Moral Hazard On Wall Street

White House spokesman Robert Gibbs went after Rick Santelli of CNBC during today’s White House Press Briefing. He was responding to Santelli’s on-air rant yesterday from the floor of the Chicago Board of Trade. Santelli was mocking Obama’s mortgage plan as helping “losers. He was cheered on by the traders around him.

Below is the rant that drew the White House’s attention:

The White House could not have asked for a better target. The spectacle of a Wall Street blowhard going after Obama’s plan while millions of Americans are losing their homes demonstrates exactly the kind of thinking that has gotten us into this mess. While Wall Street has been taking billions in bailout money from the government for bad behavior, ordinary Americans – and that includes the millions of Americans who bought their homes and paid their mortgages on time – have watched what is likely to be their biggest investment turn into a money pit and a financial stranglehold as property values have plummetted up to 40% in parts of this countryWatching Wall Street traders boo the Obama plan on live TV should remind Americans whose side these people are on – and it ain’t Main Street. After taking 350 billion dollars of taxpayer money for their bad behavior, these people are booing an underfunded 75 billion dollar mortgage rescue plan as “moral hazard”. Their behavior is hazardous to our morality.

So, Robert Gibbs and the Obama Administration have Rick Santelli, Wall Street blowhard, to thank for exposing Wall Street’s hypocrisy. It was great television.

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6 Responses to Moral Hazard On Wall Street

  1. Joe Beau says:

    Great post; another interesting video I dug up is here, it’s Art Laffer, infamous reaganomics personality making all the wrong predictions:

  2. John Chynoweth says:

    Who’s side do you think Obama is on? He has received record amount of donations from wall street and will end up giving trillions of dollars (not billions like you mentioned) to them in bailout money. Dean Baker, one of the few economists who saw what was coming all along, pointed out that it’s almost like appointing Osama bin Laden to run the so-called war on terror. Robert Rubin and Lawrence Summers, Clinton’s treasury secretaries, are among the main architects of the crisis. This is just distracting sideshow. 70 billion is less than what AIG alone is going to receive.

    I my humble opinion, being what I think is a willing pawn to Obama propaganda while Rome burns is not the best use of this blog. I would think reporting on human rights abuses in Bangladesh and around the world is something the world still needs to hear about.

  3. Mash says:

    Joe, shouldn’t Laffer be busy drawing curves on paper napkins instead of going on TV to be so spectacularly wrong? Why is it that the more wrong these economists are, the more arrogant they act? 🙂

    Ouch John, that’s harsh! 🙂

    You should read my previous post on Obama’s bailout plan to see if that qualifies me as a “willing pawn”. I am not very fond of that plan. I try not to carry water just for the sake of carrying water.

    I haven’t yet written a post on the mortgage plan, but I think it is a step in the right direction. But I think it is nearly not enough, as I hinted above. The issue that has to be tackled is the very real fact that millions of homeowners are upside down on their mortgages in a big way. Under normal economic times, that is not a problem and comes with the territory. But, under current circumstances, if those homeowners walk (as is probably in their best economic interest), the bottom will completely fall out of the housing market and we are going to be in a serious tailspin. The Obama admin is betting that lowering people’s payments will entice the majority of them to stay with their house even though they may be upside down for a decade or more. Normally, that is a good bet as a small percentage would abandon ship. Under current circumstances though, I think homeowners are likely to abandon houses in droves unless they see principle reductions.

    So, Obama’s mortgage plan may not be enough. But he isnt up against only Wall Street here. The American public is unwilling to give homeowners in trouble help because they think it is “unfair”. Well, bailouts are fundamentally unfair. The point is not to be fair, the point is to protect the larger economy from collapse. Until the American public understands that not helping homeowners in trouble is causing their own home values to plummet, there will be no political will to do what is necessary. Most people dont realize that their own self interest is tied to bailing out homeowners. Being “fair” does no one good when the economy is tanking.

    Finally, its a stretch to blame Summers for this mess. Its not as if the actions of the Bush administration over the last eight years didnt matter. And Dean Baker’s hyperbole aside, the Obama administration has done more in one month to try to tackle this mess than Bush did in all eight years.

  4. John Chynoweth says:

    Obama is doing more because it is only now the patient is on life support. But what is he doing? I aint no economist but seems to me he is only trying to prop up the bubbles that got us into this mess. I am all for spending money to help people. Why not spend trillions of dollars to increase the safety net and let all these banks fail? At the end of the day we have to write off all these bad assets.

    Sorry to sound harsh. There are no good solutions to this. What a mess!

    Hope you are doing well.

  5. Mash says:

    John, I agree with you about the need to write down these assets. I’ve been making that exact point for a while. It will happen sooner or later. It seems to me the only orderly way to do this is by nationalizing the insolvent banks (most of the big banks!) and spitting out new banks into the private sector sans the bad assets. Its been done before and it can be done again. Just shoving more money into these banks without assuming control is just plain stupid.

    I see that since they first unveiled the bailout plan, the Obama admin has moved closer to openly discussing nationalization. They better get moving because things aren’t going to get any better any time soon.

    What pisses me off is that Bush just gave away $350 billion to the banks, with no strings attached, as he was walking out the door. Now we have half of what was allocated left, and I want to make sure Obama doesnt do the exact same thing Bush did. As far as I can tell, the $350 billion bailout did less to stabilize the credit markets than the moves the Fed made regarding commercial paper. And the Fed did this outside the TARP funding. So the TARP was a complete boondogle.

  6. John Chynoweth says:

    Thats the one Obama voted for right before the election right?

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