A Nation of Village Idiots
Don't let them tell you this economic meltdown is a complicated mess. It's not. Our national financial crisis is readily understood by anyone who has seen greed and hypocrisy. But we are now witnessing them on a profound, monumental scale.
Conservative Republicans always want the government to stay out of business and avoid regulation as long as they are making lots of money. When their greed, however, gets them into a fix, they are the first to cry out for rules and laws and taxpayer money to bail out their businesses. Obviously, Republicans are socialists. The Bush administration has decided to socialize the debt of the big Wall Street Firms. Taxpayers didn't get to enjoy any of the big money profits on the phony financial instruments like derivatives or bundled sub-prime paper, but we get the privilege of paying for their debt and failures.
Let's just consider the money. The public bailout of insurance giant (becoming a dwarf) AIG is estimated at $85 billion. According to one report, that's more than the Bush administration spent on Aid to Families with Dependent Children during his entire time in office. That amount of money would also pay for health care for every man, woman, and child in America for at least six months.
How did we get here?
That's pretty easy to answer, too. His name is Phil Gramm. A few days after the Supreme Court made George W. Bush president in 2000, Gramm stuck something called the Commodity Futures Modernization Act into the budget bill. Nobody knew that the Texas senator was slipping America a 262 page poison pill. The Gramm Guts America Act was designed to keep regulators from controlling new financial tools described as credit "swaps." These are instruments like sub-prime mortgages bundled up and sold as securities. Under the Gramm law, neither the SEC nor the Commodities Futures Trading Commission (CFTC) were able to examine financial institutions like hedge funds or investment banks to guarantee they had the assets necessary to cover losses they were guaranteeing.
This isn't small beer we are talking about here. The market for these fancy financial instruments they don't expect us little people to understand is estimated at $60 trillion annually, which amounts to almost four times the entire US stock market.
And Senator Phil Gramm wanted it completely unregulated. So did Alan Greenspan, who supported the legislation and is now running around to the talk shows jabbering about the horror of it all. Before the highly paid lobbyists were done slinging their gold card guts about the halls of congress, every one from hedge funds to banks were playing with fire for fun and profit.
Gramm didn't just make a fairy tale world for Wall Street, though. He included in his bill a provision that prevented the regulation of energy trading markets, which led us to the Enron collapse. There was no collapse of the house of Gramm, however, because his wife Wendy, who once headed up the Commodities Futures Trading Commission, took a job on the Enron board that provided almost $2 million to their household kitty. And why not? Wendy got a CFTC rule passed that kept the federal government from regulating energy futures contracts at Enron.
If John McCain gets elected and chooses Phil Gramm as his Treasury Secretary, which many politico types see as likely, they will be able to talk about the good old days when Gramm was in congress and McCain was in the senate and they were in the midst of the Savings and Loan crisis.
The S and L scandal, which may look precious when compared to our present cascade of problems, isn't hard to understand, either. But it is impossible to take John McCain seriously on our current financial Armageddon since he was dabbling in the historic collapse of 747 S&Ls that occurred during Ronald Reagan's era. In the early 80s under the Republican president, congress deregulated the savings and loan industry in much the same way that Gramm made sure there were no laws hindering our current financial malefactors on Wall Street. S&Ls simply lobbied until they had less regulation and then began making rampant, unsound investments.
The guy who was going the wildest with financial freedom was Charles Keating, who headed up Lincoln Savings and Loan of California. Because the S&L industry had managed to get congress to increase FDIC insurance from $40,000 to $100,000 on deposits, the irresponsible investing of people like Keating began to put taxpayer insurance funds at great risk of loss. Keating placed money in junk bonds and questionable real estate projects and because so many other S&Ls started acting the same way the Federal Home Loan Bank Board (FHLBB) began to push for a regulation that limited these dangerous speculative "direct" investments to 10% of an S&L's assets.
And Keating didn't like it; he called on a private economist named Alan Greenspan, who promptly produced a study saying that there was no danger in "direct" investments.
But that didn't convince the FHLBB and as further scrutiny showed Lincoln Savings and Loan was making even more historically bad investment decisions, a federal investigation was launched.
So Keating called his home state senator John McCain.
McCain and four other US senators (known to history as the Keating Five) met with Edwin Gray, then chairman of the FHLBB. McCain had been hesitant to attend but had reportedly been called a "wimp" behind his back by Keating. The message to the FHLBB and Gray from the Keating Five was to lay off Lincoln and cool the investigation. Gray and the FHLBB did not relent but Lincoln stayed in business until 1989 when it collapsed with the rest of the S&L industry. The life savings of more than 20,000 elderly investors disappeared with the failure of Lincoln. Keating went to prison for five years.
Charles Keating was John McCain's pal. They met in 1981 and Keating dumped $112,000 in the McCain campaign bank accounts between '82 and '87. A year before McCain met with the FHLBB regulators, his wife Cindy and her father, according to newspaper reports at the time, invested about $360,000 in one of Keating's shopping centers. The Arizona Republic reported McCain and his wife and their babysitter took nine trips on Keating's private jet to the Bahamas to stay at the S&L liar's decadent Cat Cay resort. The senator didn't pay Keating back for the plane rides until years later when he was under investigation.
McCain wasn't found guilty of anything but bad judgment, which is an historic understatement. Republicans, who led deregulation of the S&L industry, delayed the bailout until after the 1988 election to make sure George H. W. won the White House. The cost to taxpayers for helping these 747 bad actors in the S&L industry was finally estimated at $1.4 trillion. If the bailout had begun in 1986 instead of after the presidential election, the cost would have been contained at $20 billion.
And now the Republicans who engineered our present crisis and got us into the S&L debacle of the 80s are before us saying the markets need regulation. No, actually, they don't need regulation. Why don't you Republican capitalists who believe in the free markets get out of the damned way and let them work and allow these various financial nuthouses be crushed by the weight of their own stupidity? When it is all over, we'll have sane and sober people create laws to make sure it doesn't happen again, assuming we survive this chaos.
Also, while you are handing out our tax money to idiots on Wall Street, save a little of the long green for the unemployed auto and construction workers and all of the other people who have lost their jobs because you were too stupid to notice what Phil Gramm was doing and you were convinced everything was going to be just fine because the markets work.
These, then, are the people -- the Republicans -- who want to run our government for four more years. John McCain isn't just one of them. He rides their jets. He takes their campaign donations. He makes them his campaign advisors. And he tells us to trust him.
He must think we are a nation of village idiots.
Hell, maybe we are.
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Wait, are you trying to tell me that just because I can jump off a bridge I will? Well, that is exactly what the credit industry did. They jumped off the bridge, financially speaking, and now they are in freefall.
But just because you can do something does not mean you have to do it.
I think we should leave the burden for making insane bets with the credit industry. That they were enabled by someone with a bill is one thing. But that they actually went for the insanity is another, much deeper issue.
Let me repeat the paragraph that popped out at me the most:
The public bailout of insurance giant (becoming a dwarf) AIG is estimated at $85 billion. According to one report, that's more than the Bush administration spent on Aid to Families with Dependent Children during his entire time in office. That amount of money would also pay for health care for every man, woman, and child in America for at least six months.
Makes you think, doesn't it. NO more Bush or the likes of him!!!
Obama for President!!
And I would like to know does this mean they stole the rest of the Social Security account?
It's not that hard to understand. Sure, everyone knows the house of cards can't just keep reaching higher into the sky. But when huge amounts of money are being made, no one wants to be the first to jump off the train (sorry for the mixed metaphor). Everyone thinks he'll see it coming and get out in time. It's like people who smoke: it's other guy who's gonna get cancer.
There will always be people to jump off the bridge. Maybe we shouldnt have taken the railing down that prevents people with our money in their pockets from jumping off the bridge.
Besides those big companies know we, the people they just screwed over, will be forced by our big business government to rescue them.
Great post James.
That is exactly true, they all decided to jump off the bridge... You know why? It was deregulated, so one major company decided to take that jump.... and it raised profits tremendously. Because of this all companies who wanted to stay competitive had to follow suit, if they did not, they would lose business and remain small and not have the profits to compete. So they all sold the bad variable rates/subprime mortgages. The worst thing is if rates had subsequently been frozen at 6.5 to 7% as a cap we could have avoided this, but no banks wanted to make this concession because then they would have had to do it for everyone. Hurting their profits. Greed strikes again. Sadly the law that was put in July of last year to protect the consumer probably hurt sales and the econmy even worse - if people get a variable rate mortgage they must now qualify for the higher rate, so this cut drastically into new loans, less people were able to qualify, however this is probably necessary to protect the consumer. I myself had to reduce my debt ratio/load to qualify for a debt ratio that would allow me to get a FHA loan which is regulated. Wow! having to become finaincially sound in order to qualify for buying a house. What a horrible regulation!
We are a Nation led by Village Idiots, with the dumbest in charge.
Did you see his statement on our financila crisis a little while ago?
How about a bail our for consumers and America istself?
Just resign and Cheney also.
Let Nancy take over she can't screw up our world any more than the Bush brothers, George and John and Sarah.
Pelosi wouldn't know what to do without Bush/Cheney telling her. She might have to exercise a bit of thought if they were to go away, and if you've watched her performance since she became Speaker, thinking for herself appears not to be her strong point.
Sweet post James.
Perhaps you are just simply 100% correct.
How else will a logical mind absorb the impending Republican argument that Universal Health Care will be expensive and intrusive.
But a universal insurance company won’t be.
..corporate socialism by any other name....as we hurdle towards a plutocracy, the question must be asked, "was the modal american always this stupid and shallow"?...or has the dominant , very narrow right of center MSM politcal spectrum resulting from corporatization of the media , which subtley foists the corporate agenda upon unthinking americans as "the nation's agenda" and has created a society of homogenized , gluttonous consumers too dumbed down to think won out?
Catfish: Good post.
Born a slave, in the town of Vicksburg
Traded for a chesnut mare
Lord he never spoke in anger
Though his load was hard to bear
this is probably one of the best articles on the hypocrisy of the republicans and the word socialized at it's max.
would you allow the government between you and your banker?? well bush just did and so did mccain.
The key thing to watch now is how the newly nationalized (that used to be a swear word to Republicans) FannieMae, FreddieMac, and AIG are handled. What American should NOT tolerate would be sudden, urgent, resale for some pathetic amount to the first well-connected consortium that comes along. That's what was done with public transport and telecoms in the UK, and with essentially everything in Russia. The result is that the nation as a whole loses money, and the well-connected become filthy rich - again. Something closer to the French model would be more fair - when business is good and the nationized company needs capital, the government sells off chunks of 5% to 20% at a time on the stock market, gradually reducing the governments share to a minority or even zero.
Exactly, I do so agree with you... Our precious utility company COnsteallation is in the process of being bought by the French utility company....
I think you can count on a Republican administration to continue to allow the banks to make money off of this without regard to the nation "as a whole".
Excellent story! Never knew what the final price tag was for that mess. Also didn't know how much more it ended up costing because of the Republicans incessant political game playing. Two weeks ago Silver State banking and loan went under, offices in Nevada and Arizona. Andrew McCain, Johny come lately's son, was on the board of auditors for several years and earlier this year became head of the bank. Should also mention that it was a Republican led investigation that let John off and sent 4 Democrats packing, of course it could have never been partisan politics, because the republicans don't care what party you are from if you have a good idea it's not about the credit. Of course if it's a bad idea it doesn't seem to be about the credit either.
This is a great reminder of the Keating Five scandal. John McCain has gotten a pass because of his well known POW experience. I believe Sen. Obama is relucant to raise this spectre from McCain's past.... and I also believe McCain's campaign has sought to insulate him from possible negative attacks by continually showing the pics of him in the prison and telling the story over and over. But recent events on Wall Street and the similarities to the S&L scandal of the 80's may provide that opening....certainly, for so many americans not familiar with his involvement in the Keating Five scandal...... they may question McCain's judgement.
It has always amazed me as to how shallow the thinking behind the "free market" movement is. Civilizations since the beginning of time have recognized the nature of the human species, with its greed, violence, and ego-centerism somewhat balanced by love, community and good will. As a result, these civilizations have developed systems of rules and laws to protect the society (good for the many) from the negative human nature that will always evidence itself in some fashion. Why would anyone attempt to claim that the institutions that are controled by these same humans with such characteristics are in any fashion exempt from the same behavior? Rules and regulations have to be present to also protect any society from such excesses from the institutions that spring from such cultures. The trick is finding some balance. The advoctes of "free makret" in our modern day have no concept or concern for the "good of all society", only the good of theirs.
Exactly. I don't see the government jumping through hoops to help out Americans losing their homes, or small business owners who can't compete with the giant companies. These Repugs make me sick. They privatize profits and socialize debt. When can we..the taxpayers.. expect to receive our dividends when these businesses finally start to rack in the money again? And to top it off Bush is hiding under his bed, Mccain is running around saying "I'll fix it". That's BS...he and his party are the ones who got us into this mess. It's like hitting the wall with a hammer and putting a hole in it, and then saying "look...a hole....I will fix that". When will the dumb people in this country learn that Republicans CAN'T be trusted to run the country.
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