It is almost beyond belief that the Congress of the US is likely to pass the huge bailout. Can it be the pork features that have been added, such as a half billion dollar tax cut for the film industry and subsidies for manufacturers of wooden arrows, have been aimed at individual recluctant members of the House?
But watching the drivel that mostly consumes US cable news, perhaps anything is possible. After about an hour of watching, albeit from the quiet remove of Central America, I can feel myself getting foggy brained. There is so little attempt to provide facts, much less alternative views. Oh yes, Ralph Nader got a few minutes of airtime, but that was weeks ago and I haven’t heard him or other highly critical speakers since. It is always intensively polarised.
What became of the outrage, the demands for a longer look, especially after the market bounced back? Timothy Egan (http://egan.blogs.nytimes.com/author/timothy-egan/) writes about the financial implosion as the third in a trilogy of disasters for the Bush administration, after the war on terror and the near total failure to address the long-brewing energy issues.
George Friedman, writing for Stratfor, reminds us that economy is always preceeded by ‘political’. And this is the place to remind readers that economy and ecology come from the same stem, ‘oikos’, or household, with the meaning of management or administration behind both. It never has been a question of either the economy or the environment, but those chickens have not yet totally come home to roost.
Friedman points out that the savings and loan fiasco of 25 or so years ago resulted in a bail out that was less, in total GDP, than this one. However, it was oversighted by a semi-independent board that managed the gradual sell off of the assets in the public good. The bill that is about to be passed gives extraordinary powers to the treasury secretary Paulson to distribute the funds without meaningful oversight. Accountability can only come with transparency, and this bill can’t deliver on that. There is very little detail about where the money will go, and that will make it all the easier when it vanishes wihout noticable result. What you can’t measure…
Back in the 80s, the US wasn’t funding a hapless war with near endless financial liabilities. And they weren’t facing the dual consequences of climate change and peak oil as they are now. (I intend to throw down a gauntlet and a wager to climate change sceptics in a future blog.)
Harvard economist Jeffrey A. Miron (http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html) says that bankrupcy is a better option for the failed institutions, as it would at least preserve whatever value still resides in them. Bailing them out, on the other hand, hides their weaknesses and does nothing to address the underlying patterns of economic behaviour that created the mess.
The chief problem, according to Miron, is that Fannie and Freddie, the huge government backed mortgage companies, completely abandoned any attempt to apply prudency in their lending. This was done over a number of years, in plain sight of regulators. This crisit has hardly come without years of warning, as any regular reader of financial pages can attest.
Propping banks up with a bailout prevents the system from reaching a natural adjustment. Miron echoed the query of my spouse, who simply asked: if these companies are worth anything, won’t other companies step in an buy them up?
Yes, they would, and some shareholders would benefit from the bargains that might result. Warren Buffet certainly is. But if Wall Street can get 80 cents on the dollar from the government, why would they wait for the real value of their companies to surface?
Miron’s argument is hard to knock. The reality is that the Bush administration is as far from a market supporter as you can get. Paulson was the CEO of Goldman Sachs, and the revolving doors of Wall Street and Washington see regulation as their private kitty. There is regulation, and plenty of it, but it exists not for the public benefit, but for engorging the coffers of the lucky insiders who will now get their fabulous golden parachutes.
But that’s ok, because Nancy Pelosi had an idea, described on the TV as a ‘breakthough’. After another hour of tedious watching, this idea seemed to boil down to making the golden parachutes ‘reasonable’. Is that it? A dab of caution, smeared like lipstick on a disgracefully blatant grab for even more money. But by that time I was drooling into my tea.
Having both Obama and McCain fully supporting the bill sends off big warning signals. How can it be that the only issue on which bipartisan agreement can be reached is an extravagant and rapidly drafted gift to the very people and companies that created the problem? You mean they couldn’t get together to address either the energy problem or the health insurance problem? Wow, this issue must really be important, public health counts for nothing in comparison. (By the way, my mother, upon hearing that Costa Rica has universal and almost free health care, dismissed it when she heard the country only has 4 million people. Yes, but wouldn’t you expect the world’s most powerful nation to do at least as well as a tiny central american republic?)
This bailout fits all too neatly with Naomi Klein’s Shock Doctrine: a problem ‘suddenly’ arises and must be dealt with as if it were truly a crisis. This becomes the cover for wide-ranging legislation or action that further erodes democratic oversight or accountability.
It can’t be a real financial crisis, or the stock market wouldn’t have recovered half of its loss on the next tradiing day. And Warren Buffet wouldn’t be rubbing his hands together. But why let facts get in the way? There’s money to be made, but mainly for the insiders that will get the graft. And let’s call it clearly: money of that size where oversight and regulation in the public interest is pushed aside as something ‘that can come later’, as Bush said in his speech, is going to further delay the reality check that should and will come to the US.
This will end in tears. But not mine, I pulled my money out of super in February, just in time.