Editorial
Very few think Alan Greenspan’s retirement was anything but a timely decision before his juggling act fell apart. Of course hindsight is clearer for most, but not for economists. A wonderful trait of economists is hindsight and foresight are often both in clear focus. For example, when HSBC bought predatory lender Household International, leadership at the time realized the deal was time sensitive. Make the money, make money for your friends, and retire before everything crashs around you. The time to retire is the most important critical goal, not the long term fiscal effects of your decisions. It is sound third grade logic, in practice by 8-year olds every day, although they are probably not thinking of retirement.
The current financial crisis, evidenced by the fall of Bear Stearns, is a result of failed economic policy that kept the United States economy moving after the September 11, 2001 terrorist attacks. Some say fundamentalists struck at the heart of America’s financial district. American excesses and influence around the world were the targets. The idea was to take something valuable away from Americans in a sudden, shocking, and coordinated manner.
Vice President Cheney, not known for holding personal reality checks as often as he probably should, said today that oil prices are tied to supply and demand. Cheney did not address the fact that the price of a barrel of oil was totally and completely separated from the price of a gallon of gas at the pump. That separation took place last summer. When prices first rose above $3 per gallon the Chinese were blamed, saying they were developing, thus using much more oil.
perhaps Countrywide should have looked at lending standards when the company had a chance. Instead, foreclosure rates have doubled at Countrywide. In addition to becoming a cash flow problem, issues such as tax liability and carrying costs now concern Countrywide. Lawsuits are sure to follow. In the discovery phase some analysts predict a startling similarity between what was commonly acceptable and previous allegations against Household International and Ameriquest.
One news article urges people to be smart about their biggest investment – their home – while another article says people are giving up. I suppose it depends on your track record and your lender. Some mortgage lenders have nothing to lose either way, such as HSBC, where losses continue to mount and investors are urging the bank to dispose of HSBC Finance. Unfortunately nobody wants to buy the troubled unit, once known as Household International. Yes, it is a good idea to be smart about your biggest investment, but logic and intellect tells us to be realistic.