Dreams of Easy Money Vanish to the Reality of Foreclosure Daylight

Posted on October 27, 2009
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Peter S. Goodman in his latest book writes how dreams of easy money have vanished with daylight breaking accompanied by foreclosures. The past years were indulged in senseless borrowing by the borrowers and bankers. That thinking has lost its magic touch and days of harsh reality have woken up Americans.

Goodman is a correspondent of The New York Times. He does not go too far but it is obvious that Alan Greenspan of the Federal Reserve is Peter Pan – the flying fellow in a world of fantasy who refused to grow up to battle the world of the adults. The idea of markets correcting itself does not work in reality – at least not in the way one wishes it to operate. So Peter Pan and his team of Lost Boys continued to hibernate in Neverland. If Ben Bernanke and his boys are allowed to continue in their dream of Neverland there would come about another round of financial disaster.

In forceful penmanship Goodman shows how both Bernanke and Lawrence Summers the economic adviser of White House, together with the moguls of Wall Street as well as the plutocrats of the last 20 years became captivated by the dream cooked up by Greenspan of the Chicago school that the financial entities can be relied upon to police each other sans any government controls. Summers had spoken strongly against the regulating of credit derivatives while he was part of the Clinton administration. He helped to open the gates to wild trading that ultimately brought down Wall Street to its knees. Bernanke did not realize that the risks of sub-prime lending would vanish on its own, until it was too late.

Greenspan admitted to his folly last October but all that is of no use now except that he has retired from the arena and cannot do more harm. Bernanke and Summers continue to hold key posts and they are stumbling. They have failed to identify in clear terms where Greenspan went wrong and how they now intend to draw up a new blue print for banking and regulation of finance.

The Obama government is trying to make the Securities and Exchange Commission more powerful and attempting to weaken speculation in derivatives. But the initial steps are now running out of momentum. The book of Goodman points to the fact that the seeds of future mayhems have already been sown.

Goodman with his vast repository of experiences covering economics, technology and industry has done a great service by highlighting how market manias may change but the core content remains fixed.

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