What GMA don't tell us....

The Philippines perennial dollar top earner is slowly succumbing to the world economic crisis and this is what the government don't tell us, it seems that GMA does not want to show that her main economic savior and employment program is loosing steam.

http://www.rgemonitor.com/asia-monitor/255789/how_far_will_remittances_to_the_philippines_fall_in_2009

Campus Harassment: “Student activists” tear down FBC-Phils. exhibit on Burma

What can i say? this only proves what they really are...i'm sure if this guys won their revolution we will be the next Laos..

MANILA, MARCH 6 -- At 1:30pm today inside the campus of the Polytechnic University of the Philippines (PUP) in Manila, a group of young students claiming to be “genuine activists” forced the members and volunteers of the Free Burma Coalition – Philippines (FBC-Phils) to fold down a photo exhibit on political prisoners in Burma, confiscated their campaign materials, and pushed them out of the campus, threatening physical attack if they do not leave.

The activity is hosted by a class of management students who had applied for, and was granted, a permit to hold the activity by the school administration. The exhibit was about the 8888-faces photo petition campaign calling for the release of Daw Aung San Suu Kyi and all political prisoners in Burma anchored by the Initiatives for International Dialogue (IID) and FBC-Philippines.

Members of Bukluran ng Manggagawang Pilipino (BMP) and FBC-Phils volunteers from the school have just finished setting up the exhibit when the incident happened. A group of students (about 20 of them) claiming to be “genuine activists” from a group called ANAKBAYAN ganged up on them, tore copies of the 8888-faces leaflet in front of the volunteers and commanded them to fold up the exhibit. “You are not allowed to set up the exhibit here, counter-revolutiona ries -- with or without permit from the school administration. You are fake activists.”

Teody Navea, BMP secretary-general and part of the campaign team, tried to negotiate with the students, stressing what the campaign was about and that it is part of an international solidarity effort in support of the people of Burma. The “activists” led by a certain “Jojo Kulot” then started a countdown, further threatening to attack the FBC volunteers if they do not fold up the exhibit.

To avert any further violent confrontation, the FBC team volunteered to fold up the exhibit. But not satisfied, the “activists” from ANAKBAYAN even grabbed the tarpaulin exhibits and the BMP banner and all other materials. Navea tried to calm down everyone and appealed to the activists to return the materials as they are packing up. The “activists” started pushing and shoving FBC-Phils volunteers, slapping one in the head, as they violently escorted them outside the school gate and on to the thoroughfares.

As these things happen, other members of the “activist” group explain to all bystanders and onlookers that “these things will happen to you if you organize activities like these and if you join these and other organizations.”

We condemn, in strongest terms, this barbaric act of “gangster activism.” The issue of Burma’s political prisoners is a legitimate international issue and to prevent any group from holding this kind of campaign in any venue is not just a show of “sheer ignorance” to the issue but also an act only the “military dictators” of Burma can appreciate.

FBC-Phils is a coalition of individuals, trade union workers, NGOs, peoples’ organizations, youth and students, church groups, human rights and women organizations. This campaign of 8888-faces is just one of the many expressions the coalition can contribute in the spirit of international solidarity. It’s ironic and disgustful that this legitimate democratic campaign was attacked in the name of the so-called “revolutionary ideals?”. Where in this world you can see one “activist group” attack the very basic right to freedom of expression?

As activists, we SHOULD hate dictatorship whatever its name, we must abhor undemocracy; we ousted Marcos because of military dictatorship and now Burma is suffering the same kind of rule. Our message to these “activists” is simple: LET US NOT BECOME THE EVIL THAT WE DEPLORE!



Egoy N. Bans
Spokesperson, Free Burma Coalition – Philippines
Burma Program Coordinator – Initiatives for International Dialogue (IID)

based on the incident report filed by Teody Navea in behalf of the FBC-Phils 8888-faces campaign team at PUP campus.

US Economic Shocker

651,000 Jobs Reported Lost in February

New York Times

By JACK HEALY
Published: March 6, 2009

Another 651,000 jobs were lost in February, adding to the millions of people who have been thrown out of work as the economic downturn deepens.

In a stark measure of the recession’s toll, the Bureau of Labor Statistics reported on Friday that the national unemployment rate surged to 8.1 percent last month, its highest in 25 years.

The economy has now shed more than 4.4 million jobs since the recession started in December 2007, and economists expect that the losses will continue over the rest of the year and into 2010. The economy lost an upwardly revised 655,000 jobs in January, when the unemployment rate rose to 7.6 percent. December job loss was revised to 681,000, from 577,000.

Some economists expect that the nation’s businesses could cut another two million jobs and that unemployment could reach 9 to 10 percent by the time a recovery begins.
“It just feels like we’re in the teeth of the recession, and the bite is still very hard,” said Stuart Hoffman, chief economist at PNC Financial. “This is economy-wide, industry-wide. It just shows the severity and the breadth of the job losses.”

The figures were about equal to economists’ predictions of 650,000 jobs lost in February, but the unemployment rate rose higher than an anticipated 7.9 percent.
February marked the fourth consecutive month that the economy has shed more than 500,000 jobs, a pace that underscores the magnitude of the problems facing the Obama administration as it promises to save or create 3.5 million jobs over the next two years.
Last month, President Obama signed a $787 billion stimulus package of tax cuts, infrastructure spending and emergency aid. The first tax credits, in the form of reduced payroll withholdings, are expected to appear on paychecks beginning April 1.
But in testimony this week before Congress, federal officials again cautioned Americans that even with the stimulus package, a recovery will take time.

The package “should provide a boost to demand and production over the next two years as well as mitigate the overall loss of employment and income,” the Federal Reserve chairman, Ben S. Bernanke, told the Senate Budget Committee, but the timing is “subject to considerable uncertainty.”

The pace of job losses has only increased since the credit crisis shook financial markets last autumn, spawning a vicious circle of economic contraction that dragged down corporate earnings, consumer spending and overall growth. And Mr. Bernanke said in testimony this week that the labor market “may have worsened further in recent weeks.”

Economists worry that mounting job losses could make it harder for homeowners to make their mortgage payments, triggering another wave of home foreclosures, which would further depress home values and the mortgage-related securities owned by major banks.
“We’re feeling the negative fallout from the intensification of the financial crisis,” Mickey Levy, chief economist at Bank of America, said. “We’re in the middle of the worst stage of job losses as well as the speed of contraction of gross domestic product.”

Workers from New York to Florida, from the Rust Belt to the Sun Belt, and across nearly every sector of the economy are being affected as employers reduce costs by slashing their payrolls and cutting their capital investment. Manufacturers cut a seasonally adjusted 168,000 jobs in February, and 104,000 construction jobs were lost. And retailers cut 39,500 jobs.

“There’s been no place to hide,” Mr. Hoffman said. “Everybody in every industry has lost jobs or is feeling insecure about whether they’re going to keep their jobs or how their company’s going to do.”

In the New York region, the Federal Reserve’s beige book noted earlier this week, that hiring “has virtually ground to a halt since the beginning of the year, during what is usually a busy season,” the beige book said, with large financial firms having “all but stopped hiring.”
“Both manufacturing and non-manufacturing firms in the district report increasingly widespread cutbacks in their employment levels in February,” the report said of New York, “and a sizable proportion expect further retrenchment in the next six months.”

Mark Ortiz was one of those who joined the ranks of the unemployed in February. Mr. Ortiz lost his job at the art-framing company where he had worked for 11 years, most recently as the production manager. He has plastered his résumé across the Internet and searches for jobs every day from his home on Long Island, New York. His search has been hampered by the fact that he went straight to work when he was younger, and never got a college degree.
“That was a major strike against me,” he said. “You spend all this time doing this, and now what? It’s almost like I’ve gotten divorced and I’ve got to find a new wife.”

Hands off Gaza!

The International Committee of the Fourth International and the World Socialist Web Site denounce the Israeli military's murderous assault on the Palestinian population of Gaza. The combined air and ground attack on the densely populated and virtually defenseless enclave is a war crime.

The incursion of Israeli troops, tanks and artillery, on top of the ongoing bombardment from air and sea of civilian targets, sets the stage for a sharp increase in the bloodletting, which in the first eight days of the aggression has already claimed the lives of over 500 Palestinians and wounded more than 2,400, including scores of women and children.

As always, the Israeli regime's use of military violence is accompanied by a staggering level of cynicism, hypocrisy and deceit. A state that possesses one of the most modern and sophisticated military machines in the world is once again casting itself as the victim.

The claim that this latest aggression is a legitimate reaction to Hamas rockets falsifies the events that preceded the assault on Gaza. Prior to Israel's launching of its air war on December 27, not a single Israeli was killed by the recent spate of home-made and largely ineffectual Qassam rockets fired from Gaza. The increase of such rocket firings was provoked by Israel's shattering of a cease-fire with a cross-border raid in November that killed six members of the Hamas security force. Israel defied the terms of the cease-fire, refusing to lift its deadly blockade of Gaza, which for 18 months has deprived the impoverished population of food, medicine, potable water and electricity. It agreed to the cease-fire in the first place in order, by its own admission, to undertake intense preparations for the present war.

Since Israel launched this latest round of aggression, four people in southern Israel have been killed by Palestinian rockets. The loss of all life is regrettable, but it is an ugly fact that the media applies very different standards in its valorization of Israeli and Palestinian lives. The latter, judging from the coverage of events by CNN and other western media outlets, count for very little. The ratio of Palestinian to Israeli deaths in the current war is more than 100 to one. Over the past eight years, approximately 20 Israelis have died in rocket attacks from Gaza, while Israeli forces have killed nearly 5,000 Palestinians.

The rocket attacks from Gaza reflect the desperation of Hamas and the Palestinian population. Israel deliberately provokes such actions in order to create a pretext for pursuing its aggressive and expansionist aims.

What is the situation in Gaza, created by Israel and backed by the United States, the European powers and their allied Arab bourgeois regimes, including the US-Israeli Quisling, Palestinian Authority President Mahmud Abbas? A million-and-a-half people are imprisoned in an area the size of metropolitan Detroit—a sliver of land wedged between the desert and the Mediterranean Sea. They are prevented from leaving by Israeli troops to the north and east and troops of Egyptian dictator Mubarak to the south.

As unpleasant to the Israeli regime as the comparison may be, the plight of Gaza resembles nothing so much as the tragic fate of the Jews of the Warsaw Ghetto in Nazi-occupied Poland.

There are, without question, Israeli intellectuals, youth and class-conscious workers who are opposed to the invasion of Gaza and deeply ashamed of the crimes being committed by the regime in their name. They are, we are sure, horrified by the implication of the Jewish people in crimes that recall the atrocities of the Nazis. But if, as is claimed by opinion polls, some 80 percent of Israelis support the military onslaught on this tortured territory, this can only attest to the deep level of disorientation and demoralization among broad sections of the population. Not the least of Israel's crimes is its cynical exploitation of the horrors of the Holocaust to justify its own criminal actions.

It is not possible to discuss the assault on Gaza without placing central emphasis on the role of the United States. The American ruling elite has served as Israel's chief enabler and co-conspirator for the past four decades—ever since Israel seized Gaza and the West Bank in the 1967 war.

The Bush administration is reprising the criminal role it played in the 2006 Israeli invasion of Lebanon—running interference for Israel to block all diplomatic initiatives for a cease-fire so as to give the Israelis maximum time and scope to murder Palestinians and smash a hostile Arab movement. The time-line of the past few days indicates that the Bush administration urged the Israelis to launch their ground invasion now in part to scuttle efforts by the European Union to broker a truce.

On Friday, after the EU and French President Sarkozy had announced a mission to Israel slated for Monday to pressure the Israelis to agree to a cease-fire, US Secretary of State Condoleezza Rice addressed the press outside the White House to once again place the blame for the fighting on Hamas and back Israeli opposition to a cease-fire. On Saturday, President Bush devoted his weekly radio address to restating Washington's carte blanche to Israel, setting the stage for the invasion that began later that day.

In the course of his brief remarks, Bush managed to cram in one lie after another—charging Hamas, which won a popular election in 2006 and put down an attempted coup by the Fatah-led and US-Israeli-backed Palestinian Authority in June of 2007—with "taking over the Gaza Strip in a coup," and going so far as to blame Hamas for the humanitarian catastrophe caused by the Israeli blockade imposed eighteen months ago. Bush essentially demanded that Hamas agree to its removal at the hands of the US-Israeli puppet Abbas as a condition for an end to the Israeli aggression.

Late on Saturday, after the Israelis had launched their ground attack, the US intervened in the United Nations Security Council to block a statement urging an immediate truce.

Predictably, President-elect Barak Obama is playing an equally despicable role, maintaining a public silence on the grounds that the US has "only one president at a time." Here the legal principle—silence denotes consent—applies in full. It should be noted that Obama had no similar compunctions only a few months ago when it came to promoting the handout of hundreds of billions in taxpayer funds to his supporters and friends on Wall Street.

While Obama maintains a damning silence, top congressional Democrats, including Speaker of the House Nancy Pelosi, Senate Majority Leader Harry Reid and Illinois Senator Dick Durbin, have gone out of their way to declare their support for Israel's actions.

No less revealing is the response of the United Nations. Its combination of impotence and duplicity recalls the response of the League of Nations in the 1930s to Fascist Italy's rape of Ethiopia. We are once again living through a period when supposed "peace" organizations established by the international bourgeoisie reveal themselves to be instruments of imperialist power politics. The hypocrisy of the UN and the imperialist governments that dominate it is exposed most graphically by their entirely opportunist use of the term "war crime." What is defined as a war crime and who is sent to the Hague tribunal depends entirely on the geo-political and economic interests of the various imperialist powers.

Finally, there is the perfidious role of the bourgeois regimes in the Middle East. This includes not only the outright accomplices of the US and Israel—especially Egypt, Jordan and Saudi Arabia—but also the supposed opponents of Zionism and imperialism, Iran and Syria. While one of the objectives of Israeli and American policy is no doubt to weaken Tehran and Damascus, and prepare the way for military action to effect "regime change" in those countries, it can be reasonably assumed that elements in the US State Department and the Israeli Foreign Ministry are maintaining back-channel communications with these regimes. It would not be the first time that bourgeois governments shed crocodile tears over the fate of a lesser client in the hope that they could be parlayed into an agreement with the major powers.

The Israelis say more than they intend when they declare that their mass killing in Gaza is necessary to create the conditions for a so-called "two state" solution to the Palestinian question. This only reveals the reactionary character of this policy, which envisions the creation of an Israeli-dominated mini-state, divided by security roads, Israeli settlements and barriers, which will serve as a prison for the Palestinian people, guarded and policed by a puppet Palestinian bourgeois regime. Such an outcome will do nothing to address the conditions of poverty and repression that dominate daily life for the Palestinian workers and youth, while offering the Zionist state an opportunity to ethnically cleanse Israel by expelling its Arab population to the Palestinian Bantustan.

The only real ally of the Palestinian masses is the international working class. The wave of international protests against the Israeli aggression, in Europe, Asia and North America as well as the Middle East, is a clear sign of a shift in mass sentiment. The outrage and revulsion at Israel's war crimes are indicative of a growing response of the working class not only to imperialist militarism but also to the deepest economic crisis of the world capitalist system since the Great Depression.

It is the united mobilization of the working class of all countries, including Arab and Jewish workers, that holds the key to a genuinely democratic and progressive solution to the crisis in the Middle East. This must take the conscious form of a struggle against Zionism, imperialism and the Middle Eastern bourgeoisie for a socialist federation of the Middle East, as part of the world socialist revolution.

This is the international socialist perspective fought for by the Socialist Equality Party and the International Committee of the Fourth International. We demand the immediate withdrawal of all Israeli forces from Gaza, the lifting of the blockade and full restoration of normal trade and economic conditions, and the provision of massive aid to the Palestinian people.

Barry Grey and David North

Let Gaza Live!

the coming year of battle...

2009 is just days away but it's face is already showing...and what do they look like? nothing much but much poverty and misery....war and body bags...soup lines and hunger...empty pockets and unemployment...nothing new except people is asking questions now...when will this end and starting to take matters into their own hands...greece is the beginning, republic windows and doors is an inspiration...palestine will be a test of what obama is really made of...the moment to fight is now, 2009 may be days away but events are forcing it to come early as expected....let it roll! Happy New Year To All Of Us!

Capitalist Fools

Behind the debate over remaking U.S. financial policy will be a debate over who’s to blame. It’s crucial to get the history right, writes a Nobel-laureate economist, identifying five key mistakes—under Reagan, Clinton, and Bush II—and one national delusion.

by Joseph E. Stiglitz

There will come a moment when the most urgent threats posed by the credit crisis have eased and the larger task before us will be to chart a direction for the economic steps ahead. This will be a dangerous moment. Behind the debates over future policy is a debate over history-a debate over the causes of our current situation. The battle for the past will determine the battle for the present. So it's crucial to get the history straight.
What were the critical decisions that led to the crisis? Mistakes were made at every fork in the road-we had what engineers call a "system failure," when not a single decision but a cascade of decisions produce a tragic result. Let's look at five key moments.
No. 1: Firing the Chairman
In 1987 the Reagan administration decided to remove Paul Volcker as chairman of the Federal Reserve Board and appoint Alan Greenspan in his place. Volcker had done what central bankers are supposed to do. On his watch, inflation had been brought down from more than 11 percent to under 4 percent. In the world of central banking, that should have earned him a grade of A+++ and assured his re-appointment. But Volcker also understood that financial markets need to be regulated. Reagan wanted someone who did not believe any such thing, and he found him in a devotee of the objectivist philosopher and free-market zealot Ayn Rand.
Greenspan played a double role. The Fed controls the money spigot, and in the early years of this decade, he turned it on full force. But the Fed is also a regulator. If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you'll get. A flood of liquidity combined with the failed levees of regulation proved disastrous.
Greenspan presided over not one but two financial bubbles. After the high-tech bubble popped, in 2000-2001, he helped inflate the housing bubble. The first responsibility of a central bank should be to maintain the stability of the financial system. If banks lend on the basis of artificially high asset prices, the result can be a meltdown-as we are seeing now, and as Greenspan should have known. He had many of the tools he needed to cope with the situation. To deal with the high-tech bubble, he could have increased margin requirements (the amount of cash people need to put down to buy stock). To deflate the housing bubble, he could have curbed predatory lending to low-income households and prohibited other insidious practices (the no-documentation- or "liar"-loans, the interest-only loans, and so on). This would have gone a long way toward protecting us. If he didn't have the tools, he could have gone to Congress and asked for them.
Of course, the current problems with our financial system are not solely the result of bad lending. The banks have made mega-bets with one another through complicated instruments such as derivatives, credit-default swaps, and so forth. With these, one party pays another if certain events happen-for instance, if Bear Stearns goes bankrupt, or if the dollar soars. These instruments were originally created to help manage risk-but they can also be used to gamble. Thus, if you felt confident that the dollar was going to fall, you could make a big bet accordingly, and if the dollar indeed fell, your profits would soar. The problem is that, with this complicated intertwining of bets of great magnitude, no one could be sure of the financial position of anyone else-or even of one's own position. Not surprisingly, the credit markets froze.
Here too Greenspan played a role. When I was chairman of the Council of Economic Advisers, during the Clinton administration, I served on a committee of all the major federal financial regulators, a group that included Greenspan and Treasury Secretary Robert Rubin. Even then, it was clear that derivatives posed a danger. We didn't put it as memorably as Warren Buffett-who saw derivatives as "financial weapons of mass destruction" -but we took his point. And yet, for all the risk, the deregulators in charge of the financial system-at the Fed, at the Securities and Exchange Commission, and elsewhere-decided to do nothing, worried that any action might interfere with "innovation" in the financial system. But innovation, like "change," has no inherent value. It can be bad (the "liar" loans are a good example) as well as good.
No. 2: Tearing Down the Walls
The deregulation philosophy would pay unwelcome dividends for years to come. In November 1999, Congress repealed the Glass-Steagall Act-the culmination of a $300 million lobbying effort by the banking and financial-services industries, and spearheaded in Congress by Senator Phil Gramm. Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organize the sale of bonds and equities); it had been enacted in the aftermath of the Great Depression and was meant to curb the excesses of that era, including grave conflicts of interest. For instance, without separation, if a company whose shares had been issued by an investment bank, with its strong endorsement, got into trouble, wouldn't its commercial arm, if it had one, feel pressure to lend it money, perhaps unwisely? An ensuing spiral of bad judgment is not hard to foresee. I had opposed repeal of Glass-Steagall. The proponents said, in effect, Trust us: we will create Chinese walls to make sure that the problems of the past do not recur. As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend human behavior toward self-interest- toward short-term self-interest, at any rate, rather than Tocqueville' s "self interest rightly understood."
The most important consequence of the repeal of Glass-Steagall was indirect-it lay in the way repeal changed an entire culture. Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people's money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people's money-people who can take bigger risks in order to get bigger returns. When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risktaking.
There were other important steps down the deregulatory path. One was the decision in April 2004 by the Securities and Exchange Commission, at a meeting attended by virtually no one and largely overlooked at the time, to allow big investment banks to increase their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed securities, inflating the housing bubble in the process. In agreeing to this measure, the S.E.C. argued for the virtues of self-regulation: the peculiar notion that banks can effectively police themselves. Self-regulation is preposterous, as even Alan Greenspan now concedes, and as a practical matter it can't, in any case, identify systemic risks-the kinds of risks that arise when, for instance, the models used by each of the banks to manage their portfolios tell all the banks to sell some security all at once.
As we stripped back the old regulations, we did nothing to address the new challenges posed by 21st-century markets. The most important challenge was that posed by derivatives. In 1998 the head of the Commodity Futures Trading Commission, Brooksley Born, had called for such regulation-a concern that took on urgency after the Fed, in that same year, engineered the bailout of Long-Term Capital Management, a hedge fund whose trillion-dollar- plus failure threatened global financial markets. But Secretary of the Treasury Robert Rubin, his deputy, Larry Summers, and Greenspan were adamant-and successful-in their opposition. Nothing was done.
No. 3: Applying the Leeches
Then along came the Bush tax cuts, enacted first on June 7, 2001, with a follow-on installment two years later. The president and his advisers seemed to believe that tax cuts, especially for upper-income Americans and corporations, were a cure-all for any economic disease-the modern-day equivalent of leeches. The tax cuts played a pivotal role in shaping the background conditions of the current crisis. Because they did very little to stimulate the economy, real stimulation was left to the Fed, which took up the task with unprecedented low-interest rates and liquidity. The war in Iraq made matters worse, because it led to soaring oil prices. With America so dependent on oil imports, we had to spend several hundred billion more to purchase oil-money that otherwise would have been spent on American goods. Normally this would have led to an economic slowdown, as it had in the 1970s. But the Fed met the challenge in the most myopic way imaginable. The flood of liquidity made money readily available in mortgage markets, even to those who would normally not be able to borrow. And, yes, this succeeded in forestalling an economic downturn; America's household saving rate plummeted to zero. But it should have been clear that we were living on borrowed money and borrowed time.
The cut in the tax rate on capital gains contributed to the crisis in another way. It was a decision that turned on values: those who speculated (read: gambled) and won were taxed more lightly than wage earners who simply worked hard. But more than that, the decision encouraged leveraging, because interest was tax-deductible. If, for instance, you borrowed a million to buy a home or took a $100,000 home-equity loan to buy stock, the interest would be fully deductible every year. Any capital gains you made were taxed lightly-and at some possibly remote day in the future. The Bush administration was providing an open invitation to excessive borrowing and lending-not that American consumers needed any more encouragement.
No. 4: Faking the Numbers
Meanwhile, on July 30, 2002, in the wake of a series of major scandals-notably the collapse of WorldCom and Enron-Congress passed the Sarbanes-Oxley Act. The scandals had involved every major American accounting firm, most of our banks, and some of our premier companies, and made it clear that we had serious problems with our accounting system. Accounting is a sleep-inducing topic for most people, but if you can't have faith in a company's numbers, then you can't have faith in anything about a company at all. Unfortunately, in the negotiations over what became Sarbanes-Oxley a decision was made not to deal with what many, including the respected former head of the S.E.C. Arthur Levitt, believed to be a fundamental underlying problem: stock options. Stock options have been defended as providing healthy incentives toward good management, but in fact they are "incentive pay" in name only. If a company does well, the C.E.O. gets great rewards in the form of stock options; if a company does poorly, the compensation is almost as substantial but is bestowed in other ways. This is bad enough. But a collateral problem with stock options is that they provide incentives for bad accounting: top management has every incentive to provide distorted information in order to pump up share prices.
The incentive structure of the rating agencies also proved perverse. Agencies such as Moody's and Standard & Poor's are paid by the very people they are supposed to grade. As a result, they've had every reason to give companies high ratings, in a financial version of what college professors know as grade inflation. The rating agencies, like the investment banks that were paying them, believed in financial alchemy-that F-rated toxic mortgages could be converted into products that were safe enough to be held by commercial banks and pension funds. We had seen this same failure of the rating agencies during the East Asia crisis of the 1990s: high ratings facilitated a rush of money into the region, and then a sudden reversal in the ratings brought devastation. But the financial overseers paid no attention.
No. 5: Letting It Bleed
The final turning point came with the passage of a bailout package on October 3, 2008-that is, with the administration' s response to the crisis itself. We will be feeling the consequences for years to come. Both the administration and the Fed had long been driven by wishful thinking, hoping that the bad news was just a blip, and that a return to growth was just around the corner. As America's banks faced collapse, the administration veered from one course of action to another. Some institutions (Bear Stearns, A.I.G., Fannie Mae, Freddie Mac) were bailed out. Lehman Brothers was not. Some shareholders got something back. Others did not.
The original proposal by Treasury Secretary Henry Paulson, a three-page document that would have provided $700 billion for the secretary to spend at his sole discretion, without oversight or judicial review, was an act of extraordinary arrogance. He sold the program as necessary to restore confidence. But it didn't address the underlying reasons for the loss of confidence. The banks had made too many bad loans. There were big holes in their balance sheets. No one knew what was truth and what was fiction. The bailout package was like a massive transfusion to a patient suffering from internal bleeding-and nothing was being done about the source of the problem, namely all those foreclosures. Valuable time was wasted as Paulson pushed his own plan, "cash for trash," buying up the bad assets and putting the risk onto American taxpayers. When he finally abandoned it, providing banks with money they needed, he did it in a way that not only cheated America's taxpayers but failed to ensure that the banks would use the money to re-start lending. He even allowed the banks to pour out money to their shareholders as taxpayers were pouring money into the banks.
The other problem not addressed involved the looming weaknesses in the economy. The economy had been sustained by excessive borrowing. That game was up. As consumption contracted, exports kept the economy going, but with the dollar strengthening and Europe and the rest of the world declining, it was hard to see how that could continue. Meanwhile, states faced massive drop-offs in revenues-they would have to cut back on expenditures. Without quick action by government, the economy faced a downturn. And even if banks had lent wisely-which they hadn't-the downturn was sure to mean an increase in bad debts, further weakening the struggling financial sector.
The administration talked about confidence building, but what it delivered was actually a confidence trick. If the administration had really wanted to restore confidence in the financial system, it would have begun by addressing the underlying problems-the flawed incentive structures and the inadequate regulatory system.
Was there any single decision which, had it been reversed, would have changed the course of history? Every decision-including decisions not to do something, as many of our bad economic decisions have been-is a consequence of prior decisions, an interlinked web stretching from the distant past into the future. You'll hear some on the right point to certain actions by the government itself-such as the Community Reinvestment Act, which requires banks to make mortgage money available in low-income neighborhoods. (Defaults on C.R.A. lending were actually much lower than on other lending.) There has been much finger-pointing at Fannie Mae and Freddie Mac, the two huge mortgage lenders, which were originally government-owned. But in fact they came late to the subprime game, and their problem was similar to that of the private sector: their C.E.O.'s had the same perverse incentive to indulge in gambling.
The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, "I have found a flaw." Congressman Henry Waxman pushed him, responding, "In other words, you found that your view of the world, your ideology, was not right; it was not working." "Absolutely, precisely," Greenspan said. The embrace by America-and much of the rest of the world-of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.

© 2008 Vanity Fair
Joseph E. Stiglitz is University Professor at Columbia University. Among many books, he is the other of Globalization and Its Discontents. He received the Nobel Prize in Economics in 2001 for research on the economics of information. Most recently, he is the co-author, with Linda Bilmes, of The Three Trillion Dollar War: The True Costs of the Iraq Conflict.