Where it really hurts

by Michael O. Allen on October 1, 2008

As I am in the habit of doing, I fired off this e-mail to a family friend working overseas this morning:

Can you believe what’s going on here? The country is going down the tubes.

* * *

In some countries I know, Treasury Secretary Henry Paulson (he cashed out from Goldman Sachs in 2006 with half a billion dollars) would already be shot by now and George Bush would have already fled the country.

There’s a problem with our democracy when the perps are proudly walking around, insisting we hand them unfettered access to more money, or else they’ll take down the economy. And then, they follow through on that threat.

Here’s my friend’s response:

Hi, Michael:

I am distressed by what’s going on multiple levels. On a personal level, we have lost lots of money — at least on paper. I have refused to sell anything we set aside for our retirement (only a few years away for me, but looking longer now!!!), because once you sell, that confirms the paper loss, but the sliding markets came so fast it was hard to keep up with them (not when we ordinary working folk have such stressful jobs to keep up with!!!).

On other levels, I am filled with disgust to now realize what a party Wall Street had at our expense these last 10 years — inventing these reckless new investment vehicles filled so much with mortgages sold to people who the sharpies knew would not be able to afford to pay them back — but which they came up with a term for, “sub-prime,” that somehow made it seem okay.  (Once again, the U.S. media, like it did on Iraq, blew it on this story. We always do a decent job after the shit hits the fan, but never before; then again, Americans never pay attention until it is too late.)

The party appears to have been at our expense because so many banks bought those investment vehicles and these are the banks that the government is now rescuing because those investment vehicles failed when mortgages went south when, lo and behold, people defaulted on their mortgages.

And no one in government was watching. The credit agencies that approved all of these deals in glowing reports to potential investors were not regulated by the government, not in any substantive way because of the de-regulation era promoted by Bush, both houses of Congress, McCain and to some extent, Clinton. The credit agencies were in cahoots with the companies that brought these investment deals to market because they had financial relationships with them.

In effect, for a decade on Wall Street, there was no official watchdog. It was party time. How could anyone in their right mind expect people in pursuit of profit to not do whatever they can to pursue as much profit as they can?

Especially when no one is watching!

I am of a mixed mind about the rescue package. I understand the taxpayer revolt against it, but I do worry about the collapse of the banking system, meaning the credit system. If banks cannot loan money to one another, or to businesses, then the economy stops. Some signal of faith needs to be given. Whether this package is the right one I am not sophisticated enough to know, but we are teetering on the edge of a disaster is my gut feeling. Too bad it is happening when The House is up for re-election in a month, and every member knows that his or her re-election, as never before, is virtually solely dependent on this one vote, something we have not seen in our lives.

What has also emerged in all of this is that we need a leader, and clearly Obama is that man. McCain’s alleged suspension of his campaign and silent attempt to resolve the crisis, along with his selection of the Alaskan moose, are disasters. The polls show even dim-witted Americans coming to this conclusion. We can only hope it is true, because we need a leader.

Best to you and the family.


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