An Amnesty for Stupidity
Is it fair that businessmen who fail in neighborhood stores have to close shop and often sell their homes, while Wall Street titans are spared the consequences of monumental stupidity and greed?
No, it is not fair. Yet, Treasury's Hank Paulson may be right. To save the sheep who might have been wiped out in a general financial panic, we may have to save the pigs.
Life is unfair, said JFK.
Yet, this is going to be the mother of all bailouts. Paulson will be voted by Congress authority to spend $700 billion, 5 percent of our gross domestic product, to buy all that toxic paper stinking up the books of our biggest banks.
And this is not the first such bailout of foolish and incompetent financiers and politicians.
In 1975, when its cravenness to extortionate union demands had bankrupted New York, the Big Apple had to be rescued by Gerald Ford.
Marion Barry's Washington, D.C., was next in line at the cashier's window.
In the Reagan era, it was Chrysler. Later that decade, Citibank, Chase-Manhattan and Bank of America were staring into the abyss, as Latin American regimes, to whom they had lent scores of billions, were balking at paying their debts. Uncle Sam stepped in.
Then came the Mexican and Asian financial crises and the U.S.-IMF bailouts of the 1990s. The Mexican bailout was as much a rescue of Goldman-Sachs as Mexico City, as Treasury Secretary Bob Rubin's old firm was choking on all its Mexican paper.
The great myth is that these 1990s bailouts were models of U.S. financial statesmanship and great successes. The reality is the U.S. workers took it in the neck.
For the countries bailed out, like Mexico, Thailand, Indonesia and South Korea, were forced to devalue. This radically reduced the wages of their workers relative to American workers, creating incentives for U.S. manufacturers to shut plants here and move them abroad. The devaluations also slashed the price of foreign goods relative to U.S. goods. Imports flooded in.
Who ultimately paid for the Mexican bailout? Florida tomato growers wiped out by Mexican producers, the price of whose tomatoes was chopped two-thirds by the devaluation. U.S. autoworkers who saw Ford and Delphi plants shuttered as new Ford and Delphi plants opened in Mexico. U.S. textile workers whose mills closed and jobs vanished.
Middle-class American families have paid and paid—in lost jobs, lower wages, a falling median income—to save the big banks from the consequences of their follies. And those bank bailouts are behind the trade deficits that set five records in the Bush era, reached 6 percent of GDP, forced huge U.S. borrowings from abroad and ravaged the dollar.
Having bailed out Latin America, Mexico, Asia and their U.S. creditors, we now find our own country in trouble. And how are our allies reacting?
"Europeans on left and right ridicule U.S. money meltdown," ran the Los Angeles Times headline. Italy's finance minister compares us to corruption-ridden Albania, where "a nationwide pyramid scheme cost hundreds of thousands of people their savings and ignited anarchic civil conflict" in the 1990s.
How will the bailout work? Will every bank that brings in toxic paper be able to dump it on the Treasury? Will the Treasury buy securities based on subprime U.S. mortgages from foreign banks? Apparently so. What about mortgage-backed securities held by U.S. companies and individual investors? Is there to be a general amnesty for bad judgment, or just a bankers amnesty?
About one thing we may be sure. The U.S. deficit and national debt are going to soar. The credit rating of the United States, as this nation of non-savers has to borrow abroad to save its banks, and their banks, is going to fall. We are going to be a poorer nation and people.
As for the promises and plans of Barack Obama and John McCain—be it for national health insurance or middle-class tax cuts—they are going by the wayside. For the United States is as bankrupt as Lehman Brothers, with this difference: Uncle Sam can still borrow from abroad because foreigners see many juicy U.S. assets they would like to take off our hands with their hoards of ever-cheapening U.S. dollars.
Looking at the federal budget—the five or six major items are Social Security, Medicare, Medicaid, defense and interest on the debt. All are going up, as tax revenues fall. Add the cost of two wars and a bailout of U.S. banks that some estimate will cost $1 trillion to $2 trillion, and we appear to be looking at budget deficits ad infinitum.
"There is a great deal of ruin in a nation," Adam Smith once consoled a friend who lamented that Britain would be ruined if the 13 Colonies were lost.
We are about to test Smith's proposition.
COPYRIGHT 2008 CREATORS SYNDICATE INC.
Entries(RSS)
This could be a wonderful thing if it leads Americans to end their "American greatness" sense of nationalism, belief in American infallibility (reality doesn't affect America - America is great because of... the American spirit), etc.
Hopefully the vulture class will be left starving and forced to flee to fresher carrion.
America couldn't continue down the same path indefinitely. The sooner the crash, the sooner the recovery.
The Bush-Cheney follies remind me of a fraternity brother of mine who ended up getting his MBA at Wharton.
Because he was an anarcho-capitalist (that is, an anarchist who wants to be rich but not have to put up with a lot of pesky laws), he daydreamed about a scheme to confuse and bankrupt the U.S. government so that it could no longer function.
The federal budget, the U.S. Constitution, the military, the courts, the electoral system, America's reputation, and now Wall Street have all been "broken" in the last eight years. Almost as if someone planned it that way.
Have the administration and its friends been listening to my old college chum? Just wondering ...
I think Barney Frank may have inadvertatly made a good suggestion: eliminate the failed exec's golden parachutes
I'd go further and suggest that the execs of any institution that accepts bailout money- including Fannie & Freddie- give back any previous bonuses they were paid in the past 5 years. And i they don't do so willingly, allow the Treasury to sue them for recovery
The worst President in my lifetime used to be Jimmy Carter.
How ironic: At the start of his first term in the White House, Bush saw himself as the new Ronald Reagan; at the end of his second term, America sees him as the new Jimmy Carter...but worse, much, much worse.
Carter is still the worst- with an insurmountable lead on W.
Bush is not even 3rd worst, although the argument could be made that he's the equal of LBJ
Keep in mind that Carter did all his damage in one term. By the time he was done, the economy had nearly ground to a halt and even Tip O'Neil knew the only way out was to slash tax rates. We're still dealing with Carter's foreign policy screw-ups almost 30 years later
Mike H wrote: " We’re still dealing with Carter’s foreign policy screw-ups almost 30 years later."
I voted for Bush twice but now am certain I voted for the wrong man. With Gore or Kerry, the enemy to The Republic wouldn't have been pretending to be one of us.
And, at least there was still a genuinely conservative opposition to clean up after Carter. Where is the man who'll clean up after Bush? Certainly not the cadaverous John McCain. Barring a miracle, we're going to be picking up after Bush for at least as long as Carter, and as bad as Carter was, he wasn't so stupid to try to cause a new cold war.
The bankers recently bought their way to a revised bankruptcy statute. Not surprisingly it was much harder on imprudent saps who got in over their heads financially. So, I see no reason not to hoist these thieves on their own petard, and let them go through bankruptcy under the law they paid so much to get passed after writing most of it themselves. Forcing all of these insolvent firms through the bankruptcy courts, would eliminate most moral hazard, do justice to those who so richly deserve it, force the proper valuation of assets of all classes, and take enough time to let the dust settle. There is no need whatsoever for any new legislation or bailouts. In fact, since what Secretary Paulson has done so far is probably illegal, impeachment of him would also assist in the long healing process. Agrarianism and Distributism have long been savaged by the foolish and/or greedy as being impractical. What we are facing now is the strongest argument imaginable for the elimination of unnecessary speculation and a return to Distributist sanity. The Endarkenment has long argued that there is a necessity for a lower social common denominator than Virtue. First, it was lust for power, then fear of violent death, later it was commodious self preservation, and finally avarice. The result of all of this folly is world wide financial and social disaster. It is long since past time to give Virtue, rather than vice the center stage. We have quite the mess to clean up.
Ron Paul has now endorsed Chuck Baldwin. Will PJB do the same?
We the taxpayers "bail out " a bankrupt incompetent imperial government EVERY DAY with the 40-50% of our income that is seized EVERY YEAR.Catch your breath,Pat....a buy-out of assets and liabilities (not bail- out of corporations and overpaid execs ) may work out for Main Street...and I'm not losing sleep over the dwindling resources for empire.If one of the two idiots leading the polls for President would also halve the war budget(a modest proposal) we might dare wish for prosperity and a real dollar again.
Red, do you have to ask?
MilesGloriosus wrote:"And, at least there was still a genuinely conservative opposition to clean up after Carter. Where is the man who’ll clean up after Bush? Certainly not the cadaverous John McCain."
True enough. I see McCain more along the lines of Eisenhower- another mediocre president who might well have been a Democrat if only they didn't already have a canddate. We'll end up with a democrat in the white house no matter who wins.
" Barring a miracle, we’re going to be picking up after Bush for at least as long as Carter, and as bad as Carter was, he wasn’t so stupid to try to cause a new cold war." Here's a little news flash for you: Carter DID start up a second cold war when he coerced the Shah to let Khomeni return from exile. Carter thought he had common ground with the Ayatollah because, after all, they were both Men of God. That's the main "whoopsie" Jimmah caused that we've been dealing with for nearly 30 years and there's no forseeable good outcome to it.
Steve Berg wrote:
"The bankers recently bought their way to a revised bankruptcy statute. Not surprisingly it was much harder on imprudent saps who got in over their heads financially. So, I see no reason not to hoist these thieves on their own petard, and let them go through bankruptcy under the law they paid so much to get passed after writing most of it themselves"
As it turn out, part of the bad debt the bankers want the taxpayers to clean up for them turns out to be delinquent credit card accounts and defaulted student loans- not just sub-prime mortgages that have gone bad.
As a Realtor, the company I work for has us take yearly update classes given by our attorney. He describes Title Insurance as being the perfect business model: Collect the premium and KEEP it. It looks like the bankers may be trying to improve on that: Loan money with interest and if it gets paid back, keep it. If it doesn't get paid back, get the taxpayers to pay it back and then keep it.
Not to needle Pat Buchanan, but I believe the Chrysler bailout came on Jimmy Carter's watch and Marion Barry's dew rag-in-hand bailout pleas came during the Reagan Administration. But Mr. Buchanan is largely right and a dry-rotted establishment, from politicians to stockjobbers to K Street association chiefs deserve to be thrust upon the funeral pyre.
When have the financiers ever failed to control the government for their benefit. Not since Lincoln installed the policies of Mr. Buchanan's hero Alexander Hamilton, who believed that corruption was the key to effective government.
Scott R., I'm trying shame as a tactic.
Pat, There is an upside to an American economic collapse. The immigrantrs will find out the hard way that this is no longer the land of opportunity, and they'll return home with a revolutionary spirit crying out for a better life back home. Back here the rich will make money and the poor will make children. Then we can go about breeding our own underclass, and then we won't have to press 1 for English anymore.
The downside will be we'll have to press 1 for ebonics.
Mike H wrote: "Here’s a little news flash for you: Carter DID start up a second cold war when he coerced the Shah to let Khomeni return from exile. Carter thought he had common ground with the Ayatollah because, after all, they were both Men of God. That’s the main “whoopsie” Jimmah caused that we’ve been dealing with for nearly 30 years and there’s no forseeable good outcome to it."
You made a good point, though I'm hard pressed to call our situation with Iran "cold." Forgive me for quibbling, but though I wouldn't call it hot, it's far from just a cold war. In fact, it may be outright boiling before long.
That being said, recalling the witless Jimmy Carter, lo, those decades ago and comparing him with George Bush today has driven home EMPHATICALLY one thing to me: Do NOT put "born-again" evangelicals in The Oval Office. Though we might quibble which was worse, both men's belief in himself as God's instrument on earth seems to have goaded both Bush and Carter into naively pursuing policies saner folk would never have. And, for the future, If someone wants to play the tambourine, roll on the floor and speak in tongues," Good for him!" I say. Just keep him/her far away from The Oval Office.
"I voted for Bush twice but now am certain I voted for the wrong man. "
Maybe you're on the road to waking up, but I'm curious as to how any sentient being could be gulled into voting for W twice. I had enough trouble understanding how anyone who considered himself a conservative could have remained in the GOP after the sorry spectacle of Dronin' Bobby Dole being run as a soft pitch to Clinton's second term campaign.
Dole's phony win in the primaries followed on the heels of the complete capitulation of the GOP in Congress, led by Dole and Gingrich, after the braying announcement of a "republican revolution" anf its "contract with America". The GOP had completely thrown off the mask of conservatism by that time.
By the time the brainless wonder from Connecticut masqueraded as a Texan for his first presidential campaign any conservative with a shred of discernment should have been able to see that the GOP is a socialist party. It's more than a little puzzling to me to hear people state that they have awakened, finally, after having voted for Bush twice.
Taking 8 years to awaken from such a deep, self induced slumber presents the image of someone who wears the snooze button on his alarm clock down to a nubbin before finally dragging himself out of bed.
The truth hurts Pat but thanks for it nonetheless.