Monday, October 17, 2011

I'm the 0%

I must be one of the 0%.   Not in the 99%, not in the 1%.   I know how to do math, and there is no room left for alternative opinions.   The 100% live in a black-and-white world.   No room for me in that world ~ my world has colors and shades.

OccupyWallStreet raised my suspicion from the beginning, but it was a fuzzy suspicion until I found a fact to back it up.   What I found is that the 1% and the 99% have a lot of common ground.   Both groups are confused, misguided, and deceived, and so they have been for many long years.   They are ironic partners in their debacles.

It's so provocative, isn't it?   The groups pretend opposition;  we watch the reality show unfold, sometimes photoshopped, sometimes not;  people pretend that something could change as a result.   But nothing fundamental will change as long as fundamentals stay buried under the same confusion, deception, and faulty advice that caused this trouble to escalate.

The problem is that some people ~ the 100% ~ think there's a free lunch out there, and by god, they've got a right to eat it.   They have advisers and commentators and Congress and the president, and even bloggers (!), telling them, "YES!   There IS a free lunch out there and it has YOUR NAME on it!!   Now go out there and get it before this offer expires!"

Take the 99% back to 1999, for example, when Congress passed the Gramm-Leach-Bliley Act.   (Note our own Congressman Jim Leach's name in the title of the bill.   Wikipedia says, "The legislation he [Leach] is perhaps best known for is the 1999 Gramm-Leach-Bliley Act, one of the seminal pieces of banking legislation of the 20th century."   The final bill passed in the Senate 90-8-1 and passed in the House 362-57-15.   

Not much controversy there.   The bill had widespread support; it was veto-proof.   Not that Clinton wanted to veto it: it finally had the provisions that he and the Democrats had been arguing for.   From a New York Times article published at the time of the bill's passing, 

But the White House . . . had its own ideas about community lending.   It wanted the legislation to prevent any bank with an unsatisfactory record of making loans to the disadvantaged from expanding into new areas, like insurance or securities.
Now, in this particular situation, an "unsatisfactory record of making loans" does NOT mean that the bank made too many risky loans.   It means just the opposite: the bank didn't make enough loans to the disadvantaged, meaning those people who were more likely to default on the loan.   In order to qualify for the advantages offered by the change in the legislation ~ that is, to keep up with the changing landscape in banking, investment, and insurance ~ banks would have to make enough risky loans to create a "satisfactory lending record".   

So they did.   They made risky loans.   They created "satisfactory lending records".   

Whatever else you might think of them, the people running our banks, investment firms, and insurance companies are not stupid.   They are creative and adaptable.   So they applied their creativity and they adapted to the new game ~ the game that had over 80% support in Congress plus the support of the president.

They put the toxic assets (the risky loans) into derivatives and sold them.   Why?   Because they could.   It was legal.   Nobody told them they couldn't.   

When you've waded through multi-hundred pages of documents, you might figure that lawmakers put everything they wanted into the law, right?   Lawmakers have the power to outlaw anything they want to: they can just add another hundred pages onto their bill.   And they have the power to make the rules of the game.   The new rules didn't outlaw new derivatives ... so ... what's a creative, adaptable financial player to do?

Play the game.

Almost never is the bureaucratic game accused of being logical or moral or fair, and this was no exception.

So the new financial institutions made loans to people who couldn't afford them.   Those people defaulted on the loans.   The house of cards tumbled down and a lot of people at the middle and bottom got hurt.

Here's one thing I have a problem with.   A whole bunch of people got loans who otherwise would not have.   You'd think they'd have gotten what they wanted: a chance to make it work.   Risky, yes, but they wanted that chance.   That's what Clinton and the Democrats in Congress said they wanted for the disadvantaged ~ a chance they wouldn't otherwise have.   So are Clinton, the Democrats, and the disadvantaged satisfied?   No.   They wanted a FREE lunch.   Not a risky lunch, not a toxic lunch, not a lunch with a price.   Only a FREE lunch would satisfy their appetites.

Here's my second problem.   The protestors, the 99%, are all up in their self-righteousness and moral superiority, but I'll bet you could dump a truckload of money in front of them and tell them, "No law against you taking that money," and they wouldn't walk away without stuffing their pockets full.   Why ask where it came from?   Hell's bells, it's money, and it's legal to take it.   Only a fool wouldn't, right?   People do it all the time.   They take money that has been taken from someone else, and don't think twice, because it's legal.   In fact, it's encouraged.   In fact, sometimes nearly impossible to avoid having money put in your pocket that's been taken from someone else.   Money redistribution is so deeply engrained in our culture, people hardly notice it.

Self-righteous, morally condescending people annoy me.   

I wonder what their story is, what they're hiding.   In this case, when it comes to a free lunch, the 99% are as greedy as the 1%.   Common ground.

There's a third thing that bothers me.   This mess is being blamed on deregulation of financial services.   It wasn't a deregulation.   It was a REregulation.   Multi-hundreds of pages are not needed to deregulate.   A single page can take an old law off the books ~ that's deregulation.   Multi-hundreds of pages are needed when you have a whole new set of regulations that need to be spelled out in detail.   The banking fiasco had absolutely nothing to do with a free market, because the market was very tightly bound in a straitjacket of multiples of thousands of pages of regulations.   We need a new name for these horribly UNfree markets.   Bound markets?   Markets de Sade?

Back on November 8, 1999, as the Gramm-Leach-Bliley Act was being considered as a reregulation of the Glass-Steagall Act, Ron Paul reminded Congress of his one-page bill to repeal Glass-Steagall.   He explains his opposition to Gramm-Leach-Bliley in about ... one page.

Which brings me to the Republicans.   No, not Ron Paul.   I mean the Republicans who wanted to deregulate (cough) financial services by writing a ton of new regulations instead of just repealing the original regulation (Glass-Steagall).   From the same Times article

For more than 20 years, Congress has tried unsuccessfully to rewrite the nation's financial services laws and repeal Glass-Steagall, particularly as many other industrial nations had no similar restrictions on their banks.   But until recently, the three main industries affected by the legislation -- banks, securities companies and insurers -- had competing interests and were able to lobby any legislation to a standstill.

That all changed in recent years as the lines between the industries began to blur and it became more broadly acknowledged that a deregulation of financial services could be beneficial to insurers, bankers and securities firms alike.   Once the three industries rallied around the legislation, they became a formidable political force, raising millions of dollars for lawmakers and pressing both Republican leaders in Congress and the White House for new legislation.

"Bidding opens for Section 104A, Paragraph 2, Clause iii, at $100,000 for our initial bid.   I see $200,000 from the lobbyist for Citibank, $220,000 from Goldman Sachs, any more bids for Clause iii?   Going once, . . . "

Having met Jim Leach ~ grandfatherly, intent on integrity ~ I have some doubts that he intended to set up a crash.   He probably thought he had tied the straitjacket tight enough to stop movement but loose enough to allow breath.   That's what everybody wants in our regulations, right?   Other lawmakers I'm not at all sure about.   The legislation they passed did not reflect informed and judicious care about common sense or decency, and definitely not the Constitution or liberty.   Well, maybe Congressmembers were confused, misguided, and deceived, and have been for many long years, along with the 100%.   Common ground for more and more . . .

*   *   *
I admit my fascination for the amazing adaptability of financial wizards who maneuver around the tons of regulation in their field.   It's the kind of fascination I have for cunning, dangerous, and unpredictable animals.   I have no patience, however, for their conscienceless decisions.   With all their tremendous intelligence, they could do better than rapaciousness.   They could remember that just because a free lunch is offered doesn't mean they have to eat it.   In fact, since the markets suffer too much bondage and discipline, they could find a different game to play.   They could invent a new game ~ a really fun one ~ instead of just playing along with someone else's tired old twister.   The smarties who came up with toxic derivatives do NOT get a pass for their behavior.   A stare, maybe, but not a pass.

The smarties could start a new game, but I guess I don't really expect them to look much further ahead in their lives than their next quarter, maybe their next fiscal year.   Not unlike the disadvantaged borrower, who looks as far ahead as the next paycheck, maybe two.   Gee, another common ground between the 99% and the 1%.

That leaves it up to you, dear readers.   You need to come up with a new game, one that works for you, and stop playing the other guy's game, because that guy wrote the rules to help himself, not you.