Wednesday, September 24, 2008
USA: The Movie
Livin' in the USA sure ain't dull these days. On the home stretch of the most vivid Presidential campaign ever, Wall Street has a long overdue meltdown. Republican candidate McCain tries to weasel out of a scheduled debate with his opponent on Friday, seeing his poll numbers tend southward. He announces that he's suspending his campaign and invites his opponent to do likewise; he's rebuffed. Then the President invites both of them to an emergency conference tomorrow.
The Republican President desperately requests a Rooseveltian solution: nationalizing huge financial institutions with $700 billion of “taxpayer” money. The laissez faire, anti-big-gumment Republicans have their shorts in a knot over this, "it's un-American!" they wail. The Democrats are hee-hawing like the donkey that symbolizes that party. The terse-bail out plan handed down from the throne had no provision for oversight – and the lack of oversight was what brought this collapse on. All this happens just before Congress is scheduled to adjourn for the year. Are you kidding me? This is better than a Tom Clancy movie! I stayed up all night last night watching analysts hash this over on TV.
This is just a more drastic repeat of what happened in the Reagan administration. He deregulated the banks and soon after there was a Savings and Loan collapse that had to be bailed out. The real estate loan business was deregulated under Bush, high-risk derivative publicly traded securities based on these loans were legalized and that precipitated this calamity. And to be fair, there was some deregulation, or more accurately, less than diligent attempts at regulation during the Clinton administration as well. President Clinton, by coincidence, has been making the rounds of all the talk shows this week to report on the Clinton Global Initiative summit, and has had to address this (among other issues).
I don't have any money in the market but I know this is a ricocheting calamity. My livelihood is probably at risk and my grocery, fuel and other expenses, which have risen over the last year, are certainly going to go higher. But I've got some savings and some momentum; I'll get on fine. No pain, no gain. What's the gain, you might ask. In a word, perspective. You can see a bit more clearly when a bubble bursts. This situation is not likely to repeat itself on the next economic upswing, an upswing that can most absolutely be predicted, in time. These are very deep pockets, at least at the top, and this is a very resilient and radiantly ingenious people, one that historically is able to tighten its belt and soldier on.
But if the working American public sees this bailout money going to failing institutions without any penalties, oversight or payback, if executives of these bailed out institutions can subsequently sell their stock, pocket the proceeds and bow out, there will be riots in the streets. Bush knows this and announced in his speech tonight that there would be limits in CEO pay, provisions for taxpayer reclamation, and oversight. It has been suggested that a CEO of a bailed out, and subsequently taxpayer-owned institution should earn no more than the highest paid civil servant, i.e. the President, who earns $400,000.00 a year. Can you imagine? 400K as a booby prize?
I'm not personally fearful, I'm flabbergasted and intrigued. I expect this will sort out very soon, because it has to, and I expect that there will be hell to pay in the Republican sector which will guarantee a Democratic victory in November. Democrat's joy will be short lived as it is the future president who will inherit this mess. And we'll all feel the pinch as this plays out. Most Americans are going to have to live with diminished assets. But as Bill Gates said earlier today in an interview "most of the people in the rest of the world love to have our problems." And in truth, this fissure in the N.Y. Stock Exchange will have much more severe repercussions overseas than it will here.
Mainer, New Yawka, Beijinger, Californian, points between. News, views and ballyhoos that piqued my interest and caused me to sigh, cry, chuckle, groan or throw something.
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