The Big Short by Michael Lewis

I was watching Michael Lewis who wrote "The Big Short" on Fareed Zaharia GPS on CNN  TV today.

I found his take on the last 5 years pretty amazing and astute. His end point about how Ireland and Greece couldn't sustain the loses but the United States could for now was very good. But his parting idea was that "What happens when the U.S. Fed runs out of ammunition in it's fight against U.S. debt and inflation: His answer was "A Real Great Depression like the 1930s" once again.  So, if and when foreign nations decide not to buy U.S. debt the U.S. would fail financially.

Having remarked on his perspective, the most interesting topic he covered was the response he saw at the time he published "The Big Short."  People were angry about the government subsidization of private banking debt without the requirements imposed on Freddie Mac and Fannie Mae.  Private banks were not required to make any changes, nor were they asked to refrain from lobbying their special interests in exchange for the bail out money.  Under President George W. Bush, the government acted quickly but did not fix the problems in the banking system; problems which could precipitate the same failure again.

Michael Lewis saw that moment in 2008 as the beginning of the "Tea Party Movement" but somehow the public lost sight of the government failure to regulate big banks and instead a conservative movement grew in reaction to the financial problems.  It was a surprise to him that the movement did not become a liberal outcry against big banking abuses and the failure of a conservative government to take a tough stance on a broken system. 

Naturally, President Obama inherited this problem and there has been a very slow response to banking regulation and enforcement with very little funding to govern the banks.   We recovered from the initial wallop of recession but the failure to re-regulate banking is contributing to the longer term after effects of the recession, slow recovery a sluggish employment and the continued real estate market woes.