The Moment of Truth — September 20, 2008

Wall Street Celebrates Socialism

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Stocks rallied on Thursday as the US government announced it was effectively socializing several key financial institutions.

The question arises: now that the market is up, will the US taxpayer be rewarded with a little of that windfall? Or are we only expected to shoulder the burden of debt but never receive the reward of profit? Sounds more like Soviet-era Communism than any kind of reasonable democratic-style socialism.

I think I even heard Bush say in a Russian accent: “The peasants will get their fair share of all shortages.” And the Cato Institute released a report titled: “Workers of America, Join in the Great Collective. You have nothing to lose but your homes, jobs and savings.”

Thank goodness we’re not like China. First of all, China somehow realized that, with the Republican neo-con extreme capitalists in charge of the US economy, relying on the value of the US dollar probably wasn’t the smartest thing to do. So since 2005 their currency value has been valued relative to a variety of other currencies, including the Euro. Kind of spreading the risk across several world economies, assuming that one nation’s ill fortune is another’s good, I guess. I wonder who got our good fortune.

And of course, as an authoritarian communist nation, China has remedies we in the USA don’t. For example, if one of their banks looks like it’s having problems staying afloat, the State will inject money into the financial system to—oh, wait, that’s exactly what the US Treasury just did.

What shall we call this new communist system the US has just adopted? How about “fair-weather free-marketism?” As long as the financial system isn’t about to collapse, we believe in the free market. When that policy has done more damage than the system can sustain, we switch over to massive State intervention. That way we get to keep the name “free market” while concealing the fact that, when things get rough, it’s back to communism we go.

What are you going to do with your shares of insurance giant AIG? You know, we the people just bought controlling interest in that institution. I think we should add health insurance to its roster of products. We could create a subsidiary of AIG called the US Health Insurance program, which would guarantee us, the majority stockholders, free health insurance. I mean, come on. As majority stockholders, surely we deserve some perks. It’s not like we’re asking for the kind of golden parachute CEOs receive when they resign after running a company into the ground.

Oh, gee. Can I just pause to say a big FUCK YOU to the Cato Institute? No? Okay, then let us press on.

If we can’t all agree to turn AIG into a National Health Insurance corporation, can we at least sell it if it ever becomes solvent again? And not give that money away to the richest one percent this time? They really don’t seem to know how to manage their money. We working people know what to do with money: buy actual things that people make and grow, and pay people for employing their actual hands-on skill and expertise.

I can’t even figure out what the super-rich were buying with the trillions of dollars George W. Bush gave them—you remember, the three trillion dollar surplus that is now a five trillion dollar deficit? It seems like they went into the business of buying debts that no one would ever pay back. Kind of, well, stupid. (FUCK YOU Cato Institute.) I mean, I’m no genius, not like the guys who invented these packages of negative money for people to buy, or their genius bosses who signed off on it, or the geniuses who went ahead and bought negative money. Or the geniuses at the (FUCK YOU) Cato Institute. But at least I know that buying a sandwich is a better idea than buying an IOU for a sandwich from someone who has never had and never will have the makings of a sandwich. That’s just throwing your money away. Although it’s a good way to lose weight, I guess.

Don’t get me wrong, it’s an act of great kindness to loan money to someone you have no reason to believe can ever pay it back. Family members do it for each other all the time. But relying on such a practice for a large portion of your income, that’s just nuts. Especially if you’re a bank or other large financial institution.

We should all think about that practice very carefully. Most of us keep at least part of our savings in banks. If I keep five thousand dollars in a bank, say, Chase Bank, I’m lending Chase five thousand dollars. I do this on the condition that Chase will be able to pay me back anytime I call in the loan. See, Chase isn’t one of my close friends or relatives. I’m not going to lend Chase money in exchange for a hopeless sandwich IOU.

And I feel safe, because even if the worst happens and Chase goes bankrupt, my loan to them is insured by the Federal Deposit Insurance Corporation.

But what if your bank has been using the money you lend it to buy hopeless sandwich IOUs themselves? That’s okay, you say, my money is still insured by the FDIC.

Well, I don’t want to alarm you, but that FDIC money is ours too. And we’ve already spent so much of it bailing out institutions for making risky, insane, and corrupt investments (just fuck off and die, Cato Institute) that it’s a bit of a question where we, the people, will get the money to insure our, the people’s, money once we’re done bailing out this cycle of financial shipwrecks.

See, back in the days of Ronald Reagan and George Bush I, there was the Savings and Loan problem, where a whole slew of financial institutions had been mismanaging their investors’ money, including one run by Bush I’s son Neil. Or was it Neal? Who gives a shit? And the Reagan mission, egged on by rabid fair-weather free-marketeers like Milton Friedman and the… Cato Institute, was to allow high finance types do any ridiculous thing they wanted with any money that came their way, and to pressure regulators to get off their backs.

The FDIC was panicked even then, worried that people like Charles Keating, chairman of Lincoln Savings and Loan, were pursuing investment practices that would eventually cause them to collapse and require the FDIC’s money to bail them out. But Keating had friends who would help stall investigations of his risky and corrupt practices. Keating got Alan Greenspan to write a report saying that the risky practices weren’t actually risky. This was before Greenspan became Federal Reserve czar and brought his financial brilliance into public service. Keating also got Ronald Reagan to appoint a friend of Keating’s to the very regulatory board that was investigating him. That’s beautiful.

But Keating’s best friend of all was John McCain. McCain was one of the Keating Five, five senators who met with the regulatory board and told them to leave Keating alone. In the end, McCain deserted his friend when he found out Keating might face criminal charges. But he still deserves today to be remembered as the senator of the five who received the most campaign money from Keating, and the best presents, like free trips to the Bahamas on a private jet for McCain and his family, and some juicy, or perhaps foolishly risky, investments for his wife and father-in-law.

In the end the FDIC did have to fork over some healthy helpings of cash to cover the disastrous mismanagement of the S&Ls.

The reason John McCain hated regulators so much back then, though, was not because they kept bothering his rich friends with nitpicky details about corrupt and dumb business practices. See, John McCain had been a victim of communist oppression. He had spent more than half a decade as a Prisoner of War in North Vietnam. And that experience was so sobering that he vowed never would communism of any kind be committed in the USA!

So when John McCain says we should just sit by and not bother the wealthy while they play with their money (which is our money), he’s just trying to protect us from communism. The trouble is, the rest of the financial world is now going over to communism like it’s the only way they can avoid a global depression.

Perhaps John McCain is a little out of touch. But even he’s starting to admit that his hardline stance is out of tune with today’s free-market embrace of communism.

At least Barack Obama is consistent. He was in favor of spending our tax money to prevent the current crisis, which might have spared us spending the even larger amount of money we now have to spend to try to dig the financial system out of the damn quagmire. But people like John McCain wouldn’t allow that kind of communism. The preventative, cheap kind. No. That kind is a burden on his big-money friends. And it’s only now that the entire world is on the verge of economic catastrophe that he’ll even allow the kind that bails out his friends after they’ve committed their offenses against reason and law.

We can’t afford to go back in time to John McCain’s style of Cold War economics. It’s time to rethink the idea that if we just let the market have its way everything will be fine. (FUCK YOU Cato Institute.) In fact, now is the perfect time for rethinking. We should strike while the financial geniuses are receptive to revolutionary ideas. Because who knows how long Wall Street’s love affair with Karl Marx will last?

This has been the Moment of Truth. Good day!