spoilt milk and sour finances
The news out of China is pretty awful - several kids have died from tainted milk, tens of thousands of others are suffering kidney damage, and who knows what the final toll of dead and sickened people will be.
It has occurred to me there are some similarities, and one big difference, between China's milk-gate and our ongoing Wall Street financial fiasco.
First, there were official assurances from the Chinese government that the situation was under control... and it wasn't all that many days ago that Hank Paulson was saying the same about our ongoing sub-prime problem, now a full fledged financial crisis (with a bailout deal on Capitol Hill?). Both the Chinese government and the de facto Bush Administration were lying, were wrong, or (more likely), both. (Although I think we can accept for once a Bush Administration (FDA) recommendation, to avoid ingesting Chinese milk products. If you can identify them.)
In China, farmers added a poisonous substance called melamine to their milk to make their milk look better, to make it look like it met minimum protein standards. In the US, financial wizards added poisonous subprime mortgages to securities with higher quality mortgages to make the securities look better, knowing that selling pure subprime mortgages would be difficult. As a result, in China good milk is being thrown away because nobody knows what is safe to buy. And in the US, probably-good mortgage securities were marked down dramatically because nobody knows what is safe to buy.
In China, a company (Sanlu) selling tainted baby formula lied and tried to hide the evidence that its products were unsafe, to avoid losing sales. In the United States, Countrywide Mortgage, Bear Stearns, Lehman Brothers, and frankly most of Wall Street lied about the quality of various mortgages and the securities they made out of them, hiding evidence that their products were unsafe and unsound, to avoid losing sales and commissions.
China's regulatory agency was inadequate and unable to control the safety of the milk supply. In the US, after twenty-plus years of Republican deregulation topped by Phil Gramm's magnum opus the 1999 Financial Modernization Act, Federal regulatory agencies were inadequate and unable to control the safety of the securities on offer on the market. And so was the market, by the way. So much for the invisible hand.
The big difference? In China it is highly likely that officials in the businesses involved, possibly individual farmers, and maybe even Communist Party officials, will be punished for their misdeeds. Those punishments could even include execution.
In the United States, Senator Gramm and others will continue to rake in big bucks for lobbying. People in charge of companies like Lehman Brothers and Bear Stearns and AIG and Merrill Lynch and Washington Mutual, and people at credit rating companies that said those shit-laced mortgage backed securities were AAA quality, and all the rest of them will keep their multi-million dollar severance packages and big bonuses and obscene salaries. And none of them will be executed. In fact, many of them will get other well-paid jobs.
I oppose capital punishment. But I could possibly be convinced in this instance that it might have a salutory effect.
It has occurred to me there are some similarities, and one big difference, between China's milk-gate and our ongoing Wall Street financial fiasco.
First, there were official assurances from the Chinese government that the situation was under control... and it wasn't all that many days ago that Hank Paulson was saying the same about our ongoing sub-prime problem, now a full fledged financial crisis (with a bailout deal on Capitol Hill?). Both the Chinese government and the de facto Bush Administration were lying, were wrong, or (more likely), both. (Although I think we can accept for once a Bush Administration (FDA) recommendation, to avoid ingesting Chinese milk products. If you can identify them.)
In China, farmers added a poisonous substance called melamine to their milk to make their milk look better, to make it look like it met minimum protein standards. In the US, financial wizards added poisonous subprime mortgages to securities with higher quality mortgages to make the securities look better, knowing that selling pure subprime mortgages would be difficult. As a result, in China good milk is being thrown away because nobody knows what is safe to buy. And in the US, probably-good mortgage securities were marked down dramatically because nobody knows what is safe to buy.
In China, a company (Sanlu) selling tainted baby formula lied and tried to hide the evidence that its products were unsafe, to avoid losing sales. In the United States, Countrywide Mortgage, Bear Stearns, Lehman Brothers, and frankly most of Wall Street lied about the quality of various mortgages and the securities they made out of them, hiding evidence that their products were unsafe and unsound, to avoid losing sales and commissions.
China's regulatory agency was inadequate and unable to control the safety of the milk supply. In the US, after twenty-plus years of Republican deregulation topped by Phil Gramm's magnum opus the 1999 Financial Modernization Act, Federal regulatory agencies were inadequate and unable to control the safety of the securities on offer on the market. And so was the market, by the way. So much for the invisible hand.
The big difference? In China it is highly likely that officials in the businesses involved, possibly individual farmers, and maybe even Communist Party officials, will be punished for their misdeeds. Those punishments could even include execution.
In the United States, Senator Gramm and others will continue to rake in big bucks for lobbying. People in charge of companies like Lehman Brothers and Bear Stearns and AIG and Merrill Lynch and Washington Mutual, and people at credit rating companies that said those shit-laced mortgage backed securities were AAA quality, and all the rest of them will keep their multi-million dollar severance packages and big bonuses and obscene salaries. And none of them will be executed. In fact, many of them will get other well-paid jobs.
I oppose capital punishment. But I could possibly be convinced in this instance that it might have a salutory effect.
posted by Don Q Blogger at 1:51 AM
0 Comments:
Post a Comment
<< Home