As everyone has heard, the US economy is in dire straights. In fact, we now hear about it ad nauseum. So what is the Anarchist's perspective on all of this? First and foremost, I'll reiterate my opinion about Capitalism. Capitalism unregulated is a self destructive economic system, that feeds on inequality, excessive wealth, and worst of all, greed over humanism. When the need to attain wealth begins to override solid common sense, and basic compassion you have an economy that will implode, all on it's own.
Now, starting about four years ago, I began to tell people that the inflation we were seeing was going to cause a real problem. It was simply based on observation, purely anecdotal, but I said it none the less. No one believed me. Years later, I continued to state that the (now worse) inflation was teetering on economic conditions that were ripe for an economic meltdown. "Conspiracy!" They yelled at me.
Well now, people are scrambling aren't they. Nobody listens to the Anarchist, said in my pest Eeyore impression.
Right, what was I talking about? The economy...
Today the debate is about the government writing a bail-out check to the tune of $700 billion dollars, with or without stipulations.
Now, let's work some thing out, here. First you have Frannie Mae et al imploding due to a bad housing market, or rather a real estate bubble. According to the New York Times Fannie Mae has been padding her caboose a bit to fluff the numbers:
After significant accounting problems, the companies since 2004 were required to hold 30 percent more capital than the minimum previously required, in effect capping their ability to purchase mortgages. [...] Henry M. Paulson Jr., announced the takeover over of Fannie and Freddie after advisers poring over the companies’ books concluded that Freddie’s accounting methods had overstated its capital cushion.
So, the company had purchased a high number of bad debt, and even though they were required to keep 30% more capital thus reducing their purchasing ability, they continued to purchase bad debt as the credit market froze.
As Bloomberg writes:
The purchases by Freddie and Fannie helped fuel the boom in lending that led to frozen credit markets, more than $514 billion in bank losses and the collapse of two of the country's biggest securities firms. [...]
Former Fannie Mae CEO Dan Mudd, 50, said in a 2006 interview that he planned to expand the companies' holdings to include more higher-risk loans. Anything else would be ``counterproductive,'' he told investors in March of that year. Brian Faith, a spokesman for Fannie, declined to comment.
And the CEO salary for last year was raised, as their ability to stay afloat dwindled:
NEW YORK (Reuters) - The head of Fannie Mae, a company chartered by Congress to help more Americans own homes, reaped a 7 percent rise in pay last year, to $13.4 million, while the company lost money and the country suffered its worst housing crisis in decades.
Furthermore, the subprime lending crisis is coming to a head with allegations of lenders intentionally falsifying application information, and generally taking bad risks that were not outlined by the CRA, a policy that required certain lenders to make mortgages and loans affordable or available to their non wealthy clientele of choice. Add a peppering of speculative lending based on an artificial boom in real estate and a smattering of lenders giving out subprime mortgages when they were not required to by regulation, and Fannie Mae and Freddie Mac taking on more risk than they feasibly could thus encouraging this lending, and what you have is a market imploded.
OK, and now on to AIG a multi billion dollar private insurance company who plays a similar role as Fannie Mae et al, but in the insurance world. Another large company who took risks in the real estate industry, and the global economy, and apparently had a bit of mismanagement going on. For a play by play by the numbers, read this article.
So what we have here, are companies who are privatized, who rail against government intervention, who get themselves into trouble, and then turn around and ask for a bail out, from the government, with no strings attached.
In what world, who here has ever borrowed money - from your mother even - who has ever borrowed money that have no strings attached? You can't get a $500 grant without the grantor crawling up your rear end to make sure you are fulfilling the goal you outlined in your grant proposal. You can't get a loan, a mortgage, a school scholarship without jumping through hoops of fire and signing consent agreements that you'll spend the money on what you say you will.
You can't get a credit card with a $200 dollar limit without stipulations. Even if you do have good credit.
But multi million dollar companies who play fast and loose with bad debt and speculative markets can get $700 billion dollars without some form of oversight?
Not with my tax dollars.
From PBS tonight, on News Hour, with Jim Lehrer show:
Various Democratic counterproposals included provisions that limit executive pay for firms asking for the bailout; greater congressional and independent agency oversight of the program; give the government an equity stake in the companies that are seeking a bailout; and help homeowners renegotiate mortgage terms.
However, the House minority leader, John Boehner of Ohio, said yesterday the Bush administration proposal should be passed quickly and without the add-ons. [...] REP. CLIFF STEARNS (R), Florida: Through these bailouts, our federal government is effectively risking hard-earned taxpayers' dollars to protect private-sector companies that utilize reckless investment strategies with little regard to the consequences.
RAY SUAREZ: Stearns and other members of the House Conservative Caucus echo many of the concerns across party lines now that Treasury has produced its sweeping plan. [...] (Chris Dodd) we're not going to write a check for $700 billion and walk away. Accountability issues, taxpayer concerns, what we do with the foreclosure issue are all legitimate issues that people are raising. Some maybe have more items they want to add, others less, but all of it kind of focused on the issue.
Of course, Republican John Boehnr of OH wants to nix any regulatory stipulations, and write the check as quickly as possible.
Of course these companies will need to be bailed out, or else our economy will utterly collapse. But I dare say that all of the citizens out there braying on about how great private free market free from government regulation is should sit up and take notice.
Left to their own devices, these mega companies cause more harm than good, and still require a babysitter to keep them out of trouble. Anyone who is still convinced that government interference, and only interference was the sole cause of this needs to look at the numbers again. Risky business ventures, bad accounting, poor budgets that allow CEO's to collect millions as their company goes up in flames, these are bad decisions made by greedy men.
That is what the "free market" encourages. this is what the deregulated market creates.
In a way, I would like to see that implosion happen. In a way, little old vindictive me wants to sit back as we enter into an economic depression because of these greedy companies, and say "See! See! I told you this was a bad idea!" In a way, I want it to implode so it can be rebuilt the right way.
Of course, millions of innocent people will be the victims, and not the greedy companies and their golden boys who made enough money off the backs of those who will pay the price to buy their own island, and hide away until the rage settles down. And they can safely return to the states without the fear of being lynched.