Bailout bitter pill to swallow

Wall Street is starting to give greed a bad name.

Most of this crisis was self-inflicted. There is no question this problem came about due to deregulation during the Bush administration (with a small amount during the GOP-controlled Congress of the Clinton administration), and the basic lack of emphasis on oversight by the current administration.

With nobody looking over their shoulder, banks not only aggressively encouraged subprime loans, where they could make more money, but paid little attention to whether or not buyers could make their payments. If the government wants to solve the housing finance problem, it should probably just set up a system whereby subprime mortgage holders could apply to the government to refinance at lower rates (or the government could require the banks to do so). That would eliminate some of the foreclosures and free up a considerable amount of disposable income by homeowners that could be poured into the Main Street economy.

Unfortunately, the more I try to study the complicated and confusing system of back room wheeling and dealing by the banks, the more I'm convinced it isn't the housing market that's the real problem, merely the trigger to the crisis.

Financial institutions have engaged in significant speculation on these loans, using the risky mortgages to as collateral to back securities. And they traded them back and forth in a system whereby functionally they were making side bets to each other concerning their value. Eventually, the mortgages got used multiple times to back securities and hedge fund investments. When the mortgages started to go bad, the house of cards began to fall apart.

That's really what you're being asked to bail out -- a series of high-stakes gambling that went bad when the horse broke it's leg at the quarter pole.

The bailout will leave the very people who created the problem the opportunity to try again. That's an appalling lack of accountability with taxpayers asked to bear the costs for their mismanagement.

Yet the crisis is real -- very real. It's one of those cases where you may not like the taste (and nobody but Wall Street does), but you're going to have to swallow it anyway.

Because in the global economy, this could trigger a worldwide financial collapse. Already governments in Europe this week were forced into multi-billion-dollar bailouts of major banks in their countries (which had huge investments in the American economy).

And a lot of businesses use basic operating loans to cover the difference between accounts receivable and cash on hand. If that credit disappears, so does the ability to make payroll.

Furthermore, with overvalued Wall Street in free fall, pension funds that relied on "secure" investments, are getting clobbered. And God help the poor soul who bought into the argument that 401K investments were better than Social Security. Of course they were, as long as Wall Street kept climbing. If it collapses, good old barely-above-poverty-level Social Security payments are starting to look pretty good.

But as much as people are screaming about the current bailout, it's hardly the first of this year alone. Congress and the administration have been quietly taxing our grandchildren's paychecks for months.

In March, Congress, at the request of the president, approved an extra $800 billion to the federal debt ceiling (part of it to help pay for the war in Iraq). The debt, before this bailout, was over $9 trillion dollars, almost all of it accrued during the Bush administration.

Since March the government has provided:

* $153 billion to households for "economic stimulus," a bailout for strapped taxpayers clobbered by rising prices (most of it due to a total lack of a coherent energy plan beyond "drill, baby, drill").

* $29 billion to bail out Bear Stearns.

* $40 billion in the first mortgage-holder bailout.

* $85 billion to bail out AIG.

* $200 billion to bail out Fannie Mae and Freddie Mac.

* $300 billion in essentially interest-free cash issued to banks by the Federal Reserve on an emergency basis, which might be repaid.

Then there's the current $700 billion general bailout, which the International Monetary Fund estimates will rise to at least $1 trillion.

That comes to at least $1.5 trillion.

Based on 132 million taxpayers (I'm projecting a slight increase from the latest figures available from the government), that comes to $11,363 and change per taxpayer. And change.

A part of me wants to stand up and scream "let'em fail!" But it's like a traffic accident -- you may not be at fault, but you're involved in the crash anyway.

Which is why there may simply be no choice.

* * *

We all know political rhetoric is just that, but perhaps the fastest flameout in recent history of a declared major policy belongs to the GOP. On Sept. 3, the Republican Party, at its national convention, adopted the following policy:

"We do not support government bailouts of private institutions. Government interference in the markets exacerbates problems in the marketplace and causes the free market to take longer to correct itself."

Three weeks later...

* * *

And the head-in-the-sand award goes to (tie):

* President George Bush -- Sept. 19, 2008 -- "...Americans have good reason to be confident in our economic strength."

* John McCain -- Sept. 22, 2008 -- "The American economy is fundamentally sound."

The financial crisis erupted on Sept. 17, 2008.

* * *

As far as I can tell, having seized federal control of the nation's financial institutions and markets, under a Republican administration and as result of Republican policies (apparently the words "fiscal responsibility" in their mantra was a joke on voters), we have now become the world's most powerful socialist nation.

And who is buying up this debt? Our "good friends" China and Russia. The former socialist, now "capitalist" countries that for years threatened to destroy us with nuclear weapons and promised to bury us, have now hauled out their checkbooks and are buying us.

* * *

After the brilliant William F. Buckley, Jr., died, George Will assumed the mantle as the intellectual standard bearer for the nation's conservatives (yes, it is possible to be conservative and intelligent at the same time, most conservative talk show hosts notwithstanding).

It's not carried locally, but Will's column last week ripped McCain's choice of Sarah Palin, calling her completely unqualified to be a heartbeat away from the presidency.

She's been kept on a tight leash by the McCain campaign, and after the Couric interview I can see why. Palin just babbled the knee-jerk phrases of right-wing ideology, running one into the other, without obviously understanding any of it. It was like she was speaking in tongues. It made no sense and none of it was responsive to the solid questions Couric posed.

Nor was Will alone. More and more conservative leaders are questioning her capability and some have even called for her withdrawal from the ticket. It's looking more and more like McCain just ran a Google search for VP and grabbed the first name that showed up (Alaska, governor).

She had better do a lot better during Thursday night's debate, especially after a week of intensive "coaching" by the McCain staff, which she really wouldn't need if she were qualified. This is make it or break it time for her.

After giving McCain a brief bump in the polls she may be the anchor that sinks his campaign.