Recently I read a Newsweek column by Daniel Gross documenting that U.S. private employment today is less than in 2000, despite population having grown 9%. That bit of basic insight led me to read his "Dumb Money" about how the Ownership Society quickly degenerated into the Bailout Nation during the same time period. The book is short (101 paperback-sized pages), interesting (even entertaining), yet comprehensive, covering all the decade's financial 'stars' - Ben Bernanke - keeping interest rates low, continuing Greenspan's rosy forecasts), Christopher Cox (ineffectual SEC head), Alan Greenspan (keeping interest rates too low for too long, lobbying for deregulation, blindly following philosopher Ayn Rand instead of economic data and theorists), Edward Lambert (acquired K-Mart and Sears early in the decade, then spent $4.9 billion to buy back shares at an average $118 - now $70), Richard Fuld (named a #1 CEO by Institutional Investor magazine in 2006, received a $22 million bonus in 2007, and then watched the 28,000+ firm Lehman Brothers collapse in a market-terrorizing bankruptcy in 2008), Angelo Mozilo (making mortgages available to almost everyone in his pursuit of #1 market share), Henry Paulson (a latecomer to the crisis, he then created a bailout for the institutions that created the crisis), Robert Rubin (lobbyist for deregulation, Citibank board member while sailed into a major government rescue), John Thain (CEO NYSE from 2004-2007, paid $83,785,021 in 2007 - mostly by his not-yet employer Merrill Lynch, requested a $10 million 2008 bonus for 'saving' Merrill by selling it to Bank of America for $28 billion + $20 billion in government money, spent $1.22 million in 2008 corporate funds to renovate two conference rooms, a reception area, and his office, and was fired in January, 2009), the fine folks (both legislators and regulators) behind the Community Reinvestment Act, and countless financial geniuses that bought up every exotic three-letter financial instrument, company M&A or LBO, and mirage within sight.
Gross even managed to 'share the blame' (sarcastically) with China for our low interest rate-fueled housing bubble. Institutional players involved and included in Gross' accounting included insurance giant AIG, banks, bond rating agencies, builders, Congress (bought, paid-for, and asleep), Fannie-Mae and Freddie-Mac (repeatedly raised their loan limits, allowing the bubble to keep inflating), mortgage originators, and the shadow bankers. Dumb money players were not limited to the private sector - California and the U.S. government also were major participants, followed by New York, New Jersey, Illinois, etc. - all but North Dakota, Wyoming, Montana and Alaska. And none of this could have happened without the little people (you and I) who bought ARMs, balloons, HELOCs, liar's loans, and no-down loans by the millions and then got stuck with them after the crash; regardless, we're all paying now for the private and public sector bailouts, along with our children, grandchildren, great-grandchildren, etc.
Gross' Recommendations? Outlaw stupidity, and create some sort of fiscal lithium (sprayed over Wall Street?) for starters. Gross is not enthusiastic about more regulation (too easy to get around). Perhaps a tax on securities trading and the creation of structured financial products to be used to help cover future messes.
