I am afraid I’ve been derelict in my duties as Chief Bemused Chronicler of the Coming Catastrophe. I’ve got an excuse, though. My Give a Damn’s Busted.
Well, that’s only half right. Of course I care about the precipice we are currently teetering upon. Nevertheless, part of me wants to scream “Jump!” just because the idea of huge corporations with enormous political influence and the fabulously wealthy men who run them getting off the hook and not paying dearly for the cruddy decisions they made with their customer’s money sickens my soul.
In six months, even the ones who are fired will no doubt land on their feet running some other company or fund into the ground. They are losers. And the helluva it is, many of these fellows with their hands out, begging us to backstop their stupidity will not be fired, or disciplined, or even given a slap on the wrist. They may even receive kudos from shareholders and the “experts” for having the good sense to finagle cash from the government in exchange for paper that is worth less than a supermarket full of Charmin.
Yes, I know that eventually the Treasury Department will try and sell these securities. And no doubt, the American taxpayer will be told that it was a great deal because we bought in for a song and sold for a huge profit. In the meantime, these same guys will be planning their next get rich quick scheme, gambling that they won’t be one of the suckers holding the bag when the crap hits the fan next time.
As I understand it (and I use the word “understand” in the minimalist way as in “I “understand” quantum mechanics isn’t about repairing tiny cars) the whole point of these trillions of dollars in mortgage backed securities bought by banks and investment firms all over the world is that it “spread the risk” so that no one company would be too exposed.
Who came up with that idea? And why, after spreading the risk all over the world, does it come all the way back and slap the American taxpayer square in the face?
In the immortal words of C-3PO, “Don’t get technical with me.” We are used to government programs being designed to do one thing while ending up accomplishing exactly the opposite. But a financial instrument?
We are told there hasn’t been enough regulation. We are also told there’s been too much regulation. We’ve been told that capitalism is at fault. We’ve been told that it’s government’s fault. We’ve been told it’s a lack of oversight. We’ve been told that banks were forced to lend to deadbeats. We’ve been told it’s the fault of greedy businessmen. We’ve been told it’s no one’s fault, that everyone is to blame.
Now I am not that bright about this kind of thing but to my way of thinking, I’m not sure everything we’ve been told can all be right. And given the track record of the people making these grandiose claims of fault – right and left – it hardly engenders confidence that anyone, anywhere knows what the hell they are talking about.
We might as well face it. Even the financial gypsies at the Fed don’t know what they are doing in this situation. They are in full reactive mode and their crystal balls have gone dark. And if the Fed is in the dark, the hacks at the Treasury Department are only guessing too.
Now I may not understand what’s going on too well but common sense would tell the average Joe that before we go off half cocked and start handing out taxpayer money that maybe, perhaps, we should have the slightest idea if this is going to work.
Just sayin’, that’s all.
Do we have a fallback plan in case this doesn’t do the trick? Or are we just going to throw more money at these Wall Street geniuses and hope for the best?
One thing about this crisis that is truly entertaining is reading bloggers trying to outdo one another in the level of hysteria that their posts reach. It is truly amazing. I’ll bet some of those online thesauruses are getting massive traffic as bloggers search for new adjectives to describe how dire is the situation we find ourselves.
One would think such hyperbole would be the exclusive province of the left. But we righties are making a brave stab at matching them – not in describing the financial crisis but in warning of the catastrophic consequences of the bailout plan. Now, one can oppose the Treasury plan without going off half cocked about “nationalizing Wall Street” or “socializing” the financial system in America. Similarly, one can write of the gravity of the situation without resorting to florid language about selling apples on street corners and half of America standing in soup lines.
But then, what fun is being calm and reasonable? After all, this is an election season and the more out of control and idiotic the rhetoric, the more some people will take you seriously. Besides, predicting the end of the world makes you sound smart to some. It speaks to one of humanity’s most fundamental impulses; the need for drama in our dull and dreary existence. We see this with global warming advocates whose calamitous warnings actually make them feel good inside. There is something almost sexually arousing about imagining the end of the world.
And some bloggers appear to really have a hard on for this disaster.
9:07 am
I must admit that I have a total hard on for this disaster.
It’s like watching a movie where you hope against hope that the bully (wall street) will finally, after everything, get a severe ass kicking from our reluctant hero (the tax payer). I want the bully to suffer so much pain and humiliation that he would never even think of f’ing with the hero ever again. Kinda like Biff and George McFly in Back To The Future.
Now, I know that punching Biff in the face is going to severely mess up my hand… maybe even break some bones and hurt like hell, but I feel like I’d welcome the pain just to see these guys go down in flames.
I’ve read everything there is to read, from both sides of the isle, and one thing is clear. If both sides stand up together and tell these guys to go fuck themselves everyone will win in the long run. Despite the pain we’ll feel.
I’m very happy to see both sides royally pissed at someone else for a change. I know there is political posturing going on, but I’m hoping they come out swinging and don’t screw the tax payers.
9:34 am
Adding to the hyperbole and gay-ron-teed certainty are the locals that I’m forced to listen to. Co-workers, family members, etc. Based on their political leanings it is completely predicatable where they’ll throw blame. More than once in the past week I’ve thrown down, with a big smile, the “Well, that makes you smarter, in economic matters, than the chairman of the Federal Reserve and the Treasury Secretary. What are you doing here?” at whatever geniuses seem to have it all figured out.
It is really strange to find out that I’m surrounded by disguised savants along the lines of Dilbert’s garbage collector.
9:37 am
Rick, thanks for your thoughts on this issue. I reflects my thinking exactly. I also am tiring of the hyperbole from the political Left and Right about the consequences of being for or against this huge bailout. This one sticks in my craw probably more than most: I don’t have a mortgage, I’m a renter. I haven’t saved enough to make a SANE 20% down payment for a mortgage. So why are younger people like me put in the position of having take toxic debt off the books of major banks. Will these banks give me sort of discount or cut rate? I doubt it. Even if the government ends up making money on this a decade from now, will get back some sort of check from our “investment”? I doubt that too.
If your in your 20’s and 30’s, a non-homeowner, single and paying rent, the government will basically tell us to bend over, take it and not complain.
Excuse me if I’m less than thrilled about this.
9:39 am
Yikes! I should use spell-check. Typo after typo…
9:44 am
Your article reminds me of something I was told by a very wise person several decades ago: “Don’t allow a salesman to make you think you’re headed for catastophe if you don’t buy his product in the next few minutes, especially if he has come knocking on your door.” This advice has done wonders for the financial well-being of my family. America would do well to heed this advice also.
10:27 am
I can say this with the moral authority to do so, because I have several significant investments in REITS (and I’m losing my ass on them): the market should be allowed to fail. It can, should, and will self-correct. Since when is it the government’s responsibility to take care of idiots (and yes, I am one of them for buying the high-risk REITs)? Who came up with the idea that poor business and investment decisions should be pain-free?
There is plenty of blame to go-around- Bush and McCain should have carried their warnings directly to the people. Clinton should not have “forced” F-Mae and F-Mac to approve high-risk loans. Barney Frank and Chris Dodd should… well, they should be shot.
A failing market will cause hardship, but will not end the republic. New (hopefully honest) leaders will emerge, good corporations will be rewarded, bad corps punished. A catharsis of sorts that, while painful in the short-term, will be hugely beneficial in the long term. And hopefully, both the American public and the government will learn a valuable lesson.
10:32 am
Of course, referencing my comment #5, I am speaking ideally… I am aware of the political reality of each party trying to avoid the blame, and if possible, assign it to the other party. Which, of course, is why a true, viable plan will NOT be presented.
11:28 am
First off a disclaimer, I was one of those who benefited from loose credit. On my first home I paid a minimum down payment, nowhere near the 20% I should have put down. I bought at the very bottom of a very depressed housing market. When my home almost doubled in value I used the equity to buy a better home in a better neighborhood. I am living well within my means and made sure that no matter what happens I would always be able to make my mortgage payment, but I qualified for a loan that was way beyond my means. There is no way could I have taken on the amount of debit I supposedly qualified for.
What strikes me about this situation is how we have been doing this same thing over and over again. We should have learned after the Great Depression that fast and loose credit was a problem. Instead we had the savings and loan meltdown, watched Japan go through an inflated real-estate banking crisis, and now this. We have banks issuing insurance like contracts on debit without the insurance company credentials, or insurance company scrutiny by government. We have people “qualifying” for mortgages that they could in no way afford, and with no down payment. We have banks extending credit and obviously not understanding exactly what the risks were for these sub prime loans.
So now we have a bailout, and if the taxpayers take on this debit there will be demands for more regulation, but I doubt we have learned anything. Never underestimate human ingenuity for finding out ways around any regulation and coming back to exactly this same situation in another decade or so.
11:29 am
I imagine in a couple of years we’ll all look back and ask why in the hell we accepted such a monstrous debt. I suppose it has something to do with the fact that we don’t understand such large numbers – we’ll quibble over a couple of dollars at the gas pump, but 780 billion dollars? What is that? Is that any different from 500 billion dollars?
1:03 pm
I think it is a good time for all responsible Americans to adjust their 5-year plans to include some sort of post-apocalyptic scenario. I plan on catching and selling rats for food. I think I’ll mention that in my next job interview.
1:08 pm
The most sensible response to the current financial mess I’ve yet seen. “They” screw up, with minimal personal consequences (except for the few who will be scapegoated—I wouldn’t wanna be one of THOSE guys).
I “understand” the various points-of-view; we “can’t” let them fail or there’d be dire consequences, past actions led inevitably to this, many have warned us and were ignored, Dems are partially responsible, Reps are partially responsible, people who SOLD the crap are partially responsible, people who BOUGHT the crap are partially responsible …
Which gets us nowhere fast. Fix it as best as we can and let’s move on already.
Oh, wait, has anybody said yet that this is all a scheme by Bush to slow Obama’s campaign momentum?
1:27 pm
nice one rick, wife and i were discussing it last night.
doorhold,
i have heard the opposite, ha, that the left orchestrated this issue and exacerbated it so it would be the main issue in the campaign. to which i state too big, too far reaching.
issue to me is, yeah, i am young and the market will bounce, correct, whatever we do (good or bad), and i understand the cycles, but “I WANT BLOOD” i want to watch “things” die for this transgression of “our” trust. my parents are on the verge of retiring, many people are, and people (whoever they are) hold the onus for this situation… arrghh… mad, mad, mad… ain’t found a way to kill us yet… but they sure are trying.
2:04 pm
Just one note to add to this great article.
Quantum mechanics repair quantums. An important, underappreciated job that someone must do.
3:43 pm
Quantum mechanics repair quantums. An important, underappreciated job that someone must do.
And a messy job, too. I’ve already contacted Mike Rowe.
4:30 pm
Quantum mechanics repair quantums. An important, underappreciated job that someone must do.
I thought they worked on Australian jets.
BTW, Rick, that music was AWESOME (my give-a-damn’s busted)!
7:40 pm
Had to laugh cause I for one am guilty of throwing ‘socialism a la Bush’ around. There are indeed comic aspects to all this e.g. CEOs proclaiming they also had no idea of what kind of schemes they had endeavored in. IMHO, there are no hardened battle lines because there is general bipartisan confusion of what to do next. Makes me think maybe it won’t make much difference who wins the election cause neither one will have anything to spend. If it is a party on the Titanic let’s at least have some fun!
10:47 pm
Blaming the corporations for the subprime loan disaster is like blaming the flies on the corpse for murder. It was not businessmen or banks that wanted loans to be given to poor-risk borrowers. It was the Democrats during the Carter Administration. THEY were the ones that passed the laws REQUIRING banks to give loans to “lower income” demographics and to distribute loans according to ethnic diversity standards.
The banks and investors and corporations were stuck with that dead, rotting fish, and they had two choices: sell it off as fast as possible, or leave the rotting corpse sitting in their office, stinking up their business.
7:19 am
So is this the Luddite stage of denial? Is Rick smugly celebrating his uninformed state and refusing to advance? Is learning just too far above this blogger’s pay grade? Snap out of it and educate yourself! Start with Robert Samuelson on Dennis Pragger at http://townhall.edgeboss.net/download/townhall/audio/mp3/16daed24-c830-4f42-bb17-ddc85c67e9a6.mp3 (fast forward a bit until you get to the interview)
I am as well informed as reading dozens of articles from excellent authors like Prager and Samuelson can make me. I have no claim to expertise beyond that. And unless you’ve worked for the Fed or the Treasury in some capacity that would make you privy to information beyond what has been in the MSM, shut the fuck up and stop lecturing.
Anyone who thinks they have all the answers – can say definitively how we have arrived at our current crisis and whose fault it is – is an arrogant prick. I would prefer a little humility rather than the swaggering braggadocio of morons like you.
ed.
7:22 am
There is actually a change that the Resolution Trust Corp. that is to be setup by this pending “deal” will in fact not only not cost the taxpayers any money, but could make a profit.
If there is a profit .. how many fathers will this deal have then ?
8:00 am
Commenter #17 wins the “Blame this mess on the Democrats contest”...going all the way back to Carter? Also, I hear those poor bankers had guns held to their heads when signing the loan papers for poor people.
8:16 am
How’s the right wing hard on for privatizing Social Security going? Has it been four hours? Do we need to call the doctor?
8:38 am
“Anyone who thinks they have all the answers – can say definitively how we have arrived at our current crisis and whose fault it is – is an arrogant prick. I would prefer a little humility rather than the swaggering braggadocio of morons like you.”
bingo or in a few less words
He who knows best knows how little he knows. – Thomas Jefferson
there are so many complicating issues and areas of ambiguity that it will never really be possible to truly lay the blame on individuals, but groups can be held responsible, and the congress, senate, and POTUS know they are in the collective blame for just letting it ride without oversight…
hang’em and hang’em high.