Reason Writers Around Town: Matt Welch Debates Dean Baker Over Who's Getting it Worse From Washington: Detroit or Wall Street?

April 2, 2009

On Day Two of an L.A. Times auto-bailout Dust-up, Reason Editor in Chief Matt Welch argues that Wall Street firms are more subject to federal intervention than the Big 2.5, and that "there's a good reason why all of Europe [...] has been methodically selling off state ownerships in nearly every single sector while expressing skepticism at Obama's nationalization binge: Governments are lousy at running businesses." Economist Dean Baker counters that "because it was the bankers who wrecked the auto industry, it makes it especially difficult to stomach a situation in which Detroit gets micromanaged while the Wall Street crew continues to do business as usual."

Read the whole thing here. Day One here.

Comments

ed|4.2.09 @ 3:36PM|#

the Wall Street crew continues to do business as usual

Becasue their current bosses in the government are their former bosses on Wall Street? Gotta love it when bankers regulate bankers. What could possibly happen?

High Every Body|4.2.09 @ 3:46PM|#

"because it was the bankers who wrecked the auto industry, it makes it especially difficult to stomach a situation in which Detroit gets micromanaged while the Wall Street crew continues to do business as usual."

Bankers pushed for the CAFE standards? What wonders I have learned from Economics dweebs.

ed|4.2.09 @ 3:47PM|#

Detroit or Washington?

Shouldn't that be "Detroit or Wall Street"?

Matt Welch|4.2.09 @ 3:55PM|#

Thanks, ed.

Xeones|4.2.09 @ 3:58PM|#

Shut the fuck up, Dean Baker.

|4.2.09 @ 4:04PM|#

because it was the bankers who wrecked the auto industry,

WTF? The bankers approved decades of crippling union contracts, instituted layers of crippling corporate bureaucracy at automakers, and imposed CAFE standards? Who knew?

Since, in some circles, bankers are a code word for Jooz, I'm beginning to seriously wonder if Baker isn't a member of the kind of fringe groups who believe in Secret Semitic Conspiracies.

it makes it especially difficult to stomach a situation in which Detroit gets micromanaged

If that had been the sum total of his indignation, I would agree.

while the Wall Street crew continues to do business as usual.

The "Wall Street crew" is undergoing a massive contraction, laying off thousands while dozens of firms close. The "Wall Street crew" is currently looking at a pending bill that will penalize them with a combined tax rate in excess of 100% for any earnings over $250K. The "Wall Street crew" has recently absorbed such regulatory indignities as Sarbanes-Oxley, and is looking at even more regulation at both the national and international levels.

So just WTF is he talking about?

|4.2.09 @ 4:05PM|#

On an Tangentially related note...
remember when BoA CEO was talking about giving the TARP money back and implying that they didnt NEED it to begin with.

Apparently his tune is no longer the same:

Last week:

NEW YORK (Reuters) - Bank of America Corp Chief Executive Kenneth Lewis said the largest U.S. bank wants to start repaying $45 billion of federal bailout money next month, after completing a government stress test, the Los Angeles Times reported on Wednesday.

Lewis had previously said he hoped to pay back all of the money Bank of America took from the $700 billion Troubled Asset Relief Program as soon as later this year, without saying when repayment would begin.

Now:

Ken Lewis from Bank of America (BAC) doesn't seem to be able to run away from last month's promise to repay TARP funds fast enough.

In his latest media appearances, including an interview on CNBC, Lewis said that BofA would repay taxpayers for the $45 billion in TARP proceeds his bank received. Eventually. (Lewis also said he "regrets" having taken that much, saying the bank took more than it needed, describing the total as "his mistake." From this vantage, seems like the government's … but po-tay-to, po-tah-to, right?)

But he quickly added that the economy will have to rebound. And then several quarters will have to pass.

|4.2.09 @ 4:14PM|#

I would seriously like to know how Dean Baker thinks Wall Street wrecked the auto-industry.

There are many things I could logically blame on Wall Street, but the fate of the auto-industry is not one of them.

Is Baker saying seems to be implying that because the economy had a downturn, and that he blames Wall Street for the economic downturn it's Wall Street's fault that the auto-industry failed?

If your industry can't adapt to an inevitable economic downturn (since economies do tend to cycle up and down over time) then the blame lies with your industry, not with the economic downturn.

ed|4.2.09 @ 4:15PM|#

I will pay $5 for Joe (AIG Financial Services) Cassano's London address.
I have a dead fish and a large turd that have always wanted to visit England.

High Every Body|4.2.09 @ 4:24PM|#

Since, in some circles, bankers are a code word for Jooz, I'm beginning to seriously wonder if Baker isn't a member of the kind of fringe groups who believe in Secret Semitic Conspiracies.

MNG will be busy on that Cathy Young thread for a while, if he ever gets here.

JB|4.2.09 @ 4:33PM|#

I wrote the following on the retard's blog:

It wasn't bankers who caused this crisis; it was stupid people who took out mortgages they couldn't afford. The bankers helped, but this crisis wouldn't be here without the bad assets. Those bad assets are mortgages obtained by individuals who made stupid decisions.

That is a fact and nothing, not one thing you can say, will change it.

Lay the blame where it is due. As a responsible renter, I get more and more furious each day that fools like you absolve the idiots who caused this mess.

Also a renter|4.2.09 @ 4:43PM|#

You also can't change the fact that the bankers were stupid and/or greedy enough to give those loans to people who were clearly making stupid decisions in the first place.

The blame rests on everybody involved in the equation.

Also, I don't know if I want to laugh or cry at the fact that Reason is arguing about Detroit or Wall Street "getting it worse from Washington" when they've both been handed hundreds of billions of our tax dollars. What the fuck are you people smoking?

JB|4.2.09 @ 5:08PM|#

If those people paid those mortgages, the bankers wouldn't be looking so bad. The bankers are to blame, but those who signed mortgages they couldn't afford are more to blame.

|4.2.09 @ 6:05PM|#

Because it was the bankers who wrecked the auto industry

Wrong.

Again Still.

|4.2.09 @ 6:20PM|#

If those people paid those mortgages, the bankers wouldn't be looking so bad. The bankers are to blame, but those who signed mortgages they couldn't afford are more to blame.

Many of those bankers didn't care about ability to pay. How else do you explain the availability of LIAR loans, NINJA loans, interest only loans, no money down loans, and negative equity loans (where your monthly payment less than the interest accruing which got added to the principal) and the rest. These bankers basically were throwing money at un-creditworthy people. Just because the people took the money doesn't absolve the banks.

Furthermore, there were many loan apps that were altered without the knowledge of the borrower. And the lenders assured the buyers that the housing market will go nothing but up and when their new-fangled loan product reset or whatever they would be able to easily refinance and take advantage of all that equity.

Yes of course the borrowers are to blame in this, but to pretend that the bankers (and real estate agents and corrupt appraisers)...the people whose whole business is assessing risk -- the people who should have known better than anyone that what was going on wasn't sustainable -- to pretend that these guys aren't as if not more culpable is just a little odd to me.

How many houses do people buy in a lifetime? I don't expect every buyer to know all the ins and outs of home buy, or even understand the market place. That's why there are professionals who make a living doing this.

But how many loans do lenders make? Thousands upon thousands.

The lenders absolutely should have known (and did) better, and I blame them more. They also knew that if homeowners got into too much trouble, the homeowners could just walk away and give them the house.

The lenders have a duty to protect themselves and their share holder financially. I expected more from them.

|4.2.09 @ 6:25PM|#

Many of those bankers didn't care about ability to pay. How else do you explain the availability of LIAR loans, NINJA loans, interest only loans, no money down loans, and negative equity loans (where your monthly payment less than the interest accruing which got added to the principal) and the rest. These bankers basically were throwing money at un-creditworthy people. Just because the people took the money doesn't absolve the banks.

I think you have an excessively broad definition of "banker".

JB|4.3.09 @ 1:49AM|#

Just because the people took the money doesn't absolve the banks.

Did I say otherwise?

I said they are to blame, but those who signed contracts where they could not meet the terms are more to blame. I'm not hearing that the banks didn't live up to their end (unless you are broadly claiming that their actions in the whole caused them to fail...but no one has allowed them to fail).