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next week's column: You Can't Bank on It


Note: I wrote this over two weeks before you’ll see it in the paper, so whatever is going to be done has likely already been done; in other words, it’s all over but the shouting.

So, yeah – plenty of blame to go around on the credit crisis issue, just as I mentioned last week. Please don’t make me repeat myself, I get a headache.

Among other things mentioned before, we know that the top officials of Fannie Mae and Freddie Mac, just like the CEO’s of many corporations at the time, pocketed hundreds of millions of dollars worth of bonuses. If these guys were such hot-shots, they should have seen what was going on.

As for G.W. Bush? Well, maybe he should have listened to a fellow named Peter Wallison, who predicted that “If (Fannie Mae and Freddie Mac) fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

Except Bush wasn’t President when Wallison said that: It was 1999.

In that same year the New York Times said, “By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less than stellar credit ratings.” That pretty much says it all, as far as what went wrong. Loan requirements were lowered on purpose. The underlying cause of this entire current crisis comes down to the “subprime and junk” mortgages bought by Fannie and Freddie, who are not characters on “Scooby Doo”, and the market for those mortgages that resulted. Lots of people to blame.

Gee, I just put the whole thing into one paragraph. I didn’t need to write my previous column at all – how will you ever forgive me?

So, what are we going to do about it? I thought you’d never ask.

I don’t know.

See, here’s the problem: If we don’t do the bailout, credit will continue to dry up until there’s none to speak of, which will result in an economic crash all too similar to what happened in 1929 – at least, as far as its effect on the nation. For those of you who don’t remember, the 30’s weren’t fun times.

But if we do do the bailout – and doo doo may very well be the operative term, here – I have no confidence that it will do anything except delay the inevitable. We were due for an economic downturn, anyway; in fact, the unusual period of relative economic good times, interrupted by only a couple of minor dips, was getting more and more artificial. In other words, the bubble burst.

It may be there’s no way to prevent a bad recession; the best we can hope for is to lessen its effects. So, is sending good money after bad just going to make things worse in the long run? After all, what’s basically happening is that the federal government will take over a lot of bad loans, with the idea of collecting the money and someday turning the business over to private enterprise again.

Now, reread that last sentence.

Various government officials say this won’t cost the taxpayers, because the loans will eventually be paid off, and then the government will simply get out of the loan business. But they’re bad loans. The whole reason this mess started is because they couldn’t get paid off. Besides, how often does the government give up power once it’s attained?

I’m sorry, I’m afraid I’m mucking this up horribly by being too simplistic; it’s a complicated business, but bad loans remain the bottom line. What I’m trying to get at is that all those reassurances that the taxpayer won’t foot the bill are worthless. However, if we don’t do something everyone will suffer: The poor people who only wanted to own their own home; the short sighted who used their home equity to buy luxuries they really couldn’t afford; the employers who depend on credit; their employees; and the worldwide economy as a whole, which means all of us. (A week after I wrote this, Iceland went bankrupt. Well, for all intents.)

It seems we’re running out of options.

So, when I’m elected President (which should happen any minute now), I’m going to ask for the following restrictions and additions to be put on any bailout bill:

FDIC will increase its insurance guarantee from $100,000 to $250,000, so people with more than a hundred thousand bucks in the bank won’t be tempted to make a run to pull their dough out. I don’t have the slightest notion what it feels like to have that much cash in the bank, but I’d like to find out someday.

The salaries of all management employees in any company taken over by the government will be reduced to the normal rate paid for a civil service employee. If management wants a bonus, they can make their company profitable again. If they make their company profitable, no bonuses will be given out until all the taxpayer money that went into the company is paid back to the government. Any money paid back will go toward the national debt.

No CEO of any company that received a federal bailout will get a dime until he gets his company back on track. I’m talking not even a salary; they can live in an efficiency apartment on ramen noodles and take a part time job, just like a lot of regular people have to.

A small user fee will be put on each and every Wall Street transaction, to go toward paying off the bailout.

Each and every taxpayer will become a protected shareholder in the companies. In other words, there will be a guarantee that if the companies start making money and some fat cat manages to keep it from going toward the debt, the taxpayers will get their money back by sharing in the profit – but will have no risk of further losses.

Any politician who again suggests arm-bending banks into making unsecured loans to people who can’t afford to pay them back will be taken behind the Capital Building and summarily shot.

Don’t think for a second I’m not serious about that last one.


( 24 comments — Leave a comment )
Oct. 9th, 2008 10:57 am (UTC)
So.. are you on the candidate list for the State of Michigan... because I gotta say, you'd get my vote.
Oct. 10th, 2008 07:56 am (UTC)
It's the shooting politicians thing, isn't it? That always gets me a lot of support.

I tried to get them to put me on the Michigan ballot in place of Clinton, at least in the primary, but no go. Have no fear, though: ACORN is working on it.
Oct. 9th, 2008 11:13 am (UTC)
If the US did council housing like the UK did, this problem probably could have been lessened.

As for the rest, well the problem here is those little thing called credit cards. I'm on welfare, crippled, and a week doesn't go by when I don't get one application for $ 1,000 limit credit card.

Too freely available by far.
Oct. 9th, 2008 04:12 pm (UTC)
How does council housing in the UK work? I've often vaguely wondered, but not, till your comment, enough to look it up.
Oct. 9th, 2008 04:18 pm (UTC)
Council houses are built and operated by local councils to supply uncrowded, well built homes on secure tenancies at affordable rents to the local population. These rents are usually below local market rates.

One large criticism is that it hurts labour mobility with its system of allocating housing to those in the local area. Working-class people thus face a disincentive for moving across district lines, when they would be further down the waiting list for council housing in the new districts.

But on the upside, no major businesses going bankrupt or needing bailing out by the government when they loan out money to tens of thousands of people who can't pay it back. It also ensures pretty regular work for local businesses.
Oct. 10th, 2008 08:00 am (UTC)
Oh, it's not just you. I went through bankruptcy five years ago, and I still get credit card applications every day. I did get one card, with a $750 credit limit, for emergencies -- then one day they upped the limit to $3,500 without any request from me. Easy credit is the Big Curse.

The problem with council housing is that Americans would see that as another case of renting their homes. We've come to think of owning our own homes as a right and as a sign of prosperity, although it isn't really either. Renting's likely to come back into fashion, though, as easy credit goes away, so council housing might be the wave of the future here.
Oct. 9th, 2008 01:34 pm (UTC)
Seriously, can I write you in on the ballot? Because I so would in a heartbeat.
Oct. 10th, 2008 08:02 am (UTC)
I wish you could! I'd certainly stir things up in Washington, although with both sides of Congress hating me I doubt I'd get much done.

But I'm not sure I'd really want the job. There probably isn't a more stressful job in the world, and I doubt if all those perks would make up for the way you'd get beat on, day after day.
Oct. 9th, 2008 04:14 pm (UTC)
You and Irish might not necessarily agree in your politics, but you seem to have similar view of politicians. Your capital punishment scheme isn't as all-encompassing as his, though. (He says if we want honest politicians, we need to line them all up against a wall and shoot every other one. The remaining 50% will become honest. I'm a little sceptical, myself.) (I wish I could say he was entirely joking. I love my husband, but I'd really don't think I'd ever want him in public office. Fortunately he'll never want to run!)
Oct. 10th, 2008 08:03 am (UTC)
Hm ... I'll have to study that proposal ...

Oct. 9th, 2008 05:32 pm (UTC)
Yep, I'll vote for you. :)
Oct. 10th, 2008 08:04 am (UTC)
I'll start packing!
(Deleted comment)
Oct. 10th, 2008 08:08 am (UTC)
I'm afraid I'm violently opposed to the idea of a welfare state here in America, although something certainly needs to be done about the way we pay for health care. I foresee that brand of socialism, at least among the unique conditions of our country, as being an opportunity for the government to take still more control of our lives, and we founded the USA on the very idea of avoiding that.

However, the council housing idea sounds interesting, and might be a way to deal with the large amount of foreclosures going on here.

Watch out for yourself, though! This is rapidly turning into an oncoming worldwide recession, and it'll be a bad one.
(Deleted comment)
Oct. 10th, 2008 10:28 am (UTC)
Our Congress authorized our military to take out a dictator who was threatening his neighbors, so no, the war wasn't illegal here ... if we'd done the same thing when Hitler first invaded Austria, it would have saved the world a whole lot of trouble. But never mind that, let's talk religion! :-)

Credit crunch or whatever it's called, it's just the beginning. Things are going to get a lot worse all across the world before it's done -- sadly, this one time we really are all in this together.
(Deleted comment)
Oct. 10th, 2008 10:59 am (UTC)
I'll be honest, at this point I don't give a hoot about international law. If the UN or any other international group had gone in there and taken care of that madman when he was invading his neighbors and slaughtering his own people with the WMD's he supposedly never had, it never would have come to this. The US and its allies went in there and put Saddam out of business, just like the UN should have done after the first dozen or so worthless resolutions. Again, if, say, England and France had gone in and overthrown Hitler right after his first hostile action, they'd have faced the same criticism the Bush administration is getting now -- but they'd have saved millions of lives. The people who should take the blame for Iraq are sitting on prime real estate in New York City.
(Deleted comment)
Oct. 11th, 2008 06:49 am (UTC)
Realistically? We don't do anything about China because they'd clean our clocks. We had a chance during the Korean War, but that was a long time ago. Same with Iran, which is a much bigger country than Iraq and a completely different challenge, and with North Korea. But the biggest reason is simply that they have not (recently) invaded and attacked neighboring countries, like Iraq (and Germany) did. I might not want to support a dictatorship, but I also wouldn't attack one, unless it took offensive action first.

I don't believe our governments lied about the WMD's; there's every indication that all the intelligence communities of the world were fooled into thinking Saddam had them, partially due to his own actions. He would, for instance, send trucks fleeing out the back gates of his facilities, while weapons inspectors were delayed at the front gates, and he constantly stonewalled the UN inspectors for reasons that wouldn't make sense if he wasn't hiding something. There's also the documented case of a very large, heavily guarded convoy of trucks that escaped into Syria immediately before the Allied invasion -- what was on them? I remain unconvinced that he didn't have a manufacturing operation for poison gas or something else going on.

One of the things I like about you is that you're just not a violent person in any way; I may not agree with you on when action needs to be taken, but we can both agree that peaceful means should be pursued first.
Oct. 14th, 2008 04:53 am (UTC)
I was cruising by and noticed your journal, got interested in some of the politics but found out you didn't have comments enabled for the ACORN post. I think you might find this interesting.
Oct. 15th, 2008 08:29 am (UTC)
Sorry: Probably 75% of my flist are liberals, and most of them writers, and I just didn't feel like arguing with them anymore. It's only the second time since I've been on LJ that I've disabled comments; ordinarily my feeling is that you shouldn't say something if you aren't willing to defend it.

That link is quite eye opening -- and maybe just a little bit frightening. Or, wait ... a LOT frightening. Funny how the mainstream media doesn't seem to be revealing all that stuff that's right there, if you dig for it:

Oct. 15th, 2008 02:49 pm (UTC)
Yes, it is. Thank you. Dare I suggest you are a conservative or just someone who still believes in free speech for everyone regardless of their leanings?
Oct. 16th, 2008 06:31 am (UTC)
*sigh* I really, really like to think of myself as a centrist, but the truth is the older I get, the more right I lean (on most subjects). the other thing is that I remain a moderate by Indiana standards; but a moderate in Indiana is a conservative on, say, the West Coast, the Northeast, or many other parts of the world.

I am into the free speech thing, though -- even when I don't like it.
( 24 comments — Leave a comment )

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