Sunday, February 1, 2009

We Can't Trust Them With Our Money

This time I'm speaking, not of our elected officials, but of the presidents of the banks and other struggling institutions that are quickly consuming the $700 billion from the first bailout.

Every single bank that made bad loans in the past 3 years knew exactly what they were doing. They threw away all of the rules or guidelines or due diligence or what have you, about making loans to people when you know there's not a snowball's chance in Phoenix of the borrowers ever making good on the loans. But they did it anyway. Call it greed, or hubris, if you want.

Basically, all of those banks were irresponsible with your money.

Then, all of those loans and mortgages were repackaged into financial instruments (like stocks or bonds), called "mortgage backed securities," which the banks then sold to each other at face value. The buyers and sellers knew all along that a lot of the mortgages backing those securities were bad mortgages. They should never have been sold at face value. They should been discounted, sold for face value multiplied by the probability that the mortgages backing them would ever be paid off. The buyers and sellers knew the score. They knew that many (most?) of those loans were risky and would probably end in default. For a bank or lender to say "Well, I didn't know" or "Well, the borrower qualified for the loan" is just stupid. I wouldn't fall for it. My next-door neighbor wouldn't fall for it. What made those MBAs and Wall Street tycoons fall for it?

Basically, all of those banks and investors threw away their common sense in the name of greed -- although they would never call it "greed."

Then, when borrowers started defaulting en masse and these mortgage backed securities started dissolving and slipping through the bankers' and investors' fingers, they ran crying to the government, begging to be saved from their own greed and stupidity. President Bush's Secretary of the Treasury, as one of his last acts, gave them over $700 billion with no strings attached and no provision for accountability.

Do you know what they did with that money? Fannie Mae and Freddie Mac sent a lot of their managers to a golf resort in Texas, for a week of relaxing and unwinding. A banker in New York had his office remodeled, spending $1.2 million on the job. One bank completed the purchase of a customized, luxury jet that they had ordered two years earlier. And executives at many of these failed institutions rewarded themselves for their greed and their irresponsibility by taking huge bonuses from the bailout money, in a period when thousands of people per day were losing their jobs. Maybe they thought we wouldn't notice.

Basically, the banks and their executives were stupid.

Do you know who should have lost their jobs? The entire executive suites at these banks! Some bankers and politicians tried to justify those bonuses, but their words rang hollow in the ears of ordinary Americans. A bonus is a reward for doing something right, and it's clear to everybody in America except the aforementioned stupid executives that they didn't do anything right last year.

Now the Obama administration and Congress want to give Wall Street and Company another $820 billion bailout. NO! The people who run Wall Street and Company (along with the people who run Washington) have shown that we cannot trust them with our money.

I have a better idea. If the federal government is serious about bailing out those in financial distress, if they really want to stimulate the economy, and if they're willing to spend $820 billion to do it, then give that money directly to the people.

According to the U.S. Census Bureau, the population of the United States right now is 305,729,371. If the government were to distribute that money evenly to every man, woman and child in the United States, we would each get a check for $2,6822.11. And I can promise you that the majority of Americans would be a lot more wise and responsible in how they used that money than the great minds of Wall Street and our elected officials in Washington have proven themselves to be.

1 comment:

jodi said...

I completely agree. I watched Olbermann, Stewart, Rachel Maddow et. al. last week with complete astonishment. Wasn't it Shakespeare in The Merchant that said, 'First, let's kill all the lawyers?" Perhaps that should be amended to bankers.
We deal with a credit union here, and are member-owners. No executive jets; but we actually get money BACK from our branch as member payouts. Not enough to BUY a jet, but it's good to belong to an ethical organization.
I think your president is biding his time, being a bit bridge-building with the other guys for a while, but the Republicans act like selfish fools at their peril. The voters will remember, in two years time, I have no doubt. (wearing my pollyanna hat here)