Wall Street

There was an article in The Wall Street Journal today about the Recession, by John Izzo. The rather long title was "Outlook Darkens as Recession Deepens: Economists Forecast Lengthiest Downturn Since Great Depression."

I did not find this myself, but someone I know sent it out to me and 300 of his favorite friends.

The title gets one's attention. The good news is that "the latest Wall Street Journal economic-forecasting survey" shows that the consensus of 54 economists is that the Recession will end in June of 2009. That is good news for President Elect Obama, and for us, if it is true. Remember, it is the consensus of economists. And, it is about economics.

The other problem is that the economy is not expected to get well immediately. It will take a while for it to get back to where it was. This is projected to be the longest recession since the end of World War II, which most of us don't remember. For most of us VJ-Day is "time out of memory."

The question of how we got here will be kicking around for a long time. There is the question of what was going on on Wall Street. This longish article talks about the piling up of greed and the piling up of empty assets. The author, Michael Lewis, is also the author of Liar's Poker, a memoir of his time on Wall Street in the 1980s.

But, to understand what went wrong, aside from the fact that greed is inherent in many people, we need to ask why the regulators of Capitalism--who were supposed to protect us from ourselves, failed. As Mr Lewis points out, the bond rating agencies failed. As Mr Izzo points out, the 54 economists in the Wall Street Journal poll gave Treasury Secretary Henry Poulson a rating of:

60, the lowest level during his tenure. More than half of respondents gave the Treasury secretary a grade equivalent to a D or F. Federal Reserve Chairman Ben Bernanke's average grade rose slightly to a 72, but 26% gave him the equivalent of a D or F. More than half of economists put his grade in the A or B range.

I wonder what they thought of Senator Chris Dodd and Representative Barney Frank? I wonder how long it will take to fully understand their roles with Freddie and Franny? Only when we understand that will we begin to understand what went wrong.

Regards -- Cliff