Read a Pacific Northwest, liberal perspective on world, national, and local politics. From majestic Redmond, Washington - the Northwest Progressive Institute Official Blog.

Thursday, August 09, 2007

Sub-prime crisis hits market

With the stock market taking some big hits due to the sub-prime crisis (down 387.18 today on my desktop ticker,) those "Old Europe" people sure are conservative about lending. From Business Week:
For years, European bankers have endured slights from U.S. rivals about their stodgy lending habits. Imagine: They still demand a 20% downpayment—or more—for a home loan. Adjustable-rate mortgages are a novelty. And instead of packaging loans into fancy derivatives and selling them to hedge funds, the Europeans keep them on their own books. How quaint.

Now those Old World bankers are looking mighty smart, at least when it comes to their domestic markets. True, a growing number of Europe's global banks are suffering losses from investing in U.S. debt. On Aug. 9, French giant BNP Paribas (BNPP.PA) announced it was temporarily suspending three investment funds that are together worth more than $2 billion because a shortage of liquidity and lack of visibility made it impossible to fairly value the funds' assets. The move rattled stock markets, drove up short-term money-market rates, and helped provoke an unprecedented $130 billion liquidity-boosting action by the European Central Bank (see, 8/9/07, "Subprime: The Ugly American Hits Europe").
I guess I don't know why our financial sector always winds up behaving in such irresponsible and illegal ways (can you say "Savings and Loan crisis?") Could it be that our financial sector is run by irresponsible and corrupt people who often manage to convince the Republican Party to avoid meaningful regulation of their activities? (Can you say "Enron?")

Actual conservatives would want the market to operate in transparent and efficient ways. Dubious lending standards driving down everyone's share value is flat out stupid and unnecessary. But I'm sure some of the bright bulbs who developed cruddy "innovative loan products," to mock the euphemism for making home loans to unqualified borrowers, enjoyed their brief success and material wealth. How nice for them, as thousands of American families look at losing their homes.

Meanwhile, do we need more reminders about how foolish it would be to put Social Security money into the stock market? The people who proposed that are not conservatives. They're radical reactionaries who wanted to steal our money.

It used to be a lot of Americans could kind of chuckle as Wall Street crashed and burned, but now with 401(k) plans and all the rest, the radical reactionaries are a real threat to a lot of folks' retirement plans. Like we needed more reasons to hurt the GOP as badly as possible at the polls next year.

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