Ed Koch Commentary: Unfinished Business – The Great Recession By Ed Koch

eHezi Archives 13 Comments

Koch_EdwardIrving-standing Looking back on 2010 and the Great Recession, I continue to be enraged by the lack of accountability for those who wrecked our economy and brought the U.S. to its knees.  The shocking truth is that those who did the damage are still in charge.  Many who ran Wall Street before and during the debacle are either still there making millions, if not billions, of dollars, or are in charge of our country’s economic policies which led to the debacle.      

Yes, in the recent mid-term elections, the American people did replace 63 Democrats with a like number of Republicans, but will that really change things for the better?  Time will tell, but I doubt it.  Neither do I see the Obama administration, with all its good intentions, succeeding in the areas where the public has suffered the most:  jobs and home values.          

The stock market has recovered beautifully from a Dow low in the Great Recession which began in December 2007 and technically ended in June 2009.  The current Dow hovers around 11,500.  But how many millions of people out of fear, lack of market knowledge, or the need to cash in their market holdings simply to survive the years beginning in 2007 when the Great Recession began until now, didn’t receive the benefit of the market recovery?                

We do know that the current unemployment figure is 9.8 percent, which represents 15 million people.  But that figure does not include those who are no longer looking for a job, those who are underemployed, or those whose salaries and benefits have been slashed.  Worst of all, there are millions of people in their 50s, 60s and 70s who will never be employed again.               

Then there are those who lost their homes to foreclosure and those who will lose them.  Why is it that when Congress adopted the current bankruptcy law in 2005, it decided to uphold the principle of moral hazard, which in the housing context means that those who purchased homes they could not afford, lured to do so by banks and the federal government, must not be helped by the federal government to keep those houses when coming out of bankruptcy proceedings.          

On the other hand, rapacious banks, Wall Street investment firms, and automobile industry giants who overextended themselves financially while seeking unconscionable profits or who engaged in poor management practices, were rewarded with astronomical federal government bailouts.           

The absence of accountability is also evident in state government.  State legislators voted for pensions for state and city employees when they knew or should have known that these pensions were unaffordable.  The expectation is that some states will not be able to pay their current bills and the interest on their general obligation bonds.  There is now a fear that those states will collapse and become unable to provide basic services including Medicaid and education.  Newspaper editorials are commenting and bond holders are beginning to worry about the state and municipal bonds in their portfolios which, according to a New York Times article of December 9, 2010, are valued at $2.8 trillion dollars.             

Legislators running for office throughout the country were overwhelmingly reelected in the recent state and federal elections.  Very few were punished with defeat.  I’m aware of no law that can be used to hold them accountable for their poor decisions in administering the affairs of the states and localities they represent.  But surely there are laws that could be used to pursue Wall Street operators who beggared the country and as a result of federal bailouts – remember too big to fail – are richer today than ever.           

Millionaires continue to have tax loopholes available to them which allow them to take deductions reducing their tax payments to ludicrously low levels.  Let me repeat what I’ve reported several times in prior commentaries:          

One of the least known tax injustices was revealed by The New York Times when it pointed out that the top 400 taxpayers who earned $250 million on average in 2005 paid income taxes at a 17.2 percent rate.  That rate is lower than that of a family making between $50,000 and $75,000 a year, which is 17.4 percent.  It is a continuing outrage that under our tax code some of the wealthy pay a lower percentage of taxes on their income than the middle class.           

As a result of President Obama’s negotiating a deal with the Republicans in the lame duck session of the Congress following the Congressional election of 2010 which will give Republicans a majority in the next House of Representatives, he gave the Republicans what they wanted – a two-year extension of the Bush tax cuts for millionaires and to the top one percent of taxpayers, 26.8 percent of the extended tax reductions.          

Leona Helmsley infamously but perceptively said that only the “little people” pay taxes.  We know life is unfair, but that doesn’t mean the “little people” have to allow their government to continue to oppress them.

Let Mayor Koch know your thoughts by directing email to eikoch@bryancave.com.

The Honorable Edward Irving Koch served New York City as its 105th Mayor from 1978  to  1989.




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eHeziEd Koch Commentary: Unfinished Business – The Great Recession By Ed Koch

Comments 13

  1. Clinton was a failure until the Republicans took over Congress.George W. Bush walked in to a Clinton/Rubin Dot-Com bubble bust and than before he had nine months in office the 9/11 attacks that killed thousands but also crippled the economy for years.The present Obamaists are creating a huge stag-flation economy with runaway inflation, stagnant salaries and high unemployment.The only good Democrat is a defeated Democrat.

  2. wait a minute guys..you both have legitimate arguments up to a point…you cannot blame either “party” for
    the fiasco..you can however blame some indivuals in
    both parties for the debacle..Alan Greenspan will go
    down in history as the worst Fed Chairman ever..He was
    too smart by half..he is the one that did not see the
    bubble in housing..forget about the dot com decline
    that is stock market driven and has always occurred
    in the business cycle for various reasons (tulips
    for example)..but the housing crisis was the product
    of a failure to regulate the banking industry and allowing glass steagel to be repealed which meant
    that the firewall between investment banking and
    plain banking was gone…Rubin and Summers were at fault but so was greenspan and the republican congress
    read george W.s DECISION POINTS…he recognizes that
    the problem existed in his own party…you have and
    still have today voodoo economics..lower taxes do not
    increase revenues..supply side theory is garbage..
    it has proven twice not to work at all…and republicans keep pandering to voters on this one single
    issue..they are dead wrong and we are headed for a
    rude awakening if we continue to believe that cutting
    taxes is possible in light of existing enttitlement
    benefits now and in the future…TARP was the brainchild of Hank Paulson and George Bushes economic
    team…he says so clearly in his memoirs..bush was not
    going to allow the economy to tank regardless of supply side dogma..he was not going to let the big
    banks fail not because of ideology but because bernanke
    told him that if they did counter parties all over the
    world would fail and that would mean disaster..so stop
    trying to blame democrats or republicans per se for
    the problems…the bankers who created derivatives
    out of whole cloth were by and large all republicans
    the wall street journal is republican…fox news is
    republican…larry kudlow is republican …and if you
    want to actually place economic blame it has to lie
    on the failure to regulate the finance industry and
    the notion that lower marginal tax rates create job
    its bullshit…how many jobs were created under W..
    and thats a fact…not many…how many under clinton
    with higher tax rates…plenty…so this is more
    an economics discussion than a political blame game..
    the sooner everyone understands that we need to change
    the way we do business to reduce debt and stop spending
    the sooner we will create an economy that isn’t hostage
    to foreign buyers of US debt..oh and by the way..
    RYJUX..its a bet that US interest rates rise over the next 5 years…its one of the only ways to short
    the bond market withot actually shorting any one
    class of treasury security….

  3. Facts,not false history!Greenspan was head of the Federal Reserve under George H Bush,Bill Clinton and George W. Bush and was responsible for the 1987 crash,the Dot-Com bubble and the mortgage madness that he was created by Clinton,Rubin and Cuomo.Greenspan role was not doing anything to end the Dot-Com or credit bubbles outside of making a few negative remarks.Congress did not create the crisis the Democratic executive branch was responsible and Frank and Dodd covered it up with public statements saying the FNMA was sound and the taxpayers would not lose.The bailouts for FNMA will be billions for years and years to come with no payback to taxpayers.For those legitimate buyers with incomes and down payments who bought between 2003 and 2007 they are losing in the trillions in net worth as more and more of them pay into under water mortgages.The only good Democrat is a defeated Democrat.

  4. You can’t help yourself – just more FOX claptrap.
    Any reason why the GOP didn’t “fix” the problem in 2001, 2002, 2003. 2004, 2005 or 2006 when they controlled everything? It’s because Rubin, Summers and Dodd took the same positions as Republicans.
    Look at the numbers in my first post.
    Oh no, it wasn’t the mortgages. It was derivatives killed the beast.
    But I ask too much. You can’t even bring yourself to admit that Gramm and Greenspan were the prime movers in the debacle. You make up an alternate history. You live in a fantasy world. Do you blow coke with Gordon? He would be labeled a Democrat on FOX.

  5. Interesting fact was mentioned by a guest on CNBC, that the federal government law on pension guarantees, does not guarantee state and municipal pensions.I still say that the credit crisis would never happened if Clinton,Rubin,Dodd,Frank and Cuomo did not have HUD force the FNMA and FMAC to lower their standards on mortgage purchases and mortgage guarantees.These two federal agencies are responsible for over half the purchases and guarantees in the country and Wall Street would not have the supply of mortgages to securitize and sell to other parties.Yes Bush and his compassionate conservatism did nothing to stop it, but the only ones who did, were the editors of the Wall Street Journal, who relentlessly attacked the FNMA over-leveraged capitalization for years before the collapse.During this time Dodd and Frank publically stated that the taxpayers had nothing to worry about and leftwing editors like our own Journal News no icome verification,no down payment loans were the greatest thing since sliced bread.The only good Democrat is a defeated Democrat.Have a Happy New year

  6. A History Lesson for Jack:
    In Nov. 1994, the Republican Party won the House of Representatives and controlled it until Jan 2007. In that time, under the leadership of Newt Gingrich, Dick Armey, Tom DeLay and Denny Hastert, no bill would be brought to the floor of the House for a vote unless a majority of Republicans were in favor of passage. This was stated openly and proudly by Gingrich and DeLay. In fact, the majority had to be an overwhelming majority lest Democrats be the deciding factor in passage of a bill.
    Barney Frank did not become Chairman of the House Financial Services Commission until Jan 2007. Until that time, Frank had no influence under GOP leadership. Not only did DeLay made it a practice to exclude Democrats from all negotiating sessions but he illegally held conference committee meetings in secret and behind locked doors so that Democrats on the committee could not attend.
    By mid- 2007, people like John Paulson saw the looming financial crisis and were already betting against big banks. Of course the fact that Frank was chair for only months means nothing to you. It has become standard practice for Republicans to blame Democrats for everything – even for things that the GOP pushed for an enacted.
    Your stance on Chris Dodd is mind-boggling. Dodd, like Frank did not become chair of the Senate Finance Committee until Jan 2007. Similarly, he had little chance to influence the looming debacle. Unlike Frank, Dodd was a bank enabler. He held the same positions as Republicans. Dodd did his best to weaken financial reform legislation. Of course, you fault Dodd but the reason is a mystery to me. Are you in favor of deregulation? If so, you should be cheering Dodd for being a champion of the banks and piling loopholes into the legislation.
    But no – your mindset is that it all the fault of Democrats. The fact that the GOP ran the country (into the ground) for almost six straight years and that the president at that time was a Republican somehow gets obliterated from your memory banks.
    The University of Maryland did an extensive study of media sources and found that FOX news viewers were the most misinformed in every category. FOX does its best to place the blame for Republican mistakes on Democrats. Remember when Mark Foley was caught sending inappropriate IMs to pages? He was identified on FOX as Mark Foley (D-FL). Similarly, when Mark Sanford was outed as hiking the Appalachian Trail to Argentina, he was identified on FOX as Mark Sanford (D-SC). If you watch FOX news, you’d believe that TARP was enacted under Obama and that McConnell and Boehner voted against it. Of course, that is all incorrect.
    And FOX blamed Obama for the economic situation of this country before he was inaugurated and of course, you bought it.
    I have said over and over that Rubin and Summers were instrumental in allowing deregulation to occur. They went as far as blocking Brooksley Born when she wanted to regulate derivatives. They are Democrats and deserve our condemnation. But Phil Gramm and Alan Greenspan were even worse but since they are Republicans, you will never admit to their part in setting the stage for the financial fiasco.
    We have already become a banana republic in terms of wealth distribution. Upward mobility has become more an illusion than a fact and as long as FOX news has people like you buying misinformation, this country will continue its slide into second-class status.

  7. good points both of you..but in point of fact (read the
    big short) the crisis that brought this nation and
    the world to its financial knees although partly due
    to the mortgage frenzy where unqualified low income
    or no doc loans were made simply to generate fees
    for mortgage companies..was primarily due to wall street investment bankers who created credit default
    swaps based on slicing up these loans and packaging them…and then betting on them…those who understood
    that housing like everything else in the world cannot
    go up forever bet against the entire housing market
    by buying insurance against default on the mortgages
    unfortunately the premiums they paid for that insurance
    had no relationship to the risk that was involved and
    when the housing market subprime mortgage began to
    default the result was a rippling effect that every
    single bank in the world was tied to in one way or
    another (read the book)…so yes dodd and frank and
    clinton and by the way bush..(read decision points)
    did encourage home ownership way beyond what was
    financially prudent but..wall street by creating derivatives based on those loans got us into the quagmire…and now because of our profligate spending
    both individually and by states and municipalities we
    are up shits creek without a paddle..states face the
    prospect of declaring bankruptcy..municipalities as
    well and that means bond holders will either take
    a beating or the federal government will bail out
    the states..(with a republican congress i doubt it)
    bottom line is that revenues do not support expenditures and they certainly don’t support state
    and local obligations…so solving that problem will
    be the number one issue going forward..and unless new york state wants to wind up like that town in alabama
    which said to its former retired workers..sorry we
    can’t pay your pensions..it better get is financial
    house in order

  8. Iceland and Ireland had/have MASSIVE banking crises.
    Germany has a social safety net that is second to none. Why didn’t you mention that.
    Germany doesn’t subsidize German companies to move their operations abroad.
    Why didn’t you mention that.
    So now answer my post about the cause of the meltdown in this country.

  9. Germany by the way, took the Tea Party route cutting social welfare spending and cutting taxes and has a booming economy.The only good Democrat is a defeated Democrat.

  10. Spain,Portugal,Greece and other countries have a sovereign debt crisis not a banking crisis.The sovereign debt problem comes from their Obamaism social welfare programs, that they no longer can pay for, therefore jeopardizing their ability to borrow.Ireland had a reckless credit bubble that their own social welfare programs leave them fiscally unfit to manage, necessitating bailouts from the IMF and European Union.Nobody hears the old leftist Democratic Party refrain anymore of “Why can’t we be like Europe?” and we no longer hear about”Change,you can believe in’ and “Change on day one”. The Obama leftist are plunging the nation into stagflation, with rising commodity prices, heavy unemployment and stagnant wages.The only good Democrat is a defeated Democrat.

  11. “In fact, Rep. Barney Frank is the only politician I know who has argued that we needed tighter rules that intentionally produce fewer homeowners and more renters.”
    – Lawrence Lindsey. (Chief Economic Advisor (2001-2002) for President George W. Bush.)
    In fact the outstanding debts on all mortgages in the USA totaled about $1 trillion – not enough to bring down our financial markets.The derivatives on these mortgages totaled at least $62 trillion (the true figure will never be known) which caused the disaster that crippled this country.
    In fact, Iceland. Greece, Spain, England and other countries had similar or greater financial meltdowns without Fannie, Freddie, Dodd or Frank.
    In fact, Phil Gramm (R) is more responsible for the financial meltdown than all the culpable Democrats (Rubin, Summers et al) combined.
    But Jack will never let facts interfere with his fact-fantasy narrative.

  12. Democrats Dodd and Frank who defended the FNMA and FMAC accounting practices, are now the authors of the Financial Reform Bill.Democrat Andrew Cuomo who had HUD pressure the FNMA and FMAC to lower their standards on purchasing and insuring mortgages, thereby creating the mortgage madness, is now going to reform the economic policies of New York State.Wall Street had many accomplicies on left-wing editorial boards,the real estate lobby,rating agencies and the present Federal Reserve Chairman Ben Bernanke.This country is in a whole lot of trouble with no intelligent andJack patriotic leadership.The only good Democrat is a defeated Democrat.

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