One of my favorite Australian commentators, Richard Glover, has a pointed take on the rescue package for banks and financial institutions currently being worked out in Washington.
On bankers and 500-kilogram gorillas
George Bush was unable to help the hurricane-battered poor of New Orleans but somehow he's located a spare trillion dollars for his distressed friends on Wall Street. It's a rescue package for bankers - dropped from the skies above Manhattan. You wonder what's in it. Bespoke suits? Stripy shirts with white collars? Braces?
The bankers have been thrilled to receive the help. Offered a trillion dollars of other people's money, they find themselves instant converts to the world of socialism and government assistance. All that talk about the free market; all that sneering about central government: that is sooo last month. Welcome to the Wall Street branch of the People's Collective for Distressed Bankers. It's like watching an atheist on his death bed begging for a Bible; you half expect the bankers to sing The Red Flag at the start of each day's trade.
The bail-out is necessary, we're told, because the speculators made some bad investment decisions. Their worthless assets will now be bundled together and placed in a sort of Bad Debt Holding Company and the stinking mess presented to American taxpayers, encircled with a bow. Thank you, Wall Street. Not so much a gift horse as a decade's worth of its droppings.
It's been a big change in lifestyle for bankers. Right up until last month, every 10 minutes saw a Wall Street banker buying a luxury property in the Hamptons. They've now had to find that guy and make him stop. It doesn't look good now that taxpayers are paying the bill.
So, exactly when did governments start rescuing people from their own bad investment decisions? If they are going to start now, how about that $10 you put on the Melbourne Cup in 1987 or the $25 that went down the drain on last week's Powerball?
As Exhibit A, perhaps I could tender the House of Merivale and Mr John disco-style suit I purchased in 1986 in a moment of speculative madness. (I was speculating on the fact that white flares were on the way back.) It was a very, very bad investment decision, a fact that became apparent the instant I arrived home and had a moment's visual intercourse with my bedroom mirror. So should the taxpayers of America or Australia now come to my rescue?
I still have the suit. Perhaps Mr Bush would be willing to add it to the pile of steaming refuse that will make up the holdings of his True Stinkers Holding Company.
Already included are the wonderfully named institutions Fannie Mae and Freddie Mac. Who would have thought that the world's financial system rested on things with names like Fannie Mae and Freddie Mac? They sound like children's toys, most likely a line of rag puppets. What's your sister doing? "She's playing dress-ups with her Fannie Mae doll. She's pretending to marry her off to Freddie Mac."
Western capitalism survived al-Qaeda only to be brought down by a couple of Cabbage Patch dolls.
Either that or they are like characters from The Dukes Of Hazzard - hard-living Freddie Mac and his trashy girlfriend Fannie Mae. "Hey, Freddie, you seen Fannie Mae in her bikini? Oh my, that girl is highly leveraged."
So why are authorities suddenly rescuing the injured and foolish from the combat fields of capitalism? There's an answer to that, of course. You get bailed out when your size is so large and your mistakes so numerous that you can't be allowed to fail. A 500-kilogram gorilla with dyspepsia gets more attention than a mouse with a dicky heart.
In the end, they probably had no option other than to rescue the mad speculators - and quickly so, before they brought the roof down on all of us. But as the money is being doled out, can we at least ask for a few admissions? Can we demand that the gorilla at least takes some medicine for his continuing behaviour problems?
Can we all agree that the market, unfettered and uncontrolled, does not always get it right? Can we admit that capitalism is a great engine for material progress but that it needs to be guided and regulated?
We learnt all these lessons in the late '80s. So how come, so soon, we need to learn them all over again?
The other lessons of the late '80s, after all, seemed to have stayed with us. We remember that big hair can make a bad impression. That the Rubik's Cube gets boring after the first hour. And that white suit from the House of Merivale was a tragic error of judgment.
Why, then, do we have trouble remembering that other rule of the late '80s? Greed, unrestrained and unregulated, is not always that useful.
So far, the response to the profligacy of the speculators has been to supply new money but not new, permanent rules. So far, the response has been much like an old joke rendered into public policy: "It's true we're kleptomaniacs," the Wall Street bankers can still say. "But when it gets bad, we just take something for it."
I agree with Mr. Glover's sentiments. The proposed bail-out smacks too much of socialism for my taste. I think the bankers should stew in their own juice: and if some form of bail-out is necessary, let's have one that requires the bankers responsible for this mess to be stripped of all their assets as their contribution to fixing the foul-up they caused.
Peter
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