Sunday, April 05, 2009


I appreciated Frank Rich's column today -- I agree with him that there's no reason to feel less angry at Rick Wagoner and other auto executives than at screwups on Wall Street -- but I still have a problem with the sentence I've emphasized below:

Some of Wall Street's exact failings also capsized G.M.: the hard sell of alluring but junky products, crony capitalism, reckless gambling, unregulated accounting sleights of hand....

The parallels between G.M. and the likes of Citigroup are uncanny. Much as bloated financial institutions gorged on mortgage-backed derivatives even when the underlying fundamentals made no rational sense, so G.M. doubled down on sure-to-be obsolete S.U.V.'s and trucks to serve a market transitorily enthralled by them. Much as the housing boom's collapse left the get-rich-quick holders of AAA-rated mortgage derivatives with worthless paper, so the oil price spike left consumers trapped with self-indulgent, wealth-depleting gas guzzlers. In both instances, the customers were not entirely innocent.

I know it's true. But it rankles. As does this:

... we must rid ourselves of the illusion that there's a rigid separation between Wall Street and ... "the real world." Any citizen or business that overspent or overborrowed in the bubble subscribed to its reckless culture.

Yes, but if you have a limited understanding of finance, you turn to authorities on the subject -- and when those authorities, who actually do know what they're doing, tell you we're living in a brave new world and your only two possibilities if you take on a mortgage you can't afford are to (a) find it affordable eventually or (b) sell your property at a profit, and if those authorities are the people America respects, the moneymakers, the wheeler-dealers, are you crazy not to believe them?

And if you as an individual are being reckless, you assume any bad decision will affect you and your family only -- bad enough, but not damaging to the entirety of society. By contrast, the money guys knew, or should have known, that what they were doing could bring the whole financial down. They had great power, and so they had great responsibility. Individual mortgagees weren't remotely in the same situation.

And as for Americans who bough gas-guzzling SUVs: obviously they could understand what they were doing, but a liberal-bashing, hippie-hating culture (yes, even in the Clinton years) encouraged them to bulk up their rides and feel proud. Buying a big SUV was like going to a sporting event and chanting "U-S-A! U-S-A!" The ultimate oversize vehicle for consumer was the Hummer, which was based on a military vehicle used in the Gulf War and first hit the market in 1992, the year after that war ended.

Bulking up -- one's body with weights and steroids, one's living space through the purchase of a McMansion, one's vehicle, one's collection of consumer items -- was what a lot of Americans did starting in the Reagan years. They rejected the scrawny hippies and got physical, physical. Of course they did. Americans were told that enemies lurked everywhere -- the Evil Empire, "urban" predators -- so building up layers of symbolic armor seemed an appropriate response. The Reagan and post-Reagan era continued without interruption until the Bush years. It was just a long backlash against the 1960s. But it was sanctioned, from above.

So I don't blame ordinary citizens nearly as much as I blame the culture's leaders. Yes, the fish stinks from the head.

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