Thursday, September 25, 2008

No.

I simply have no way to express my utter disgust with this bailout plan that Treasury came up with. I am livid. I have never come closer to having to resort to Extremely Bad Words in the course of writing on this site.

This bailout is, admittedly, just one more catastrophe overseen by the most incompetent administration in US history, cheered on by the most hypocritical non-Republican congressional and senatorial morons in recent memory, and it is, quite frankly, the craziest economic policy ever.

I’m pretty sure Adam Smith would be projectile vomiting over this if he were still about.

These companies deserve to die. Their shareholders should be suing the boards of directors and the CEOs for having pursued this idiotic strategy, for inflating the short-term bottom line in favor of the long-term solvency of the companies involved, and for lying to them and to the government about their shady dealings.

I have mixed feelings about those that are being foreclosed on. In cases where deceptive tactics were used by the banks to sell the loans in the first place, I have little pity for the banks: when such cases come up, payments should stop, the family given a year to find a new, affordable house, they move out, and then the bank can try to sell the property. Institutions that bought the mortgages may opt to sue the original vendor of the loan for any losses incurred.

The problem is that a lot of the people buying houses they couldn’t afford simply didn’t take the time to think things through. Yes, some institutions used high-pressure and/or deceptive tactics, and should get thumped for that, but what about institutions that laid out the terms of the loan, and the homebuyers looked at the perfectly accurate figures and said, “Oh, sure”?

There aren’t any easy answers to all this. It would have been less expensive to just issue an injunction that would require:

• a full investigation, including financial audits;
• the offending firms to operate long enough to renegotiate the loans to terms that would either allow homeowners to keep their houses in cases where the payments are only marginally outside their ability to pay, or give them enough time to find alternate accommodations and move in a reasonable time frame;
• allow the offending firms to sell the renegotiated loans (if they can) to pay off their creditors and bond-holders; and
• then let them mercifully go under.

In the meantime, other, less expensive mechanisms could be put in place to ensure the flow of credit (still a vital part of business and personal transactions), and oversight could be put in place to keep this sort of criminal idiocy from happening again.

Yes, that means I’m suggesting regulation. Well, tough. That’s what happens when an industry is not capable of regulating itself, behaving ethically or responsibly, or just generally screwing up. It’s a natural consequence of incompetence. It’s sad when it has to happen—it’s like making the industry go stand in the corner for misbehaving—but it’s the only way to ensure better behavior in the future.

It also goes to show how a strident, brainless cry of deregulation can go horribly awry. But I would imagine that one of the major proponents of deregulation for this industry—John McCain—won’t be talking about that. If patterns hold, he’s going to try to pin this on the Democratic Party, or on Obama himself.

Hopefully the bill will mutate into something more palatable before it passes. But it’s still going to be horribly expensive, and will limit the options for the next president. Taxes will have to go up—they will have to.

In any case, I’m not thrilled with what has transpired, and Treasury’s plan is downright screwy.

I guess I could live with the possibility of a temporary Big Government solution: buying hard assets at discount prices, allowing an independent agency or non-profit firm to renegotiate the loans as above, and then selling the assets within 8–10 years at a nominal profit. Granted, that’s a socialized remedy, but it’s of finite duration, it’s revenue-neutral (or slightly better), and while it’s still cringe-worthy, it’s more responsible than the idea of propping up these firms and allowing them to continue their ridiculous, unethical behavior, and more palatable than a permanent government institution.

But I still hate the idea of tying up that much money—it’s going to make things very hard for the next administration. But then, I think the GOP doesn’t mind that idea, since the polls are tending to show that the next administration will be Not Theirs.