month."

Right hand (operations): "They've been in the warehouse for six weeks, and we've already had three OSHA recordables because of them."

Kill. Me. Now.

Derrick|1.3.08 @ 11:15PM|#

John Edwards is one of the most economically illiterate people I've known of in my life. From a recent post on my blog:

LISBON, Iowa (AP) - Presidential candidate John Edwards on Saturday said the country can't simply wait for the economy to turn around, and he wants Congress to come up with as much as $100 billion to prepare for a potential economic slowdown.

The Democrat and former North Carolina senator suggested an initial investment of $25 billion for job creation and other aid, and asked lawmakers to be prepared to come up with the rest if the economy slides into a recession.

[…]

He didn't propose how to pay for the plan, saying it's his first policy proposal where he hasn't come up with a detailed plan for funding. "It's a one time thing and it's paid for by growing the economy," he said.

That's one of the stupidest policy proposals I've ever heard in my life.

BTS|1.3.08 @ 11:20PM|#

Working For Change is only pseudo-defunct. At least I think so, since the place where I get my Tom Tomorrow fix is some sort of bastard offspring of it...

Franklin Harris|1.3.08 @ 11:21PM|#

I'd say Thompson is the biggest winner on the GOP side. And while I don't trust Thompson, I must admit that I find his supposed shortcoming according to the pundits -- his lack of desire to actually be president -- endearing. Really, as a rule the only people fit to be president are people who don't lust after the job.

BTS|1.3.08 @ 11:22PM|#

...which incidentally doubles as a leftist phone company? I don't really know, I just stick around for the comics then get the hell out.

|1.3.08 @ 11:30PM|#

With the one-day Hucka-BOO-yah on the GOP side, the big winner in Iowa tonight seems to be illiberal economic populism.

Why do people turn to this snake oil when the economy is *least* able to absorb it?

I have to agree with FH - that Thompson looks to have taken third without hardly running a campaign is pretty astounding.

Bingo|1.3.08 @ 11:32PM|#

But, Graphite, it worked so well under FDR!

Right?

...right?

|1.3.08 @ 11:33PM|#

Goddamnit Matt! Never mind that shit. You're suppose to be keeping McCain out of the White House. And you're doin a half assed job of it.

bachwards|1.3.08 @ 11:33PM|#

Franklin Harris,

I was just being sarcastic. Tim Russert, Mike Allen, Chris Matthews, and other pundits seemed convinced throughout the night that McCain was a big winner regardless of the actual outcome.

TLB|1.3.08 @ 11:48PM|#

Interesting post. "Interesting" as in "completely clueless". Both Obama and Edwards are what I refer to - quite illiberally - as "globalist scum".

1. See the JE sales job here: youtube.com/watch?v=YRObrQggC9U

2. See JE brushing elbows with the common folks.

And, both have the same ImmigrationPolicies as the WSJ/MexicanGovernment/BushAdministration/DemocraticParty/GOP. Anyone who thinks they're on the same pages as Dobbs and Nader isn't familiar with what either actually stand for.

Franklin Harris|1.3.08 @ 11:50PM|#

Tim Russert, Mike Allen, Chris Matthews, and other pundits seemed convinced throughout the night that McCain was a big winner regardless of the actual outcome.

It's nice to know that the pundit class' six-month break from fellating McCain has ended. It was a bit weird living in a world in which pundits didn't think Mr. Straight Talk was the Second Cumming.

|1.3.08 @ 11:51PM|#

Million-Dollar Haircut; Ten-Cent Head

You have to go to DONDEROOOOOOOO! to get the latter...

|1.4.08 @ 12:11AM|#

So Matt, was it orbiting mind control lasers that made the banks and brokers slash their loan standards to nothing so they could bundle up and disguise the crap loans for sale? Was Professor X mentally controlling appraisers so they backed up wildly inflated home prices? Was it actually that trickster Loki in disguise, getting old people to sign up for loans with complicated structures misrepresented so the customer didn't realize the interest rate would soon skyrocket beyond their means? (It's like knowingly selling an Aston Martin to a middle-class 16 year old. Only if the car is repo'd the kid doesn't end up homeless.)

Or was it greed for short-term profits? I'm not sure what else to chalk it up to.

(And yes, I admit that some borrowers got in trouble through greed of their own. But a greedy borrower can only get him or herself in trouble. A greedy company can get thousands of people in trouble. And even the greediest borrowers might have been kept from getting in too deep if the banks and brokers had been acting out of prudent self-interest.)

|1.4.08 @ 12:18AM|#

Oh, also Matt, considering that taxpayers are likely get stuck with big bills at some point due to the banks giving it away with less caution than Larry Craig, I'd think libertarians might have some gripes about business greed, at least when it overcomes all rational business practice.

|1.4.08 @ 12:21AM|#

Jon H, the bankers bought into the same stupid "home equity values will rise forever" theme that homebuyers were duped by. This theme gained traction after the moronic Greenspan Fed lowered interest rates to 1%. Classic case of bungled government intervention whose bad effects will be blamed on "the free market" and "greed."

|1.4.08 @ 12:24AM|#

Also, Jon, it's precisely the economically populist candidates who are most likely to push bailouts and urge the Fed to pursue inflationary policies to try and paper things over. Libertarians will be the first (and perhaps only) ones to advocate letting a lot of these banks fail to teach a lesson to the rest and limit moral hazard.

|1.4.08 @ 12:25AM|#

"Classic case of bungled government intervention whose bad effects will be blamed on "the free market" and "greed.""

Bankers should know better. The big ones certainly have economists on staff. Why did they fall for the "home values will rise forever" bs? Greed

Just like lust makes a guy believe a girl who says those aren't genital warts, it's just big cellulite, even though he knows better.

|1.4.08 @ 12:28AM|#

Bankers should know better. The big ones certainly have economists on staff. Why did they fall for the "home values will rise forever" bs? Greed

So what's your point? We should banish greed and fear from financial markets and let smarties like John Edwards run them instead?

Maybe it's just me, but I seem to remember some people pretty far to the Left whining not that many years ago about how people with less than perfect credit records had a hard time getting mortgages, and the lenders should by golly loosen up and loan 'em some money, That did happen, didn't it?

And darned if they didn't get what they wanted. Loose credit, loans designed to take advantage of the loosened rules and *still* make money (there's a reason junk bonds are called junk bonds and pay more interest, you know). Everybody wins!!

Now the bills are coming due and the same whiners are now whining about how too much money got loaned to people who couldn't afford it or didn't understand it or got ripped off or whatever. Duh. Who could have guessed?

Actually, in real numbers, not that many mortgagees are in trouble. It makes for good political hoohaw, but economically, it's a blip.

Bingo|1.4.08 @ 12:29AM|#

those aren't genital warts, it's just big cellulite

Totally using this line...

|1.4.08 @ 12:30AM|#

" Libertarians will be the first (and perhaps only) ones to advocate letting a lot of these banks fail to teach a lesson to the rest and limit moral hazard."

I'm all for letting the banks take it good and hard. Especially since they were probably handing out NINJA loans while their lobbyists were whining about irresponsible people borrowing too much on their credit cards in order to get their bankruptcy bill passed.

But that still leaves all the people who are losing their homes and/or driven bankrupt trying to make the payments. They're much more sympathetic (at least not the rabid speculators and flippers), and certainly aren't a good monument to Bush's homeowner society.

|1.4.08 @ 12:33AM|#

"Actually, in real numbers, not that many mortgagees are in trouble"

Except if you focus on recent loans, not old 30-years, or look at the places where the bubble was biggest.

|1.4.08 @ 12:36AM|#

"So what's your point? We should banish greed and fear from financial markets and let smarties like John Edwards run them instead?"

Hm. There's a word for something that keeps a process running in a reasonable manner rather than spinning off out of control or freezing up. I think it's "regulation".

Bingo|1.4.08 @ 12:38AM|#

Jon H:

So what? They fucked up.

superconnected|1.4.08 @ 12:49AM|#

Listening to a millionaire trial lawyer complain about corporate greed is laughable, at best.

Which one is it that creates wealth, and which one destroys/moves wealth around-- is it corporations or lawyers?

|1.4.08 @ 1:18AM|#

"So what? They fucked up."

If they only fucked themselves up, I wouldn't care, but they fucked up lots of people who couldn't afford that.

|1.4.08 @ 1:19AM|#

"Totally using this line..."

My condolences. Hope they clear up.

Tim R.|1.4.08 @ 1:23AM|#

Let me explain to you how this works: you see, the corporations finance Team America, and then Team America goes out... and the corporations sit there in their... in their corporation buildings, and... and, and see, they're all corporation-y... and they make money.

Mike|1.4.08 @ 1:25AM|#

You have to keep interest rates low otherwise the housing troubles couldn't be offset by the huge increase in new businesses and we'd be in even bigger trouble.
And chill out John Edwards is done and his populism with him.

Out of the big three democrats the most economically liberal guy one so... whine about Huckabee

|1.4.08 @ 1:47AM|#

Out of the big three democrats the most economically liberal guy one

You think so? Obama has talked a lot about stopping outsourcing, rejecting free trade agreements, etc. I prefer Hillary on economic issues (assuming she would rule like Bill, which might not be the case).

Paul|1.4.08 @ 1:57AM|#

No one here has yet mentioned Giuliani's 5th place trouncing.

Wasn't he supposed to be the one "serious" republican candiate? One who would appeal to moderate republicans, while remaining tough on... stuff that republicans are traditionally tough on?

M. Simon|1.4.08 @ 3:10AM|#

|1.4.08 @ 4:39AM|#

"Of course not. It was Congress complaining that po' folk had a hard time getting home loans."

Riiight. Because to the wise men of industry there is no sensible middle ground between "prevent po folk from getting home loans" and "give half a million dollars to anyone who can draw an 'x' on the dotted line whether or not they have a job or there's a high likelihood of default."

For instance, they might have made it easier for employed applicants to get enough money for a small condo or a fixer-upper. There's no requirement that they be loaned enough for a

Also, plenty of non-poor people got loans that made no sense. And, lots of people got crazy-termed mortgages and equity loans on homes they already owned.

It wasn't Congress, it was the banks realizing that CDOs and whatnot removed the traditional incentive for banks to make good loans: risk. They thought they could just dump the loans on the market, and profit without the long-term consequences of writing insane loans.

|1.4.08 @ 4:44AM|#

oops

... loaned enough for a McMansion with pool....

|1.4.08 @ 4:47AM|#

No one here has yet mentioned Giuliani's 5th place trouncing.

Is there any place in the world where they're more likely to hold being a former mayor of New York City against a guy?

|1.4.08 @ 4:58AM|#

They thought they could just dump the loans on the market, and profit without the long-term consequences of writing insane loans.

It looks like many of them might have been right; there are undoubtedly a bunch of people that got their money and ran. What I don't understand about this is why anyone gives a crap if a bunch of these highly leveraged, derivitive-based, you need hundreds of thousands of dollars to invest hedge funds collapse.
The whole point of mortgage-backed securities was to distribute risk; let the people to whom it's distributed feel the sting when the loans go bad.
It'll make it harder to get odd mortgages, and therefore harder to bid up the price of real estate. This'll in turn erase a bunch of equity and hurt tax bases, but that's why it's a bubble: it pops.

Chucklehead|1.4.08 @ 7:53AM|#

But that still leaves all the people who are losing their homes and/or driven bankrupt trying to make the payments. They're much more sympathetic (at least not the rabid speculators and flippers), and certainly aren't a good monument to Bush's homeowner society.

Hmmm.... excoriating the banks as greedy is ok, but the folks who took out loans they had no hope of ever repaying get a pass. Apparently only corporations are evil greedy bastards while creditless folks are angels.

Anon|1.4.08 @ 8:07AM|#

Nothing says "I'm anti-corporation" while typing on a pc probably made with an Intel chip, probably with Taiwanese motherboard, probably using Windows. The only thing that says it more is to be talking on your Nokia, sipping Starbucks, listening to your ipod, and wearing Nikes/Old Navy at the same time.

|1.4.08 @ 9:37AM|#

Anon, you nailed it. Some of the most materialistic people in America are the most hypocritical as well.

But, hey, everyone that wants to save the whales also must hate corporations, want socialized medicine, demand diversity (whatever that means), be pro-choice, have a gay friend, have a black friend, and drive a hybrid. And, everyone that likes low taxes must also be pro-war, pro-life, pro-death penalty, greedy, religious to a fault, and drive a pick-up truck with a gun rack. Makes perfect sense to me. Oh, and anti-immigration.

This is why I blame the LP for a complete lack of promotional advertising as the number one reason libertarianism hasn't taken off in this country. By not getting the word out of a sensible alternative, we've committed ourselves to a life of thinking we're cooler than everyone else by not being pidgeon-holed into one of the two retard parties, without actually getting anything we want - ever.

Russ 2000|1.4.08 @ 9:41AM|#

But that still leaves all the people who are losing their homes and/or driven bankrupt trying to make the payments.

To borrow a line from joe: Boo fuckity hoo.

|1.4.08 @ 10:06AM|#

Pretening that calling for carefully-tailored loans with favorable terms be offered in poor areas is the same thing as calling for irresponsible loans with predatory terms is thte sort of sleight of hand that people without a valid argument engage in.

It's the equivalent of the LAPD abandoning whole swathes of the city during the riots, then pretending that the people complaining about that had been demanding that the police abandon their neighborhoods.

|1.4.08 @ 10:11AM|#

In the real world, as opposed to the "wouldn't it be great if..." fantasy-land of the contempotary right-wing, the community development agencies calling for an end to redlining and more lending in low-income neighborhoods are, and have always been, the same people calling for greater regulation of the finance companies that go around in poor neighborhoods conning granny out of her home.

As a matter of fact, they often point to the absense of legitimate lenders as a big reason why people end up getting into bad mortgages in the first place.

|1.4.08 @ 10:39AM|#

Isn't there a difference between being anti-corporate and being opposed to undue corporate influence in politics? I have no problem with Starbucks's business model; I just don't want them buying my Senator.

|1.4.08 @ 11:09AM|#

Ignoring that difference is a very major part of a certain set of political philosophies, Timmy Mac.

See, for example, people who think that criticism of shady mortgage companies' business practices cannot be reconciled with a desire to see more lending institutions doing business in poor neighborhoods.

|1.4.08 @ 11:19AM|#

(It's like knowingly selling an Aston Martin to a middle-class 16 year old. Only if the car is repo'd the kid doesn't end up homeless.)

And neither is the guy whose house was foreclosed on.

He has no equity to speak of to lose. The reason he had to get a subprime loan meant he likely paid nothing or next to nothing down and the loan is so new he hasn't had any time to build any up (and since the markets in the crapper there isn't any equity anyway).

All the guy has to do is walk away from the house and rent. Meanwhile the holder of the loan stands to lose thousands (and deserves to) except for the fact that morons like Edwards will vote for some scheme to bail them out while claiming they're "doing it for the workers".

|1.4.08 @ 11:49AM|#

Steve, as a "safety jerk" (my title too) you might enjoy this site:

http://www.electrical-safety.com/

Especially the Violation Photo Forum.

R C Dean|1.4.08 @ 12:13PM|#

But that still leaves all the people who are losing their homes and/or driven bankrupt trying to make the payments.

Sigh. Don't borrow more than you can afford. If you do, don't expect it turn out well.

To sum up: Boo fuckity hoo.

As Isaac points out, the poor baby borrower can basically walk away (although with a black mark on their credit history). The lender (or at least the owner of the loan), a big bad corporation, is who will take it in the ass.

|1.4.08 @ 1:37PM|#

The democrats needed a playbook to create an image that made them stand out from the republicans... and thats the one they picked up...

economist|1.4.08 @ 3:22PM|#

Let me make one important point VERY clear to Jon H and Joe. The borrowers who took these mortgages were NOT FORCED INTO IT. They voluntarily took on the risks and responsibilities spelled out in their freakin' loan agreements. If they bit off more than they could chew, then it's their fault, not greedy corporate America, Congress, or even our brain-dead president. Of course, I also think the banks can suck it too, since anyone with half a brain doesn't set himself up for massive losses by loaning to a jackass who'll default. Incidentally, this whole thing is screwing me over, since the company I work for pretty much lives and dies by the housing market, and they've announced layoffs.

R C Dean|1.4.08 @ 4:43PM|#

There's a word for something that keeps a process running in a reasonable manner rather than spinning off out of control or freezing up. I think it's "regulation".

No, that's not the word you're looking for. The banking industry regularly spins out of control, and its heavily regulated, for example. Almost every other heavily regulated industry is in constant danger of freezing up.

I was thinking "free market", myself (in the pretty strong sense of one where the government doesn't distort or intervene to select winners or protect losers).

|1.4.08 @ 9:58PM|#

I love the idea that there's some set of Snidely Whiplash "predatory" bankers somewhere who are making bank off of home foreclosures. News flash: Banks LOSE money when they foreclose on mortgagees. The worse the housing market is, the worse they lose, which is why financial stocks are spinning down the bowl.

The "predators," if you can call them that, are the middle-men who made the fees repackaging and selling these securities. The ratings agencies are also to blame for giving their blessing to a lot of the worst securities, but hey, I'm sure more regulation and a bigger, badder ratings agency based in Washington DC will solve the problem. Fortunately, a lot of the same middle-men who raked in the fees started to believe their own bullshit and invested in a lot of subprime debt, so they're going to get theirs. See Citigroup, Merrill Lynch, and Bear Stearns, just for starters. Even the middle-men who didn't invest in subprime are now out a major source of income.

Both the borrowers who took on more debt than they could afford, and the investors who bought it, should have known better and deserve no sympathy.

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