Foreclosures, Bonuses and the STREET Goes On

A number of articles today bring together an underlying theme of this blog. The first is from USA Today, detailing an unexpected rise in foreclosures for the first time since July (a presumed peak): www.usatoday.com/money/economy/housing/2010-01-13-foreclosures-rise-in-december_N.htm. Just to give perspective, that is 349,519 families that lost their homes last month. Another 2.4 million are expected to happen in 2010. In 2009, the total was 2.8 million homes, the year before 2.3 million and around 1 million in 2007. These numbers are staggering when put together, but there is, of course good news as well.

Things are coming up roses for banking, which some have erroneously blamed for the financial crisis (read sarcasm here). As reported in the Wall Street Journal today: “An analysis by The Wall Street Journal shows that executives, traders, investment bankers, money managers and others at 38 top financial companies can expect to earn nearly 18% more than they did in 2008—and slightly more than in the record year of 2007.” (http://online.wsj.com/article/SB20001424052748704281204575003351773983136.html#mod=todays_us_page_one). That makes sense, right?

To bring the two articles together, is an oped by Nobel Lauriat Paul Krugman regarding the current Congressional hearings regarding reregulation of the financial sector (www.nytimes.com/2010/01/15/opinion/15krugman.html?hp). Krugman makes the very valid point that it is absurd to talk to Wall Street about fixing Wall Street, when they are so blind to the truth and so inured to the idea of profits over people and the common good. Historically, as I have mentioned many times before, the average person does better when markets are regulated. Wall Street does better when it is not. Yet the marginal return to regulation is better for everyone, given the pain almost all of us feel during financial crises like the Great Depression, 70s stagflation, the 87 crash and the current financial crisis. We need to remind politicians and Wall Street that the country is not built on the elite interests alone and that we need to rebuild a fair and just American economy before we are all forced to fold our cards and start the slow descent into third world country status. It is time for the people to stop listening to foolish talking heads regurgitating old Reaganomic lies and start listening to economists who know what they are talking about. Governments might be bad and dangerous sometimes, but they are necessary if we are to escape this mess.