Tuesday, September 30, 2008

Billionaire Bailout Bonanza: "Manie Men Feare"

"The Lord Viscount Wentworth came to Ireland to governe the kingdom. Manie men feare." — Diary of Sir Edward Denny, July 23, 1633. That brief statement by a Protestant "Planter" in 17th century Ireland should serve as a most useful warning for Messrs. Bernanke and Paulson. Thomas Wentworth, Lord Deputy (later Lord Lieutenant) of Ireland under Charles I Stuart was the most powerful man in the three kingdoms of England, Scotland, and Ireland in the 1630s. He absolutely controlled money, credit, taxation, and the courts in Ireland, and exercised his "brilliant but sinister influence" in England as Charles' chief adviser on all matters economic, military, and political.

Unfortunately, although Wentworth sought to retire quietly when Catholics and Protestants temporarily overcame their differences and combined to get rid of him, he was decapitated on Tower Hill amid great rejoicing on May 12, 1641 before a crowd estimated at around 200,000. A few months later the "Great Rebellion" started, touching off the Civil Wars in England, which led to the execution of Charles I and the dictatorship of Oliver Cromwell.

The current situation is a perfect recipe for equal outrage. People are genuinely terrified, yet the masterminds behind the proposed Billionaire Bailout Bonanza can only reassure the taxpayer that the burden will fall on him or her ("Taxpayers Will Pay Anyway"):
"By voting down the proposed $700 billion financial bailout package — and causing a spectacular stock market rout — a majority of members in the House of Representatives made a clear statement that they didn't want to put taxpayers on the hook for the failures of financial institutions.

"But there's a catch: taxpayers are already on the hook for the failures of financial institutions, and it's possible that the bill will actually be larger without bailout legislation than with it. That's because the regulators who mind the financial industry — the Federal Reserve, Treasury and FDIC — will keep doing what they've been doing: stepping in to prevent the chaotic failure of banks and other large financial institutions. This means continuing to put hundreds of billions of taxpayer dollars at risk, but in a way that adheres to no clear plan of action and doesn't require members of Congress to explicitly approve their actions."
Thus, the speculators and gamblers stand to profit twice and thrice via 1) the original profits made on sub-prime loans, 2) the bailout, and 3) their probable repurchase of the same loans in the greatest short sale in history. The taxpayer gets stuck each time, paying for someone else's losses in the biggest high stakes game ever run — and without even being permitted to get into the game.

If Bernanke and Paulson, to say nothing of the Congress, had a healthy concern for their own wellbeing (to say nothing of their responsibility to the common good), they would be looking into our Homeowners' Equity Corporation as not only a way out that benefits everyone except the gamblers and speculators, but as a way to save their own necks. "Heads will roll" is an expression that came from somewhere, and it was not always a metaphor.

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