A Little Background

Gretchen Morgenson does not think highly of Bear Stearns. Basically, she thinks they've not always operated on the high road. Some examples she gives:

• Clearing dubious stock trades for 'bucket-shop' brokerage firms in the 1990s
• Providing a lot of credit to aggressive subprime lenders
• Having very lax lending standards
• Refusing to help in the bailout of Long Term Capital Management.

Yet, she does not disagree with the bailout by the Fed. It's part and parcel of the times where the failure of Bear Stearns would very likely trigger failures of other major financial firms.

The times are bad but we've put ourselves here. Consider that household debt has doubled in eight years; at the end of last year it was $13.8 trillion. Consider that the current account deficit (the difference between what we import and export) went from 3.6% of GDP in 1999 to 6.8% in 2005; I doubt it's improved since then. Consider the euro was worth 80 cents in 2002 and closed yesterday at $1.56. Consider that in thirty-one of the last thirty-five years the federal government has spent more money that it has taken in. Consider that we have a negative savings rate. Consider that, although Social Security, Medicare and Medicaid accounted for 40% of the federal budget in 2006, we are doing nothing about the flood of baby boomers entering the world of retirement. Consider we are making the world safe for democracy by helping to bankrupt our kids with a $3 trillion war bill. Consider the declining scores of our kids when they take the same tests as kids from other countries. Consider studies showing our health care system is not as effective as we think it is. Consider the unbelievable disparity between the compensation of workers and that of Fortune 500 CEOs. Consider the decline of the working middle class.

I could go on. But I'll stop now except to ask what are Hillary, Barack and John saying about these things?