I have a confession. I know it’s poor form and I should be my better self here, but honestly, not only do I not care about those crazed moneychangers on Wall Street, it couldn’t have happened to a better bunch of guys. If Paris Hilton were required to have a real job, she would be one of these arrogant investment bankers – living the high life, self-important, and profligate. The two egos are completely compatible: they both know the price of everything and the value of nothing.
We conservatives, who hold to the faith, believe that ideas have consequences. At the bottom of this most recent financial meltdown was the idea that every American should own a home regardless of job status, income, or liquid assets. This was Bill Clinton’s idea to give homeownership to low-income and minority Americans. And not to point fingers – this is what any self-respecting liberal in power would seek to do. In his mind, he was only trying to extend the American dream to the people whose pain he felt all those years. And his plan was really simple: make businessmen an offer they can’t refuse.
I think one of the myths in this whole tragic series of events is that those sub-prime mortgage deals were risky for Wall Street lenders. Not even close. Clinton had greased those skids from the outset. He got federal secondary mortgage markets to buy the bad loans and then convinced Fed Chairman Alan Greenspan to look the other way. Far from risky, these deals were a moneychanger’s dream – cut the deal, make the money, and sell the risk to taxpayers.
Of course, the only problem is that selling risk has its limits. At some point, the proverbial bubble has to burst. Balance sheets can only tip so far. There is only so much liquidity out there – even among government agencies – and the money dried up. Fannie Mae and Freddie Mac had their bellies full. They couldn’t move. It was a Kirsty Ally moment.
From this mess, 148 years old Lehman Brothers filed for bankruptcy. Bear Stearns fell apart at the seams and was sold on E-Bay for $2 a share. Merrill Lynch was sold to a real bank. AIG, the second largest insurance company in the world, was purchased by the largest insurance company in the world – the American taxpayer – and is now a wholly-owned subsidiary of Uncle Sam – a proud moment in U.S. history, by the way – the moment we first nationalized an American business. Fannie Mae and Freddie Mac have been revealed for the government-assistance programs they always were. And, if all that isn’t embarrassing enough, now we must live with the humiliation of having the People’s Daily, the official voice of our new banker, communist China, chastise the Land of the Free for lousy business practices.
All this because a bunch of liberal do-gooders skipped Econ 101, jumped on the back of Lord Keynes for joy ride down Stupid Street to the Federal Reserve, and decided that printing money was easier than making money. And this is where we find ourselves today: the Federal Reserve is going to print an extra $700 billion to provide liquidity for the housing market.
I’ve heard of the Nanny State, but what we need is that lady on television who barges her way into families and teaches bad parents how to discipline their kids. She tells them not to indulge them, don’t give them things they haven’t earned, ignore their whining, and then, when needed, give the little brats a good beat-down until you have their attention.
The good news is that Wall Street is not Main Street. America’s real banks and credit unions are in good shape; Utah’s are in great shape. Hopefully, Utah’s decision makers will learn from the sins of Washington and Wall Street and remember that money doesn’t grow on trees – it’s printed on a great big machine at the Federal Reserve.
I’m Paul Mero. Thanks for listening.
