Vail Valley Voices: How soon we forget
Vail, CO, Colorado
Regardless of who wins the presidency, a stream of milestones has been laid out that will take 16 or more years to play out. It concerns the Great Recession, in three parts:
• The cause: A triple whammy that started in 1998 and came to a head in 3Q, 2008:
• First, both parties in Congress were constantly pushing Fannie Mae and Freddie Mac to offer mortgage loans to more and more people – starting erosion of traditional standards for mortgage lending for both these and private organizations.
• Second, Wall Street played a role with its math wizards concocting a new way to package and sell mortgages in a totally misunderstood financial vehicle called collateralized debt obligation, creating a feeding frenzy for more and more loans, which eventually became toxic assets. It should be noted these obligations were sold worldwide to individuals and governments. Hence, we had a hand in the worldwide recession.
• Third, two successive presidential administrations contributed to the problem. Under President Clinton, warning calls were not heeded when a major hedge fund collapsed (Long Term Capital Management) and the head of the small-staffed Commodity Futures Trading Commission, Brooksley Born, as a whistle blower was silenced by a group of key folks that included a former Wall Street CEO as treasury secretary and Fed Chairman Greenspan.
Under President Bush, the sins that were evident in 1998 were taken to a new level under the watchful eyes of his treasury secretary (another former head of the same Wall Street firm as the secretary under Clinton), leading to the now infamous statement in a President Bush State of the Union address saying something like “all new homeowners are advancing democracy.”
• Fixing it: Fixing something that had permeated nearly every neighborhood and employer in the country clearly involved more than fixing your typical cyclic downturn, instead fixing a structural problem. Something that took 10 years to create clearly was going to take a long time to fix, regardless of person or party.
Let’s remember that fixing it started under President Bush with a $500 billion stimulus parceled out in small amounts in checks sent to nearly every household and the $700 billion bailout of Wall Street financial firms. Rescuing the automobile industry started with talks under President Bush and was finalized under President Obama, noting that a so-called “structured bankruptcy” was never a possibility, as these require private infused capital that simply was not available in the amounts required.
• The fix: The housing problem will play out over time but with a lot of personal tragedy and lost dreams. Jobs are another matter, as the world has changed dramatically since this whole thing started. Today, companies and people in most places in the world can make things versus the U.S. having a monopoly on these skills in the past. So our leadership will have to evolve over time in a new direction, coupled with a certain amount of a “new norm.” For example, some of the old manufacturing jobs will never come back.
Whether it be in the manufacturing or the service sector, a trained and educated work force is the cornerstone, and here we are way behind when you look at our math and science skills versus other parts of the world.
However, with a loud enough wake-up call and willingness to work together (versus raw parasitism and ideology), we can maintain and expand our leadership position in the world.
So let’s do our part to support the next president, regardless of party, and remember the facts surrounding the Great Recession in holding him accountable.
Paul Rondeau is a Vail resident.
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