Notities bij boeken

Kevin PHILLIPS
Bad money - Reckless finance, failed politics, and the global crisis of American capitalism [Revised Edition]
New York: Penguin Books, 2008; ISBN: 11 0104 456X; 272 blzn.

[Phillips schildert in dit boek alles wat er fout ging in de VS in de decennia voor de financiële crisis van 2008. Hij laat zien hoe de financiële wereld zelf die crisis veroorzaakte, geholpen door een kritiekloze overheid en door bijzonder coöperatieve overheidsinstellingen als de FED, met name onder Greenspan. Hier alleen een samenvatting van het voorwoord bij de herziene editie, die in feite zelf een samenvatting vormt van het oorspronkelijke boek.]

(xi) Preface to the Revised Edition - After the Fall: The Inexcusable Failure of American Finance

"The hardcover edition of this book was published in mid-April 2008, and though it reached the New York Times nonfiction and business bestseller lists, relatively little of its contents have been discussed or publicized by the politicians or by the gatekeepers of the major national media. My analyses and the warnings that accompanied them were, in a word, unwelcome. They were deemed overly pessimistic. For that reason, first-time readers will find information that is still mostly ignored — and is still revelatory. At the same time, more than a quarter of this post-election book is new — a much enlarged and updated preface, plus a twenty-page afterword that sets out the U.S. domestic political and global financial implications for 2009–2012."(xii)

De grimmige voorspellingen die in de eerste editie van 2008 werden gedaan kwamen al snel uit, vandaar deze herziene editie. Het boek gaat over het speculatieve financieel systeem van de laatste twee decennia, een systeem van vaak papieren ondernemingen dat dominant werd (van 10-12% naar een 20-21% van de US economie) ten koste van de reële industrie (die terug viel van 25% naar 12% van het BNP van de US).

[In feite werd er binnen die economie dus steeds minder werkelijk geproduceerd en verkocht. Het geld werd verdiend met financiële speculaties.]

Het werd een contraproductief systeem vanwege hebzucht ('greed') en incompetentie. Er was genoeg gewaarschuwd tegen deze ontwikkelingen, maar die waarschuwingen werden in de wind geslagen door politieke leiders, bankiers, hypotheekverstrekkers en 'hedge fund pirates'. Maar ook door de nieuwsmedia die de ontwikkelingen kritiekloos toejuichten.

"... the recent displacement of manufacturing and other capital-intensive industry by the paper entrepreneurialism of finance was long neglected, its ramifications barely discussed. From the television networks to the major print media, from the halls of academe to the committee rooms of Congress, mum was long the word. This is a shame. Had there been serious discussion, the abuses now so obvious and the effects now so harsh would almost certainly have been more limited. News executives and journalists have arguably been as negligent as politicians and regulators."(xiv)

"It didn’t help that, as chastening memory of the Great Depression faded after a half century, Americans were drawn once again to the psychological amusement park of consumption, borrowing, credit, and debt."(xv)

"For the first time since the 1920s, both public and private debt had become fashionable again — a social and political convenience, no longer a lingering nightmare (except among aging grandparents). Liquidity, debt, and leverage provided the essential structure of the Multi-bubble, and its principal architect, from 1987 to 2006, was Federal Reserve Board Chairman Alan Greenspan. He kept the liquidity flowing and declined to regulate the ultimate excesses, be they rogue derivatives, exotic mortgages, mergermania, margin-loan speculation, or a giddy succession of asset bubbles. Over his nearly two decades at the helm of U.S. monetary policy, total credit market debt in the United States quadrupled from under $11 trillion to a mind-numbing $44 trillion. The principal growth, moreover, came not in government debt but in private borrowing and credit — the unsung, but indispensable oxygen of grand-scale financial leverage and speculation."(xvi)

Als illustratie van die ontwikkelingen presenteert Phillips vijf mini-protretten. Allereerst schildert hij de 'Credit Card Nation' met zijn manische consumptie waarvoor huishoudens zich vergaand in de schulden staken

"Consumer psychology was the underlying, vital driver. Beginning in 1997, advertisers, retailers, and lenders drummed relentlessly, so that U.S. consumption rose from representing 67 percent of gross domestic product to 69 percent in 2002 and almost 72 percent in 2004. Nowhere else were consumers driven to pull so hard on national economic oars.
The New York Times rightly observed that "the machinery of American marketing, media and finance all encourage the consumption habit. Many consumers are unable to resist the overpowering mantra: spend,spend, spend." But because so many households had stagnant or declining incomes, they had simultaneously to borrow, borrow, borrow. And to make that possible, the United States, in the words of sociologist Robert Manning, became a 'Credit Card Nation'."(xvii)

Die stimulansen om geld uit te geven, zelfs al had je helemaal geen geld, werden nog sterker door de steeds verdergaande deregulatie die door de overheid werd doorgevoerd sinds ongeveer 1978 (Reagan 1981!) en waaraan tot aan 2008 niets werd veranderd.

"Astonishingly, the U.S. administration urged a citizenry already overburdened by debt that it was their patriotic duty to take on even more of it. Between George W. Bush’s first and second inaugurals, household debt increased by 39 percent."(xvii-xviii)

"Comparable growth opportunities for the financial sector came from a trio of frenetic, debt-enabled merger and acquisition waves. Until the 1990s, financial services purveyors were constrained by an old New Deal statute — the Glass-Steagall Act of 1933 — that kept commercial banks, mortgage finance, insurers, and securities firms apart and unable to collude with each other in the unsafe and speculative practices they had indulged in the 1920s. But cracks were expanding. In 1984, the Bank Holding Company Act was relaxed somewhat, and in 1997, banks were permitted to buy securities firms; in 1998, even before Congress had repealed Glass-Steagall, the Fed had on its own supposed authority approved a merger between Citigroup and Travelers, a leading insurance company. In 1999, Congress passed and President Clinton enthusiastically signed the Financial Services Modernization Act, which reallowed the mergers that had been prohibited six decades earlier and also established a new category of financial holding companies (FHCs)."(xix)

Tussen 1995 en 2000 waren er 11.100 bankfusies en ontstonden er 500 grote FHC's die nauwelijks aan regels waren gebonden. Daardoor konden ze bijvoorbeeld allerlei vage financiële producten verzinnen (SIVs,, SPACs, CDOs, CDSs) waarmee ze konden speculeren. Er werd in die periode 30:1 geleend om die aankopen en speculaties te kunnen verrichten. De FED ondersteunde een en ander door elke crisis te bezweren door de rente zo laag mogelijk te houden - wat voor de gewone burger betekende dat hij nauwelijks rente op zijn spaargeld kreeg. Omdat het niet in het belang was van de banken om af te lossen, werd die schuldenberg ook niet kleiner.

"I’m sorry if this book doesn’t make for pleasant reading. But I can’t underscore too strongly how much of the upsurge of financial sector size and clout during its quarter century of self-enlargement came from pretty much the same sort of flawed products, arrogance, and antisocial behavior paraded daily across the headlines. We are not talking about normal, safe growth. We are talking, as more and more commentators intuit, about the economic equivalent of metastasis."(xx-xxi)

"The most revealing surge, however, took place in the fast-money, highly leveraged, or regulation-evading categories — securities brokers and dealers, hedge funds, private equity firms, issuers of asset-backed securities, funding corporations, structured investment vehicles (SIVs), and the like. Although some categorizations muddle as much as they clarify, these groups soared from 1 percent of the assets in 1966 and then 4 percent in 1986 to about 18 percent in 2006. Nearly one fifth of the financial sector’s ships flew pirate or privateer flags. Hedge funds, still virtually unregulated, mushroomed from a couple of hundred in the early 1990s to roughly ten thousand in 2007, boasting assets of close to $2 trillion. Some funds were stereotypical gunslingers in derivatives or commodities."(xxiii)

"The fourth major expansion platform of our twenty-five year chron- icle relied on the huge profits and ever expanding zoo of exotic financial flora and fauna — derivatives, securitization, and the like."(xxix)

Dit soort riskante financiële instrumenten werden door mensen als Greenspan en Bernanke en door de handeklaren op Wall Street toegejuicht, omdat er met die instrumenten snel geld verdiend kon worden.

Een vijfde factor werd gevormd door een expansieve hypotheekmarkt waarin iedereen een hypotheek kon krijgen ook al was er aan een aantal simpele voorwaarden niet voldaan (zoals voldoende inkomen hebben). Ook die markt werd door Greenspan gestimuleerd door de rentes laag te houden. Phillips'conclusie:

"It would be convenient to be able to say that these five circumstances accounted for three-quarters or four-fifths of the financial sector’s takeover, so that the chickens coming home to roost in 2007 and afterward were related hatchlings of that same arrogant and misconceived expansion. Obviously, though, no such precision is possible. It’s my surmise, but guesswork is not proof. In societal terms, though, the balance must tip toward condemnation. Hyping Americans into something like card-carrying indentured servants obliged to support 70 percent of the U.S. economy was unforgivable. Letting the merger and acquisitions process run wild and create mega-firms beyond effective national regulation but disposed to experiment and speculate hither and yon was disastrous. Allowing the financial sector to metastasize using $15 trillion of borrowed money over a quarter of a century was calamitous. So was permitting the derivatives and securitization business to create its $11 trillion of this and $53 trillion of that with the most incestuous and uncontrolled webs of distribution and counter-party relationships. And turning the core of the American dream, home ownership, into a trap for the rest of that dream staggers belief. For these transgressions, combined with a malfeasance that has jeopardized tens of millions of jobs, turned some suburbs into incipient ghost towns, and bushwhacked retirement plans, university endowments, and pension funds, the principal blame can fairly be placed on big finance and on largely ineffective federal regulators and political overseers."(xxxi)

Phillips was dan ook een tegenstander van de reddingsoperaties ('bail outs') van 2008: de 'Frankenstein Fifteen' werden geholpen in plaats van ter verantwoording te worden geroepen.

"The deregulation of the savings and loan industry set in motion by the Reagan administration in 1981 is a jumping-off point. Edwin Gray, a California Republican who headed the Federal Home Loan Bank Board, agreed that philosophy encouraged the scandals and bad loans because oversight was generally neglected: "The White House was full of ideo- logues, particularly free-market types. They’d say ‘The way to solve the problems is more deregulation,’ and by the way, deregulation means fewer examiners" (see p. 41).
The 1999 repeal of the Glass-Steagall act and its restraints on financial mergers, pushed by Democratic President Clinton and his treasury secretary, Robert Rubin, as well as by Congressional Republicans, wound up creating the regulatory equivalent of the Cumberland Gap."(xxxii-xxxiii)

"As for the administration of George W. Bush, its eight years of pro- permissiveness attitudes and refusals to regulate or inhibit were predictable."(xxxiv)

"Over the years since 1987, however, no single person’s responsibility in these matters can match that of Greenspan, the libertarian and erstwhile follower of Ayn Rand. In testimony to a newly hostile Congressional committee in 2008, he allowed to being shocked, just shocked, at the failures of his beloved free market and self-regulation on the part of the financial sector. In a sense this was perjury, albeit of a philosophic and non-indictable nature. The Fed chairman well knew, from decades of personal experience, that Washington had long since ceased to leave the fortunes of banking and financial services to free-market vicissitudes.(...)
Overall, banking and finance constituted the sector of the economy that the Federal Reserve Board and the Treasury not only strongly favored, but had bailed out time after time, pumping money in where necessary to overcome bad managerial judgment or to stave off unwelcome free marketplace judgments. For a decade and a half now, I have described this flagrant practice as 'financial mercantilism' and discussed it at some length (see pp. 54–58)."(xxxvii-xxxviii)

"If any federal regulator was seen as generally benign by the financial sector, it was the Fed, for reasons one European scholar, Professor Willem Buiter of the London School of Economics, would distill a few months later: "The Fed listens to Wall Street. Throughout the twelve months of the crisis, it is difficult to avoid the impression that the Fed is too close to the financial markets and leading financial institutions, and too responsive to their special pleadings, to make the right decisions for the economy as a whole.""(xliv)

[Volgen nog allerlei concrete analyses en conclusies over de Amerikaanse politiek die ik minder interessant vind.]