Krugman: The Face-Slap Theory (And From Other Experts: How the Clintons' First Co-Presidency Led to the Mortgage Crisis and the Resultant Financial Crisis Krugman is Writing About)

No he didn't notice my post below.  He's talking about a practice by which the Fed supposedly bitch slaps the financial markets to snap them out of a panic attack. They've done it twice now and it hasn't worked.  Of course if you read the details it was more of a feeding a child with a tantrum a banana split because he made a mess of your day kind of slap in the face.  And it worked just as well as doing so with a problem child.  What we got were more tantrums from the financial market.  Why is that not a surpise?  All those managers were once toddlers, weren't they?  

I don't mean to disparage them as being worse than others, about that.  If someone gave me a new car every time if I went outside and started shooting a gun (which I don't own and am not advocating using) into my neighbor's tree instead of sending a cop to take me to jail (it is actually against the law to shoot a firearm in the city limits here unless you're a police officer or sheriff's deputy or otherwise specifically licensed) it might be hard to keep from doing it again.

The only solution which Krugman sees to a total financial sector melt down resulting from the housing sector crisis is for the American public  to take on a lot of the dicey debt.

Excerpt NY Times -- Paul Krugman (link at bottom): 

The Fed’s latest plan to break this vicious circle is — as the financial Web site interfluidity.com cruelly but accurately describes it — to turn itself into Wall Street’s pawnbroker. Banks that might have raised cash by selling assets will be encouraged, instead, to borrow money from the Fed, using the assets as collateral. In a worst-case scenario, the Federal Reserve would find itself owning around $200 billion worth of mortgage-backed securities.

and for the American taxpayer to guarantee Fanny and Freddy loans.  

Isn't that another gift to big money?

If you read Krugman's article  you will see how this all followed from the collapse of the subprime market.

What he doesn't admit is that this all came about because of laws passed during the time when Hillary claims on her political virtual resume to have been co-president of the United State of America.   And even if it weren't true that she was co-president with her husband, the assumption is that Bill will be her mentor or even co-president if she is elected to the office.  But why is that offered as a liberal dream when it was just an extension of the Reagan sell off of public protections after the Clintons (the Mrs. brought in Dick Morris, remember?) realized the only way to get re-elected was to dump the public good and side with Big Money, Big Oil, and Big Business.  

Here's a link to where Robert Scheer mentions the "Gramm-Leach-Bliley Act of 1999" that Bill Clinton signed.

---------------------------------------- 

More web based analysis on the Gramm-Leach-Bliley Act which repealed FDR's Glass-Steagall Act (these are important to read):

Progressive Historians: Bill Clinton's Role in the Mortgage Crisis

PBS -- Frontline: The Long Demise of Glass-Steagall

-----------------------------------------------'

 Here's the link to Krugmans latest column "The Face-Slap Theory " 

tags: krugman  robert scheer  fdr  mortgage crisis  glass seagall act  gramm leach bliley act  

links: digg this    del.icio.us    technorati    reddit