The massive profits Wall Street has made selling worthless securities have been privatized, but the risk has been socialized. To make matters worse, nobody understands that we have had to do this to save our personal lives, especially not the talk radio hosts that fifty million Americans listen to every day.
To hear them talk, the bailout was a terrible mistake, but they never say what would have happened without it. Instead, they spout rigid ideology that is totally indifferent to our welfare–that is to say, to the lives of their own listeners.
The bailout was an outrage, but it was a necessary outrage. If it had not been done there would have been a total financial collapse, and we would have quickly ended up in a situation where our jobs would be lost and our lives ruined–a repeat of the Great Depression, only worse, much worse.
The reason is that business cannot function without short-term loans from banks. If you work for a small or medium sized business, last week’s paycheck was probably placed in your hands because your company dipped into its line of credit. Had it been unable to do so, you would not have gotten paid.
As distasteful as it is, the bailout is part of what, it is hoped, will restart lending.
The talk show hosts scream free market ideology without saying that, to follow it strictly now, means that millions of us will lose our jobs and our country will be, essentially, destroyed. I say that without equivocation. Without the bailout, and probably a lot more government intervention beyond that, a lot of us who have homes and jobs right now are, to put it bluntly, going to starve.
If talk radio has its way, that’s fine. Let the listeners starve as long as right-wing ideology is served. What they will get, though, is massive joblessness like we had during the Depression. We dodged a bullet then because of the inspiring leadership of Franklin Roosevelt. There are no Roosevelts on the horizon now, and, if this economy cracks up, I think that there is going to finally be the sort of socialist revolution that threatened then. Talk radio will end up having its ideology rammed straight down its brain-disconnected throat by people whose children are starving.
We simply cannot listen to extremists any more, especially these evil, cynical people who would rather juice their ratings by manufacturing false controversy than tell the hard truths. Talk radio hosts are in the entertainment business. What they say depends on their ratings, and it is their job to rile people up and manufacture controversy in order to make advertising money for their stations. That’s what it’s about, and that’s all it’s about. We must not turn to uneducated entertainers with loud voices and manufactured strong opinions for economic advice that our lives depend on.
There are senators and congressmen all over this country in trouble right now, both Democrats and Republicans, in trouble for voting for the bailout. They are in trouble because their constituents are listening to liars who talk only about a giveaway to Wall Street and scream about creeping socialism.
What is at stake here is not Wall Street. This has gone quite far beyond that. Those jackasses have taken their money and run. What is at stake is no longer their profits, it is the food on your table and the roof over your head.
I am not ideological. I don’t give a darned about conservatism or liberalism. As I’ve said in this journal before, I’m middle of the road. That means I’m a pragmatist. But I am also no fool when it comes to economics. I understand the so-called dismal science perfectly well.
The bailout was ugly. Uglier was the fact that it could only be passed after votes were bought on both sides of the aisle by loading it with pork. Disgusting. But our lives are at stake here, and in ways that we, who have grown up amid constant prosperity, can scarcely imagine.
I don’t know, in fact, if it will actually help. It might be too little too late. That’s right, this is such a mess that seven hundred billion dollars might not be nearly enough. In fact, there might not BE enough money to bail the world economy out. We are on the edge of a cliff, and we’re swaying in the wind. Which way it will blow is anybody’s guess.
The problem is beyond ideology. It is beyond politics. But it is addressed by the screaming loonies with ideology, and politicians are being asked to fix it in a piecemeal, disorganized and desperate manner.
We should not vote people out because they voted for the bailout or against it. I can well understand a vote against it. It’s an ugly patch on a sinking ship, and it’s still leaky, for sure. But a vote for it is a vote to keep our economy and our country from disintegrating in ways that can scarcely be imagined, and the courage it took to do that has to be respected.
The politicians who voted in favor went home to the screaming of the talkers, and now they have to see if they can survive the chorus of lies that so many of us listen to every day of our lives and believe implicitly.
Frankly, no politician should be kept in office or voted out of office because of the position he took on the bailout. We need to look beyond that to what truly matters to us in our political lives, and vote with our core beliefs.
This catastrophe developed on the watch of both parties. It is not a Democratic or a Republican problem, it is a national problem and a national failure. The Democrats encouraged the mortgage industry to lower their standards in the 1990s in order to allow more people to afford houses. Wall Street was glad to accommodate the lowered mortgage standards, and they used them to turn a tidy profit.
Then Phil Gramm came along and pushed through legislation that ended what little fiduciary oversight the government still possessed, and the oversight authorities literally became unable to tell whether the banks they were supposed to regulate were solvent or not.
Here is precisely what happened: banks began making mortgage loans to people who could not afford to pay back the mortgages. Knowing that these loans were risky, they sought to offset their risk by buying insurance. This type of insurance is called a “credit default swap.” It is called a “swap” and not insurance so that it cannot be regulated.
When an insurance company sells you a policy, it must put a certain amount of the premium you pay aside, so that, when you or other policyholders like you must use the insurance, the company will have money to pay the claims.
This is not true of credit default swaps. Because of Mr. Gramm’s legislation, there was no requirement to put anything aside to cover the possibility that claims might have to be paid if the default-protected securities became worthless.
Lehman Brothers alone sold five hundred billion dollars worth of credit default swaps, with little or no provision to actually pay them off if needed. Then, when thousands of claims began to be made, they had no choice but to declare bankruptcy.
But this wasn’t the end of it. As long as the securities were covered by the credit default swaps, the banks could continue to carry them on their books at 100% of their purchase price. But when the swaps became worthless, then the banks had to revalue them to their true value.
This is why banks went down so suddenly. One day, a bank like IndyMac would be saying that it had adequate capital. The next day, it would announce that it was broke. This was because, among other things, it had been unable to collect on credit default swaps taken out to insure mortgage-backed securities that had become worthless.
This is what really happened. And what threatened was a massive, national banking catastrophe of a kind that was not seen even in the Depression. There is a reason that the Administration warned some congressmen that it might have to declare martial law if the bailout wasn’t passed.
This is because the collapse of the short term business loan, or commercial paper, market would have led to millions of people suddenly and unexpectedly finding themselves without paychecks.
Think what would happen if you found out, say, this Friday, that you would not be getting paid. It would have happened that suddenly, and it would have happened to a lot of people.
Hopefully, the bailout will mean that it will not happen to all of us, and ideally not to any of us, but only the future will tell us how well it works, if at all.
I just don’t know what to make of tie ignorant and ill-informed children of talk radio. They are not serving the national interest at all. In fact, their screaming is so inaccurate and so cynically willful that I think that it amounts to a form of treason.
They need to tell the truth. We were snookered by Wall Street, and we have ended up holding the bag while they have been able to keep the billions they have earned. To save ourselves, we have no choice but to bail out the very folks who robbed us.
That’s the blunt truth of it, and the politicians who voted for the bailout did at least one thing that was honest and good and right: they voted for food on our plates and roofs over our heads, and talk radio be damned.
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