The Money Party (7):
Just Say No
(Wash. DC) We're being blackmailed into accepting the responsibility and debt for the worst managed financial institutions in the history of this country. The starting price, our debt, is $700 billion dollars.
What's really about to happen is that the failed financial institutions will be rewarded for their bad behavior. As a result, they and others will be encouraged to do it again. It's just a matter of time.
We're under the gun and told that we have just days to make a decision to bailout these mismanaged entities. The last thing they want is an open hearing on the problem. Deliberation is deadly for them.
We're told that our world will collapse; there will be a systemic breakdown if the president's bailout legislation is not passed. Without it, we'll all be eating stale beans and rice for the rest of our lives.
How do you argue with a premise like that - vote yes and you get a chance to live. Vote no and you'll be soon living in a cold house or damp shelter, if you're lucky enough to be off the street.
This is the same type of argument that was used to pass the Patriot Act after 9/11. It had to be passed right away. The vulnerability to attack was blamed on the Constitution. We were asked to forget the president's disregard for the many warnings of just such an attack. The people paid for that egregious error through the loss of constitutional rights.
Now we're told that to avoid economic ruin and all that portends, we must give up common sense, evaluation, and deliberation and allow more debt to be piled on our backs.
The largest financial institutions have made very bad decisions. They bought into schemes that were senseless. Subprime loans sold as premium securities and the looming credit derivatives melt down -- 50 times larger than the subprime problem -- are obvious losers just on the face of it.
How can grouping subprime loans create a stock that's anything other than subprime? What kind of institutional investor would bet your retirement on a subprime investment?
Why would anyone other than a very experienced financial expert get into anything as complex as credit derivatives? Because the commissions on sales were huge. For buyers, the short cut to profits was too good to resist.
So what are we supposed to do? Give $700 billion to these companies to keep them afloat. While those who marketed these flawed products bear some responsibility, the responsibility and blame grow as you move up the management chain to the top. They all knew what was going on. They ignored the certain risk and failure of these schemes for their personal benefit.
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