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Here's an experience I'm not used to having: genuine uncertainty about whether a plan initially proposed by the Bush administration would actually be a good thing.
I'm going to come out right now and say that a solid understanding of the workings of the financial industry is not my strong suit. This is one of the areas of domestic and international policy where I can maybe tell you what is just and what is fair, but when we get into what will actually work, I need to find someone else who can give me the run-down. I can stare at this $700 billion bailout as long as I want, but I will never have a prayer of forecasting the odds that it would actually do what it is supposedly designed to do.
Things I do know include:
1) Governing in crisis mode can be a sign of internal disorganization and disarray, but it can also be a tactic used to prevent people from defeating a proposal which would otherwise clearly generate strong opposition. We've seen that happen already with the Patriot Act and we know it is a favorite ploy of this administration. It is only natural that a lot of people here would immediately react against the bailout plan as a con job/coup/organized theft/etc. simply because it fits that pattern. It is possible that those people are right. But it is also possible they are wrong.
2) Nevertheless: this crisis itself is not imaginary. It is a real crisis. That doesn't mean the Bush administration is not exploiting it cynically in an attempt to increase executive power--that would certainly be in character for them--but I don't think you can look at what's going on in the market and the banking industry right now and tell me that we are not in big, bad, ugly scary trouble. The only question is how long that's going to last and how bad it's going to get, with or without the bailout. My brain cannot answer that question. My gut is answering, though, and my gut says, "DEPRESSION! AUGH!! DO NOT WANT!!!!!" Is my gut right? I don't know. Normally I woudl call in my head to evaluate the gut's response, but my head is, as I said above, totally fucking useless in this particular area.
3) Chicago school economists notwithstanding, capitalism is not rational. The market has moods, neuroses, binges, and bouts of irrational self-destructive behavior. The market has been swinging up and down for the past few days solely based on the *idea* of a bailout. One starts to wonder at this point whether you could stave off a market crash just by *saying* that the bill passed when it secretly didn't, and save us all $700 billion. Nevertheless, it is true that a capitalist economy can crash simply out of panic. Money has to circulate or else the whole thing dies; when people panic, they clutch their money close to them. I am a hoarder by nature myself. If I were about 10 years closer to retirement, I'd probably have already cashed out every investment I have. Ther eis the added problem that when there is a crisis of confidence, it's the people who refuse to panic initially--the cool, level headed ones, or the true believers, depending on your point of view--who get screwed the worst, because they stay in too long. Self interest says, if there's a run on the bank or a run on the market, pull yours out first. So selfinterest augments the effects of panic and hoo boy it doesn't bear thinking of.
4) Our destinies are unfortunately and unavoidably linked to those of the megabanks and investor giants. It is impossible to allow this crisis to kill Wall Street--as many people here seem to look forward to doing--without ordinary people getting caught up in the slaughter. Unemployment is going to be one immediate consequence. But let's say you keep your job through some miracle. If the bank failures start to cascade rather than trickle, well, what happens to our money? The FDIC cannot pay out enough to cover all the bank accounts that could conceivably go poof--at least not without printing play money that would drive up inflation. In a bad enough economic crisis, there is NO safe place to put your money, other than in food, water, and shelter. There is no mattress big enough.
5) Is it right or just to reward the people who caused the crisis by indemnifying them? No. Is the bailout also going to ultimately help the ordinary people who up till now have been screwed by said people? This to me is the more important question of the two; and it is, unfortunately, the one I can't answer on my own.
6) I hear a lot about people taking out bad mortgages and how this is really their fault. I have this to say: I think the subprime crisis is what happened when Milgrom met Mammon. There were a lot of people out there trying to generate mortgages by hook or by crook--often by crook. An entire industry developed around the project of getting more mortgages into existence so that they could be bundled into these securities which were then sold to investors; and banks no longer had to care about whether these loans got repaid or not (or so they thought) because they would just turn around and sell them to someone else. So all of a sudden, you have people deliberately hunting down people who would normally never be let near a mortgage and aggressively selling them on loans that are completely unrealistic. And this hard sell is targeting the segment of the population least likely to have any real financial literacy. Yeah, people have free will. History has also demonstrated time and time again that the human will is not often equal to the pressure of circumstances. The fact that so much of American mythology revolves around home ownership and getting rich quick through your own Yankee ingenuity doesn't help. Plus, the person signing the loan would have to be thinking: "This guy works for a bank. He's lending me money. He must think I'm capable of repaying it or why would he be doing it?" I mean, if you go to a loan shark, sure, you would have to know you're dicing with death. But this is the industry. It's supposed to have standards. You don't know anything about this crap. Why not believe him, since he's offering you something you want?
So yeah, you can blame people for taking out loans they can't repay. But spare a little blame for the bastards who conned them into it as well. And anyhow, you'd be doing a lot of frickin' blaming if you take that attitude, because from what I can figure out most Americans operate in debt and in a LOT of it and it's that alone that has kept the economy afloat--and so Americans have been encouraged to buy more and go in deeper, to keep consuming because it keeps the economy going. Well, we've about reached the end of that road...for now.
Cause here's the other thing I know:
7) This isn't the first time this has happened. It will not be the last. The boom/bust cycle and the regulation/no regulation cycle are both well-established and pretty well in synch. You'd think the market would figure out that deregulation is, in the long run, very bad for it. YOu'd think, but you'd be wrong. Because everyone always wants to jump on the hot new thing and milk what they can and then get out before the bubble pops and they just don't think about what happens to the next guy or in the next year. Which is exactly why we cannot let the financial sector regulate itself. It's not good for us, and it's not even good for them.
So am I glad the bailout failed? I have no frickin' idea. I'm scared, I can tell you that much. But I guess at least we'll find out what the consequences of inaction are; and who knows, maybe they'll turn out to be not as bad as the consequences of action.
@#$!,
The Plaid Adder
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