Ireland

Krugman has an excellent take on the Irish economic crisis:

The Irish story began with a genuine economic miracle. But eventually this gave way to a speculative frenzy driven by runaway banks and real estate developers, all in a cozy relationship with leading politicians. The frenzy was financed with huge borrowing on the part of Irish banks, largely from banks in other European nations.

Then the bubble burst, and those banks faced huge losses. You might have expected those who lent money to the banks to share in the losses. After all, they were consenting adults, and if they failed to understand the risks they were taking that was nobody’s fault but their own. But, no, the Irish government stepped in to guarantee the banks’ debt, turning private losses into public obligations.
Before the bank bust, Ireland had little public debt. But with taxpayers suddenly on the hook for gigantic bank losses, even as revenues plunged, the nation’s creditworthiness was put in doubt. So Ireland tried to reassure the markets with a harsh program of spending cuts.

Step back for a minute and think about that. These debts were incurred, not to pay for public programs, but by private wheeler-dealers seeking nothing but their own profit. Yet ordinary Irish citizens are now bearing the burden of those debts.

Or to be more accurate, they’re bearing a burden much larger than the debt — because those spending cuts have caused a severe recession so that in addition to taking on the banks’ debts, the Irish are suffering from plunging incomes and high unemployment.

It's amazing that the Irish people are allowing themselves to get fleeced on behalf of the banks. This isn't like the U.S. and the bailout--the Irish are facing higher taxes, higher unemployment, and a lower standard of living--all to bail out millionaires and billionaires. Krugman goes on:

But Ireland is now in its third year of austerity, and confidence just keeps draining away. And you have to wonder what it will take for serious people to realize that punishing the populace for the bankers’ sins is worse than a crime; it’s a mistake. 

I'd go a bit further than Krugman. What will it take for the people at large to realize that fundamentalist global capitalism doesn't work except for the wealthy? When will people begin to demand accountability from corporations and the political class? When will people begin to demand employment and the restoration of the social safety net? I'm certainly not seeing it yet, neither in the United States, nor Ireland, nor anywhere else. The average everyday person still believes that free market capitalism is their friend. Despite all the evidence to the contrary.

Bob Corker and the Criminal Payday Loan Industry

The New York Times is reporting that Tennessee's Republican Senator Bob Corker has been successful in lobbying (every pun intended) the Senate Banking Committee and its Chairman Chris Dodd (CT) to remove draft language from new financial rules that would regulate the Payday loan industry. Without question, the scope of financial skeeziness that has afflicted the US in the past ten years or so has been startling - from the unconscionable excesses of AIG, the unregulated world of derivative trading, predatory and dishonest lending practices in the mortgage industry, the willingness of too-big-to-fail banks like Citigroup, Bank of America, and the rest to loot the US treasury, etc. And yet, for many Americans, the most egregious forms of financial exploitation have their origins directly in the willingness of the Payday loan industry's exuberance in profiting off of people's desperation.

Payday loan companies have thus far existed as unregulated territory, at least from the federal perspective. While it's true that some states have taken a harder stand against the exploitative practices of lenders charging, as the Times reports, as much as 400% annualized interest rate, its a mishmash of regulation. And, the payday loan companies exploit this reality by setting up shop in the states with the least regulations, and in the neighborhoods with the most people without access to reasonable credit. If you've lived, for example, in a city alongside a major military base, payday loan shops are ubiquitous just off base, targeting poorly paid enlisted men. It seems that transitions between "good" and "bad" parts of town are invariably marked now by the appearance of payday loan and check cashing businesses, even more so than moving sides of the track.

It's not just the truly usurious interest rates and predatory geographic practices of the industry that make it evil, but also other aspects of their loan terms. For example, usually one can't amortize repayment, and must redeem the loan in a lump sum. As evil as credit card companies can be (see the opening week on any college campus as the vultures descend to peddle cards to unsuspecting and newly-freed freshmen, all with the lure of a free soda), they can't even hold a candle to these predators.

Corker receives a fair amount of money from the payday loan industry in part because Tennessee's lax regulations make the state a welcoming home to the business. And now he's doing his state proud, standing up for the poor, threatened, unrepresented, and thoroughly reprobate interests of these exploiters of the true poor, threatened, and unrepresented.

Could the U.S. Learn from Mexico?

There is an interesting article over at Bloomberg that talks about the bank bailout in Mexico in 1995 and what the U.S. could learn from their experience. Not the best article, but the main point is that there was no oversight in how the bailout money was spent Mexico. Sounds a lot like what the Bush administration wants...