Someone should come to terms with the fact that, although deregulation has run rampant under Republicans, it was the Clinton administration that repealed Glass-Steagall, surely one of the causes of the current crisis. How does the Democratic party free itself from the likes of Robert Rubin?

If Americans can’t remember that these problems are the direct result of deregulation from the likes of Phil Graham and John McCain maybe they deserve another 4 years of it under McCain.

Obama has a very big hole (many holes) to dig out of and he may or may not succeed. There’s little doubt that Obama rather than McCain is the one to help lead us out of this but if he fails it’s not all him, the mess is bigger than any one person’s ability to fix it.

Bush and Co. have really made a mess of things.

Ditto to Richard above. My concern, however, looking at the polls, is that Americans will not take this opportunity. It’s unclear why, given that the trickle down economy has led to vast amounts of wealth for some at the exclusion of the many, unsustainably so. I see a lot of people hurting. It’s obvious something new needs to be done.

Does the guest have any hope that Republicans will be forced to embrace a kind of new deal given the circumstances, or will they continue to be supply-siders?

I wish the Democrats would come back into power but I fear this may not occur due to the so-called Red States and their morality/culture issues vote. Does the guest think the Republicans could do something new or are they too married to the “The market will fix itself” philosophy? Thanks.

Thanks On Point for finally taking the right approach to this story. Free markets are supposed to be self correcting and so are democracies. These bail outs are desperate attempts to salvage the status quo. If the failure of these huge corporations were properly allowed to play out, massive economic turmoil would result and people world wide would suffer the consequences… such suffering would lead to political, social, and economic revolutions of a massive scale, just like in The Great Depression.

When our institutions are in tremendous disorder and failing the common man, drastic revolutions in thought and action are exactly what is needed and this is what should happen in a legitimate democracy. Our government is merely postponing the inevitable by squirming to protect the wealthiest one percent of the population, but beneath these band-aids, sores are festering. Republican “leadership” has so terribly failed this country that revolution WILL COME! - V

Kuttner has a point, Obama can use this crisis to discredit the whole republican economic ideology and win the election.

Hark back not only to FDR but to FDR’s critics. I’m thinking specifically of Brandeis, who was advisor to Wilson and indirectly but effectively to FDR. Brandeis admonished strongly against trusts and big business; but also against big government.

FDR’s folks thought Brandeis’s faith in small business was too 19th century. However, his warnings regarding being too big to be understood pertains today.

On Point should invite Philippa Strum, Brandeis’s biographer, to describe his genius not only in law but in economics and in the balance of the interests of labor and capital

Your discussion of the financial crisis so far has ignored the root of the problem. The basic reason people were willing to pay unrealistic prices for homes is that “the supply of homes was lower than the demand”. If there was an supply of homes large enough to meet the demand prices would not have escalated to unrealistic levels and buyers would be able to pay their mortages.

There is a disconnect between the creation of jobs and the creation of places for people to live. There is a disconnect between the number of immigrants coming to the USA and places for them to live.

We need planning beyond the narrow (NIMBY) interests of local towns who find the best thing to do is to close and lock the door. We need informed leaders, not the narrow self interests of political parties.

I don’t agree with Kuttner that Obama is the door to this ‘New Deal’, he just said it, “its a sign of the power Wall Steet has over both parties”.

I am for investment in public works, but skeptical that in todays climate it wouldn’t just be outsourced to corporations at inflated prices to taxpayers, just like our military budget.

This financial breakdown and corporate greed should be an open door for Nader/Gonzlez not for Democrats, the second line of free market capitalism.

Drew, the housing bubble was not due to a shortage of homes, but rather was due to a massive infusion of world capital into the US mortgage market, spurring a frenzy in homebuying with no logic restricting the amounts people were willing to pay for a house. For a truly amazing and award winning program covering this topic in only an hour, listen to “The Giant Pool of Money” at the “This American Life” website. Here is the link: http://www.thislife.org/Radio_Episode.aspx?sched=1242

A little research on AIG has yielded the following information: the company was begun in China! But more importantly, “six of the directors own significant portions of Starr common stock, with Hank Greenberg’s 21.86% share leading the way. These six directors are all senior management at AIG.”

I thought that this type of self-contained structure was now illegal. Apparently not! See the following link:
http://www.fool.com/news/foth/2002/foth020212.htm?source=EDSTRM‘);

Regulation should absolutely be put in place that prevents the owners and functionaries from rewarding themselves and supervising themselves.

Should we be bailing out people who have put their interests above those of the company and other stockholders, and increasing their profit on our dime?

Outrageous!

Mr. Kuttner is right “ON POINT”.
If you are ready for real change in our economic system then become part of that change. When I heard Barack Obama speak fours ago I heard fire in his words and delivery and decided I would support him all the way. His handlers have tamed him down way too much, that fire is now but a tiny spark. We need a bonfire, not a spark to get out the vote for real transformation and to overcome the sea of lies launched by the right wing millionaires.
Lets all help get the campaign fired up again. Contact the Obama handlers and make your wishes known
http://my.barackobama.com/page/content/contact/

Transformative indeed. We need leadership that recognizes and acknowledges that government, in cahoots with the ‘market’, had made it totally unattractive to save for retirement and instead created a culture where regular people are encouraged to invest in real estate and mutual funds in order to have a chance of not being more impoverished after they stop working (either voluntarily or involuntarily) than they are while they are working. Now all those ‘assets’ have been lost, stolen, or devalued beyond belief. Government owes a entire generation some restitution of those assets.

The problem with “things as they are” - financial institutions and insurance companies acting like financial institutions in crisis; health care and health insurance priced out of reach or repackaged inconveniently or more expensively; record oil company profits in what can only be described as less than ideal supply conditions; mortgage institutions in crisis - is that all these institutions and others are filling their pockets by taking bigger and bigger bites out of the income earners’ paychecks.

The notion that personal debt now serves as the replacement for lack of income growth is critical. Many of us are now at the point where servicing our debts are all we can do, with no real hope of eliminating the principal, and those of us whose “creative” mortgages now have dramatically increased monthly payments are now in default. As such we are no longer in a position to afford higher insurance deductibles or higher premiums, higher gasoline prices to get to and from our jobs which are 20-40 miles from the suburban homes we can no longer afford, or the losses in our investments wrought by the people who gambled that we would keep buying those big houses and that the mortgage industry could ride our backs forever.
Indebted as we are, and as fundamental to the entire free enterprise system as we are, and as that “system” has over the past 30 years or more sought more and more convoluted ways to enrich its highest earners (and not coincidentally the politicians of every party who turned a blind eye), we may as a nation be at the point of collapse.
Whether corporations directly contracting with physician groups, bypassing insurance companies, as the American Academy of Family Physicians proposes, will stave off further strain on our health care system remains to be seen. Whether a new administration can manage the economic woes, rather than merely reacting to the latest calamity, is unknown. That we can reclaim government from the highest bidder is essential if any solution to our current woes is to be even sought, much less implemented.

We, as a people need to get back to being and living honest. Dishonest companies with dishonest business practices and employees should fail and they should be jailed, not paid to leave. Govt should get involved when they see this happening, but bailouts of any kind just perpetuates the problem.
The “buy now, pay later” crowd has helped.
NO MORE LAWYERS IN PUBLIC OFFICE!! Who finds loopholes in laws except the crooked lawyers looking out for themselves.

Re AIG: whatever you think of this corporation, the fact is that if it went under a great many people (here and abroad) would lose their pensions and insurance (including people on the Gulf coast just hit by a hurricane). In addition, a failure of this corporation would great accelerate a world-wide recession. It should also be remembered that the US gov’t LOANED AIG the money at 11%+.
There continue to be many ways that AIG can avoid bankruptcy and pay this loan, including selling off assets. So I reluctantly support this move. Right now we cannot go back and changed everything past US administrations did wrong — we have to deal with the mess.

I would also submit to you that 95% of Americans spend money they haven’t earned yet, buying things they cant afford, to impress people that they don’t even like.
What is happening to our society?

What a vacuous windbag! I listened for 30 minutes of this guy blaming some undefined and unspecific deregulation and basically saying the government should just do more regulation without saying what it should do. Government certainly needs to have a role in defining what contracts between people it is willing to enforce with its police powers and what contracts are illegal… for instance, 20% down payment on a house should be required again in order for the government to enforce that mortgage contract.

But to irresponsibly call for a politically based economy where government decides who gets the capital to replace a free market one, which seemed to be where this “progressiveness” is heading… centralized capitalists with guns… is nuts.

We need rational regulations and a government that will reverse market consolidations. Not one that is just going to let businesses become too big to fail and then take them over. Right now the “progressive” solution seems to simply let Bank of America consume all the assets of all the other banks and financial companies and then to have the government step in and run it. Sounds like a political power grab, not a way to create a healthy economy where risks are spread out among people that are actually responsible for outcomes.

If a company is too big to fail, then it is simply too big and the government should be stepping in to break it up.

Thank you ON POINT for one of the best shows you have had on this subject.

I agree 100% with Robert Kuttner’s outlook and how to move forward.

Unfortunately as vast swaths of the American public listen to right wing radio and the power of these people is not to be underestimated.

The other issue is the republicans seem to think that we Americans are stupid. Hence the recent rhetoric on ‘change’ from McCain as he try’s desperately to change his platform in what I see as a fake, he’s a phony. Obama needs to hit hard on this economy and McCain’s voting record.

If you look back to before the Republican convention, a mere 3.5 weeks ago the republican platform was that Obama lacked experience and McCain was a maverick.

Now it’s all about some strange notion of them reforming and change and more empty rhetoric.

Maybe a lot of Americans are dumb, or in denial may be a better phrase.

Do people really think that a McCain/Palin administration would do anything that even comes near to what Mr. Kuttner is talking about?

The republican platform for the last 30 years has been to dismantle the New Deal. They hate FDR, and they hate everything he stood for. I would also like to add a lot of what guided FDR was his wife Eleanor Roosevelt who was responsible for a lot of the progressive ideas we take for granted in today’s democratic party.

http://en.wikipedia.org/wiki/Eleanor_Roosevelt

Pat did you listen to what he was saying?
Does not sound like it.

He did say that the regulation would have be a rational and well considered.

What’s your bright idea, let these people to take the bailouts and to go back to the ‘free market’.

Pat did you listen to what he was saying?
Does not sound like it.

He did say that the regulation would have be a rational and well considered.

I see your a right winger, so no matter what any progressive says you will come up with a complete negative response.

That’s fine, but how does the republican party, how are the party who are responsible for this mess, what bright ideas do they have? None what so ever.

There is plenty of blame to go around for both parties however.

Barney Frank should resign as the Chairman of the Financial Services Committee for his involvement with the Freddie and Fannie mess.

I think we definitely need a “new deal”. However, the “new deal” is WE - both individuals and all levels of government - need to stop the blame game and start looking at the mirror for a solution. No one forced me to buy a house that I cannot afford, buy a low-mileage vehicle that I cannot afford the gas, max out credit cards that I cannot afford the payments, go enjoy my days off that I could spend enhancing my skills for my current or new jobs.

The great thing about this country is - for a majority of people here - they can make their own decisions.

Governments do have to play a strong role in policy - regulation or not - but it is all on us.

I think people should finally start questioning one of the central postulates of the free market ideology dating back (at least) to the 18th Century. The one that says that the market participants each acting in their own best interests are thereby advancing the interests of the society as a whole. Perhaps that was the case back in the day of “neighborhood butchers.” However, today huge multinational corporations acting solely in their own interests are capable of doing so much harm to the environment, the consumer, the labor and the very economy in which they operate, that the governments simply have to regulate them.

Having rules of the game does not equate with socialism. I mean, look at the American national passtime. The game is tightly regulated and so is the league. Does it make baseball a socialist activity?

“I think people should finally start questioning one of the central postulates of the free market ideology dating back (at least) to the 18th Century.”

People will start coming around to your view when they realized that Adam Smith’s “invisible hand” stole their wallets.

[...] Kuttner NPR Link « Reaction to McCain’s Speech [...]

Another great program going in-depth into economics. Would love to hear more like it.

Please give Dr. Kuttner a chance to answer Denise’s question about the CE0’s walking away with their golden parachutes as we taxpayers bail out the companies for the mess the CEO’s caused.

Couldn’t Paulson do a little negotiating on our behalf? E.g., “We’ll save the company if you take a modest retirement but not otherwise.”

Some really should ask the question, “who was putting out the warning signs of this impending crisis and calling for regulatory reform across the country for the last several years?” Answer: many community organizers, that’s who. ACORN (for all their faults) and many other community organizations were grappling with this and calling for reform for the last 10 years.

This was one of the worst instances of Tom Ashbrook’s obnoxious manner. Why the hell insert a clip of Sean Hannity being an arrogant shit to Kuttner when Kuttner appeared on his program. Is that the measure of discourse that Holbrook thinks should count? He was so busy saying that Kuttner’s message was stillborn that he wasted plenty of time that Kuttner could have used much better. Kuttner has been right on these issues for a long time. Who needs Holbrook’s childish “yeah but”-ing him to death. I bet he’d be much more respectful toward some Republican flunky — mustn’t look like part of the “liberal press”. No that wouldn’t do at all.

Chris Lydon, please.

A New Deal is not the answer at this time your nuts to think most Americans would take jobs in manual labor. The Pride that we have displayed over the last 15 years is a sickness. Which has been caused by the great expanse of American wealth or should I say spending. Personal debt is out of control and we the people need a swift kick in the pants to knock us back to reality. Long term Government intervention is like a using Band-Aid for cancer. The reform needs to reach far deeper then government aid or programs.

This issue will only adjust after we as a nation wake up, understand what it means to living with in your means. We need to be accountable for our personal choices, spending, and actions from top to bottom. and then hold our leaders to this standard, to vote is a good start. More government is not the answer.

The accountable parities in this falling of the markets can be blamed on us all. Spending habits into debt, the sue happy crew killing our health care system and the ability to jump into bankruptcies with a slap on the wrist madness and have been the enablers for our drug of choice, Greed.

To over simplify this and say it’s the republican philosophy that is at fault makes as much sense as saying the man is a drunk because prohibition was repelled. simply because you have a choice, agency, is not reason to find fault in the freedom.

Kuttner got two things right and one things seriously wrong . . .

Right:
1. The recent failures in the financial markets and the need for Fed intervention represent a repudiation of the laissez faire economic policies of the GOP.

2. The Democrats certainly “should” be able to make political hay over this by “connecting the dots”, but they only have a short time to do it.

Wrong:
Kuttner’s idea that there is any realistic possibility to “transform” our economic culture. Kuttner’s zeal for this has the same disconnected-from-reality hubris that the Neocons’ fantasy of transforming Iraq into a Jeffersonian democracy, or Jeffery Sach’s theory in the early 90’s that the Russian economy could become anything other than the corrupt kleptocracy that it is.

Kuttner’s examples of Lincoln freeing the slaves and FDR’s New Deal overlook a fatal difference with today. Lincoln had the “encouragement” of a large well-organized, passionate grass-roots abolitionist movement in the US. FDR had the support of an equally large well-organized, passionate grass-roots left-wing labor movement.

But there is NO large well-organized, passionate grass-roots progressive movement in the US today. The American left is just a tiny vestigal and largely ineffective movement of idealists and aging hippies meeting in Unitarian church basements. It’s not an effective political force.

The sorts of change Kuttner dreams of must come from the grass roots - it can’t be imposed from the top - and grass-roots American culture is not interested in that sort of reform.

This was one of the worst instances of Tom Ashbrook’s obnoxious manner. Why the hell insert a clip of Sean Hannity being an arrogant shit to Kuttner when Kuttner appeared on his program.

I thought it was very appropriate to include that clip, mainly because it illustrates my point, above. Namely that it shows the sort of reception Kuttner’s ideas will receive outside of the friendly progressive and academic environments of places like Boston or NPR.

I’m a gardener - one thing I know is that you can’t grow plants in the wrong soil. The US does not have the right cultural soil for progressive politics! That’s why we don’t have national health insurance; it’s why the farthest-left political party with significant seats in our national legislature (the Dem’s) is still in the pockets of big corporations, it’s why we can’t wrap our heads around the fact that we still produce more per-capita CO2 than any other major country, and it’s why the whole country goes ga-ga over Sarah Palin. This is a corporatist right wing country that barely tolerates liberals as long as they keep a low profile.

While I agree with Landon above that people for the most part have a choice whether to spend themselveds into bankruptcy or not, I disagree that that’s the end of the analysis. Freedom has its limits in any society. That is you are free to do whatever you want as long as you are not harming others. This Greed thing amplified by the Wall Street innovators free to do what they want puts us all into bankruptcy. And to that I object. I think the government does have a role to play in the same way it prohibits smoking at public places or serving you transfats at restaurants. Therefore, I blame Republican ideology for closing their eyes on free activities of greedy free agents. And by the way, where is Bush in all of this?

To over simplify this and say it’s the republican philosophy that is at fault makes as much sense as saying the man is a drunk because prohibition was repelled. simply because you have a choice, agency, is not reason to find fault in the freedom.

I agree with PART of your thesis. I agree that it was a failure of individual reponsibility that caused the explosion of mortgage defaults, and not anything that Wall Street did. Just as I am not required to spend up to my credit card’s spending limit, likewise the availability of easy credit is no excuse for people to take out ridiculous mortgages.

BUT, where I disagree is your claim that no regulation is required. The problem was not the defaults, per se. Only about 2% of all mortgages went into default and if risky mortgages were properly identified, packaged and tracked they would not have been bundled in with good debt obligations. In other words, they would not have brought down the system.

Furthermore, institutions with fiduciuary reponsibility took excessive risks. The lack of transparency, lack of proper assessment of mortgage quality, and excessively risky investment practices involving complex instruments that they didn’t even understand led to the failure of Fannie, and Freddie, and Lehman Brothers, and others which, by today, have resulted in a virtual freeze-up of the credit markets. Banks are now afraid to even lend to each other. Proper regulation of investment banking would have prevented this.

According to some comments here investing in the crumbling infrastructure is not a good idea to help the economy.

So I guess the people who suggest this as a non-starter are willing to let more bridges fall down and for the roads and rail lines to just fall apart to the point that we are no longer even able to have our local commerce work. Here in Boston and the suburbs water main breaks are all to common. You can’t help but to wonder about the bridges, some look like they are ready to fall down. I live in Boston, yet I can’t get a fiber optic connection.

Is this what people are saying?

My wife is from Japan, she has friends who live in the middle of know where in Japan who have this.
They live in a rural community and they have a fiber optic cable connection. It’s the reason they moved there both work from home in a high tech industry. I live 20 minutes from downtown Boston and I don’t. What’s wrong with this picture.

I don’t think that investing in this is the one panacea that will save our economy. However it seems to me that not investing in this seems foolish.

s this what people are saying?

No, I think what people are saying is that infrastructure investment is not likely to help the economy much. The Japanese government tried to pull out of their recession/depression a decade ago with huge infrastructure investments, driving their national debt to 130% of GDP and it still didn’t help. It’s been suggested that they were not smart about where they spent the money -lots of bridges to nowhere- but there’s no reason to think we’d be any smarter.

On the other hand, we definitely need to invest in infrastructure for its OWN sake - crumbling bridges, etc, are dangerous, and slow down transport, and waste gas (e.g., because trucks have to take alternate routes)

WRT fiber optic - I can’t get fiber optic in my town either and when I looked into it, it was not lack of investment capital that caused the problem - it was exclusive contracts by competitors like Comcast that locks fiber-suppliers like Verizon out. This is an example of where we can induce lots of infrastructure investment (using Verizon’s money) by just changing the laws on exclusive internet/cable contracts.