“We conclude first and foremost that this crisis was avoidable,” said Phil Angelides, chairman of the Financial Crisis Inquiry Commission (FCIC). In last month’s report the FCIC said the financial crisis that spread to Montana could have been avoided.
The FCIC contends that the causes of the crisis lay with the federal authorities, under presidents George W. Bush and Barack Obama, as they both failed to curb reckless behavior on Wall Street. The FCIC said that the economic troubles were perpetuated in a “shadow banking system,” almost entirely unregulated.
One of the world’s largest insurance companies, AIG, was rescued by the feds as it risked $79 billion in insurance contracts on mortgage-backed securities. Publicly bailed out, in our county where half of us own less than 1 percent of America’s stocks and bonds and 1 percent owns more than 50 percent.
The FCIC indicates the turmoil erupted in 2008 and 2009, at the peak of Montana’s real estate boom. Many will dismiss the FCIC report as partisan, but, remember, “irrational exuberance” was how the past Federal Reserve chairman responded to accusations that the market was overvalued.
Now, with the backlog of homes on the market and record foreclosures, construction jobs are at historic lows. Since the Great Depression, we are living in some of the most perilous economic days in the Flathead Valley, gratefully steadily getting better.
A free market is one where there exists no economic intervention or regulation by the state, except to enforce private contracts and the ownership of property. It is often praised as a savior to our economic problems. Montana has some glaring examples of how the free market fails middle class locals.
Homeowners’ property taxes shadow free market valuations and most agree are too high. Recently reappraised during the boom years, the real culprit of exorbitant homeowner taxes is simply Legislative policy. Tax-caps and appraisal-upon-resale for folks living in their homes is far more economical than the speculative market approach Montana has been using for decades. Tax-caps or appraisal-upon-resale regulate cost to homeowners while providing predictability.
When Montana deregulated the energy system in the late 90s, it was under the promise that the free market would make the sixth-lowest energy costs in the nation even cheaper. This made no business sense to Main Street, but was welcome political dogma. Energy deregulation failed, proving disastrous to Montana’s history of cheap, clean and public power.
“One lesson is that deregulation or restructuring in fact requires a very active and vigilant regulator,” said Bob Rowe, past chairman of the Public Service Commission. Rowe is now president of NorthWestern Energy, Montana’s largest utility. NorthWestern recently opposed repealing laws that keep wind power part of the energy portfolio, citing good progress and great investments.
Chasing a legislative mandate for market returns, Montana’s Board of Investment lost nearly $3 billion in public pensions, getting caught short in real estate and other Wall Street investments. The Board of Investment could bank locally, putting a portion of Montana’s cash in secure banks and competitive credit unions, freeing up money for small businesses.
The Flathead middle class is hungry for leadership that will lead to job recovery. One-third of Montana’s 62nd Legislative Session has now past, with halftime transmittal just two weeks away. Montana needs a jobs plan, not pessimistic discourse or more derisive social bills. It is time to concentrate on what’s important.
The Legislature could join forces with Gov. Brian Schweitzer on a jobs plan and reevaluate homeowner taxes. As General Electric Chairman Jeff Immelt recently reminded 2,000 business leaders in Montana, “Anger is not a strategy. Anger does not create growth. Only optimism creates growth.”
Behavioral economists say America will recover when people believe that things are getting better. Believing in Montana’s entrepreneurship spirit coupled with practical regulation for energy, homeowner taxes and public investments helps assure positive returns to avoid another crisis.