Matching Grant Challenge
alexPureWhen I met Alexander Cockburn, one of his first questions to me was: “Is your hate pure?” It was the question he asked most of the young writers he mentored. These were Cockburn’s rules for how to write political polemics: write about what you care about, write with passion, go for the throat of your enemies and never back down. His admonitions remain the guiding stylesheet for our writers at CounterPunch. Please help keep the spirit of this kind of fierce journalism alive by taking advantage of  our matching grant challenge which will DOUBLE every donation of $100 or more. Any of you out there thinking of donating $50 should know that if you donate a further $50, CounterPunch will receive an additional $100. And if you plan to send us $200 or $500 or more, CounterPunch will get a matching $200 or $500 or more. Don’t miss the chance. Double your clout right now. Please donate. –JSC (This photo of Alexander Cockburn and Jasper, on the couch that launched 1000 columns, was taken in Petrolia by Tao Ruspoli)
 Day 19

Yes, these are dire political times. Many who optimistically hoped for real change have spent nearly five years under the cold downpour of political reality. Here at CounterPunch we’ve always aimed to tell it like it is, without illusions or despair. That’s why so many of you have found a refuge at CounterPunch and made us your homepage. You tell us that you love CounterPunch because the quality of the writing you find here in the original articles we offer every day and because we never flinch under fire. We appreciate the support and are prepared for the fierce battles to come.

Unlike other outfits, we don’t hit you up for money every month … or even every quarter. We ask only once a year. But when we ask, we mean it.

CounterPunch’s website is supported almost entirely by subscribers to the print edition of our magazine. We aren’t on the receiving end of six-figure grants from big foundations. George Soros doesn’t have us on retainer. We don’t sell tickets on cruise liners. We don’t clog our site with deceptive corporate ads.

The continued existence of CounterPunch depends solely on the support and dedication of our readers. We know there are a lot of you. We get thousands of emails from you every day. Our website receives millions of hits and nearly 100,000 readers each day. And we don’t charge you a dime.

Please, use our brand new secure shopping cart to make a tax-deductible donation to CounterPunch today or purchase a subscription our monthly magazine and a gift sub for someone or one of our explosive  books, including the ground-breaking Killing Trayvons. Show a little affection for subversion: consider an automated monthly donation. (We accept checks, credit cards, PayPal and cold-hard cash….)

pp1

or
cp-store

To contribute by phone you can call Becky or Deva toll free at: 1-800-840-3683

Thank you for your support,

Jeffrey, Joshua, Becky, Deva, and Nathaniel

CounterPunch
 PO Box 228, Petrolia, CA 95558

The Man Who Blew the Bubble Until It Burst--Then Said It Wasn't His Fault

Why Greenspan Owes America an Apology

by DEAN BAKER

Alan Greenspan will go down in history as the person most responsible for the enormous economic damage caused by the housing bubble and the subsequent collapse of the market. The United States is still down almost 9m jobs from its trend path. We are losing close to $1tn a year in potential output, with cumulative losses to date approaching $5tn.

These numbers correspond to millions of dreams ruined. Families who struggled to save enough to buy a home lost it when house prices plunged or they lost their jobs. Many older workers lose their job with little hope of ever finding another one, even though they are ill-prepared for retirement; young people getting out of school are facing the worst job market since the Great Depression, while buried in student loan debt.

The horror story could have easily been prevented had there been intelligent life at the Federal Reserve Board in the years when the housing bubble was growing to ever more dangerous proportions (2002-2006). But the Fed did nothing to curb the bubble. Arguably, it even acted to foster its growth with Greenspan cheering the development of exotic mortgages and completely ignoring its regulatory responsibilities.

Most people who had this incredible infamy attached to their name would have the decency to find a large rock to hide behind; but not Alan Greenspan. He apparently believes that he has not punished us enough. Greenspan has a new book which he is now hawking on radio and television shows everywhere.

The book, which I have not read, is ostensibly Greenspan’s wisdom about the economy and economics. But he also tells us that his problem as Fed chair was that he just didn’t know about the flood of junk mortgages that was fueling the unprecedented rise in house prices during the bubble years. He has used this ignorance to explain his lack of action – or even concern – about the risks posed by the bubble.

Greenspan’s “I didn’t know” excuse is so absurd as to be painful. The explosion of exotic mortgages in the bubble years was hardly a secret. It was frequently talked about in the media and showed up in a wide variety of data sources, including those produced by the Fed. In fact, there were widespread jokes at the time about “liar loans” or “Ninja loans”. The latter being an acronym for the phrase, “no income, no job, no assets”.

The fact that banks were issuing fraudulent mortgages by the millions, and that the Wall Street crew was securitizing them as fast as they could get them, was not top secret information available only to those with special security clearance. This was the economy in the years 2002-2006.

It was impossible to look at the economy in these years and not see the role of the housing bubble and the tsunami of bad mortgages that fueled it. The run-up in house prices led to a near record pace of construction. Typically housing construction is around 4.5% of GDP. It peaked at 6.5% in 2005. Greenspan didn’t notice? Who did he think was going to live in all these units, the building of which had created record vacancy rates as early as 2003?

And he didn’t notice that the spike in house prices had led to a surge in consumption pushing saving rates to nearly zero? He actually co-authored several pieces on exactly this topic with another Fed economist. Between the 100% predictable collapse of residential construction and the plunge in consumption that would follow the loss of the housing wealth that was driving it, we were looking at a loss of more than $1tn in annual demand. What did Greenspan think would fill this gap, purchases of Ayn Rand’s books?

Greenspan had all the information that he could have possibly needed to spot the housing bubble and to know its collapse would be really bad news for the economy. More than anyone else in the country he was in a position to stop the growth of the bubble.

Suppose that, instead of extolling the wonders of adjustable rate mortgages, Greenspan used his public addresses to warn people that they were buying into an overpriced housing market; and he warned investors that the subprime mortgage backed securities they were buying were filled with fraudulent mortgages. Suppose further that he used the Fed’s research staff to document these facts.

Greenspan could have used the regulatory powers of the Fed to crack down on the bad mortgages being issued by the banks under the Fed’s jurisdiction, as his fellow governor Edward Gramlich urged. And, he could have arranged to have a meeting with other federal and state regulators to see what they were doing to prevent mortgage fraud in the financial institutions under their jurisdictions as well.

Those are the actions that we had a right to expect from a Fed chair faced with the growth of a dangerous asset bubble. That is what Alan Greenspan would have done if he had been earning his salary. Instead, he did nothing. He cheered on the bubble until it burst and then he said it wasn’t his fault.

This man has nothing to tell the country about the economy and the media is not doing its job to imply otherwise. If Greenspan doesn’t have the decency to keep himself out of public view after all the damage he has done to the country, then the media should do it for him. The only thing he has to say that would be newsworthy is that he’s sorry.

Mark Weisbrot is an economist and co-director of the Center for Economic and Policy Research. He is co-author, with Dean Baker, of Social Security: the Phony Crisis.

This essay originally ran in the Guardian.