Financial security

Okay, they are really starting to annoy me.

You’ve no doubt heard the latest news from that bastion of capitalism. Six months after rescuing Bear Stearns & a week after bailing out Freddie & Fannie, the Feds have declined to save the bespoke-trouser clad asses of Lehman Brothers. (Since beginning this post, the government has stepped in to “loan” billions to AIG; I’ll rant about that below.)

& Wall Street is shocked & outraged.

The two investment banks & F&F have been washed ashore along with other rotted detritus of the Cheney-Bush economic maelstrom of greed. Specifically, they “overextended” on totally crap loans in the sub-prime débâcle. The masters of the universe have been cleaning out their desks, auctioning their coffee cups & mouse pads on eBay (opening bid: $130—after all, they’re trained to be rapacious & you don’t lose that just because they took away your keycard) & shuffling off to enjoy the last of their $80 hand-made cigars & $570 bottles of Opus One while they contemplate where they’re going to take their top-tier MBAs next & make more outrageous salaries & even more obscene bonuses.

Seeing as to how their options are kind of diminishing.

So here’s what I don’t get, being a liberal arts major, so I’m hoping some of you MBAs out there can 'splain it to me:

Investment bankers, hedge fund managers, insurance giants—in the past couple of decades they’ve bought pols by the gross for the specific purpose of not only refraining from regulating their industry, but of enacting legislation that will allow them to rape & pillage unencumbered by such pesky things like class action law suits, anti-trust actions, etc. The whole idea was that the “system” would only work optimally if free-market forces were allowed to operate freely & the government kept its ignorant nose out of things.

Even after the S&L crisis in the Reagonomics 80s & the telecoms/Enron meltdown at the beginning of this century—the “investment” industry was still able to perpetuate this sub-prime mortgage scam with the happy encouragement of the Bush administration, who touted the bubble as a positive outcome of their economic philosophy.

But now, after their genetically engineered capons have come home to roost in the multi-million-dollar Eastside co-ops, these guys have been crying & whining to the Feds that they’ve spent all their allowance (& all their investors’ allowances) & they need more money so they can stay in business & lose more money.

So how does it work that the government is anti-capitalist & economically blinkered if they try to regulate some aspects of business life, but are anti-capitalist & economically blinkered if they don’t bail these bozos out?

These dire financial straits are completely self-inflicted. & at the same time they were handing out/backing mortgage loans to people who were patently incapable of making the payments on properties they couldn’t afford if they pooled assets with a village, these financial vandals were taking home “performance bonuses” that ranged from excessive to obscene.

Why is their stupidity suddenly my taxpaying problem? If the positions were reversed—if I’d invested in property or stocks & then couldn’t make good on the payments, they’d toss me out in the street & seize my assets in a New York instant. & they wouldn’t return my calls if I tried to explain that I was just a little short this month & couldn’t they just trust me…

BTW—the Feds wouldn’t help me out, either. & I could be had for considerably less than the squillions we’re talking about.

There is not one single communication from anyone associated with investing, from emails to annual reports, that doesn’t carry the disclaimer that you “invest at your own risk”. Why does this stricture not apply to the greedy schmucks who send the missives?

& if they’re seriously worried about their futures, why don’t they

There’s a line in my favorite movie about investment, Trading Places, where Eddie Murphy tells Ralph Bellamy & Don Ameche (playing Randolph & Mortimer Duke, characters who would fit in very well in the current scenario) that basically their brokerage firm is a bookie operation.

Well, no self-respecting bookie would try to weasel out of paying off bets, regardless of the immediate cost—primarily because there’s rather a lot more at stake than mere money in losing your credibility in that line of work. Also because they apparently have to be better judges of what’s a bad risk than major investment firms.

& you certainly wouldn’t hear a bookmaker whimper about how no one will help him. Who’d bet with a bellyaching bookie?

So, when the Feds told potential buyers of Lehman Brothers that they’d have to invest without the security of the US Government to make good any bad choices, it was just bizarre to hear all the wailing & bleating from the Wall Street community. Their about-face was faster than the 500-point drop on the Dow.

I’m glad that the Feds held firm with Lehman (& with Merrill Lynch, who had to find a buyer on their own). But this AIG thing is just more salt in the wound. I understand that they’re megalithic, with tentacles in every kind of business involving money but no actual tangible products, & that if they went belly-up, the current recession we’re in as a result of the sub-prime implosion, the endless war investment, the oil crisis & every other aspect of Cheney-economics—the company’s woes would metastasize & take down a lot more innocent people than have already lost too much.

(18 September addendum: check out this actual AIG commercial.)

But still—just as you know you have to give some tough love to your kids when they spend their allowance & ask for an advance, just this once—“loaning” $80B to AIG is a bad policy. They & all their ilk have no incentive to do anything different in the future, & we’ll all end up bailing them out of the next crack-brained get-rich-quick scheme they cook up & sell to the American people.

One last question: how is it that we aren't rioting in the streets over this?