debate: Who’s to Blame – Washington or Wall Street?

The audience votes Washington. Debate transcript here. (pdf) Quotable:

“This symbiotic and indeed corrupt relationship between Wall Street and Washington is the thing that is rotten at the heart of the United States, it is the principal explanation for this crisis, and that brings me to the key question you have to ask yourselves. Who has to defend the public interest. Is it the investment bankers, the hedge fund managers, or is it your elected representatives. Ladies and gentlemen, it is perfectly clear, that it is Washington that has failed to defend the public interest, and I fear, it is continuing to fail to do so.”

— Niall Ferguson, Harvard U. – History

Read an interview with Ferguson here, and read Ferguson’s account of the financial meltdown here.

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One Response to debate: Who’s to Blame – Washington or Wall Street?

  1. Jonathan says:

    Blame can be dispersed to both elements, but more heavily towards Washington. There were many people like us who have been shouting, more so recently, that businesses should not seek the extended bureaucratic hand of “stimulus.” Some of the men and women on Wall Street took the aid and are now at the fate of Washington.

    We are in this economic situation directly because of government intervention. We always have economic downturn every 6-8 year or so, but the housing market and credit downturn on top of it has created a firestorm. The Community Reinvestment Act created by Jimmy Carter forced banks to give subprime mortgages. It would be later extended by William J. Clinton, which will inject Freddie and Fannie and Countrywide. The local banks were not giving these loans to individuals with poor credit because they were poor investments. The central planners and “utopianites” of our society were driven as usual by race and class warfare, which had nothing to do with it. Washington forced local banks to dish out bad loans and companies like Countrywide and Freddie & Fannie bought up these loans.

    Contrary to what the left claims, Fannie and Freddie were integral to the creation and expansion of the subprime loan industry. With Fannie and Freddie as their largest customer, subprime king Countrywide Financial grew from a tiny institution to the largest mortgage lender in the country. Fannie and Freddie’s subprime business was not isolated to Countrywide. Fannie and Freddie both bought subprime securities since 1995, and by 2004 they were purchasing $175 billion worth of such securities a year, or 44% of the entire market. From 2003 through 2006 Fannie and Freddie bought more than a half trillion dollars in subprime securities. That is more than any other purchaser in the entire world.

    These are government run companies who have friends in high places. Remember when the CEO of Freddie and Fannie spoke and introduced President Obama at his Illinois senatorial induction ceremony.

    The important thing we can remember is that it was not capitalism that it to blame here. The blame falls upon Washington and business men and women who thought they were secure with the government pulling the strings.

    It is interesting to watch the news and the circles Washington is making. They implement these policies that mandate regulation and additional oversight, then when the businesses fail they shout the “Greed! Greed! Greed!” of capitalism. I do not adhere to Objectivism but Ayn Rand was a capitalist, who described our situation directly and simply,

    “One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary.”

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