21 April 2011
On Greed and Money
I have to integrate bonds and bond insurance into the over-all picture I've sought to create of what happened, especially in the US though we did all too good a job of then exporting it, in the period 2007-08. This requires backing up chronologically. It was in the world of quasi-public agencies that the notion of "too big to fail" got its start when Nelson Rockefeller and John Mitchell (before he was immotalized by the Watergate scandal) planned a novel way of financing affordable housing, although they didn't actually use that phrase.
1. Nelson Rockefeller and the "moral obligation" bonds of New York
2. The rise of the muni bond insurance industry
3. Who is really paying for this insurance? Third party payment as a regular matter is a common symptom of systemic trouble.
4. MBIA, accounting chicanery, and crack houses as collateral
5. Elliott Spitzer and rumblings in early 2008. (Valentines' Day)
6. Fall of Bear Stearns. Spitzer's fall served as comic relief.
7. The rest of that year from the bonds/insurer POV.
The material included under this heading in my book proposal can serve as the chapter's ending:
Where do we go from here? The credit crunch of 2007 and the stock crash of 2008 are in the history books and time travel is impossible, so we only work forward.
We should be wary of a “hair of the dog that bit us.” We should refuse to resolve this hangover by easy-money nostrums and loose-accounting remedies, or by making it easier for corporate managers to entrench themselves. That dog will only get more rabid and bite still more devastatingly if we indulge him further.
Knowledge is warranted belief -- it is the body of belief that we build up because, while living in this world, we've developed good reasons for believing it. What we know, then, is what works -- and it is, necessarily, what has worked for us, each of us individually, as a first approximation. For my other blog, on the struggles for control in the corporate suites, see www.proxypartisans.blogspot.com.