Today CSPAN had the congressional hearings with Mozilo, who has a 40 year tenure with Countrywide as founder and CEO. He presided over Countrywide’s meteoric rise and much of the meteoric fall. I hope people hurry up and wake up to the significance of the events underway in housing right now. The mortgage meltdown is likely to become the greatest loss of wealth in human history. CEO pay is a mostly trivial aspect of this situation.I think we’ll see another 10-20% loss from current values and I think we are already down some
2+ trillion in housing value (need to check this, but the number is staggering). A discussion of the amount is HERE.
Housing is a major depository of American wealth and prosperity, and the recent boom in values has led to various forms of reckless spending by individuals as well as the usual wild, stupid, and reckless spending suspect: the Government. This is especially true of our unconscionable and totally indefensible levels of mililtary spending. Note that you *cannot* be a fiscal conservative and support the current military budget. $550,000,000,000 to the military and fiscal conservatism are mutually exclusive positions.The impact of the meltdown and the reckless spending will be felt forever because in addition to direct housing problems that we are only starting to feel, I think all this will to depress our economy for several years and thus accelerate the shift of business to China. This last notion is speculative, but I think it is now pretty clear that the Fed will keep rates low for many years in an effort to fend off an even more disastrous housing and credit situation. This means China will be buying less of our debt, but I think will switch to investing more*directly* in US companies, and thus owning more and more of the American empire. Russia’s leader and architect of communism Vladimir Lenin is famous for saying “The Capitalists will sell us the rope with which we will hang them.” But he was dead wrong. The “Communists”, to the extent that term has meaning anymore, have no intention of destroying the USA. In fact they want to keep us in good shape for as long as needed. Now it is China who is making the rope, buying the rope, and learning the capitalistic ropes so they can slowly and gradually replace us as the empire of choice on the global landscape. A few things I noted during the Countrywide questions and testimony:
* Probably Mozilo was just a high powered opportunistic guy and probably was pretty much within the law with his trades and pay, however he must have known things were poised to melt down to some degree.
* Our congressional system is failing to produce people who are worthy of ruling the amazing American empire. I don’t think there is much corruption but these guys sure are uninspired. The congress-as-corrupt view is a “naivety of the skeptic” idea that is not based on a study of the money flow, personalities, and history of public servants who for the most part are bright, helpful people. However they are mostly lacking in the key skill sets required for innovation and smart reform. In short: American politics selects for the wrong skill sets. To wit:
* Republicans can’t see past Ayn Rand’s ass. They understand the virtues of capitalism, but simply refuse to focus any attention on the key topic of how our brilliant capitalisic experiment has *failed* in many ways to deliver enough products to the neediest folks and how many capitalists are mostly focused on the creation of opportunistic business structures that are exploitable by the clever and the wealthy to the detriment of the greater society. .
* Democratic congresspeople are overwhelmed by math and economics. They concentrate on people, “good vs bad”, “rich vs poor”. * People want to find bad guys rather than find the obvious. In the case of mortgages the system as a whole incentified unwise practicies. Reminds one of the savings and loan debacle although I think government regulations (loan guarantees) were clearly at fault with S&Ls were the mortgage crisis cannot be blamed mostly on the government.
* Is there a simple legal remedy for all the CEO pay and stock manipulation issues? I propose a “Captains go down with the ship” law. If a company you founded fails you lose everything you made from that company except some modest monthly stipend. This would incentify stability over pump and dump strategies. I don’t think it would inhibit founding quality companies. What unintended consequences would this law bring to the business landscape?