Bail or Jail?

My sharply observant friend of the political scene likes this bailout deal that almost went down, probably quite like the deal that will in fact go through eventually.  I disagree.  It is not often I find myself in synch with the conservative Republicans.  But I feel like I’ve been minding my p’s and q’s while this incredible party went down during the nineties and naughties.  The greed and lack of attention to financial proprieties that accompanied the boom is something that ought to be largely paid for and made to be the responsibility of the financial sector that played the game.

Reagan, in the wake of the Carter malaise, began the deregulation of the Roosevelt era checks and balances that Republicans have trumpeted ever since – McCain up until a couple of weeks ago.  Now the pendulum will swing the other way.  With a recession or a depression?  The playout of this bill and the election will tell.

Some kind of bail-out is clearly needed – but for whom? I make no bones of how little I know of economics.  But I saw this coming and moved out of the market a year ago.  This feels like one last massive wealth transfer for the Bush administration, after the sooo many they have gotten away with.  Why should my tax money pay for this?  Why can’t it be structured so the financial sector takes the biggest hit, not receive a huge boon from the rest of us?

Clearly the party’s over for the next eight years or so.  Clearly the whole society is run on debt, and we have been living well beyond our means, personally and nationally.  Clearly, a contraction is due to arrive at the station, and no one wants to get on, but we all have to. (Professionals I rely on suggest that we should all be ready to live on 2/3 of what we have been living on in previous years.)  Clearly, this will repercuss to the whole world.  Clearly, we need to soften the blow so that the economic engine does not seize up entirely.

But this morning, the Irish government offered a guarantee for all its depositors.  When this resulted in a wholesale rush of money from England to Ireland, the English government cried foul and said this was ‘unwarranted intrusion of government into the private marketplace’.  So what’s the bailout deal, if not that?

This is socialism for the rich, as Galbraith intoned, coupled with ‘tough shit’ for the poor householder who was enticed into a mortgage beyond his means.  The more proper phrase is ‘socialization of risk’ – when everything is going well, the bankers, brokers, hedge fund analysts, and market spivs are happy to personalize the gain.  But when it all goes south, all of a sudden they are ‘too big to fail’ and we all have to pay for their irresponsible practices by bailing out their losses.  Sorry, it should work both ways – socialize the risk, then we must socialize the profit as well.

This is not free market capitalism, which depends on individuals taking responsibility for their choices, bad and good.  Seems just another continuation of screwing the little guy at the expense of the fat cats.  Personally, though it affects my bottom line negatively and my Mom’s fixed income, I am glad to see the economy shed a little of the fois gras and champagne bubbles in favor a some goat milking and attention to the hand on the plow.

Once  we see where the hurt lands most, we can do some legislating to even out the pain.  But this whole thing has felt rushed, and seems to me like an opportunity for Obama to call for a time of deep reflection, self-assessment, and a re-ordering of the social priorities.

The major cause of bankruptcy in this country is not mortgages, but medical bills, a situation every other civilized country looks on with horror.

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