Look your children in the eye America and thank them. Their debt has risen so high with wall street socialism they'll need oxygen to survive.

Who Killed Fannie and Freddie?


The question is: is there “a community” of decision-makers in the leadership of world financial institutions, and does this community have a cultural defect that causes it to destroy its own infrastructure on a regular basis? And, if all this is true, is it possible to correct this cultural defect, and who in the world might be able to do that?

Furthermore, is this community an “emotional community” as discussed by Barbara Rosenwein in Emotional Communities in the Early Middle Ages (Cornell, 2006.) The key element of an emotional community is “shared norms of emotional valuation and expression, a language of emotion that connects stereotypes and metaphors with inner feelings.”

In an article in The New York Times for Sunday, September 7, 2008 reporter Roger Lowenstein makes observations about such a community, which is called “Wall Street”.

“In the wake of Long-Term Capital’s failure [in 1998], Wall Street professed to have learned that even models designed by “geniuses” were subject to error and to the uncertainties that inevitably afflict human forecasts.” But the takeover of Fannie Mae and Freddie Mac shows that “Wall Street” tends to replay the past without gaining from the experience. So, individuals such as Daniel Mudd of Fannie Mae, Richard Syron of Freddie Mac, and Richard Fuld of Lehman brothers are not deviant individuals, but actually individuals conforming to the dictates of a problem culture. “It takes a village.”

The Long-Term Capital failure is instructive because it drew acknowledgements not just from commentators on the industry, but from insiders and decision-makers, that mistakes were made. But these acknowledgements at the time of disaster do not appear to change behavior. It is almost reminiscent of an addiction, such as to gambling, where the pain of a momentary set-back does not outweigh the underlying emotional sickness.

The diagnosis of such emotional sickness cannot afford to be simplistic. “Profit” is not a cogent clinical category. Lowenstein offers “a voracious hunger to do business on credit” as a more nuanced alternative. But we probably need to go well beyond that to achieve a beneficial insight.

“Faith in models” comes up as a possibility. “Faith in mathematics” is also an intellectual position that serves obvious emotional needs. Forgetting the past as a result of the heat of the competitive pressure of the present moment also suggests itself. Although modern industrial society as a whole is “wealthy”, those who make wealth might still feel themselves to be caught in a bloodthirsty contest for survival that, in spite of its rational and urbane trappings, is emotionally the same as the final battle against the Huns at Chalons in 451.

If we go still deeper, perhaps we find the archetypal human passion, the elixir of power itself.
Social, economic, political power -- securely held (i.e., not “of the people, by the people, and for the people”) – is the bedrock of aristocratic privilege, and aristocratic privilege is something democracy was supposed to be a cure for.

Historically, the disasters made by aristocratic privilege are elaborately documented. The Sicilian Expedition of Athens in 415-413 was an adventure the city-state never recovered from. During the 100 Years War, the French lost essentially the same battle three times over the course of three generations, never changing the strategy or tactics that decimated them the first time. So not only is economic collapse no match for the elixir of power, neither is death itself.

The financial managers of industrial society are a relatively new aristocracy, a relatively new emotional community. Since we now know so much more about emotions than Attila did, maybe we can provide an alternative to its sickness. This would be especially helpful since the effects of this sickness are not merely national, but involve the whole world.