One of my favorite bloggers ever is PollyPeoria. She hardly ever blogs these days. This is her third this year. But it’s a good one:
My grandfather, a Great Depression survivor, keeps a lockbox of cash and gold coins underneath his bed and a loaded hand gun in his nightstand drawer. I’ve always thought it a quaint, naive, sad, and paranoid practice. After watching Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, and industry giant AIG either bite the dust or require government intervention in order to avoid doing so, Grandpa’s lockbox is looking like the most sound financial policy of them all. The beauty is in it’s simplicity and the fact that Grandpa’s plan is rooted in the rarest of all commodities: COMMON FRIGGIN’ SENSE.
It has become “common sense” to assume the government is going to come along and cover your losses. Working hard, and using YOUR OWN MONEY is now considered a quaint concept, one honored only by wild-eyed libertarians.
I’ve never begrudged people who got rich because they or their parents wither worked harder or smarter than other people. People who risk their own money deserve to reap the profits. But when the government come along and eliminated the possibility of risk, well, sorry folks. That’s not capitalism. It’s using the playing rules to accomplish social engineering.
Consider this 1998 article in the New York Times. It is clear that lower standards for determining who gets home loans was done specifically to increase the numbers of poor and minority homeowners, and that everyone know at the time that doing so would put the entire home financing system at risk. But Fannie Mae and Freddie Mac needed to get the Department of Housing and Urban Development off their back.
Here are the money quotes:
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.
”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”
I saw “Mad Money” analyst James Cramer on NBC the other day. He was ridiculing the idea that the bailout mania was unwarranted. He said we are on the verge of the 2nd Great Depression. I’m not buying it. A few months ago, he was telling people to buy. No doubt he’ll soon begging selling the idea that nothing is wrong, all is well.
Our economy is sick. It’s not a disease, but our bad habits. I don’t see anyone running for office now with the guts to stand pat and let the people who lost money to really lose their money. These bailouts aren’t going to save THE economy, but they will keep specific players from losing their shirts.
But we don’t PLAN in this country. We react. So Congress and the President will come up with a scheme to bail out some businesses. And political crisis averted, we’ll end up with an economy that’s just a little more centralized and a little more susceptible to downturn. But that will happen when someone else is president. So we’re all good.
Feh. Double feh.
