McCain and The Auto Industry both cry “Mulligan”!

Both John McCain and the Auto Industry both cried “uncle” this week when the pressure got too high. In a way it was a good thing. It showed the hypocrisy of these two crumbling institutions and hopefully displayed to the world that neither Mr. McCain nor the Auto Industry are fit to operate in a free market society.

First, the auto industry. Like a workaholic father trying to hide the fact that mommy has a drinking problem buying every toy it can find for the kids to keep things normal, our government is giving the auto industry $25 billion in relief. They’re doing this because twenty years ago when Americans were asking for more fuel efficiency and instead we got SUVs and H2. Actually, go back as far as the nineteen-forties when auto entrepreneur, Tucker, built his cars with 35 mpg at a time when the national average was 15 –20. The auto industry destroyed his business faster than you can say "four dollars a gallon". Why? Because when you have two industries trying to squeeze as much as they can from their consumers, the consumer’s needs don’t really factor into the equation. Like Big Oil and Big Auto. Don’t believe me? Well, even now the Big Three are still not willing to comply with new fuel efficiency standards, and why should they? If people stop buying their cars, we’ll pay for them with our taxes. Who needs the free market when you’ve got our taxes to make up your reckless financial decisions.

Second, Senator John McCain and his own bailout. His campaign is trailing in the polls, he clearly doesn’t understand the financial mess, his running mate may as well be a deaf-mute and now, he wants to call a time out. A time out. He wants to suspend his campaign activities until we sort this whole financial mess out. This mess that could last for years. Does that mean we’ll just give George W. a third term (literally, that wasn’t a jab at McCain) until Senator McCain is ready to hold elections? It’s nothing short of a travesty and a mockery of our election procedure. Senator McCain, if you can’t work on fixing the economy while doing something else, you need to step out of the race now because you are incapable of leading this nation. I’m sorry, but sometimes being president requires doing one thing and then, suddenly having to do something else too. Will Ahmadinejad of Iran or Putin of Russia postpone their activities because you’re in the weeds?

Things don’t look good for America right now and some say that we won’t recover from this credit crisis. But you know, we’ve come through a depression and world struggle that consumed nearly every nation and we did okay. I’m not saying we should do that again, what I am saying is that we’ve been in hard times before and we made it as a nation. I wasn’t there so I can not presume to know the courage of the average citizen, but I do know this, if our leaders can’t handle this crisis without being bailed out in one form or another, stand aside and let someone with enough courage try.

The Economic Poison Well.

There is a lot of talk from both presidential candidates about our current, Depression-era financial indicators. As usual, in the battle between the millionaires, the issue is how best to help their fellow millionaires. However, only one candidate is talking about the non-millionaires and it's not the old, really rich guy. Normally, I don't like to take sides too much, but if you want to see the real differences between the parties, and not just the candidates listen to their priorities. Some are similar as in they both agree that Treasury Secretary Paulson shouldn't be the only person to dole out our 750 billion and that they don't want this to "line the pockets of executives". But that's where they end. Obama wants to provide comfort to those who may lose their homes, so far McCain hasn't said as much. Obama wants to make Wall Street pay back their future dividends to the government. McCain hasn't made his position clear. But neither candidate nor any news source is going to explain too much on the genesis of this current mess because both parties are mired up to their elbows in sewage.

Here’s a brief overview. During the last Depression, you know the one before the one we’re standing in, president Roosevelt thought it would be a pretty good idea to prevent what we’re about to live through. It was called the Glass-Steagall act of 1933 and it effectively barred banks, brokerages and insurance companies from intermingling. This way, if one industry went belly-up, it wouldn’t poison the others. A firewall, if you will. It was also a good idea for consumers who could have a choice of companies competing for their business instead of a monopoly who could set any price they wanted. See also: Health Insurance.

This all ended in 1999 when Phil Gramm and president Bill Clinton decided to end these bothersome restrictions that shackled multi-millionaires from being multi-billionaires. It also handed Robert Ruben, then Treasury Secretary, a top position at Citigroup. (Sometimes they just don’t even try.) And if you still think this all just a coincidence, the president of Citigroup has the actual pen used in signing the bill deregulating the Glass-Steagall act hanging on his wall. In any case, after our government dismantled these protections, there began an orgy of financial inbreeding in which mortgage brokers were purchased by banks and brokerage firms and soon, it was one big happy, vulnerable family.

So far so good, until they started to make bad loans and worse, loans with predatory lending practices. Loans to people in which the interest would shoot up after a certain period of time. It became such a common practice that nearly one out of every twenty mortgages made during the height of the housing boom are in default. That’s five percent. Five percent of all home loans are currently worthless. Since we deregulated the industry those bad loans were seamlessly packaged into larger assets and resold to brokerage firms. Before regulation, no firm would have ever even thought of buying these bad loans which is what kept the whole thing in check. Now, because it’s all one company, those loans aren’t even given a second look. So, in turn, this means that five percent of all those assets are bad. Here’s a helpful image. Buy twenty bottles of water and put poison in one of them. That would probably make you panic too. But instead of putting the antidote to the poison in each bottle, the government is going to pay the water company to help them when people stop buying their water.

Congress is going to debate who gets the bulk of the 750 billion dollar bailout. But, as far as I've heard there’s not one mention in either candidate’s speeches about re-instituting the regulations that actually prevented this from happening in the first place. Sure there's talk of "oversight" and "re-regulation", but nothing specific. And from what I've seen of this current congress, they don't seem too keen on sharing the money we give them. Obama has mentioned briefly today in Clearwater, Florida, about assisting "Main Street", but the easiest and quickest way to end this crisis is to go to the lending institutions and tell them to roll back their interest rates on home loans. If it makes the wealthy feel bad, give the corporations who began these predatory lending practices a subsidy so they'll make their full 29% interest rate, and it will still cost less than this bailout.

But that’s not going to happen in the world of surrealpolitics. The government, especially this administration, and especially with a Treasury Secretary who once worked with Goldman-Sachs, does not care about helping its citizenry. Their priorities have been made crystal clear in this crisis and that is when it comes to the top one percent who own ninety-five percent of the financial industry, everything that can be done will be done. However, when it comes to those who have been subject to predatory lending or those who lost their jobs because of peripheral damage, enjoy your bottled water and good luck!