Bridges, Banks, Bernake, Band aids...and Thoreau
"There are a thousand hacking at the branches of evil to one who is striking at the root" Thoreau
Last week, as we heard the news that the new 35W bridge would probably be completed this week, my Mom and I planned on driving across it the first day it was open for public traffic. We were returning from the funeral of a classmate of my Dad's who had also become a friend of Mom's and we took the scenic route across the 10th Avenue bridge that parallels the 35W bridge. I commented that they should open the 35W bridge at 2:00 a.m. so as to avoid traffic jams. when I saw the 5:00 a.m. opening, it occurred to me that at 2:00 a.m. the drunks would still be out being bottle brave and stupid. At 5:00 a.m., they'd be either sober or sleeping. So, I'm planning an early morning pickup of Mom and a cell phone camcorder recording of "Amendment X's Most Excellent Adventure on the New St. Anthony Bridge... With His Mom in Tow". What does this have to do with my blog title? I'll get to that now.
When the bridge went down, and I've blogged on this, that many people said that it would take five years to replace. well, I've got enough construction background to be dangerous and have faith in real American know how and ingenuity , so I corrected the five year people. I said that if the government got out of the way, the bridge could easily be built in under two years. So, the powers that be "fast tracked" the new bridge (read: got the hell out of the way by cutting and burning a whole slew of red tape and regulations. In other words, they struck at the roots of inefficiency and delay) and "Shazamm and Kazowee!!!". The Bridge is done in under a year from start up. I truly love being wrong to the good side.
The "banks": Lehman Brothers, Merrill Lynch, WAMU, Bear/Stearns, etc. So, what happened here? In a word: government. In a phrase: insuring the moral hazard. The thought on Wall Street "They bailed out Bear/Stearns. They'll bail out us." Like the floods in North Dakota in the 1990's, people kept building their houses on the flood plain of the Red River of the North because, well after all, the government would step in and help them build anew. Insuring/ensuring the moral hazard. The big wakeup call on Wall Street: Secretary Paulson said to the meeting of bankers on Saturday:"No government money guys. Find a way out of this yourselves." And scramble they did. The little known secret is that this was a hand grenade with the pin pulled and the spoon released. It was going to explode. It happened to explode now. It was all set up during the Clinton years with the silly notion of "affordable housing" which means "welfare/subsidized housing" and "the right to own a house". People who couldn't buy the house they were in were given loans. Freddie Mac and Fannie May were the major underwriters of loans and/for mortgages that people couldn't pay back. Then Bear/Stearns, Lehman Brothers, et al started to issue "mortgage backed securities". Then Alan Greenspan started to flood the market with low interest rates to banks and the banks went out and loaned money like there was no tomorrow. The bubble was created. And no bubble lasts. When the bubble burst, it was a ripple effect. And we see the disaster now: the government created the bubble, then protected the bubble and now blames everyone else when the bubble bursts. And Bernake has started down the same path as Greenspan. Who pays for it all? You do. I do. My widowed eighty old mother does. The single Mom does. The newlyweds do. The retirees who depend on their retirement funds.
The good news: Secretary Paulson stood by that line in the sand and said "No bailout boys." The bad news: McCain and Obama have no clue as to the real problem. They will pile on new regulations that will finally fix what all the old regulations didn't. They will "make Wall Street pay". They will cut at the branches of the problem but not strike at the roots. They will put a new band aid on the old band aid but not treat the underlying wound. How do I know? John McCain just said that people need to held responsible (I agree); that Wall Street has been reckless and will be held responsible. Nothing said about Congress being held responsible. Nothing about holding the Federal Reserve responsible. Nothing said about the executives at Freddie Mac and Fannie May and their huge contributions to left wing Democrats. But Wall Street responds to the market disruptions and distortions from Washington and then Wall Street is "held responsible".
My point on all this plus the 35W bridge? Things work well/best when the the government is out of the way.
But "holding Wall Street responsible", "holding Big Oil responsible" make for a better sound bite then "The Congress and the Federal Reserve are out of control and need to be regulated". Well, Congress is regulated-by Article 1 section 8 of the Constitution and the 10th Amendment in the Bill of Rights. Sorry- Congress is supposedly and is supposed to be regulated by...oh,forget it. People like me are ignored.
A few links for further reading:
Investors Business Daily
Masters of the Universe
Be sure to listen to Glenn Beck on CNN in the evening this week as he exposes the financial disaster that is engulfing America and what really needs to be done. And next week he'll be talking about energy.
As I look at this mess and what McCain and BHO and Congress will and will not do and as I look over the horizon at the looming three hundred foot tsunami headed for us called Social Security and Medicare, I'm reminded a quote from Will Smith in "I, Robot"-"Yah know, somehow saying "I told you so" just doesn't seem to cut it!"
And I fear that that is what I and others will be saying in a few years.