Saving Fannie and Freddie Was Nationalisation Pure and Simple --

Tweet This British economist seems to think Congress will be up to reversing the deregulation that allowed the financial markets to disintegrate. I wonder though. I read something about Barack Obama having a meeting with Bill Clinton in New York. Will Obama be willing to make Clinton look like a greedy idiot for signing the repeal of the Glass-Steagall Act during Clinton's term? Somehow, I doubt it. I think Obama is looking for Clinton's help to save his candidacy from defeat.

Portion below; whole thing (found on Angry Arab Newservice) here: http://www.guardian.co.uk/commentisfree/2008/sep/09/freddiemacandfanniemae.subprimecrisis/print

"It's the free-marketeers who are to blame but, by not seizing the moment, it's the left that could well end up carrying the can"

As such, the question is what happens now. The fourth conclusion to be drawn is that the free market has no answers to the problem other than to let banks go to the wall. But no policymaker, even those with the most impeccable laissez-faire background, is prepared to let Bear Stearns, Northern Rock or Freddie and Fannie go bust. Some smaller institutions may be allowed to go to the wall, if only to show the US treasury is aware that the bailouts are being financed by taxpayers, but the global financial community now has institutions that are simply too big to fail.

But if the big financial institutions cannot - unlike, say, a car company or an airline - be allowed to founder, they also cannot be allowed to conduct themselves in the same way as companies where there really is a risk of failure. Congress will undoubtedly demand tougher regulations for the activities of US banks in exchange for bailing them out, and rightly so. If ever there was a time to bring in controls on the ability of banks to create unlimited amounts of credit, to restrict the more toxic forms of derivatives, to rein in the activities of hedge funds, to insist that remuneration structures are not biased in favour of reckless speculation, and to use anti-trust law to break up the power of the big institutions then this, surely, is it.

This leads on to the final point. The credit crunch should be a crisis for parties of the right. They were, after all, behind the campaign to demolish controls on financial markets in the final quarter of the 2oth century. Yet there is scant evidence that either the Republicans in the US or the Tories in Britain will pay a price for the policy errors of the past. In part, that is because in the US the whiff of a return to the soup-kitchen days of the depression brings out the interventionist streak in any administration. In part, though, it is because neither Barack Obama nor Gordon Brown seem willing to seize the social democratic moment. That's dumb politics. It means that what should be a crisis for the right has become a crisis for the left.