Humpty Dumpty

 

 

Humpty Dumpty sat on a wall,
Humpty Dumpty had a great fall.
All the king's horses and all the king's men
Couldn't put Humpty together again

 

 

This is a story about a modern day Humpty Dumpty. As in the poem, Humpty Dumpty had a great fall. In the modern version, the character of Humpty Dumpty is played by the United States economy. Many thought the great fall happened in late 2007. My feeling is the fall was really a slow motion tumble which started long before 2007. Again, just like in the poem, it is looking doubtful that all the king's horses (policies) and all the king's men (bureaucrats) will be able to put our Humpty Dumpty back together again.

So what really has happened to our world class economy? When did the slow motion crash really start. Some say in the 1970's when many of our factories started to either shutter or outsource. The Becker-Posner Blog points out the following: "Manufacturing employment as a fraction of total employment has been declining for the past half century in the United States and the great majority of other developed countries. A 1968 book about developments in the American economy by Victor Fuchs was already entitled The Service Economy. Although the absolute number of jobs in American manufacturing was rather constant at about 17 million from 1969 to 2002, manufacturing’s share of jobs continued to decline from about 28% in 1962 to only 9% in 2011."

As the above shows, the relative growth in manufacturing is in decline even though the people employed in that industry has stayed constant. I worked in manufacturing most of my career, ranging from clean room to heavy. Every manufacturing company I worked for is no longer in the business. They have gone away, been sold or merged. The manufacturing company my father worked for is also no longer here. The remains are someplace overseas, owned by a foreign country.

So besides the decline in our manufacturing base and the increase in the service sector, what else changed which led to the 2007 crash? Many say the "gutting" of the Glass–Steagall Act, when in 1999 President Clinton signed into law the Gramm-Leach-Bliley Act. Glass-Steagall has been around since the 1930's and was put in place to keep the banks in check. After 1999, with the "fire wall" down, banks were allowed to go hog wild and get into all kinds of different investments. Pandora's Box had been opened and something bad was about to come out.

And what spewed out of Pandora's Box was the evil offspring of Barney Frank (D-MA) and the Frannie and Freddie lending institutions - NINJNA Loans. To refresh memories, NINJNA was a colloquialism which stood for "No Income, No Job, No Assets". In a November 2011 article from the Washington Times, it was summed up this way:

"In a nutshell, the much-maligned Bush Administration recognized the Fannie-Freddie problem early on. Slowly, relentlessly, from the 1980s on, mostly Democrat-controlled Congresses pushed both quasi-governmental entities to prod banks into ever more liberal loan policies that would allow less and less qualified loan applicants to obtain mortgages and—often for the first time—purchase housing, regardless of whether they were financially able to carry their mortgages.

The problem became acute in the early 2000s as lower and lower down payments and “liar loans”—loans that required little if any substantiating documentation—became the norm. The Bush Administration—along with eventual GOP presidential candidate John McCain—tried to put an end to these practices, but to no avail. Frank, the Democrats, and a substantial number of incredibly stupid Republicans steadfastly opposed legislation geared toward heading off the already-gathering fiscal storm."

The rest is history. Many smart folks believe that Barney Frank was the one who started the avalanche - the one who pushed Humpty off the wall. To offset the title wave of revisionist history that comes out from the Left, I want to sum up what I believe caused the great crash that is reshaping our economy:

• Our manufacturing base has been shrinking for decades - not just under the G.W. Bush era.
• Glass-Steagall was repealed under the Clinton Administration, not under the G.W. Bush Administration.
• The NINJNA loans fueled the toxic mortgages which the repeal of Glass-Steagall allowed to contaminate our banks. Even though this came to a head under the G.W. Bush Administration, it really started in the bowls of the Democratic controlled House in the 80's.

Humpty Dumpty is broken - and Dodd-Frank will do nothing to fix it except make more lawyers rich due to excessive regulation on our financial system. The next time you hear someone tell you that G.W. Bush caused this mayhem in our economy, politely (or not), share the facts as they are well documented. To fix Humpty we must first be truth tellers and then problem fixers. Failure to do so will leave Humpty in needed repair with important pieces still missing. And all the king's horses and all the king's men won't be able to put Humpty together again.