If Only I Were Smarter
Uncle Andrew
….I might be able to do more than stare at my 401(k) statement and whimper. But I ain’t, so I just tell myself that this particular trough will smooth out over the next 20 or 25 years and I’ll end up sitting on the front stoop in my adirondack chair, sipping a microbrew and reminiscing about the Big Scare of Ought Eight. That is, assuming that the entirety of the retail financial sector has not been acquired in receivership by the US government or absorbed into Wal-Mart Worldwide Financial by then, and I’m actually sitting in a shallow tank of support brine keeping my brain alive because all of my organs have been harvested to pay our property taxes.
Being a medium-grade ignoramus about the economy, I have to more or less take my government at its word when it funnels 85 billion dollars into a pack of avaricious, idiotic nest-wetting carrion feeders like AIG because failure to do so would cause the worldwide financial market to suffer untold damage. After all, the collapse of the world’s largest insurance entity can’t be a good thing for anyone affiliated with it, which from the reports coming out sounds like it might include half the mammalian biomass of the planet and maybe a few million echinoderms as well. And as it stands, having the government hold an equity stake in the doings of a struggling financial behemoth does not seem to be such a bad move. Almost as good a move as it would have been to have a GOD DAMN REGULATORY INFRASTRUCTURE WITH SOME FUCKING TEETH IN IT TO KEEP COMPANIES LIKE AIG FROM SELLING ALL THOSE SUICIDAL MORTGAGE BACKED SECURITIES PROTECTION POLICIES IN THE FIRST PLACE—but, I digress. All dollars under the bridge now. Millions and millions and millions of dollars.
But it all seems so weird; when exactly did it become sound fiscal policy to deny a safety net for individuals for making stupid mistakes yet bail out huge companies for making mind-blowingly huge, earth-shatteringly stupid mistakes? Imagine if the US government had dedicated 85 billion clams towards mortgage relief for homeowners. It would have accomplished the same end result: mortgages wouldn’t have gone into default, so the mortgage-backed securities would have remained solvent. So the dipshit insurance companies who protected those securities with policies wouldn’t have lost their shorts. In fact, that way might have been a whole hell of a lot simpler, even potentially a lot better for the economy as a whole. Keeping homeowners in their homes would have provided aid for every rung on that rickety ladder instead of just those hanging by their nails from the brass ring.
But no: giving money to a desperate homeowner is a handout. Worse yet, it’s rewarding irresponsibility. Not to mention the potential for fraud involved in cutting checks to thousands of individuals whose mortgages are in the ICU. Oh sure, it may not sound as fraudulent as, say, giving the asshole who drove the largest insurance company into the ground a $1 million annual salary, plus $4–$8 million in annual performance bonuses, $13 million annually in long-term incentive pay and a one-time $24.5 million stock package (which admittedly must have taken a pretty big hit in the last few days)….but remember, these people failed to show financial common sense! For the love of bailouts, where’s the accountability?
Quick: what’s dumber than taking on a mortgage you can’t possibly afford? Offering mortgages that people can’t possibly afford. And what’s dumber than offering mortgages that people can’t possibly afford? Offering investment products based on companies offering mortgages that people can’t possibly afford! And now, for the $85 billion grand prize: what’s dumber than offering investment products based on companies offering mortgages that people can’t possibly afford? You guessed it! Offering INSURANCE POLICIES on investment products based on companies offering mortgages that people can’t possibly afford!
[What could possibly be dumber than all that? One might reasonably assume it would be offering a bailout of the provider of insurance policies on investment products based on companies offering mortgages that people can’t possibly afford. But frankly, any dumber and you’d probably have to be watered twice a day.]
I’ll admit that the idea of letting AIG fall completely to pieces does not appeal to me. But using billions in treasure we do not have to keep it afloat—to all but admit that some institutions are too big to allow to crumble, no matter how insane and out of touch they seem—is very disturbing. It’s like….well, to be frank, it’s like being too large a nation on too wack a mission for anyone else in the world to prevent. It’s like sinking all of your money and effort into a big institution (or incursion) while ignoring the little guy. You know, the guy hiding in a cave.
It’s all very unsettling and very, very familiar.
I’m not quite ready to invest in mattress-backed securities yet, but I am regularly checking the market value of my corneas.
11 Responses to “If Only I Were Smarter”
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September 17th, 2008 at 5:42 pm
“All dollars under the bridge now. Millions and millions and millions of dollars.”
Between AIG, Freddy Mac, Fannie Mae, and Bear Stearns back in March, I think you need to say “biilly-yuns and biiiiilly-yuns” to be accurate – and yes, you have to do it with the Carl Sagan accent.
And yes, this is beyond scary if you stop to think about it at all. 😯
September 17th, 2008 at 8:12 pm
It gets worse; turns out no one wants a diabetic’s organs. 😥
September 18th, 2008 at 7:38 am
Everytime I hear about another of these stupid bailouts, my vocal cry is “Free Market my ass.” The same financial industry that we’re bailing out with our tax $ is the same industry that will pay lobbyists and politicians millions to rail against any regulations we re-impose, saying they’re interfering with capitalism and free-market economics.
September 18th, 2008 at 8:42 am
Morning Edition did a nice job of summing up both the fuckup that caused AIG to tank and the reasons why their complete dissolution would result in financial chaos. I think this helped to further cement my feeling that the bailout was necessary, but it still really grates on me. Once again, if that money could be funneled directly into the mortgages going into default it would at least act as a direct stimulus to the economy….but that’s just a pipe dream. No one uses that kind of money to help individuals unless the program is so grandfathered-in that there’s no way to kill it outright.
As for Free Markets; your ass, my ass, my cat’s asses….there’s no such thing. It’s always a market that’s overwhelmingly caveat emptor or caveat vendor. Being a good pinko lib, I tend to favor the latter—in the form of government regulation and consumer protection—because at least the stated charter of the government is the security and prosperity of the people (even if they often need reminding); with private enterprise, the charter is always geared towards the prosperity of the company. Which almost never takes the actual propsperity of the consumer into consideration.
September 18th, 2008 at 11:33 am
The thing that kills me, that actually causes pieces of my soul to die is that I have met face to face and spoken with people who think that the Repu Party, the party who’s policies –
– Allowed and even encouraged the deregulation that brought about the current financial crisis
– have spent BILLIONS in government takeovers of failed financial institutions (essentially nationalizing large chunks of the banking and mortgage industry)
– and have run up the largest deficits in the history of recorded economics
STILL think that they are the party of “small government” and “financial responsibility” and would never vote for a Democrat because they don’t want “big government socialism”.
The cognitive dissonance from that would shatter my skull
September 18th, 2008 at 11:42 am
Also, regarding the bailouts, the definition of a failed policy is one that leaves you in a situation with no good options and that is exactly the situation we are in with institutions like AIG.
The Repu’s economic policies are what allowed these institutions to become “too big to fail” and also allowed them to risk trillions of dollars in arcane and highly speculative investments while having negligible cash reserves.
The couldn’t have created a situation more likely to be overwhelmed by reckless greed. All the profits go to private individuals and all the risk is taken by the government. What incentive is there to behave responsibly?
September 18th, 2008 at 11:52 am
Sadly, it was a bipartisan Congress (and Bill Clinton) who passed the Gramm-Leach-Bliley Act in 1999, which defanged many of the restrictions of the Glass-Stegall Act of 1933, allowing various financial entities to become purveyors of all kinds of exotic investment vehicles. Many think that was the beginning of the landslide.
It would be nice if criminal penalties might be leveled against the monkeybrains who managed to drive these august institutions into powder, ala Enron, but I rather doubt it will happen. Too many layers of legal protection, too many political contributions. And always with the justification that, unlike one’s electricity, the consumer did not have to buy into any particular bizarro-world home loan.
As for the bailout(s[s]): the one thing I can think of that might be of some succor is the idea of the US government holding an equity stake in these companies. If we can’t have nationalized health care, maybe at least we can get a taste of a re-nationalized banking system….
September 18th, 2008 at 3:13 pm
OK, you can put that “equal opportuniy offender” crap out to dry now.
Yeah, some of Clinton’s moves didn’t pan out. Sure, the fat cats have always done their best to buy both sides of the Congressional aisle. But Gramm, Leach, and Bliley were all Republicans, and the guys who were actually running the show (and remarkably hostile to the idea of sharing power) during the years when the effects of the bill were playing out all had (R) after their political names.
FFS, McCain actually hired “Mental Recession” Gramm as his primary economic advisor! And don’t get me started about Carly Fiorina…
I’m really getting tired of the weird (and relatively new, yet astonishingly pervasive) idea that “balance” and “objectivity” are somehow best represented by mentioning both sides of an argument and then walking away. Sometimes one side is actually better than the other. Where the stink of this particular meltdown is concerned, neither side is clean, but the Democrats are last-week’s-underwear whiffy and the Republicans are up to their pits in sewage.
Kittens. I shall think about kittens…
September 18th, 2008 at 4:08 pm
Wow, I had no idea that pointing out that The Financial Modernization Act was supported by a majority on both sides of the aisle—and signed by a Democratic president—made me a tool of Fox News. Think they’d give me money?
If you think I don’t favor one party over another, I’m not sure who you’ve been going out to dinner with off and on for ten-plus years. I think it’s perfectly fair to mention that the legislation that quite a few people think helped to bring about the current crisis was supported by members of both parties—a lot of members of both parties—in Congress. It helps to emphasize the very prevalent point that influence-peddling in politics is the reason these things happen in the first place. This makes me a dupe for the Far Right? Whose blog have you been reading all this time? Have my posts been hijacked by operatives of The Drudge Report? Better check my firewall software….
September 18th, 2008 at 8:31 pm
What? No, Fox News is the one outfit on TV that’s immune to the false-equivalence syndrome: rather than follow a Democratic talking point with a Republican one, they skip the first part, blame the Democrats and cut to commercial. The joke about “fair and balanced” has always been that they don’t even try. Some of the other networks do try, they just suck at it: they report on some administration outrage, and then take a random slap at something Democratic in order to “restore the balance” or some such. I see it on a lot of leftish blogs, too. In fact I see it all *over* the damn place and it’s been pissing me off for weeks, which is why I popped off when I saw it here.
As a pattern, it matters because it trivializes important differences between the groups that run the frickin’ world. Yeah, they’re both corrupt, but one is a LOT more corrupt than the other. Both presidential campaigns are occasionally misleading, but one of them is running off a string of lies that’s unprecedented in modern politics (and that’s saying a lot.) Etc. I keep reading interviews where some random voter watches the endless parade of “a shot from the left, and a shot from the right… a shot from the left, and a shot from the right” and decides that everybody sucks and they’re just going to vote for the hot mama on the Harley or the guy who used to fly jets.
As far as the FMA goes, it is pretty explicitly an implementation of Republican economic ideology (Phil Gramm’s more than anyone else’s.) It was pushed by the Republican legislative leadership and has, for most of the time since its passage, been implemented by a Republican administration. YakBoy’s characterization of the FMA as “Repu economic policy” is basically correct, so when I read your response (correctly or otherwise) as “yeah, but it was passed under a Dem administration”… buttons were pushed, steam shot out ears, etc, etc.
Anyhow, didn’t really mean to drop a rant on the proper dialectic approach to competing political claims on my friends, or otherwise harsh an otherwise collegial atmosphere. (I get plenty of that from my family.) I shall go watch Muppets or something and try to calm down.
September 19th, 2008 at 9:39 am
Well, thanks for putting out the fires, there. I couldn’t imagine that you really intended to chew me a new cloaca for making an observation. But frankly, I’m still not sure why what I said was so awful/intellectually dishonest/emblematic of what’s wrong with political dialogue in this country today.
Yes, that’s quite true. As is your point about its poor execution in the hands of Repu lawmakers since then. Doesn’t that make it even more puzzling and potentially disturbing that the Act was passed with a veto-proof majority while the Democrats controlled Congress? Doesn’t that mean that the influence of the moneyed can express itself anywhere, not just on the side we don’t like? This is a very important concern, particularly given the level of political contributions to both candidates by financial giants in this year’s Presidential election.
It seems to bother you that I made my statement and then “walked away”. Was there some particular need for me to then go on to reiterate everything YakBoy said, in order to validate my Lib cred? Why couldn’t the validity of his statements stand on their own, with my failure to attack them point-by-point taken as an indicator that I didn’t see anything in them that demanded dissent? I mean, if I had replied to his post by saying, “Yeah, well, Clinton got a blowjob and then lied about it!”, then sure, my political leanings—not to mention my grasp on reality—would have been up for interpretation. But I don’t think that I should have to lay out the sum of my political beliefs in every post I make, just to make sure everyone knows exactly where I stand.
Anyway, let’s just consider this settled, shall we? You go watch some Muppets, I’ll go snorgle a kitten, everybody’s happy. 😉