Common Sense from Ed Giobbe

The following comments appeared in the Aiken Standard on February 18 and are being posted here in case you missed.

“ONE OF THE GREAT STRENGTHS OF AMERICA IS THE ABILITY OF ITS PEOPLE TO COME TOGETHER IN A TIME OF NATIONAL CRISIS. THE PRESENT ECONOMIC AND FINANCIAL CRISIS IS A TEST OF THAT ABILITY. THERE ARE THOSE WHO WOULD ATTEMPT TO ADVANCE SOCIAL PROGRAMS AT GREAT EXPENSE UNDER THE GUISE OF ECONOMIC STIMULUS.

THERE ARE ALSO THOSE WHO OPPOSE ANY ATTEMPT TO REDUCE UNEMPLOYMENT AND REDUCE ECONOMIC HARDSHIP AS IRRESPONSIBLE SPENDING AND SOCIALISM. WE MUST STEER A COURSE BETWEEN THESE TWO EXTREMES. WE MUST REJECT RIGID IDEOLOGICAL POSITIONS AND BE PRAGMATIC. WHAT IS IMPORTANT IS WHAT WORKS.

THE FIRST ORDER OF BUSINESS IS TO STOP THE ECONOMIC DECLINE
CAUSED BY THE COLLAPSE OF HOUSING AND ITS PARAYLIZING AFFECT ON BANKS AND FINANCIAL INSTITUTIONS. WE MUST HALT THE DOWNWARD SPIRAL OF FORECLOSURES, FALLING HOUSE PRICES, INSTABILITY IN THE FINANCIAL SYSTEM AND RESULTING UNEMPLOYMENT WITH IMMEDIATE, MASSIVE, DECISIVE ACTION. THIS WILL REQUIRE BOLD AND EXPENSIVE PROGRAMS TO DEAL WITH THE CLEAR AND PRESENT DANGER OF THE CURRENT SITUATION.

TAX RELIEF MUST BE PART OF THE SOLUTION IN ORDER TO GET MONEY AND CREDIT TO START FLOWING INTO THE ECONOMY ONCE MORE. ANY ACTION MUST DEAL WITH THE PRESENT SEVERE AND DANGEROUS ECONOMIC DECLINE. WE NEED TAX CUTS NOW NOT LONG TERM. PEOPLE DON’T EAT IN THE LONG TERM, THEY EAT TOMORROW MORNING.

THE CAUSES OF THE PRESENT CRISIS HAVE BECOME PAINFULLY EVIDENT. GOVERNMENT PROGRAMS TO ADVANCE AFFORDABLE HOUSING WITH LOW INTEREST RATES AND OVERLY LAX CREDIT STANDARDS WITH BANKS AND FINANCIAL INSTITIONS ONLY TOO EAGER TO LEND MONEY FOR MORTAGES WTH NO INCOME DOCUMENTATION BETTER KNOWN AS “LIAR LOANS”, LITTLE OR NO DOWNPAYMENT, ADJUSTABLE RATE MORTGAGES WITH LOW TEASER RATES, PICK AND PAY (SKIP THE MONTHLY PAYMENT ANDADD IT TO THE PRINCIPAL). ALL MADE POSSIBLE THROUGH THE VEHICLE OF LOAN SECURITIZATION IN THE FORM OF HIGHLY COMPLEX MORTGAGE PRODUCTS NO ONE UNDERSTOOD OR COULD CORRECTLY PRICE. THE PREDICTABLE RESULT WAS THE SUBPRIME DEBACLE.

NOW THAT WE KNOW WHAT GOT US INTO THIS MESS, WE MUST MAKE SURE THAT IT DOESN’T HAPPEN AGAIN. IT SHOULD START WITH OUR SENATORS AND REPRESENTATIVES THAT YEAR AFTER YEAR ENCOURAGED AND PROMOTED EASY MONEY, IRRESPONSIBLE HOME OWNERSHIP AND MASSIVE REGULATORY FAILURE. WHAT JUVENAL, THE ROMAN WRTER OBSERVED TWO MILLENIA AGO IS EQUALLY RELEVANT TODAY: “SED QUIS CUSTODIET IPSOS CUSTODES?” (“WHO SHALL GUARD US FROM THE GUARDIANS?”)

FOR FIFTY YEARS AFTER THE BANKING REFORMS OF THE 1930’S, THIS COUNTRY ENJOYED FINANCIAL STABILITY. BANKS LOBBIED HARD FOR MORE FREEDOM TO ENGAGE IN RISKER BUSINESSES RESULTING IN THE 1999 REPEAL OF THE 1933 GLASS STEGALL ACT WHICH HAD SEPATATED COMMERCIAL BANKING FROM INVESTMENT BANKING. WHAT RESULTED WAS A FINANCIAL CASINO OF COWBOY CAPTALISM.

MOST OF THE FINANCIAL CRISISES OVER THE LAST CENTURY HAVE BEEN CAUSED BY OVEREXTENSION OF CREDIT AND BAD REAL ESTATE LOANS BY BANKS. AS THE OLD TIGER, GEORGE CLEMENCEAU, THE PREMIER OF FRANCE DURING WWI, SAID , “WAR IS TOO IMPORTANT TO BE LEFT TO THE GENERALS’. IT IS NOW OBVIOUS THAT BANKING IS TOO IMPORTANT TO BE LEFT TO THE BANKERS. THEY NEED TO BE PROTECTED FROM THEMSELVES. BANKS AND FINANCIAL INSTITUTIONS CAN NOT BE ALLOWED TO ENDANGER THE ENTIRE NATIONAL ECONOMY BY RECKLESS AND UNREGULATED LENDING.

AMERICA IS A STRONG AND VIBRANT COUNTRY WITH AMAZING RESILENCY. IT WILL OVERCOME THE PRESENT DECLINE AND EMERGE STRONGER AND MORE PRODUCTIVE. IF THERE IS A LESSON TO BE LEARNED, IT IS THAT AS A NATION, WE LOST OUR MORAL COMPASS. WHAT FOLLOWED WAS A RISE IN MATERIALISM AND A REVERENCE OF WEALTH FOR ITS OWN SAKE, THE PURSUIT OF AFFLUENCE UNEMCUMBERED BY VIRTUE.

FOR THE NEXT EIGHTEEN MONTHS ALL OF US, ORDINARY PEOPLE AND LAWMAKERS SHOULD STOP ACTING LIKE DEMOCRATS AND REPUBLICANS, CONSERVATIVES OR LIBERALS AND ACT LIKE AMERICANS. WE NEED A SENSE OF NATIONAL PURPOSE AND RESOLVE. THE GOOD OF OUR COUNTRY AND THE SURVIVAL OF OUR ECONOMIC SYSTEM ARE AT STAKE.”