Often, when listening to conservatives talk about almost any topic I find myself muttering, "Fascist!" When I hear conservatives deride government incompetence as opposed to the efficiencies of private markets and the singular brilliance of great financiers, I often suspect that what they are really sneering at is democracy and the millions who labor in obscurity.
I recall once reading a definition of Fascism as: the open, terroristic dictatorship of Finance Capital.
This seems like a good point in time to reflect upon this definition as we observe our elected representatives battle over the control and allocation of a significant amount of public and private capital.
I do not make the argument that America may yet become Fascist but that, to a very great degree, it is and has been, and that we are currently involved in a fight to make it otherwise. U.S. Fascism has long been projected abroad in the form of U.S. supported dictatorships, primarily for corporate ends and often cloaked in hypocritical claims regarding the defense or the promulgation of democratic values. The Bush administration has gone a long way in bringing this export home calculatedly using our terror of terrorism. Anti-Fascism is not only about civil rights and democratic processes but must include "the economy, stupid". Or, as we might now wish to call, the stupid economy.
As an example of breathtakingly stupid economic decision making I previously recommended Giant Pool of Money, a May 2008 radio broadcast on This American Life. I recently listened to it again and took notes on the sequence of events that lead to the mortgage meltdown, a principal element in the larger economic crisis.
This summary does not include some of the more arcane contributing factors such as the secondary market of derivatives based on securitized mortgages. But that’s okay, they are just complicating symptoms attendant to the primary disease. Other symptoms include: hubris, unregulated greed, dishonesty, self-delusion, stupidity and, possibly the most immediately treatable of all, the pervasive existence of perverse incentive arrangements whereby risk and reward are, for individuals and institutions, decoupled.
This sequence of events is further evidence supporting arguments in favor of greater democratic participation in the capital markets. It is becoming ever more obvious that choices as regards money derived from the sweat of the many, are too important to be left to the privileged few absent the prudential restraint and guidance provided by properly functioning democratic institutions.
• Between 2000 and 2006, as the result of an increase in global productivity and prosperity, the global total of cash savings in fixed-income securities doubled to $70 trillion. A perspective: 1) It took all of human history for the value of these assets to reach $36 trillion in 2000. Then, in only the next six years the amount of these assets doubled. 2) All the money spent and earned by everybody on earth in a year is less than $70 trillion. As to the inequalities in the distribution of all this wealth and the questionable value of at least some what was produced in this boom, they are worthy questions herein not addressed.
• This placed immense pressure on fixed-income asset managers to find safe investments, one historical favorite being U.S. Treasuries, so as to maintain and realize modest rates of return on the funds.
• In 2001, under Chairman Alan Greenspan, in his words to "promote satisfactory economic performance", the Fed drastically reduced the rates paid to investors for buying U.S. Treasuries and "that really drove that army of investment managers crazy." This move was consistent with Greenspan’s free market fundamentalist ideology in that it drove capital into the private sector.
• These managers turned their eyes to the U.S. mortgage market, historically a pretty safe bet and with a better rate of return than Treasuries. Because they were not equipped to deal with individual mortgages, the fixed-income asset managers required the services of a series of intermediaries to originate, evaluate, bundle and service large numbers of mortgages into individual securities.
• Thus, securitization of mortgages begins on an historically unprecedented scale, whereby millions of mortgages worth trillions of dollars, that customarily would have remained with the banks that made the loans, were bundled and sold to investors as relatively safe, income producing assets.
• By 2003 the market for traditional mortgages made to well-qualified borrowers became saturated. But there was still a great deal of money left in the global cash pool that needed to be invested.
• In response, lending institutions drastically loosen or completely do away with borrower eligibility standards, even being dead did not disqualify some, and everybody who wants to be anybody in this arena starts lying, essentially about risk: investment bankers, commercial bankers, securities dealers, mortgage brokers, appraisers, real estate agents, borrowers, and, perhaps most egregiously, the firms whose very job it is to do detailed analysis and thus quantifiably evaluate investment risk.
The battle between the social democrats and the plutocrats for control of the commanding heights of the economy, long a feature of European politics, is now more truly joined than has been the case for a long time in the U.S. Now the conservatives, predominantly from the south, fight against us just as their historic predecessors fought for the property rights of the well-propertied and for low-cost slave labor.