As the markets burn, the CEOs deposit their bonus checks and the government keeps throwing billions of dollars at problems it won’t solve, one question remains unanswered: What about the 94% of American mortgage holders who pay every month as they promised to do? Screwed.
When the $700 billion bailout, the one we so desperately needed to stop the “meltdown”, was approved under the haze of fear of fiscal catastrophe, some of us said no. Don’t do it. It won’t help. It won’t solve anything. It’s $700 billion of our money in the toilet. So now Hank Paulson, fear-monger in chief, admits he didn’t have a clue. That Congress was clueless shocks no one. What’s a taxpayer to do?
On Good Morning America, a panel of “experts” (which in TV parlance, means good-looking people of dubious qualifications) discussed what happens to the 94% of Americans who have mortgages in good standing. That means that this entire mess is the by-product of 6% of Americans who bought homes and took mortgages that are behind or in default.
It’s hard to imagine that the entirety of our economy is such a house of cards that it teeters on the brink of disaster because of a 6% failure rate. In fact, it’s unlikely to be true, but rather that the rest of the economy was so heavily leveraged, dependent upon ever-increasing home values fueling ever-increasing consumer spending, that had their been no housing foreclosure crisis, but merely a substantial drop in consumer confidence sufficient to cut consumer spending by 50%, we would be in the same place anyway.
So all the discussion about how we need to stop foreclosures is a wrong. All the discussion about how we need to increase liquidity was a scam. We, the 94%, have been the victims of the most massive fraud in modern history, allowing the government and business to suck untold billions out of the economy, the government and our pockets, to prop up a wildly bad bet by business.
Yes, the micro-economic impact of foreclosures hurts our neighbors. No, the massive infusion of cash isn’t going to fix their hurt. Is stretching a 30 year mortgage out to 40 years going to help the unemployed mortgagee in default? But the next $25 billion won’t stop bonuses from being paid.
When I challenged the propriety of the $700 billion bailout, I received a private email from a law professor who exclaimed that I didn’t “get it,” and insisted that “the facts” proved it was necessary, and the only way I could believe as I did was to reject “the facts.” I’m still waiting for the email conceding that he was wrong and I was right. I’m not holding my breath.
Most people bristle at the idea of redistribution of wealth, the very words smacking of some commie conspiracy. But when put in the context of a big lie, one easily sold because most of us lack any adequate comprehension of economics sufficient to make sense of any of this, we will readily accept it if the word “bailout” is used in its place.
The entirety of our government’s plan to stop the economic bleeding is predicated upon a massive redistribution of wealth. The wealth comes from the 94%, and our children, and our grandchildren, and will be given to financial institutions, automakers and any other corporate giant of sufficient weight. A portion will be siphoned off the top to cover bonuses, junkets, shower curtains and cannibalism, particularly since our government “forgot” to impose conditions when handing over the check. Hank Paulson feels just awful about that.
The balance will perhaps be used to pay down their bad bets and keep them afloat. Eventually, the argument goes, they will hire back employees, loan out money, and the economy will be hunky-dory again. In other words, the best we can hope for is to float these business failures back to the point where they can underpay low level employees, overpay top executives and grab as much from the consumer as we are willing to allow. Return business to life as it should be. Leave the 94 with the tab.
It will all even out in the end, we’re told. Actually, they aren’t even giving us that much, with the only promise being that without these infusions, it will be “much, much worse.” Since it’s impossible to gauge something that doesn’t happen, you can’t lose with this argument. No matter how bad it gets, it could always be worse, proving that they did the right thing to stop the worst from happening. Whew, so confusing.
Back in September, 2008, the sum of $700 billion shocked and engaged a nation. It was the central focus of our news and our concerns. Today, tossing around $25 billion seems like pocket change, with the public paying little attention. We are defeated in one sense, and have placed our faith in the mantra of “change” to cure the disease and put us back on the road to easy street. We are Americans! We always expect someone else to fix our problems. It’s the American way.
While I try my best not to be unduly harsh toward others, I similarly try to remain rational. There is nothing rational about allowing a bunch of experts who have proven themselves wrong at every turn from continuing to push a scheme that shows no chance of success. It hasn’t stemmed unemployment. It won’t stem foreclosures for those who don’t deserve foreclosure. It will make the 94% pay, both for the 6% and for the losing bet that business could act foolishly forever. And we will happily do so out of fear and ignorance, the two forces that allows us to be played like fools.
American is all about business. We’re nothing without it. It doesn’t matter who owns the White House or Congress. This is about a fundamental abdication of the concept of responsibility for mistakes and failure. The verdict is that we, the 94, will pay the price and get nothing in return.
In my humble opinion, this is a lousy deal. and I urge you to reject it. I’m prepared to bet that the invisible hand will do a better job allocating resources. I’m prepared to be that it won’t do worse.