As I read Mr. Duncan”s most recent commentary, I thought, this must be what Sarah Palin would sound like if she wrote about the theory of relativity. Mr. Duncan seems outraged that the Federal Reserve can manipulate the financial system. Of course, the Fed can manipulate the system: that”s the whole point of having a national banking system! As for accepting warrants as collateral in the bailouts, what other collateral would Mr. Duncan suggest? Warrants are the least invasive guarantee of repayment because the government has no ownership stake in the company unless the warrants are exercised.
Mr. Duncan goes on to confuse regulation and manipulation: in regard to the market, the two terms are synonymous. Once again, this point is why the government has a Federal Reserve System.
Somehow, Goldman Sachs is dragged into the discussion. Of course, Goldman is making a bundle. In every deal, Goldman makes money going in and coming out. It also enhances its fees by betting for or against the deal, throwing the ethics of fiduciary duty out the window. The government is trying to “regulate,” i.e. manipulate these practices, by passing financial reform legislation.
Lastly, Mr. Duncan rants about “easy money” and “liquidating Fannie Mae and Freddie Mac.” The bailout was precisely because there was no easy money. In fact, there was no money at all to lend. Furthermore, liquidating Fannie and Freddie would have so severally depressed housing prices (with the corresponding loss of wealth) that we would have been thrown into a depression for decades. Mr. Duncan should remember that economist prefer inflation. Inflation can be mitigated by manipulating the money supply, the budget, and so on. There is relatively nothing that can be done once in a depression, except suffer.
Charles Moton
Lucerne
