Monday, September 29, 2008


"Bad Wall Street! No bailout! Lie down! Play dead!" said the US House of Representatives, as a majority of legislators bowed to pressure from constituents they couldn't ignore quickly enough if a well-funded special interest had come by offering candy.

So now what?

Opponents of the bill say it was cobbled together too hastily. They say it saves the bacon of Wall Street gamblers at the expense of ordinary taxpayers (those being the ones without the wherewithal to avoid paying taxes altogether). Unfortunately, the rank and file often lacks the information and knowledge to make sound decisions about high finance. That fact underpins the entire financial advice industry and puts the piquant sweetness in insider trading. The boobs and the marks are just along for the ride, a sponge to be squeezed for cash. Now they're telling their elected representatives how to decide a gigantic financial question and the representatives are actually listening? Please, God, no.

The ones who are afraid to vote for the bailout want to avoid any taint of having voted for the war and then voted against it. They're betting that the economy will survive long enough for a more methodical solution to pull it back up, or that the whole thing will right itself without any government intervention.

The patient dies or the disease runs its course and the victim staggers out of the hospital more or less cured after being ignored on a gurney in the hall for days or weeks. Either way, problem solved. Right?

The problem is, everything associated with Wall Street is a gamble. All investment involves some risk. Anyone who tells you they have a lucrative sure thing is lying or delusional or has it fixed. If the fix is in and you're on the right side of it, party on. Just remember that eventually the mob arrives with pitchforks and torches, metaphorical or actual.

The opponents of this bailout have placed their bet on behalf of all of us. As far as that goes, kudos to them for showing considerable backbone. If things really do spiral down the commode after this, guess who's getting barbecued immediately.

The sudden, scary nature of the collapse of the financial sector did seem to call for fast response, which did rob us of vital time to think. But how often does it turn out that some disregarded academic or ousted bureaucrat has already been thinking about a problem for years? Something blindsides the public in their cocoon of plasticized news bites, and all the wonks nod sagely and say, "see, I knew that would happen." September 11, 2001 is the most spectacular recent example, but there are plenty more. In my own childhood I witnessed a few smaller ones from the sidelines. The solution to this problem is out there, nearly assembled, even if it was not the bill most recently kicked aside.

How much money is tied up in the obscene compensation packages of top executives in the distressed companies? Do they have enough to contribute significantly to the bailout if squeezed nearly dry? As satisfying as that would feel, probably not. To borrow from a famous feel-good movie about real estate investing, "I don't have your money, it's in Joe's house...And in the Kennedy house, and Mrs. Macklin's house, and a hundred others." And they're not worth crap anymore!

A Coldwell Banker television ad says hopefully "affordability is at an all-time high!" What a nice way to say that asking prices have collapsed and it's a buyer's market. Really? Hope you have cash, because no one wants to lend. When the numbers are all crunched, it may turn out no one CAN lend.

I know, I know. People with plenty of money will always be able to borrow money. Even George Bailey only kept his skinny neck above water in "It's a Wonderful Life" by being able to raise the coin at critical moments. He was one slip away from annihilation while the wily Potter patiently bought low and held assets. Bad economies help the wealthy maintain control. Money gravitates to wealth, flowing away from smaller, weaker hands. The only way to create a countervailing monetary mass is to have a citizen government made up of the little people, willing to pool enough resources and demand such laws as keep the money flowing both ways. Rich people can buy things for themselves that they might not want to buy for everybody, things like good schools, health care and safe neighborhoods. So the bad news is, big government really is the friend of the little people. Big wealth doesn't need or want big government. Big wealth just needs strong military forces, lots of police and a stout prison system.

Big wealth does not need a large, strong middle class. Big wealth just needs some low life to clean the pool, take care of the landscaping, drive the limo, be the nannies, the housekeepers, the cooks. A small middle class will survive among the managers in corporate systems and the entrepreneurs in service occupations that are hard to corporatize. The wealthy will still want to eat at interesting restaurants, providing a middle-class niche for the owner and the head chef. The rest of the staff will probably have to live like cockroaches. Other small business owners may do well if they establish a niche near a population of the wealthy, as building contractors and landscapers have done around Lake Winnipesaukee in New Hampshire. As conditions worsen for the middle class, those companies will compete harder and harder to hold their position, rising and falling with the fortunes of their noble patrons, as feudal vassals do. This pattern is repeated anywhere the rich put down roots or visit on a regular basis.

The real return of feudalism still lies in the dim mists of the not-so-distant future. Right now we have to get through the next few weeks, and the winter, and see what's left of us in the middle of next year. Will some great leader like Franklin Roosevelt be able to con some wealthy people into voting against their own best interests, and reanimate the battered corpse of the middle class? It was easier to do when the world faced a cataclysmic war, with all its oportunities to profit from the carnage and control the population through the threat of obvious dangers. Economics and terrorism are murky stuff. Nazis and Japs are concrete villains. And we're all more suspicious of our leaders. That should be a good thing, but is it too little, too late? And has it made us unable to believe the good suggestions when they finally do arrive?

No one can tell us for sure.

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