G-20, Assessed

The Economist offers its first cut on the weekend G-20 summit:

Whatever the tactical reasons, the success of this weekend’s gathering has permanently changed the machinery of international economic co-operation. The centre of global economic summitry has shifted from the G7 (the rich countries’ club) to a broader group. A follow-up meeting has been scheduled for April 30th 2009. Even in areas that primarily affect them alone, such as the regulation of the most sophisticated financial instruments, rich countries will no longer set the agenda on their own.

Read the whole thing. Meanwhile, Tom Barnett is not impressed:

Simply put, the agenda right now is too vast and there are two many competing great powers for any one solution to apply. So expect a boom market for new rules over the next few years, but no one great pact. Viewed in this light, you take the meager results of the recent summit in stride.

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G-20 Summit Results

Bush or no, there’s consensus among the leaders of the world’s most important powers on the causes of the meltdown:

3. During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.

4. Major underlying factors to the current situation were, among others, inconsistent and insufficiently coordinated macroeconomic policies, inadequate structural reforms, which led to unsustainable global macroeconomic outcomes. These developments, together, contributed to excesses and ultimately resulted in severe market disruption.

The summit communique can be found at the NYT. There’s also agreement on the need for cross-border regulation:

Supervisors should collaborate to establish supervisory colleges for all major cross-border financial institutions, as part of efforts to strengthen the surveillance of cross-border firms. Major global banks should meet regularly with their supervisory college for comprehensive discussions of the firm’s activities and assessment of the risks it faces.

The Washington Post offers a good summary of the outcome. Sarkozy is happy.

Bubble Real Estate

Matt Ygelsias is (partly) in a forgiving mood about the housing bubble:

Someone who takes out a loan they can’t afford and then defaults doesn’t deserve to be “blamed” for anything. They suffer consequences for their actions. Much as the person who issues a loan the borrower can’t pay back doesn’t really deserve “blame.” Both parties to such a deal suffer from the collapse of the lending agreement. Everyone has an incentive to avoid lending money to bad borrows and an incentive to avoid becoming a bad borrow. But mistakes happen and people do dumb things, and then they bear the consequences. That’s life.

Maybe. But when you look at foreclosure records, as I have, and see that banks were offering and people were accepting home mortgages at consumer-credit levels of interest, you have to wonder.

At Least It’s An Ethos

Dan Riehl:

Some of the alarmists out there might want to take a moment to consider all the ramifications here. It may sound harsh, but the Great Depression produced many things — one of them was called the Greatest Generation.

Which on the heels of the Brooks column calls to mind the best quote from The Big Lebowski: “Nihilists? Fuck me. I mean, say what you like about the tenants of National Socialism, Dude, at least it’s an ethos.”

Brooks: “Nihilists”

An extraordinary columns today from the NYT’s David Brooks, pronouncing that the GOp has moved well beyond intellectual bankruptcy:

This generation of political leaders is confronting a similar situation [to the 1933 economic crisis], and, so far, they have failed utterly and catastrophically to project any sense of authority, to give the world any reason to believe that this country is being governed. … And let us recognize above all the 228 who voted no — the authors of this revolt of the nihilists. They showed the world how much they detest their own leaders and the collected expertise of the Treasury and Fed. They did the momentarily popular thing, and if the country slides into a deep recession, they will have the time and leisure to watch public opinion shift against them.

Read the whole thing.

Bail Out

Ross Douthat, in the wake of Monday’s House vote:

The most likely scenario, as of 3 PM this afternoon: The stock market continues to drop. Some version of the bailout passes in the next week. The American economy staggers into a recession, but passes through the storm without 1930s-style suffering; the Republican Party is not so fortunate. Even though most Americans claim to oppose the bailout [update: not anymore], the House GOP’s obstructionism is widely viewed as having worsened the economic situation; the fact that these are contradictory positions does not faze an electorate that wraps all of the country’s current troubles up, ties them with a bow, and lays them at the feet of the Bush-led GOP. John McCain loses by a landslide in November. The Democratic Party regains years or even decades worth of ground among the white working class, consolidates the Hispanic vote, and locks up a large chunk of highly-educated voters who might otherwise lean conservative. The muchdiscussed liberal realignment happens. And a politician running on a Ron Paul-style economic platform does very, very well in the GOP primaries of 2012.

The Dow dropped 777 points. Thanks, assholes. Main Street is getting antsy:

The United States Chamber of Commerce vowed to exert pressure, warning in a letter to members of Congress that it would keep track of who votes how. “Make no mistake,” the letter said. “When the aftermath of Congressional inaction becomes clear, Americans will not tolerate those who stood by and let the calamity happen.”

Community Reinvestment

Stephen Bainbridge rubbishes the idea that the Community Reinvestment Act caused the Wall Street meltdown:

Put simply, the freezing up of the credit markets doesn’t have anything to do with either affirmative action or illegal immigration, and people who believe it does are on a par with the conspiracy theorists who think fluoridation is a Chicom plot.

When you look at the data, it’s true that minorities are slightly over-represented in the sub-prime mortgage market. Yet, whites (non-minorities) received 72.5% of subprime mortgages. Blacks got 16.2% of subprime mortgages, which isn’t all that different from the 12.4% of the general population that blacks comprise. The Hispanics about whom Malkin is so hysterical got only 6.2% of subprime mortgages, significantly less than their 14.8% of the general population. But you don’t find an analysis of that data at blogs like those of Malkin or Krikorian.

Bainbridge comes to his variant of conservatism by way of intellectual honesty. And his numbers square with what I’ve seen in pawing through foreclosure records.