Regulating Banks

This American Life (my favorite radio show) produced a recent episode on the current economic meltdown, called The Watchmen. They explore who was supposed to be regulating the Wall Street companies before they collapsed and required trillions in taxpayer bailouts.

We all know now that mortgages were being handed out like handbills at a political rally or maybe more like credit card enticements we get in our daily mail - regardless of anybody's ability to pay them off. It turns out many jobless people were given a mortgage while the bank execs and jr. execs were swimming in bonus millions – soon to be joined by creative insurance companies like AIG. But who was watching the store for us depositors and taxpayers and regular people who work far from the financial sector doing little jobs like teaching, construction, nursing, and firefighting?

They trace down three regulating bodies that could have put an early stop to the whole thing, but didn't. One was the Office of Thrift Supervision. One was Congress which has committees overseeing the banks. One was the ratings agencies like Moody's and Standard & Poor's. ("Poor" must be some kind of joke for that firm.)

The Office of Thrift Supervision is funded according to the number of banks and holding companies that it regulates. When banks close OTS'ers lose their jobs. Congress members depend dearly on the campaign contributions from the banks they regulate. The ratings companies, it turns out, are also paid by the issuers of stocks and bonds that they rate. What's wrong with this picture?

Profits and Loss.... Earthstory

Did Nero actually fiddle while Rome burned? Could people actually continue to stoke our "modern" economies and lifestyles until all the glaciers and forests and coral reefs are gone? Until cities disappear under water and societies wither from famine? There's an episode (12/5/03 - "Middle of Nowhere") from This American Life, my favorite radio show, that left a huge impression on me. It's about a South Pacific island, Nauru, whose 12,000 or so people were surrounded by trees, many that bore fruit. In the late 1800's an Australian man brought back a piece of what looked like petrified wood from the island and used it as a doorstop. Another man at his work discovered that it was actually a rich phosphate and Nauru became very conspicuous on the world map. One colonizing country after another came to mine the phosphate during the 20th century. When colonialism went out of style and gave way to globalization the citizens of an independent Nahru continued to sell off their valuable phosphate rich parcels until the tiny island was almost completely denuded of topsoil and trees. For awhile, in the late 80's, the "Nauruinians" were the richest people per capita on the entire planet. By the late 90's, except for some trees on the perimeter, the entire surface of the Manhattan-sized island is all dusty gray-white coral. All food and even drinking water must be flown in.

(The story gets into the crazy and barely legal ways Nauru has schemed to raise money without any natural resources to sell.)

To me, this little island is a total metaphor for the larger group of us inhabiting Planet Earth, which is just a bigger, more spherical island. Have we reached the equivalent of the late 80's in Nauru?