Unintended Consequences
By Mitch Berg
Government (or pseudogovernmental) actions have unintended consequences; these consequences are often worse than the original problem.
History is full of such examples. Peter Huber in City Journal Bdemonstrates how Obama’s “Green Economy” is going to screw up the ecology even faster than whatever’s happening now.
Snip:
Ten countries ruled by nasty people control 80 percent of the planet’s oil reserves—about 1 trillion barrels, currently worth about $40 trillion. If $40 trillion worth of gold were located where most of the oil is, one could only scoff at any suggestion that we might somehow persuade the nasty people to leave the wealth buried. They can lift most of their oil at a cost well under $10 a barrel. They will drill. They will pump. And they will find buyers. Oil is all they’ve got.Poor countries all around the planet are sitting on a second, even bigger source of carbon—almost a trillion tons of cheap, easily accessible coal. They also control most of the planet’s third great carbon reservoir—the rain forests and soil. They will keep squeezing the carbon out of cheap coal, and cheap forest, and cheap soil, because that’s all they’ve got. Unless they can find something even cheaper. But they won’t—not any time in the foreseeable future.
Read the whole thing; it’s Economics 300, which to be fair seems to be about 200 farther than the Administration ever got.
in unrelated-yet-germane news, Charles Gasparino at the NYPost looks into the role Elliot Spitzer’s “investigation” (which, according to the story, was mostly a repackaging of AIG’s own internal probe) played in turning a former pillar of good, sober management into financial chum and a not-so-funny punchline of the current economic crisis.
Conclusion:
THE former AIG executives I’ve been interviewing lately say many people deserve blame for the tragedy that is AIG: Sullivan, for taking his eye off the growing exposure; Greenberg, for hanging onto power as CEO even in his 80s and for creating the financial-products group without grooming a competent successor — and, of course, the guys who directly ran the credit-default-swap business.
But they save their harshest criticism and contempt for Eliot Spitzer for how his investigation, as trivial as it was, so consumed AIG’s management at possibly the most important time in its history — and for nothing more than a few cheap headlines.
The whole thing is worth a read.
April 20th, 2009 at 1:35 pm
AIG. “A former pillar of good, sober management.”
American Insurance Group, right? That AIG?
Wow.
You’ll believe anything today.
April 20th, 2009 at 2:47 pm
Yeah they were all set to send the memo shutting down the CDS shop, but Elliot Spitzer got in the way. And then they totally got caught up in Burn Notice . . .
Conservatism means it is always the fault of someone else.
April 20th, 2009 at 5:05 pm
You’ll believe anything today.
Dunno, Clown. Did AIG have a long track record of being fairly well-run, or did it not?
Or is this just “Clown passes on knee-jerk liberal talking points” day?
April 20th, 2009 at 5:06 pm
Conservatism means it is always the fault of someone else.
Liberalism means facts, history and nuance mean what we say they mean.
April 20th, 2009 at 5:06 pm
But it IS hard not to get caught up in Burn Notice. Just saying.
April 20th, 2009 at 5:10 pm
Rick, if you believe that’s a fault of conservatism, you’ve got troubles.
Did you catch the BAC conference call?
No? Can I summarize something that will NEVER make it into the mainstream media since it would embarrass Frank and the other liberals?
CRA loans make up 7% of their portfolio. And 24% of their failures. And we’re still early in the Alt-A fiasco, expect those numbers to climb.
Bad policy meets bad economics and government mandates. Liberalism in action!
April 20th, 2009 at 8:38 pm
“Did you catch the BAC conference call”
No. Can you provide a link?
April 20th, 2009 at 9:34 pm
No offense, but you know dick-all about AIG. Let’s just say you’ll look long and hard in the business press to find the company – by which Angryclown means former longtime CEO Ace Greenberg – described as “a pillar of good, sober management.” Any more than you’ll find Donald Trump described as “an example of understated class and impeccable breeding.” It just shows you’re making stuff up. Businesses are *all* “sober and well managed” in your right-wing cant. Say what you will about the company, that was never AIG’s rep. You have a Republican following – must be at least 50 percent insurance agents, right. Any of you kooks in the insurance biz want to tell Mitch whether AIG was considered “a pillar of good sober management”?
April 20th, 2009 at 10:29 pm
Rick, the call itself is here: http://finance.aol.com/event/bank-of-america-corporation/bac/nys/conference-calls.
Independent confirmation is here: http://www.businessinsider.com/okay-maybe-the-community-reinvestment-act-is-a-problem-2009-4
Two links is sure to put this in moderation.
April 21st, 2009 at 6:03 am
Two quick things:
Just for the record, AIG is “American International Group.” We’ll assume that Clown just made a typo on that one.
And nerbert is right about B of A. There’s a long story involved in how B of A got a bad balance sheet (and I know some of the story because I used to work for B of A), but you can boil it down to two events — the acquisition of Countrywide, which they wanted to do, and the merger with Merrill Lynch, which they were forced to do. Countrywide had a lot of very bad loans on its books, many of which are reflected in the numbers, but the problem is Merrill Lynch.
Here’s the good news for Peev and RickDFL — since Henry Paulson was standing near the altar holding a shotgun on the B of A/Merrill deal, you can blame Bush for it!
April 21st, 2009 at 7:54 am
Nerdbert:
“Independent confirmation” is not when B repeats what A says. To be ‘independent’ B needs independent evidence that what A says is true.
April 21st, 2009 at 9:23 am
Mr. D corrected: “Just for the record, AIG is “American International Group.” We’ll assume that Clown just made a typo on that one.”
Quite right, D old chum. Angryclown’s girl has been sacked.
April 21st, 2009 at 9:37 am
Rick, “independent confirmation” is independent confirmation of my report in case you didn’t care to actually listen to the call. After all, nobody but BAC could legally look at the documentation for the loans.
April 21st, 2009 at 9:48 am
You’ll have to forgive RickDFL, nerdbert. He’s very “concrete”, and a very dense mixture of that.
April 21st, 2009 at 9:52 am
I just saw an interesting news segment about lithium, as in batteries, which is becoming highly desirable not only for our computer and cell phone batteries, but for its efficiency in powering electric cars.
A majority of the currently known deposits are in Bolivia, on the Uyuni Salt flats, with a lot of the remaining known deposits located in a few other South American countries – and Tibet. (No surprise China wants to hang on to it.)
We are a long way from efficient clean coal technology; it would be a lot smarter of us to focus on some of the other necessary raw materials that we need for our developing technology.
We have had such a bad decade in terms of accurate accounting and enforcement, that the problems of companies such as AIG have not yet been fully revealed. There is more to come, and unfortunately, we don’t seem to be working at getting to the bottom of the problem very enthusiastically.
AIG was adequately run a long time back; but I wouldn’t call AIG a well run company any time in this millenium.
I would encourage familiarizing with the current observations of the prominent economics and law professor, Elizabeth Warren, who is also the chair of the TARP congressional oversight committee. Ms. Warren is one very knowledgable and savy lady.
April 21st, 2009 at 8:59 pm
Nerdbert:
“CRA loans make up 7% of their portfolio. And 24% of their failures”
Actually what they said was “Community Reinvestment Act portfolio totals about 7% of the residential book, but about 24% of the losses.”
So, for example, CRA contributes O to their much larger loses in Home Equity loans.
Which is the whole point. No one every said that bank might not lose more money on CRA conventional home loans, compared to their other conventional home loans. But the economic crisis was not caused by problems in the conventional home loan market. It was caused by the sub-prime (non covered by CRA) market which then tanked the credit default swap market.
April 22nd, 2009 at 8:22 am
RickDFL said:
“No one every said …”
When you say that, RickDFL, it’s time to look out for the big blocks of BS.
“But the economic crisis was not caused by …”
Ew, watch your step!
April 23rd, 2009 at 9:38 am
Thanks for the links Nerdbert.