rI consider myself to be a relatively educated and astute individual. I'm a tax lawyer (not corporate tax though), so I've had enough exposure to banks and other financial institutions, derivatives, lending and so forth to at least think -- or like to think -- that I have a rudimentary understanding of what's going on with the financial markets.
Which is why I'm here to stand up and say, I am Elaine, fomerly of Indiana, and I don't get it.
I've read Rena's diary and Granny Docs and Kos and Stoller and Sirota and Krugman -- which is probably more than your average taxpayer -- and I don't get it.
- I understand there's a credit crunch. I understand that this is probably because of questionable loans, some of which were predatory, which were then exacerbated by the financial sector turning them into hard to value and highly speculative derivatives. These derivates are hard to value and probably being carried at unrealistic prices. Moreover, I understand that the repeal of the prior regulatory environment means that these poor decisions cross infected all financial markets, rather than being isolated in one silo.
- I also understand that a credit crunch is a very bad thing. More than just hurting the Wall Street types, it has implications for individuals and small businesses across the nation.
- Finally, I understand the terms, such as they are, of the legislation that was proposed, how it was amended, and didn't pass today. I also understand some of the problems the critics have raised.
But here's the part I don't get. And its the part I don't think most people get. How does No. 3 (the legislation) solve No. 1 (the bad loans and derivatives) to alleviate No. 2 (the credit crunch?)
Maybe I'm jut thick. I'm not being disengenous here... I really do believe there is a financial problem that needs some action. But I really don't understand how the pieces fit together. Moreover, I don't think any politician, on either side, has made a compelling case as to why the proposed solution will, or will not work. We can talk about equity stakes or executive comp or whether foreign companies but that's just understandable window dressing that the confused to grasp at.
Someone needs to step up and explain, why does buying bad assets solve the credit crunch?
I think that if someone can make that case to the American public, we'd live with the pain as a nation, although insisting on more protections.
I think if no one can make that case, that may speak volumes.
But as I sit here now, the only thing I know is that something needs to be done but I don't know enough to know what. And if I, fairly smart and vaguely financially literate caveman lawyer can, I can only imagine what normal people (tax lawyers aren't normal) must think.