Now we know the economy is officially bad: Hedge fund executives are seeing their golf scores soar. In fact, according to The New York Times, psychologists have been retained at some leading hedge funds to deal with the "psychological impact that high-pressure trading can have."
"It has been a very challenging period for these people," said Jonathan F. Katz, a psychologist who works with large hedge funds. "I have seen people shaken, their confidence eroded. They are upset and depressed."
Such distress can result in what some call a social contagion, as hedge fund executives let their woes at work affect their personal lives. Investors have said that their golf scores soar, that they lose their appetites and wake up in the middle of the night in a cold sweat.
If these multimillionaires wake up in a cold sweat now, wonder what they’d do if they had to face the loss of their homes because no mortgage lender told them their adjustable rate mortgage would adjust them into foreclosure? Or if they had to choose between paying for medication and paying rent, as do millions of America’s seniors and low-income workers? Or, if they fell off that golf cart and had to wait in a crowded emergency room because they had no health coverage?
These scenarios have taken place for years (well, maybe not the golf cart), but the nation’s chattering media class has paid only limited attention to the plight of millions of America’s workers, asserting repeatedly that the Bush economy is growing. Only when major banks scream for help does the Federal Reserve take action. Only when hedge fund managers think twice about buying that $48 million home are Bush administration officials required to explain how they plan to address our nation’s economic well-being.
Fed Chairman Ben Bernanke told a U.S. House committee yesterday that "global financial losses have far exceeded even the most pessimistic estimates of the credit losses on these loans." Not to mention domestic losses: Home foreclosures rose 36 percent in August over July—and 115 percent over last year. One in 510 U.S. homes are in foreclosure. And how about that U.S. dollar? It’s fallen so low, we hear it "came within a whisker of parity" with the Canadian dollar, even as it hit an all-time low with the Euro.
Bernanke, who has poured billions of dollars into the market in recent weeks to make sure big banks had the money they need to lend, testified before the House Financial Services Committee. Treasury Secretary Henry Paulson, also appeared at the hearing to that "the administration would consider allowing the big mortgage companies Fannie Mae and Freddie Mac to temporarily buy, bundle and sell as securities any loans exceeding $417,000, known as "jumbo" loans."
The idea, which represents a policy change for the administration, is portrayed as a way to inject liquidity into the stretched mortgage market.
Up to now, the Bush administration has not been willing to allow the two quasi-government agencies to help solve the burst housing bubble because to do so would mean government action is needed to shore up private-sector disasters. In doing so now, the Bush administration predictably offers aid only to the wealthiest—the low-income people losing their houses probably aren’t suffering from a lack of $500,000 loans.
Trying to shore up his failure as Fed chairman to address the nation’s housing situation before it became a crisis, former Federal Reserve Chairman Alan Greenspan has been all over the media, touting his new book and providing a certain sagacity lacking during his Fed reign. His latest prediction is that the housing market likely will decline by "double digits."
Dean Baker, co-director of the Center for Economic and Policy Research (CEPR), says such a decline in prices
will have a huge impact on the economy. Most immediately, the housing sector will continue the contraction it has already begun. We will likely lose more than a million jobs in construction, real estate, mortgage banking and other housing-related sectors.
Baker says "if Greenspan had carefully documented the evidence that there was a housing bubble when he was Fed chairman, rather than dismissing those of us who made this argument,"
it is likely that the bubble never would have grown to such dangerous levels. Clear warnings from the Fed chair might have made potential homebuyers more careful and made investors less anxious to throw away money-making bad mortgage loans.
But while some over at Bush & Co. are finding it necessary to address reality, Bush continues to repeat the lies and distortions about his failed economic policy as if he had a mandate to govern, rather than a record low approval rating—29 percent. Even as Bernanke was testifying, MSNBC.com again headlined the Bush mantra: "Fundamentals of our economy are strong."
But how does Bush know? Just yesterday, when a reporter asked him whether there was a "risk of a recession." Bush declined to answer, pointing out that he’s never been very good at "Econ 101″:
You know, you need to talk to economists. I think I got a B in Econ 101. I got an A, however, in keeping taxes low and being fiscally responsible with the people’s money.
And as the Center for American Progress points out, that "A" Bush asserts he got must have been the product of egregious grade inflation.
As for fiscal responsibility, Bush’s tax cuts have "been the single largest contributor to the re-emergence of substantial budget deficits." "Between 2001 and 2006, the passage of the Bush tax cuts without the offsetting savings have cost $1.2 trillion in lost revenues, or more than 80 percent of the cumulative deficit during this period."