USA - Profit Be(for)e People ?!(6)I/II

October 08, 2008 -
Faltering Economy Takes Center Stage in McCain-Obama Debate

It was no surprise that the economy dominated last nights presidential debate. We play excerpts and get reaction from Pulitzer-winning journalist David Cay Johnston, author of Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill).

David Cay Johnston, former investigative journalist for the New York Times. He won a Pulitzer Prize in 2001 for his running investigation of the tax system. His latest book is titled Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill). He is also author of the bestselling book Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich—and Cheat Everybody Else.

Well, first of all, we have an enormous problem that is not going to be solved by the government. What youre seeing right now is politicians taking your money and redistributing it upward. And our whole national myth is that we take from those with a lot and give to those down below. Thats not what goes on. Thats what my books have shown, from the official government data. This is a transfer of wealth and income: five percent of the years economy to essentially wealthy bankers and, to some degree, customers of theirs.

The senator from Arizonas description of the facts is just extraordinary for being a fact-free zone. Fannie Mae and Freddie Mac never originated a single loan. They certainly are participants in what went on here, but the problem was caused by this notion of, quote, deregulation.

And, of course, there is no such thing as deregulation. Everything has rules. Think about baseball, which is a trivial, a fun activity. Baseball regulates how many stitches are on the baseball. And all deregulation has meant for the last thirty years is new rules that favor those with the most money.

Well, the rules that were set up encouraged bad lending practices, and, most importantly, they separated risk from responsibility. Youre always hearing about risk and reward being tied together, but they separated risk from responsibility, because if youre a bank and you make a loan and you have to hold that loan or some of your loans in your portfolio, youre going to be very careful about vetting the borrower to make sure youll get back the principal and the interest. But if you can package a loan, securitize it and then sell it to places like the pension funds that you and I support with our tax dollars for public employees, then what do you care if the loan goes bad, especially if you get big fees and especially if the more toxic the loan is, the less likely it is to be repaid, the bigger your fees? Thats what deregulation has meant, and thats whats brought us to this pass.

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