Adam Blatner

Here we are at the peak of the controversy whether to okay the Bush Administration’s proposal for a 700 Billion Dollar Bail-Out. It’s a conundrum, indeed, as it is possible that if we don’t keep up the general level of confidence, banks will tighten credit so much that we’ll plunge ourselves into a depression. But neither should we reward those who have been irresponsible, lest it reinforce their mixture of greed and creative financial machinations.

To begin with, then, let us no longer accept the assumption that the so-called experts are either smart, competent, or honorable. We live in a cheating culture (as described in a 2004 book, www.cheatingculture.com/   , a culture in which a significant proportion of graduates of business and law schools admit to cheating in confidential research. We live in a culture in which business ethics is an oxymoron, and the excuse that seems plausible is that everyone is doing it and if we don’t also we’ll lose out and be foolish suckers. It’s easy when you’re supposed to know but don’t to be buffaloed by someone else who exudes a bit more confidence and seems to promise to do a good job. This is how the escalation in executive pay has emerged in the last few decades: “I can do it, but I’m worth this (extravagant) amount. If you don’t pay it, you’ll get someone who is worth less.” While this may not be the explicit statement, it is what is being heard implicitly by board members. It’s all bulls**t, though.

The present crisis is a simple product of a collusion of greed and expectation, a hope and pressure for growth, profits, and denial. The lack of regulation was hidden by the near-religious dogma, supported by neo-conservative rationalization, that big government (read: regulation) is bad. (Ironically, this intellectual elite in conservative think tanks also denies that it is an intellectual elite, reserving that label for those who are more liberal in outlook and who distrust business a bit more than they distrust government. The neocons, on the other hand, are linked financially with their benefactors and so produce intelligent-sounding doctrine that supports them.)

The present situation is a win-win for the Bush administration, which should be recognized as a tool for wealthy lobbyists, oil and arms manufacturers, mercenary contractors, and other corporate lobbyists and their clients. The figureheads of Bush and even Cheney and others should  be noted as just that! This is an intellectual collusion supported by the neocon intellectual sub-structure and appealing to general social and moral ideals that sound good on the surface but don’t cost business a cent.

Having failed in the ideal of the free market—it turned out to be characterized by low-grade fraud and an ever-growing bubble of expectation and forced growth—like stuffing a goose with too much food—and then the proverbial goose “died.” What to do? Ask for an outrageous amount, have so-called experts (who come from a background of big money and other than having feasted well at the trough and earned big money for themselves have shown little actual evidence of competence) claim that there’s nothing to do but pour good money after bad.

What do they have to lose? If it doesn’t work, they will have at least feathered the nests of their cronies and class at the taxpayers’ expense. If it works a little, they take credit and claim the right to continue with their exploitative policies. If it doesn’t work, they blame the other party for sabotage. It’s never hard to find scapegoats, and even those who have supported your efforts can be accused of not having done enough.

The rank hypocrisy of those who claim that the open market should be free to operate without government interference is again outrageous. This pious stance was undercut with several bail-outs in the past. This contingent sets up massive subsidy programs through farm bills, etc. The medicare bill a few years ago was as much a benefit to big pharma (industry) as it was to seniors, because of the clause that disallowed regulation of its prices! The promise is nevertheless that this system is better than the incompetence of government (which is imagined to be even more corrupt and incompetent),  as demonstrated by the failures of socialism in the past. (To make my bias more explicit, I do not have great faith in “government” either, since it is run by humans who are as prone to stupidity and corruption as anyone else. My own inclination is to continue to aim for a system of checks and balances—no simple solutions—that includes both a modicum of regulation, transparency, and incentive for business. I do question the prerogatives of the constructed fiction of the idea of “corporation,” however.)

A slight digression regarding bail-outs in general. Not only the moneyed interests feel no shame at calling on “government” (which they otherwise scorn), but also a mass of entitled people who have made decisions to live in harm’s way (as the phrase has come to be called)—vulnerable to hurricaines, earthquakes, and other natural tragedies. Since when is it incumbent on the government to save people from the consequences of their choices? Here I show that even liberals don’t fit foolish labels and it doesn’t mean that I identify with other aspects of the agendas of the conservative or liberatian—although I do, with some issues, and not with others.

Not to seem too cynical, but it’s clear that major rescue efforts follow not need but rather political constituency and media hype. If a million people suffer from some situation but don’t get a media “oh this is terrible they should do something” overlay, they remain neglected. (This is certainly true for many without health care coverage.) On the other hand, if a certain region gets hit and there’s enough media coverage and political capital, in rushes a self-proclaimed “conservative” government to bail them out.  That such acts betray their own principles and reveal their hypocrisy is obscured by claims to the moral virtues of compassion.  More, this seeming generosity actually costs politicians nothing—they have little to lose by such a show of generosity—it’s not their money they’re giving away.

Back to the present financial crisis: The congress is in a fix: Faced with a crisis, no one wants to admit that the system has become in certain ways unsound—specifically, that part of capitalism that requires growth and expansion rather than sustainability. Such a goal is problematic in a world in which China and India alone—representing almost ten times the size of the United States—are flush with rising expectations, demands, and global electronic-industrialization. Not having other alternatives to deep myths (i.e., the economic system based on interest-bearing loans and predicated on growth rather than sustainability), the familiar cliches are repeated.

I fear that even the politicians who are honorable enough to object to this scam—not only the Democrats who distrust the Bush administration, but also the Republicans who seem to believe in actual fiscal conservativism—may still give in, intimidated by the threat: What if the system tanks? Who will then be most vulnerable to blame? What is again outrageous is that the blame will then be placed not on those who broke the system and are walking away with golden parachutes, but rather on those who didn’t respond quickly enough to proposals for fixing the break (even though the proposals were close to empty in their capacity to do more than shore up or simply bail out the fraudulent economy).

A courageous politician will expose the whole system, but then, who (both politician and their constituents, the people) wants to recognize (1) the actual complexity of the problem; (2) the greed-fueled myths that they have participated in perpetuating through their votes? Too many people would have to face the possibility that they were mistaken, taken in, and this degree of shame is incompatible with their false pride.

What if we approach this with a spirit of examining who has made more than slight profits? What about mortgage brokers, or hedge fund brokers who overlook the weaknesses of the packages they worked with? What’s wrong with letting a person who asked for a loan (mortgage) for something they couldn’t well afford then default? What’s wrong with letting that person suffer the consequences of bad debt?

[On the other hand—and does this contradict my position?—I don’t see the general principle of universal health care as the same here. Admittedly, there are problems associated with illnesses that are due to life-style-choices, such as people with hepatitis due to IV-drug addiction. Still, I think a mixture of rationing—which I think is inevitable!—and a national health plan is in the long run more feasable than the profit-grabbing private “insurance” companies that operate with as much honor as the rest of the profit-fraud business climate today. ]

End of Rant.

[And now for a funny email I received about all this, a take-off on the Nigerian business transaction scam:)

Subject: URGENT Matter. Dated Material….     o: (recipient)   Date: Around Sunday, September 28, 2008, 10:33 PM
Subject: URGENT BUSINESS RELATIONSHIP
DEAR AMERICAN:

I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE.

I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 700 BILLION DOLLARS US. IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU.

I AM WORKING WITH MR. PHIL GRAM, LOBBYIST FOR UBS, WHO WILL BE MY REPLACEMENT AS MINISTRY OF THE TREASURY IN JANUARY. AS A SENATOR,YOU MAY KNOW HIM AS THE LEADER OF THE AMERICAN BANKING DEREGULATION MOVEMENT IN THE 1990S. THIS TRANSACTIN IS 100% SAFE.

THIS IS A MATTER OF GREAT URGENCY. WE NEED A BLANK CHECK. WE NEED THE FUNDS AS QUICKLY AS POSSIBLE. WE CANNOT DIRECTLY TRANSFER THESE FUNDS IN THE NAMES OF OUR CLOSE FRIENDS BECAUSE WE ARE CONSTANTLY UNDER SURVEILLANCE. MY FAMILY LAWYER ADVISED ME THAT I SHOULD LOOK FOR A RELIABLE AND TRUSTWORTHY PERSON WHO WILL ACT AS A NEXT OF KIN SO THE FUNDS CAN BE TRANSFERRED.

PLEASE REPLY WITH ALL OF YOUR BANK ACuuCOUNT, IRA AND COLLEGE FUND ACCOUNT NUMBERS AND THOSE OF YOUR CHILDREN AND GRANDCHILDREN TO WALLSTREETBAILOUT@TREASURY.GOV  SO THAT WE MAY TRANSFER YOUR COMMISSION FOR THIS TRANSACTION. AFTER I RECEIVE THAT INFORMATION, I WILL RESPOND WITH DETAILED INFORMATION ABOUT SAFEGUARDS THAT WILL BE USED TO PROTECT THE FUNDS.

YOURS FAITHFULLY MINISTER OF TREASURY PAULSON
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Finally, my friend Ed Hug gave me a bit of feedback on this before I posted it: He said: I agree with most of what you say. The (largely Republican led) deregulation of the capital markets unleashed a wave of greed and expectation. Nancy Pelosi said it right, though it REALLY annoyed the GOP !!! Imagine the “open market” as a city with no speed limits, no stop lights, drive and park where you like. A truly open city?! I think Obama frames it right when he says that it is the job of government to set up the game (of capitalism) and then let the players play, within the rules of the game!

The good that may come out of all this may parallel the outcomes of the excesses of the monopolies bubble (which gave rise to anti-trust regulations), the railroad bubble (which left us the rail system) and the dot-com bubble (which left us the Internet). Our American brand of capitalism seems to go through these cycles of excesses leading to bubbles and busts leading to regulation.

And I do agree with you that we the people should not subsidize those who choose to live in dangerous locations or take risky ventures. In fact, I’ve been following the thinking of Allan Meltzer, a prominent economist, who is dead set against the bailout for this kind of reasoning. The big problem with bailouts is what they are calling “MORAL HAZARD” ( http://en.wikipedia.org/wiki/Moral_hazard ). Financial institutions who know they will be bailed out by the taxpayer will take on risks they would not otherwise take on.

Which leads to this example of the moral complexity: “ACORN” (Association of Community Organizations for Reform Now), which worked to help poor people buy their own homes, may well have fueled the whole adjustable rate mortgage mess by encouraging folks who couldn’t afford it to use ARMs to have homes they couldn’t ordinarily afford. That is, Moral Hazard works for poor folks as well as large financial institutions (AND for your folks who choose to live in dangerous locations). One could even look at Health Insurance through the “Moral Hazard” lense: I don’t have to take care of myself so well if there is a pill or procedure that will save me from my own excesses.

(Ed adds two provocative quotes:) “The mind of this country, taught to aim at low objects, eats upon itself.” –  Ralph Waldo Emerson; (and, second quote:)        “This [the U.S. Constitution] is likely to be administered for a course of years and then end in despotism… when the people shall become so corrupted as to need despotic government, being incapable of any other.”  – Benjamin Franklin.