"I'M NOT A RACIST, BUT…"

One of the great truisms in life (and a staple component of my oldest stand-up routine) is that anyone compelled to introduce a statement with "Now, I'm not a racist, but…" is about to say something really, really racist. Things that are not racist do not need "I'm not a racist" as a qualifier. In practice, of course, this is usually an intro to a statement along the lines of "…but I really think we need to start killing more Mexicans."

Similarly, I am entirely convinced that Our Leader's half-assed scheme is in fact a bailout simply by virture of the number of times we are being told it is not a bailout. A genuine Not Bailout would not have to be preceded consistently with "This is not a bailout." Were it not, it would not look and behave like one.
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Instead we have something that looks, feels, and acts like a bailout enveloped in reassurances that it isn't.

Here is how I interpret the proposal: the Treasury Department would be given authorization to spend nearly a trillion dollars buying worthless mortgages "at market value" without even a hint – literally, not one word – of new regulations to create the charade of trying to prevent this from recurring. This is right-wing economics in a nutshell – government regulation is the antichrist, but its handouts are demanded. The benevolent, Divinely Inspired hand of the market cannot accept government meddling and rules, but it sure as hell can accept government cash. Check that. It's actually your cash. This sort of thing happens around the world with some regularity (see Sweden's banks) but the response is usually for the government to take over the institutions and run them responsibly before ponying up to pay down the bad debt. This is just taking money out of your pocket, handing it to some jackasses who gave a crackhead a 0,000 mortgage, and telling them to go on their merry way.
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"Racketeering" might be a better term.

The problems here are so transparent that the bailout seems like some kind of joke.
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First, the entire problem is that people are refusing to accept "market value" (i.e., half of whatever over-inflated price they paid) for their homes.
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We have too many $500,000 mortgages on homes suddenly worth $225,000. Offering $225,000 isn't going to solve anything. What this will amount to is either very few mortgages being bought (unlikely) or the government bidding against itself until it pays far, far over "market value" for this worthless crap (very likely). Second, we don't have $700 billion. That's larger than the annual budget of the Pentagon. It's larger than the cost of the entire Iraq War. It's almost 20% of the entire Federal budget. The only way to create $700 billion out of thin air will involve A) selling more Treasury paper to China, as if they'd buy it, and/or B) whipping out the printing press and printing more money. Third, seriously? No new regulations? No promise to maybe consider looking into thinking about enforcing the ones already on the books? Just a hearty chuckle, telling the financial industry "You sure fucked that one up!" as we hand them a check for three-quarters of a trillion dollars?

What no one seems to understand (and what the GOP is in full crisis mode to delay until after November) is that these institutions need to be allowed to fail. The consequences will be dire, but the consequences of these idiotic schemes to keep the patient alive on the heart-lung machine for a few more weeks at a time will be far worse. The patient is going to die anyway, and this Mugabe-style "Debt? Just print more money!" plan is going to make things even harder on those stuck footing the bill when the inevitable happens. And when it does, whether it's 1929 all over again or something milder, of course we will see Mrs. Republican, Mr. Free Market Worshiper, Mr. More Tax Cuts, Mrs. Supply Side Economics, and Mr. Get Big Government Out of Our Lives front and center, hands outstretched, awaiting the handouts that inevitably follow the disasters that their policies cause.

6 thoughts on “"I'M NOT A RACIST, BUT…"”

  • I was eagerly awaiting you weighing in on this important topic.

    If people haven't realized it already by the never-ending stream of borrowing against future tax income to pay for wars and tax cuts and abstinence-promoting programs in Africa, this administration is so far from fiscally conservative that it is a sick joke. Remember in early 2001 how we were forced to listen to how the MBA president would manage our economy with a cool business edge? Yeah, good times.

    Economists have been watching for years with surprise as the American consumers continued to pile on debt, always ready to borrow more against future earnings. If we do not force that trend of endless borrowing to end now, in part by letting these banks fail, then we are just setting ourselves up for a greater crisis in the future. And when that happens, America as the world's superpower will be a distant memory.

    If there is any silver lining to be seen in this cloud, it is that hopefully the exponential growth of strip malls that has been choking small- and medium-size cities will finally subside.

  • What's really scary about this, to me, is that most Americans don't seem to understand how much trouble we're in. I work in the real estate industry, and I can tell you that even the people in the business don't quite "get it" (most of them anyway). Buying, selling, mortgaging, and refinancing real estate was the core of our economic engine for the last 20 years; that world is now gone, but (a) most people in the business still insist on talking about "when the market picks back up", and (b) no one seems to have a plan for what our economy is going to be based on now.

    It was stupid to allow our economy to rest on something as silly as real estate speculation, but at least it was SOMETHING. And now our options are (1) let the banks fail and watch the shockwaves tear apart the remainder of our economy, or (2) hand the undeserving bastards $700 billion they don't deserve and we don't have.

    But the MSM would rather talk about lapel pins, fist pumps, and guys named Track (or Trig, or whatever), and as a result Americans are woefully uninformed about the shit we're in.

  • I'm going to start preceding my utterly banal, non-race related comments with the phrase, "Now I'm not a racist, but…"

    Now I'm not a racist, but I really enjoy pizza.

  • I'm not sure I agree with the handout description here. If in reference to AIG, the Fed has replaced the managment of the company and retains an option on 80% of the company. Essentially, they (and thus you and I) own the company now.

    If it's in response to Fannie and Freddie, well, that might be a bit easier of an argument to make. Those institutions were always an odd mix of gov't and private. I believe the management of those companies has changed has well, but essentially they've been given the cash they need to continue marching forward.

    The idea, however, that we should "teach those banks a lesson" is over-simplified. Not only would the failure have resulted in dramatic instability in the stock market, it would have led to a further tightening of the credit market, which in turn could very easily push additional banks over the edge. No one knows (anyone who says they do is either lying or grossly over-estimating their own intelligence) whether it would have, but I believe the various sources I read when they say it was a real possibility, both here and abroad.

    There will be a time for discussing how to prevent this from happening again, but right now I think Treasury and the Fed need to be focused on how to prevent an all-out collapse of the investment banking system. Even if that is (as I believe) unlikely, the possibility is there and avoiding it is the first order of business.

    I think of it like a co-pilot taking over the controls after the pilot did something stupid and nearly destroyed the plane. Land the thing first, then figure out how to get it back in the air before worrying about what to do with the idiot pilot.

  • What a contradiction: telling the government to stay out of business, yet expecting enormous handouts when they fail. The recent buyout reminds me of the stimulus check. I'm sure the economy improved for about a week, but the problem is still there waiting after the week is up. The logical thing to do IS to allow a failure to fail and address the underlying problem. But, I guess it is a lot easier to rack up more debt and hide your head in the sand.

    I admit I'm no economic expert, but shouldn't there be some consequences at some point to the debt lifestyle Americans live or the enormous debt Bush has racked up? Or, does another Great Depression occur and the whole financial system just collapses? It blows my mind that people and America can rack up a ton of debt, seemingly without consequences.

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