[BRIGADE] PJB: An Amnesty for Stupidity
Published: Tue, 09/23/08
By Patrick J. Buchanan
Tuesday September 23, 2008
Is it fair that businessmen who fail in neighborhood stores have to
close shop and often sell their homes, while Wall Street titans are
spared the consequences of monumental stupidity and greed?
No, it is not fair. Yet, Treasury's Hank Paulson may be right. To
save the sheep who might have been wiped out in a general financial
panic, we may have to save the pigs.
Life is unfair, said JFK.
Yet, this is going to be the mother of all bailouts. Paulson will
be voted by Congress authority to spend $700 billion, 5 percent of
our gross domestic product, to buy all that toxic paper stinking up
the books of our biggest banks.
And this is not the first such bailout of foolish and incompetent
financiers and politicians.
In 1975, when its cravenness to extortionate union demands had
bankrupted New York, the Big Apple had to be rescued by Gerald Ford.
Marion Barry's Washington, D.C., was next in line at the cashier's
window.
In the Reagan era, it was Chrysler. Later that decade, Citibank,
Chase-Manhattan and Bank of America were staring into the abyss, as
Latin American regimes, to whom they had lent scores of billions,
were balking at paying their debts. Uncle Sam stepped in.
Then came the Mexican and Asian financial crises and the U.S.-IMF
bailouts of the 1990s. The Mexican bailout was as much a rescue of
Goldman-Sachs as Mexico City, as Treasury Secretary Bob Rubin's old
firm was choking on all its Mexican paper.
The great myth is that these 1990s bailouts were models of U.S.
financial statesmanship and great successes. The reality is the
U.S. workers took it in the neck.
For the countries bailed out, like Mexico, Thailand, Indonesia and
South Korea, were forced to devalue. This radically reduced the
wages of their workers relative to American workers, creating
incentives for U.S. manufacturers to shut plants here and move them
abroad. The devaluations also slashed the price of foreign goods
relative to U.S. goods. Imports flooded in.
Who ultimately paid for the Mexican bailout? Florida tomato growers
wiped out by Mexican producers, the price of whose tomatoes was
chopped two-thirds by the devaluation. U.S. autoworkers who saw
Ford and Delphi plants shuttered as new Ford and Delphi plants
opened in Mexico. U.S. textile workers whose mills closed and jobs
vanished.
Middle-class American families have paid and paid -- in lost jobs,
lower wages, a falling median income -- to save the big banks from
the consequences of their follies. And those bank bailouts are
behind the trade deficits that set five records in the Bush era,
reached 6 percent of GDP, forced huge U.S. borrowings from abroad
and ravaged the dollar.
Having bailed out Latin America, Mexico, Asia and their U.S.
creditors, we now find our own country in trouble. And how are our
allies reacting?
"Europeans on left and right ridicule U.S. money meltdown," ran the
Los Angeles Times headline. Italy's finance minister compares us to
corruption-ridden Albania, where "a nationwide pyramid scheme cost
hundreds of thousands of people their savings and ignited anarchic
civil conflict" in the 1990s.
How will the bailout work? Will every bank that brings in toxic
paper be able to dump it on the Treasury? Will the Treasury buy
securities based on subprime U.S. mortgages from foreign banks?
Apparently so. What about mortgage-backed securities held by U.S.
companies and individual investors? Is there to be a general
amnesty for bad judgment, or just a bankers amnesty?
About one thing we may be sure. The U.S. deficit and national debt
are going to soar. The credit rating of the United States, as this
nation of non-savers has to borrow abroad to save its banks, and
their banks, is going to fall. We are going to be a poorer nation
and people.
As for the promises and plans of Barack Obama and John McCain -- be
it for national health insurance or middle-class tax cuts -- they
are going by the wayside. For the United States is as bankrupt as
Lehman Brothers, with this difference: Uncle Sam can still borrow
from abroad because foreigners see many juicy U.S. assets they
would like to take off our hands with their hoards of
ever-cheapening U.S. dollars.
Looking at the federal budget -- the five or six major items are
Social Security, Medicare, Medicaid, defense and interest on the
debt. All are going up, as tax revenues fall. Add the cost of two
wars and a bailout of U.S. banks that some estimate will cost $1
trillion to $2 trillion, and we appear to be looking at budget
deficits ad infinitum.
"There is a great deal of ruin in a nation," Adam Smith once
consoled a friend who lamented that Britain would be ruined if the
13 Colonies were lost.
We are about to test Smith's proposition.
SOURCE:
http://buchanan.org/blog/2008/09/pjb-an-amnesty-for-stupidity/