Common Cause Blog :: Krugman on Madoff and financial money

Krugman on Madoff and financial money

By Josh Zaharoff
Posted on Fri Dec 19, 2008 at 07:46:50 AM EST

Paul Krugman's column today points out that Bernie Madoff's bilking people for billions isn't all that different from what the investment industry as a whole did: creating a bubble of wealth, on the basis of which many individual money managers received millions in bonuses, only to see that bubble inevitably burst. But that's after the bonus pay was already paid.

how different is what Wall Street in general did from the Madoff affair? Well, Mr. Madoff allegedly skipped a few steps, simply stealing his clients' money rather than collecting big fees while exposing investors to risks they didn't understand. And while Mr. Madoff was apparently a self-conscious fraud, many people on Wall Street believed their own hype. Still, the end result was the same (except for the house arrest): the money managers got rich; the investors saw their money disappear.

Krugman makes a further and important point.

At the crudest level, Wall Street's ill-gotten gains corrupted and continue to corrupt politics, in a nicely bipartisan way. From Bush administration officials like Christopher Cox, chairman of the Securities and Exchange Commission, who looked the other way as evidence of financial fraud mounted, to Democrats who still haven't closed the outrageous tax loophole that benefits executives at hedge funds and private equity firms (hello, Senator Schumer), politicians have walked when money talked.

And politicians still walk when money talks. That's our system -- they need money to run their campaigns, Wall Street has lot of individuals with lots of money, and in return for that money they get access and additional influence with lawmakers. Krugman plays psychologist here and says it's simply Congress members' awe of wealthy people.

The answer, I believe, is that there's an innate tendency on the part of even the elite to idolize men who are making a lot of money, and assume that they know what they're doing.

That may be true, but it's silly to assume it's all psychology when the very real act of giving money to allow a politician to run his or her campaign has a very specific effect on individuals' behavior. Awe may be powerful, but awe and direct influence even more so.

Tags: paul krugman, bailout, financial crisis, money in politics (all tags)

Krugman on Madoff and financial money :: 2 Comments

Bailout for ALL Americans

I'm against the $85,000,000,000.00 bailout of AIG or any other company.
Instead, I'm in favor of giving $85,000,000,000 to America in
a We Deserve It Dividend.
To make the math simple, let's assume there are 200,000,000
bona fide U.S. Citizens 18+.
Our population is about 301,000,000 +/- counting every man,
woman and child. So 200,000,000 might be a fair stab at
Adults 18 and up..
So divide 200 million adults 18+ into $85 billion that equals
$425,000.00.
My plan is to give $425,000 to every person 18+ as a We
Deserve It Dividend.
Of course, it would NOT be tax-free.
So let's assume a tax rate of 30%.
Every individual 18+ has to pay $127,500.00 in taxes.
That sends $25,500,000,000 right back to Uncle Sam.
But it means that every adult 18+ has $297,500.00 in their
pocket.
A husband and wife has $595,000.00.
What would you do with $297,500.00 to $595,000.00 in your
family?
Pay off your mortgage - housing crisis solved.
Repay college loans - what a great boost to new grads
Put away money for college - it'll be there
Save in a bank - create money to loan to entrepreneurs.
Buy a new car - create jobs
Invest in the market - capital drives growth
Pay for your parent's medical insurance - health care improves
Enable Deadbeat Dads to come clean - or else
Remember this is for every adult U S Citizen 18+ including the
folks who lost their jobs at Lehman Brothers and every other
company that is cutting back. And of course, for those serving
in our Armed Forces.
If we're going to re-distribute wealth let's really do it...instead
of trickling out a puny $1000.00 ( "vote buy" ) economic
incentive that is being proposed by one of our candidates for
President.
If we're going to do an $85 billion bailout, let's bail out every
adult U S Citizen 18+!

Here's my rationale. We deserve it and AIG doesn't.
How do you spell Economic Boom?
I trust my fellow adult Americans to know how to use the $85
Billion
We Deserve It Dividend more than I do the geniuses at AIG or
in Washington DC.
And remember, This plan only really costs $59.5 Billion
because $25.5 Billion is returned instantly in taxes to Uncle
Sam.This does not even count the sale taxes for the states. The ONLY problem with this plan it is for ALL! It is NOT just for the rich which our government seems to cater to.

by herman on Sat Jan 10, 2009 at 04:17:29 PM EST

Too big to fail...

Lehman was pretty big and yet they were not deemed too big to fail. The vast majority of Americans rejected the bailout and yet the politicians approved it anyway. It shows they do not represent the people. They do whatever they want.

Lupus Symptoms

by Lupus Symptoms on Mon Jan 12, 2009 at 05:24:45 PM EST
[ Parent ]

You are not logged in.

In order to post a comment, you must be logged in. If you have a member account, please log in to comment.

If not, you can make an account just by filling out the form below. It's quick and free.

Krugman on Madoff and financial money

By Josh ZaharoffPosted on Fri Dec 19, 2008 at 07:46:50 AM EST

By Josh Zaharoff
Posted on Fri Dec 19, 2008 at 07:46:50 AM EST