When Financial Instruments Go Out of Tune, We All Pay the Piper

by Jim Washburn

Like the broken clock that’s right twice a day, every couple of decades I briefly look like I’ve made the right financial decisions in life.

My wife and I rent a house, the same one I’ve rented since 1976. I had a chance to buy it long ago and for some asinine post-hippie reason didn’t. As my friends never tire of reminding me, that’s some $653,000 in today’s dollars that I’ve pissed down a rented drain, without a cent of equity.

In recent months, some of those same friends have gone so far underwater on their mortgages they’re growing fins. They’re crazy in debt, and their chief asset is magically worth hundreds of thousands less than the amount they’re still obligated to pay for it. Oh how the wheel does turn.

I’d be more inclined to gloat had my wife and I not recently become stockholders, inheriting some mutual funds when my dad had the foresight to drop dead a few months ago. For the first time ever we owned something that had some zeroes on the tail end of it, just in time for the Bush years to grind that dream into a fine powder too. It’s like the guy can’t screw anything up anymore unless the word “trillion” is involved.

That’s right, I’m blaming Bush first. In the past week I’ve heard Republicans blame everybody from Franklin Roosevelt to Barney Frank for the Wall Street Meltdown (wasn’t that song on Springsteen’s second album?), but I prefer my lazy fallback of blaming Bush first, just because he’s a) the president and b) the worst one in our history, who has championed deregulation at every turn, and made existing regulations a joke via lax oversight and appointing ideological hacks to every office possible. Now, the same taser-like focus he’s brought to bear on Katrina, Iraq, the Walter Reed Hospital, etc, has turned toward our financial markets.

My best understanding of Bush’s plan to save our economy is this: Give them $700 billion, don’t ask where we’re getting it from, where it’s going or what we get in exchange for it, and leave the treasury secretary—a fine fellow, I’m sure, aside from him having but recently headed one of the financial houses that has fucked up so spectacularly—free to act unencumbered by any level of accountability whatsoever, not from judges, not from Congress, not from you or me.

The Republicans have always insisted that the American taxpayer knows best how your money should be spent. They just didn’t mention that the American taxpayer they’re talking about isn’t you but some guy on Wall Street, to whom my household is, under Bush’s plan, expected to scratch up $4,600. That’s to bail out CEOs whose golden parachutes for ruining their companies are each a multiple of what my wife and I will earn in a lifetime of work.

To be fair, I should subtract the $600 economic stimulus check Bush sent us earlier this year, so that’s only $4000 of anti-stimulus from our pockets. And that will help the economy how?

It’s almost like a new form of eminent domain, where instead of your property being seized because some developer has a better idea of what to do with it, they’ll just take your money, thanks.

I know I’m not looking at the big picture here, the whole “these companies are too big to be allowed to fail or else no one will be able to get loans and you’ll lose your job and you’ll never get laid again” scenario. 

But I’m more of the mind that a company that’s too big to be allowed to fail is too big to be allowed to exist. Unless there’s some new edition of Thrilling Bible Stories I haven’t read, you’re supposed to root for David, not Goliath. One reason is this: Suppose you live in a small town where 30 local shops cater to your needs. A K-Mart comes in—given all manner of tax advantages by the government because “it means jobs and long-term revenue”—and K-Mart drives those 30 businesses under. Then eight states away at K-Mart’s home office the management screws up bigtime, and they have to close your town’s store, so now you’ve got to drive 43 miles just to get a thimble.

Monolithic is not so terrific. When you had your 30 stores in town, maybe a few of them would screw up and fail, but not all of them, and you’d still have a town with jobs and thimbles. When one company has too much of the pie, they eat the pie, and then they throw up, and then they keep on eating. Really. I knew a guy in high school who won a pie-eating contest just like that, and, believe you me, it did not foster a healthy climate of competition.

So maybe we should let these Wall Street giants fall and see what can be made of their remains. At the very least, as Senate Democrats have proposed, if we’re giving them billions we should get a stake in their bigass company and at least as much oversight as we’d have as major stockholders. Not that most of us know the first thing about “credit default swaps,” “collateralized debt obligations,” and other names Wall Street comes up with for its slot machine bars.

We heard “the sky is falling” before on Iraq, and rushed into our nation’s biggest foreign policy debacle as a result. Now they’re crying “the sky is falling” again if we don’t pour the magically-arrived-at amount of $700 billion into the problem before we can even count it, or our society is going to collapse. This from the same folks who told us we couldn’t afford $7 billion to provide health coverage for America’s children?

Another argument I’ve been hearing is, “Why bail out these rich guys and not all the struggling folks stuck with these craphouse mortgages?” That has a nice populist appeal. Why not trickle up for a change? We’ve lived through enough years of  “trickle down” to know exactly what liquid is trickling down from the rich. Let’s give the poor guys who went in too deep on their mortgages a chance!

But, hold on, what about guys like me, who didn’t jump into the housing market because I couldn’t responsibly be sure I could pay for it? Or all of us who pay off our credit cards in full every month and carry no debt because you’re supposed to live within your means? Are you telling us we’ve got to bail out the guys who got rich making irresponsible loans, and the guys who got houses by taking out irresponsible loans, while any of us who acted responsibly throughout this mess can just fuck off? That hardly seems sporting.

As I write this, Congress and President Wait-I-Haven’t-Gone-to-War-with-Iran-Yet are still debating the shape and size of our economy-saving package, with time-outs for lip service about protecting taxpayers’ interests. Definition: we’ll get screwed, but maybe they’ll use a condom and let us keep the contents.

My late great friend John Crean—who grew his Fleetwood Enterprises from a Compton garage to a $3 billion manufacturing giant—once told me that his biggest complaint with big government was that government invariably serves the interests of the rich and powerful, so the bigger government was, the more their interests were served, to the detriment of the average guy. I miss Crean like crazy, but am glad he’s not around to see how very right he’s being proven.

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