Bob Maistros

So whose fault was the 2008 financial crisis?

According to the Democratic-appointed majority of a blue-ribbon panel appointed by Congress, blame those lax regulators and greedy bankers.

Hearings but never understanding.

One Republican-selected dissenter says it was too long a leash for Fannie Mae and Freddie Mac.

And three other Republican panel members insist that’s all too simplistic, and it was like ten different factors, some of which involve broad global trends.  I might be somewhat convinced by their argument if I could understand it.

In any event, as Richard Nixon used to say – or at least as Tricky Dick imitators used to say that he said – let me say this about that.  Actually, three “this-es.”

First of all, for once I can say the financial crisis wasn’t my fault.  Yes, I refi-ed my house when mortgage rates got ridiculously low and have somewhat overextended my home equity line and easy-money credit cards.  And yes, I do have a rather nasty habit of lax regulation, especially when it comes to turning burners and space heaters on and leaving, to my much better half’s endless frustration.  But for the most part, I have paid my bills and not walked away from my mortgage, declared bankruptcy or asked for a bailout.  Yet.

Second, there’s one factor I haven’t read about in any analysis, but which seems rather obvious to me.  If two of the biggest reasons for the crisis were overleverage and overhousing, doesn’t it make sense that a sizeable contributor might be a tax code that massively favors business debt over equity and subsidizes housing over renting?

After all, as a sometimes financial communicator, I’ve always marveled at all the terms that get trotted out during earnings season.  Like EBITDA – Earnings before Interest, Taxes, Depreciation and Amortization — which for a while was displaced in some quarters by OIBDA, or Operating Income Before Depreciation and Amortization.  I especially remember watching Time Warner, with its high levels of debt, getting all twisted in its knickers endeavoring to point everyone away from actual income to something called Free Cash Flow.  Wouldn’t it be nice and transparent and all that if, at earnings time, we took out the tax considerations and shareholders and the SEC and everyone else could just focus on something simple like, say, earnings?  Wouldn’t that help with regulation?

And of course, if we’re worried about leverage, wouldn’t it be better if we didn’t give huge deductions for business interest while taxing the bejeebers out of dividends and capital gains and other forms of return on equity?

And if we’re concerned about housing bubbles causing financial crises, wouldn’t it be a good idea not to provide huge mortgage interest deductions and other tax goodies to speculators whose idea of fun and profit was to buy up houses and flip them in a huge Ponzi scheme until the game of musical chairs ran out (yeah, I’m mixing metaphors.  What of it?), and then waltz off?

And couldn’t these silly, skewed, bass-ackwards tax incentives been even a little bit of a cause of the financial crisis?

Just asking.

Third, and possibly most important, it seems just a little bit crazy to ask whose “fault” the financial crisis was.  You might as well ask whose fault it was that the sun came up this morning (I understand that in some less weather-challenged parts of the world, that did happen) or the tide came in.

Business cycles happen, sometimes in long, 70-year-type waves.  Bubbles grow and burst.  Speculators speculate.

And no matter how much government tries to put the brakes on these phenomena, human nature will demand that people will end-run it and push the envelope and throw caution to the winds and reach extra far for that brass ring and fall on their overlarded, hypercompetitive rear ends.

You see the same American hubris going on, by the way, in all the discussion about who “lost” Egypt, which as far as I can tell is still pretty much right where it was.  Yes, we helped prop up a sometimes cruel and ruthless dictator, which we probably shouldn’t have done so much of.  But there were understandable and even maybe even good reasons, like promoting 33 years of relative peace and stability (intifadas notwithstanding) in the Middle East.

And while we certainly have some influence on the course of events in the Land of the Pharaohs – money, in the form of billions of dollars in aid, does talk – no matter what we self-important Yanks do, there are internal cultural forces at work that, in the long, medium and even short run, leave us on the outside looking in.  We can’t change who the Egyptians are or rewrite their history or dictate their political or cultural institutions.

Ultimately, if the Egyptians get “lost,” they will have lost themselves.  And the financial crisis wasn’t anyone’s fault and was everyone’s fault.  These things have happened for millennia and will happen again for millennia, or for however long fallible men and women are still clinging to this fragile orb.

Naturally, that doesn’t mean we still shouldn’t deep-six our insanely stupid tax code.  Just saying.

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