The frothing radical right thinks the New York Times is the frothing radical left, as if such a thing exists in this country in this day, but this is a newspaper that doesn’t speak truth to power even when the power is itself, even after the lights are out, even in the sound-proofed panic room where it can’t be overheard. So it’s something of a shock to find what amounts to a rant from long-time Wall Street watcher and Times business bigwig Gretchen Morgenson on the subject of the inequities inherent in bailing out banks but not their victims.
One doesn’t often find ranting in the Times outside the occasional Bill Kristol column, and his stuff doesn’t really qualify because, much like a water spider skittering across a pond, he’s such a lightweight as to never break the surface tension of reality long enough to make an impression on it. But when Morgenson, who both thinks and writes better than Kristol, starts a story off by flatly stating that fallout from the housing bubble “has exposed and worsened a dangerous and deepening divide in this country between a vast number of average borrowers and a fairly elite slice of corporations, banks and executives enriched by the mortgage mania,” she plunges right through the surface into the depths of a subject that has been banned from polite society for decades.
Let’s listen in; we may as well because the chances are good that no one will catch us.
Borrowers who are in trouble on their mortgages have seen their government move slowly — or not all — to help them. But banks and the executives who ran them are quickly deemed worthy of taxpayer bailouts.
On the ground, this translates into millions of troubled borrowers, left to work through their problems with understaffed, sometimes adversarial loan servicing companies. If they get nowhere, they lose their homes.
Taxpayers, meanwhile, are asked to stand by with money to inject into Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants, should they need propping up if loan losses balloon.
The message in this disconnect couldn’t be clearer. Borrowers should shoulder the consequences of signing loan documents they didn’t understand, but with punishing terms that quickly made the loans unaffordable. But for executives and directors of the big companies who financed these loans, who grew wealthy while the getting was good, the taxpayer is coming to the rescue.
She’s talking about a fairly narrow slice of the population here —way more people don’t own homes and didn’t borrow money on piratical terms than do and did — but when you throw in some of her other work, such as her criticisms of the monumental gap between employee wages and executive compensation, Morgenson is about halfway to a Marxist critique of the capitalist system. Coming as it does from a leading light of financial journalism, and arriving as it does via the pages of the Times, there’s nothing subprime about this rant.
But wait, there’s more!
“The banks are too big to fail and the man in the street is too small to bail,” said John C. Bogle, the founder of the Vanguard Group, the mutual funds giant, who is a philosopher of finance.
Mr. Bogle is working on his seventh book, titled “Enough,” which is scheduled to be published in November. He said he was disturbed by the extreme speculation that spread into the entire economy during the housing boom and that now threatens both consumers and investors.
“I predicted last summer that this would be my 10th bear market,” he said. “But this one is different. The others were more marketlike, reflecting problems in the market, not problems in the society and the economy as this one does. As a result, we’re in for a much more troublesome era than after the other big bear markets.”
Mr. Bogle, like most investors, is an optimist at heart. But he believes that we must work to correct the growing imbalances in our country. “We Americans are one lucky bunch,” he said. “But, let’s face the truth. While the Declaration of Independence assures us that ‘all men are created equal,’ we’d best face the fact that we may be created equal but we are born into a society where inequality of family, of education and, yes, even opportunity begins as soon as we are born.”
“But the Constitution demands more,” he adds. “We the people are enjoined to form a more perfect union, to establish justice, ensure domestic tranquillity, and to promote the general welfare and to secure the blessings of liberty to ourselves and our posterity. So it’s up to each of us to summon our unique genius, our own power and our own personal magic to restore these values in today’s imbalanced society.”
Not a bad idea, bringing a little 18th-century enlightenment to this moment of 21st-century gloom.
Meeee-ow!
There is, of course, a simple regulatory solution to the problem: hold the bankers responsible even as we bail out their institutions, assuming there’s some compelling reason for a bailout rather than a feeding frenzy over the shattered remains. Clap the bosses in irons, let the middle managers, who are running these places anyway, take over, and freeze trading in the companies’ shares until they’ve either repaid the bailout money or have been released from federal control, whichever happens first. The stock market is above all the icon of free enterprise, and a financial institution that has been seized or propped up by the feds really shouldn’t qualify for inclusion in the fun, especially when much of their post-bailout share price reflects not performance but simply relief that they’re not being allowed to go under.
Of course the plump proles of these United States aren’t the only victims of cut-throat lending and fat-cat bailouts. American Leftist today flagged a study published in the Public Library of Science, finding that “[International Monetary Fund] economic reform programs are strongly associated with rises in tuberculosis mortality rates in post-communist Eastern European and [former Soviet Union] countries, even after correcting for potential selection bias, tuberculosis surveillance infrastructure, levels of economic development, urbanization, and HIV/AIDS.”
As Richard says, after quoting liberally from Nobel-winning economist Joseph Stiglitz, “to put it more simply, to get an IMF loan, countries are required to cut public services, like health care, that would reduce the incidence of serious diseases like tuberculosis, while simultaneously adopting trade, investment and privatization policies that reduce the income (and, in some instances, even the jobs) of many in the workforce. Can’t get health care from the government any more, can’t afford to pay for it from private sector providers. Given the collapse of our economy, with a spiralling, out of control rate of home foreclosures, increased unemployment, decreased consumption, a declining currency and an unaccountable financial system addicted to government subsidized speculation, are we about to experience something equally draconian here in the US?”
Good question. Senator Obama? Senator McCain? Whoops, never mind.
