Rescue The Rescue
Rescue the Rescue
By THOMAS L. FRIEDMAN
Published: September 30, 2008
I was channel surfing on Monday, following the stock market's nearly 800-point collapse, when a commentator on CNBC caught my attention. He was being asked to give advice to viewers as to what were the best positions to be in to ride out the market storm. Without missing a beat, he answered: "Cash and fetal."
I'm in both — because I know an unprecedented moment when I see one.
I've been frightened for my country only a few times in my life: In 1962, when, even as a boy of 9, I followed the tension of the Cuban missile crisis; in 1963, with the assassination of J.F.K.; on Sept.
11, 2001; and on Monday, when the House Republicans brought down the bipartisan rescue package.
But this moment is the scariest of all for me because the previous three were all driven by real or potential attacks on the U.S. system by outsiders. This time, we are doing it to ourselves. This time, it's our own failure to regulate our own financial system and to legislate the proper remedy that is doing us in.
I've always believed that America's government was a unique political system — one designed by geniuses so that it could be run by idiots. I was wrong. No system can be smart enough to survive this level of incompetence and recklessness by the people charged to run it.
This is dangerous. We have House members, many of whom I suspect can't balance their own checkbooks, rejecting a complex rescue package because some voters, whom I fear also don't understand, swamped them with phone calls. I appreciate the popular anger against Wall Street, but you can't deal with this crisis this way.
This is a credit crisis. It's all about confidence. What you can't see is how bank A will no longer lend to good company B or mortgage company C. Because no one is sure the other guy's assets and collateral are worth anything, which is why the government needs to come in and put a floor under them. Otherwise, the system will be choked of credit, like a body being choked of oxygen and turning blue.
Well, you say, "I don't own any stocks — let those greedy monsters on Wall Street suffer." You may not own any stocks, but your pension fund owned some Lehman Brothers commercial paper and your regional bank held subprime mortgage bonds, which is why you were able refinance your house two years ago. And your local airport was insured by A.I.G., and your local municipality sold municipal bonds on Wall Street to finance your street's new sewer system, and your local car company depended on the credit markets to finance your auto loan — and now that the credit market has dried up, Wachovia bank went bust and your neighbor lost her secretarial job there.
We're all connected. As others have pointed out, you can't save Main Street and punish Wall Street anymore than you can be in a rowboat with someone you hate and think that the leak in the bottom of the boat at his end is not going to sink you, too. The world really is flat. We're all connected. "Decoupling" is pure fantasy.
I totally understand the resentment against Wall Street titans bringing home $60 million bonuses. But when the credit system is imperiled, as it is now, you have to focus on saving the system, even if it means bailing out people who don't deserve it. Otherwise, you're
saying: I'm going to hold my breath until that Wall Street fat cat turns blue. But he's not going to turn blue; you are, or we all are.
We have to get this right.
My rabbi told this story at Rosh Hashana services on Tuesday: A frail 80-year-old mother is celebrating her birthday and her three sons each give her a present. Harry gives her a new house. Harvey gives her a new car and driver. And Bernie gives her a huge parrot that can recite the entire Torah. A week later, she calls her three sons together and
says: "Harry, thanks for the nice house, but I only live in one room.
Harvey, thanks for the nice car, but I can't stand the driver. Bernie, thanks for giving your mother something she could really enjoy. That chicken was delicious."
Message to Congress: Don't get cute. Don't give us something we don't need. Don't give us something designed to solve your political problems. Yes, Hank Paulson and Ben Bernanke need to accept strict oversights and the taxpayer must be guaranteed a share in the upside profits from all rescued banks. But other than that, give them the capital and the flexibility to put out this fire.
I always said to myself: Our government is so broken that it can only work in response to a huge crisis. But now we've had a huge crisis, and the system still doesn't seem to work. Our leaders, Republicans and Democrats, have gotten so out of practice of working together that even in the face of this system-threatening meltdown they could not agree on a rescue package, as if they lived on Mars and were just visiting us for the week, with no stake in the outcome.
The story cannot end here. If it does, assume the fetal position
Janice Dorn, M.D., Ph.D.
www.thetradingdoctor.com
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of cowardice and arrogance -- ah now that Thomas has explained it to me -- now that I get it -- I understand that the correct and right thing to do is give everything to the bankers
Otherwise Granny will eat the parrot??!!
Thomas Friedman looks best with a pie in the face
Number 1, I understand the implications of this bail out completely. Congress should not pass it for 4 reasons.
1. It is a credit crisis. Credit in itself is a crisis.
Any business that relies on an injections of credit to make pay role has no idea how to make real money. On a very modest single income I purchased my vehicles with cash, because I understand about saving. If the American Government, business and citizens keep living on credit this disaster will keep getting worse and worse. Every person who will lose a home read the contract when they got the loan should have well known what they were getting into. I don't deserve to pay for their mistakes.
2. Hard times would come from not passing this bill, but they will come anyway. The 700 billion is a temporary band-aid. It will last till about December and they will need more money and we will need another bail out. And for goodness sake don't lie to me, buying bad debt is never a good investment. The debt on these mortgages is all fictional money anyway.
3. Consumerism has run mad in this country. A truly free man would be a thrifty saver, but instead most of America is addicted to credit that enslaves them. Let the whole lot of you who were not wise enough to save, pay the price. You asked for slavery and now you will get it. Learn the lesson now and get it over with. Stop putting off the inevitable.
4. INFLATION TAXES SUCKS A@# - no further explanation needed.
If we hope to do anything of value, we should allow the market to do what it will with this bad debt. People should start saving and not spending all their money on Chinese things that will be in the garbage in a month. If that takes a few years of hard times. I say lesson well learned.
I agree with some of the things you say, but some of your assertions are not correct.
1. Credit and debt is not always bad. Too much debt is. Debt capital markets is what separates developed countries from the third world. Almost all companies require debt to operate, grow, and create value. And paying cash for a car may not make sense either, depending on the financing rate.
2. You may be right, but you might be wrong. It is possible that the government could make money on this plan. I am not defending it, but I think a lot of people think the entire $700 billion will disappear. It may be a bad idea, but there could be much worse solutions. Buying bad debt can be a good investment; if you can buy debt at 50 cents on the dollar that you can sell at 65 cents on the dollar, it was a good investment.
3. Like I said, not all debt is bad. A sensible mortgage makes a lot of sense over the long term. The same is true for student loan debt. Credit cards are another story.
When you strap on the ball and chain of debt you are in bondage. If you call slavery good in some cases that is a matter of opinion. To quote a wise man - Debt never sleeps, it never gets sick, it does not take weekends or vacations. It is your constant companion until the debt is payed. Working hard and saving is by far preferable.
I agree there are some times when you can justifiably say it would be better to buy this item on credit, but just know that it is a risk. And with all risks you are liable for the consiquence of your action. So I can give a little and say debt is not always totally bad, but it is never totally good either.
A government gambling with fiat money is never a safe bet, especially when we are on the hook for paying the interest back on the money. Do you believe the 700 Billion will come out of the treasury or from printed money?
Lastly wow! You really think the government will make money on this debt? What do you think they will do with that money?
1. Give it to Africorp???
2. Give it to Israel???
3. Give it to the U.N???
4. Buy more bomb to kill innocents in Pakistan???
5. Build more bases in Iraq???
6. Put it in their pockets????
But we will have to see how it plays out. I fear that we do not now know what the unintended consequences of this will be. As for what they will do with any profits, who knows? More pork likely.
Well said, bsdisaster!
http://www.breakthematrix.com/node/24366
:)
Tom Mullen
www.tommullen.net
www.myspace.com/skepticsongs
"Question with boldness even the existence of a God" - Thomas Jefferson
All right until you advocate saving the bankers. Wow no wonder we are in such a crisis. You bought it hook line a sinker. Um why are you here again? Fox is calling you...
Any system that can screw with your average hardworking local yokel just by screwing up, is a screwed up system. Too much reliance on the top end of the scale.
If people pulled their money out of these "institutions" and loaned to each other, there would be no "credit crises".
Just no one at the top skimming out huge buckets of cash to finance their lavish lifestyles.
Capturing perfectly the mindset of our establishment class. Friedman, as he so often does, offers up an unintentionally humorous parody of himself and the losers around him. R