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THE FAILURE OF RIGHT-WING ECONOMICS. Starting today, TAP Online will regularly feature founding co-editor Robert Kuttner's short takes on the latest developments in the financial meltdown. A sample from today's roundup:
Perhaps a Credit Catastrophe? Countrywide Financial, the nation's biggest mortgage lender, and one of the craftiest in devising bait-and-switch mortgage products that are now blowing up, is facing huge losses and a plummeting stock price. Countrywide, among its other holdings, owns a federally insured savings bank. For a time, anxiety about the unregulated mortgage company was causing an old-fashioned run on the bank -- anxious depositors withdrawing savings.Ironically, Countrywide reassured those depositors with full page ads trumpeting the fact that their savings were federally insured -- thanks to the kind of government supervision that Countrywide and its predatory brethren mightily resist when it comes to the mortgage business. If Countrywide's savings bank survives, it will be thanks to Uncle Sam. Lately, you may have also noticed that Countrywide is now advertising for deposits, offering a hefty 5.65 percent on one year certificates of deposit. That's at least half a point above the going rate. Having paid more for its money, Countrywide will then have to find higher-risk, higher-yield uses for its investments -- you guessed it, sub-prime mortgages.Those with long memories will recall that this syndrome is exactly how the savings and loan meltdown of the 1980s began -- newly deregulated little banks wanting to grow into bigger banks paying above-market rates for deposits, and then investing in risky junk to earn extra-normal yields.Read the whole thing here, and check the homepage daily for Kuttner's short takes on what's happening with the economy.--The Editors
