The collapse is starting as the Feds have taken over Freddie Mac and Fannie Mae. The political plumbs who put these two mortgage loan operations in the red should have been "tarred and feathered" instead of given golden parachutes of multimillion-dollar severance packages. Now we see that Lehman Brothers, an operation started way back in the 1850s, has filed for bankruptcy. It made the mistake of getting in too deeply with the mortgages that Freddie and Fannie were putting out on the market.
What they failed to realize, as did Bear Stearns, bailed out by J.P. Morgan, was that the Feds had their beaks in way too deep micromanaging the Fannie and Freddie mortgage loan operation in the first place.
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Of course, Barack Obama and the Democrats will place the blame squarely on George W. Bush, when in fact, Freddie and Fannie were the brainchild of the Clinton years.</span>
The economist the late Joseph Schumpeter coined the expression "constructive destruction." It means that companies rightfully fail when they are mismanaged. In their failure lies the opportunity for new and younger companies to thrive. The problem today is that our current economic system is geared so that bad companies don't fail. They are bailed out or bought by someone else. This happens because they are just too large to be permitted to fail.
Just after the Crash of '29, rules were put into effect disallowing any horizontal mergers, thus preventing mismanaged companies from growing too large. Today's politicians are either ignorant of these rules or just plain disregarding them. It actually begs the question: Did the Democratic Congress orchestrate this mess with the intention of gaining total control of the economy? Perhaps one gives them too much credit for thinking that far ahead.
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