Bear Stearns and the Bailout

And from March 17: The Bear Stearns Bailout


So CNN and all the other purveyors of cornflakes are asking the critical question: Who should we bail out; the lenders or the homeowners?

If you are not getting any good answers, it’s usually because you are asking the wrong questions.

Look. Bear Stearns is going to be bailed out of the mess they’ve made. The larger economy cannot afford to let them go down. To do so is to guarantee that this country will sail headlong into a depression. The global consequences are even more mind-boggling. The question runs a lot deeper than whether or not to salvage the financial institutions that engaged in a decade’s worth of high-risk predatory lending practices that they clearly knew were a recipe for disaster. We’ve seen it before. There’s history here, and that history is called The Great Depression. What you see in the newspapers today is exactly the behavior that preceded that last horrific economic tsunami.

So how did we manage to let this happen again? Ah, there’s an interesting question. A free market economic system guarantees that ONLY the most predatory businesses on the planet will thrive. I know that sounds like a sweeping generalization. I assure you that it is not. And here’s why: a capitalist system relies on profit. There is a finite amount of capital in the world. A business that makes a profit this year, has to repeat that feat again next year. In order to do that, they are going to have to cut into someone else’s profit because they can’t simply create new capital out of thin air. The company that gets their hands on another company’s profit will thrive. The one that loses profit will die.

A free market system is a laissez-faire system that insists that only the marketplace determines success and failure. Government regulation interferes with the market and must therefore be abolished. Proponents of the free market theory insist that it is Darwinism at its finest, and that it is only right and proper that poor businesses become extinct. They are not fit to compete. The only problem with that theory is that doesn’t take long before a half dozen Walmarts, McDonalds, and Citibanks own the entire freakin’ world and the world’s population has effectively become their slaves in perpetuity unto the 70th generation.

This is precisely why we do not have a free market economy here in the United States. We have a mixed market economy that has always relied on its government to institute regulations that protect the workers from the predatory corporations that would eat their own young if it put another dollar into the profit column. We The People agreed long ago that we needed such protections and we asked the federal government to oversee that process on our behalf. And then we turn around and vote for Republicans who systematically dismantle the laws that govern those corporate monsters on the theory that a free market economy is good for everyone. It ain’t good for you. It ain’t good for the people in Bolivia whose water supply was taken over by international mega-corporations with the help of the World Bank and International Monetary Fund. This Libertarian approach to economics has been co-opted by the Republicans, largely through the person of Alan Greenspan, but don’t think that the Democrats haven’t been complicit in that global rape. The only difference between the Republicans and the Democrats on this issue is that the Dems are sneakier about it and don’t try to tell you that deregulation is good for you. They insist that the laws they will institute will actually protect you. Listen. If they’re giving it to Bolivia right up the old keister, they’ll do it to you too. You ain’t special.

Listen to what happened in Bolivia: The World Bank demanded that in exchange for the loans that would allow them to lower their inflation rate and encourage investment, they had to acknowledge that local governments were rife with corruption. They could not be allowed to manage their own infrastructure. So the obvious solution was to allow their public services to be administered by private corporations that had the management expertise to run those facilities on a paying basis. In exchange for their loans, Bolivia had to sell its utilities to foreign corporations. They did. The first thing that happened was that the foreigners fired 1/3 of the work force. In many instances, the workers who knew the water and sewer systems intimately were the only source of information about where they went and where the trouble spots in these aging lines were likely to be. So they lost 1/3 of their knowledge base. Maps were either lost, nonexistent, or out of date. And so many city households relied on those wages that the people were thrown into economic trouble right off the bat. But no matter. They’d find other jobs, right? Uh huh. But that was just the beginning. It was quickly determined that the real problem with the water supply was that the people weren’t paying enough for it. So they instituted a rate hike that amounted to more than 1/5 the average monthly income of a family in Bolivia. Imagine that. Imagine water suddenly, overnight, costing more than you spend on food every month. Just imagine it. For a minimum wage earner, the cost of water was more like 1/3 of their monthly income. Now imagine being unemployed (if you were say for instance a former municipal water worker) and having the cost of water skyrocket to 1/5 or 1/3 of your now-imaginery income. Not cool. And then guess what happens when those aging systems that have been patched together with duct tape for decades suffer their usual endless breakdowns and the workers can’t repair them for weeks on end because no one is left to do the work and none of the current workers have so much as a map of the system? A fairly clear picture is starting to emerge here, and it ain’t pretty. It ended with protests in the streets and the government shooting the protesters. Massively uncool.

And I tell you this story why? Because it has long been understood by corporations and governments alike that this is precisely what happens when the public utilities and services are taken over by private interests and not subject to government regulation. THIS is why we do not and never have operated under a free market structure. But remember - if they will do it to Bolivia, they will do it to you too. You ain’t special.

Still want to let the Republicans privatize education here in America? You still think they have your best interests at heart? There’s a reason why those public utilities and services are regulated by the government for the common interests of the people who use those utilities and services. Whaddaya wanna bet they own the very corporations that will be running your schools as if the object of the game were not to educate your kids, but to make a profit at it? Did you get a lower phone bill when they deregulated the communications industry? No, you did not. You got a higher bill. Did you benefit when they deregulated the banking industry and allowed every self-styled "businessman" on the planet to open a savings and loan? Why, no. You did not. In fact, you’re not even finished paying for that little debacle (which btw, Neil Bush benefitted greatly from and he thanks you for all your hard-earned dollars).

The bottom line is this - no responsible economist has ever suggested that a free market economy is a good thing for the humans that must live with them, that supply-side economics ever benefits anyone but the wealthy, or that deregulation will lead to anything but a greedfest.

So, yes. We have to bail out Bear Stearns. But we should be demanding the heads of the shareholders and CEOs on a platter right now. Ken Lay managed to die before he got to see the inside of one of the prisons those Republican fuckheads are so fond of. So let’s make the penalty for getting caught with your hand in the collective cookie jar death. Ancillary figures will simply be stripped of every nickel they ever owned, branded as thieves with a tattoo across their foreheads, and sent back to a minimum wage slow death job from which they can pull themselves up by their own goddamn bootstraps. No appeals, no 10 years of litigation. We’ll make it a high-stakes game with some real penalties for fucking up. If their egos and standard of living require a solid gold platter on which to display their remains I’ll be happy to chip in for that.