A Cheap Shot at Craving Cheap Credit
Don’t Talk to Me About Craving Cheap Credit to Spend on Imported Goods.
It’s our cravings that are at fault, the fraudsters on Wall Street bray. Consumers demanded cheap credit and we just didn’t know what to do except provide it—even at the personal cost of having to take those hundred million dollar salaries. They made us do it, with their lifestyle demands. Wal-Mart wasn’t a scheme to wreck Main Streets across America, centralize all the purchasing in the Walton family private coffers—it was the cry of manic consumer demand for Chinese TVs and toxic toys for the kids.
We had a gun at our head to create credit default swaps out of the whole cloth that used to be collateralized lending. Remember when you went to your bank for a loan? In those creaky old horse-and-buggy days, the banker wanted some reasonable idea you were going to pay him back.
He cared about such things, because it was your (and his) neighbors’ money he was lending. Your reputation might count for something back then, because he knew your reputation. But every month at the loan committee meeting, you were smiled or frowned upon.
I never craved cheap credit, worthless goods or seven credit cards. Credit cards weren’t even in common use until Visa and MasterCard rolled out in the sixties. Oh yeah, you might have carried a Texaco or Standard Oil card for buying gas, maybe had a department store charge account, but the swiping of card-readers came with the usury-friendly 18% interest rates for unpaid balances.
Texaco, Standard Oil or the department store merely got angry with you, cancelled the card and hounded you into court. Visa, MasterCard and the other big guys made a profit out of a great new business opportunity. Why make 5% warehousing, transporting and selling a sofa, when you can make three times that loaning out the money and the Congress of the United States will enable the process.
You can’t get a more prominent enabler than that.
Everyone jumped on the band-wagon of marketing and consuming because they had made the actual manufacture of goods a pauper’s business. No longer able to invent and build, the world’s most successful nation of inventors and builders turned to selling each other cheap crap and calling it the new economy. In a scant forty years, the core values of a nation were cored like apples.
So, the race was on and in four decades that race essentially boarded up the Main Streets of small towns, outsourced our jobs to the cheapest offshore producer, transformed us from the world’s largest lender to the world’s biggest debtor, put college educations out of common reach, changed the relationship between worker productivity and reward, busted the unions, set off an advertising based feeding-frenzy of consumption and—now that it has busted the bank—hands us both the bill and the blame.
Unlike your friendly neighborhood bank of forty years ago, the new-age swindlers who arranged a home mortgage or line of credit for the un-creditworthy, needed a place to offload the offal. Bingo, derivatives were invented—not regulated, but invented—the not regulated part was just another low and outside curve-ball lobbed to a well-fed and well-paid-off Congress.
Derivatives were a hedge-fund invention, a way to whistle up large fees and churn the money pump, essentially hiding rotten apples at the bottom of otherwise shining and radiant barrels of produce. The language in these shell-game contracts was so arcane as to be un-understandable to those who took their cut, closed their eyes, held their nose and shoveled them on down the line.
Rating agencies knew of the stink and approved them AAA in spite of it, for (what else) money. Mortgage bankers, investment bankers, rating agencies and insurers—essentially all the guys looking for bailouts now—knew and collaborated and stirred the conspiracy-pot for a classic RICO indictment.
Instead, Henry Paulson is Santa Claus to save the financial markets.
(TARP—Your Money at Work) those unregulated derivative contracts that allow investors to bet on a debt issuer’s financial prospects, loomed so big on balance sheets that they now drive every bailout decision.
. . . “The last eight years have been about permitting derivatives to explode, knowing they were unregulated,” said Eric R. Dinallo, New York’s superintendent of insurance. “It’s about what the government chose not to regulate, measured in dollars. And that is what shook the world.”
Don’t bother to save the co-conspirators, Henry. Rhett Butler nailed it when he looked deep into Scarlett’s eyes and said, “Frankly, my dear, I don’t give a damn.” As a taxpayer, I’m still reeling from the $11 trillion we’ve accumulated in national debt since Ronnie Reagan (the communicator) deregulated me out of my underwear.
Now you guys have come after the underwear.