Gun-totin', Chronic-smokin' Hearse Initiator (ludickid) wrote,
Gun-totin', Chronic-smokin' Hearse Initiator

Every once in a great long while, the G.O.P. finds itself on the right (that is to say, left) side of a populist uprising. On those rare occasions, it gets to step away from the racial, religious and sexual pandering, packaged together and branded as “the culture war”, which is normally their only way to make contact with the toiling classes, and do something they are normally very reluctant to do: discuss economics. The reason they are reluctant to do this is because for at least 30 years, they have stood for only one real economic principle, and that is enriching the rich. This rarely goes over with the general public, who as a rule are not rich, without some attendant fraud, and even now you have penny-ante Objectivist hustlers trying to convince middle-class people to “go John Galt” to avoid a tax burden that would, a good 90% of the time, not penalize them in any way. But at the moment, they’re standing fully behind – in terms of rhetoric, if not actual votes – the populist hue and cry that the federal bailout package is a colossal swindle.

And they’re right: it is. It’s unprecedentedly bad, and I say this after years of having railed impotently against the massive fraud going on as part of Iraq reconstruction, which was, until the meltdown of 2008-2009, the worst financial crime against the American public in the history of the country. But as usual, the G.O.P.’s populist outrage is even more of a scam: the’yre attempting to harness the proper rage that we’re being asked to participate in a bailout of the most audacious crooks and plunderers of the public till to ever crawl out into the light, and direct it instead towards the President’s plan to keep the economy afloat, aid those worst hurt by the financial industry’s crimes, and shift the burden of paying for it all onto the class that got us here in the first place. You’ll hear none of them speak of holding the executives of the megabanks responsible for their deliberate misdeeds (that’s “scapegoating”), or of giving the government control over the banks, or at least, the regulatory power to ensure they don’t defraud us again (that’s “socialism”), or even getting the people who left us to clean up their toxic assets out from behind the wheel of the economy they drunkenly drove into a ditch (that’s “class warfare”).

Instead, you’ll hear them condemn people they praised when those peoples’ boss was a Republican; you’ll hear them deliberately distort how the tax system works to advance their own agenda; you’ll hear them blame minorities, immigrants, new homeowners and debtors, at a time when the net household savings rate is negative and people earning professional salaries are still a paycheck away from disaster; you’ll hear them offer the free market as a solution for a problem the free market created, deregulation as a solution for a problem deregulation made worse; and tax cuts as a solution for a problem that can’t be solved by tax cuts. They are merely riding the crest of a new and powerful wave, using the same old broken-down board.

The cause of the current crisis is complex and damnably difficult, and arose largely out of the use of arcane financial instruments (which, in the end, were simply extremely abstruse gambling games that the mega-rich played, but we lost) that most people can’t begin to understand, and which the people who got us into this mess have no intention of explaining. (Both Henry Paulson and Timothy Geithner have declined, before Congress, to even identify the organizations which are receiving bailout monies, explaining that to do so would be “confusing” (Geithner) and “counterproductive” (Paulson). But the way that the people behind all this have gotten away with it, and the way they will continue to get away with it, is through a combination of ignorance and audacity. They will treat you like a husband who is first a philanderer and then an abuser: at the outset, they will deny any wrongdoing even as it becomes painfully clear that they are cheats by saying “Don’t talk about things you don’t understand”. Then, buoyed by the success of their lies, they will start slapping your face, relying on the fact that you’ve already let them get away with so much, there’s no point at which you won’t say that enough is enough. We’ve already seen the hollowness of the claim of a “business too big to fail”, and now we’re being asked to contend with a “crime too big to punish”. I hope before we display that last great failure of will, we consider a few things:

- At a time when it was hemorrhaging more money in ten seconds than most working families make in a year, AIG’s Financial Services group told its own investors that they could not realistically envision a scenario in which the company lost even a dollar of its assets.

- The majority of losses in the financial meltdown were a combination of imaginary money and real assets that largely came out of retirement accounts, pension funds, small group investments, and other conservatively vested small-group investments of the very sort that, we are assured, are the only way to plan for our future, because the government cannot help us. In the meantime, no government bond has defaulted and no Social Security payment has been missed; but for millions, every penny they invested in the market is gone forever.

- Two major factors in the collapse, collateralized-debt obligations and credit-default swaps, were given the highest possible safety ratings by regulators and ratings agencies, making them attractive to conservative investors like unions and retirees. This was despite the fact that they were often not backed by a single dollar of real money from the issuing agencies; as long as they were making money off of them, who cared to issue a bunch of stupid, growth-slowing regulations?

- Every single one of the problems now evident in this unprecedentedly huge economic collapse can be traced back to the huge deregulation of banks and financial companies undertaken by the “Contract with America” crowd (and their Democratic abettors) in the late 1990s.

- We used to make things in this country, now we just put our hands in the next guy’s pocket: it is astonishing, the degree to which imaginary income was being generated by the sales of CDS by parties not even involved in the original transaction. AIG, in particular but hardly unique, was selling shares of insurance on loans to investors three and four times removed: that is, someone would invest on the return on a loan held by a homeowner against a bank, and the investment would be sold to them by a financial company that bought it from a bank that bought it from an insurer that bought it from the financial services branch of the bank that made the original loan. The original authors of the loan were making gargantuan levels of paper profit on these loans over and above the actual rate they charged the lendee.

- Before the G.O.P. lobbied to have them recategorized, credit-default swaps were literally regulated as a form of gambling, no different from blackjack or craps. Literally tens of billions of dollars in private and public assets have been lost on what amounts to a horse race.

- Many of the financial services companies involved in the current crisis, including AIG, Bear Sterns, Goldman Sachs and Morgan Stanley, do massive amounts of business in Europe, and at the peak of the CDO/CDS tulipomania in 2004, were faced with the prospect of regulatory oversight by much stricter European laws. They avoided this by having a one-hour meeting with the Secretary of the Treasury, who placated the Europeans by appointing a seven-person board to personally examine such transactions by the biggest companies. Since that time, the board has met zero times and made zero examinations of their activities. They haven’t even named a director.

- The crisis at AIG in particular wasn’t even triggered by their toxic assets, but rather by their fraudulent accounting practices, an audit of which uncovered the former fraud. In other words, the crooked activities of their left hand were accidentally exposed by the crooked activities of their right hand. We have only their own incredible depth of corruption to blame for things not being even worse.

- One of the biggest losers in all this are local and community banks; they’ve been devastated by the crisis, because they were heavily laid into what they were told were conservative investments. But while the hugest financial services companies got billions of dollars in bailout money literally the very day the money was made available, the vast majority – over 75% -- of small banks have still not received the money they applied for, months later. This is particularly galling because not only did these banks not engage in the high-risk lending and speculation that led to the current crisis, but they operate a small-scale, highly regulated, smart business model based on personal knowledge of investor risk and reward that is exactly what’s needed in the market right now. Instead, the banks who did everything right are being penalized (and, increasingly, allowed to fail), while the massive, fraudulent megaconglomerates who got us into this mess are being rescued at lightning speed.

- One last thing to think about, whenever you hear some horseshit “tea party revolutionary” like that CNBC guy blaming the whole mess on homeowners who took on loans they knew they couldn’t afford: starting in 2004 and continuing until their collapse, the debt-to-equity ratio of Bear Stearns was an astounding 33-1. Save your lectures about personal responsibility for your fellow stock hustlers, Santelli, you pathetic phony.

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