A Big Crap Sandwich
By: Guest Authors
By Chad MacINNES
Markets are increasingly tense as the credit crunch wears on. Credit is starting to freeze up, employers are worried, people are worried, and politicians are very worried. Watching the Dowâ€™s dizzying roller coaster ride over the last few days is certainly enough to get anyoneâ€™s stomach upset. But the â€œrescueâ€ bill passed by the Senate is enough to make you want to throw up. If the bill defeated in the house on Monday was a â€œcrap sandwich,â€ then I donâ€™t even want to think of what to call this 471 page pork-laden monstrosity. This revision to the â€œcrap sandwichâ€ soundly defeated by the House appears to be nothing more than the original â€œcrap sandwichâ€ only with about 300 pages worth of more crap tacked on that will really have nothing more than a peripheral, if any, effect on the credit crunch that is the root of the current crisis. But hey, for these savvy Washington politicians instead of being outright disgusted their reactions might well be, â€œYum-yum!â€
According to the Wall Street Journal, the core of the bill remains unchanged, and still authorizes the Treasury â€œto borrow $700 billion to buy up tainted mortgages, securities and other financial instruments that have weakened the financial system and frozen credit markets.â€ It is also sprinkled throughout with â€œa host of measures designed to win the support of reluctant lawmakers. Additions include an increase in bank deposit insurance limits, a suggested change to accounting rules, and a $150.5 billion package of unrelated personal and corporate tax cuts.â€ It will also raise the FDIC deposit insurance cap to $250,000. The article goes on to point out that: â€œWhile the change to deposit insurance could bring over some opponents, allowing them to argue that the bill does more to help consumers, the tax provisions could be a sticking point. The tax package had been on a separate legislative track and appeared dead because House Democrats balked at taking it up.â€ My suggestion in this case to just add another $100 billion I there for ACORN and get those Democrats on board!
Think about it: then youâ€™ll have a bill, the totality of which coming from the Senate in a nice attractive pork-rolled package sent down to the House is really more like a group of pedophiles waving a brown bag with many unknown contents in it and say, â€œHey, look here! Weâ€™ve got CANDY!â€ In fact, thatâ€™s an appropriate analogy for how those who crafted it in the Senate sold it to their colleagues. I like the â€œbrown paper bagâ€ analogy too â€“ because with 471 pages of legalese and only a few hours of debate, you canâ€™t tell any sensible person that the majority in the Senate that passed it had the slightest idea of the full extent of what was in it. But, they did something, right? So, why didnâ€™t the markets reflect as much confidence as was expected? Perhaps instead of just â€œdoing somethingâ€ they ought to do what is needed. So, what is needed? For starters, how about an accurate understanding by the miscreants in Washington as to what, exactly, the problem really is. I mean, you canâ€™t really â€œfixâ€ something of you donâ€™t know why it is broken, right?
Testifying before the Senate Banking Committee on Feb. 24-25, 2004, former Fed Chairman Alan Greenspan had this to say about what was wrong with the booming housing and mortgage market and its relationship to credit and the general economy:
What we’re trying to avert is we have in our financial system right now two very large and growing financial institutions which are very effective and are essentially capable of gaining market shares in a very major market to a large extent as a consequence of what is perceived to be a subsidy that prevents the markets from adjusting appropriately, prevents competition and the normal adjustment processes that we see on a day-by-day basis from functioning in a way that creates stability. . . . And so what we have is a structure here in which a very rapidly growing organization, holding assets and financing them by subsidized debt, is growing in a manner which really does not in and of itself contribute to either home ownership or necessarily liquidity or other aspects of the financial markets. . . it invites crisis, and it invites instability. . ..â€
In response to Greenspanâ€™s testimony, Senator Chris Dodd had this to say:
I, just briefly will say, Mr. Chairman, obviously, like most of us here, this is one of the great success stories of all time. And we don’t want to lose sight of that and [what] has been pointed out by all of our witnesses here, obviously, the 70% of Americans who own their own homes today, in no small measure, due because of the work that’s been done here. And that shouldn’t be lost in this debate and discussion. . . .
To summarize, what we have here is a failure to communicate. Although I am no fan of Greenspan, what is clear is that he could see to an extent that this artificial bubble could not be long sustained and said as much before the committee. Dodd, on the other hand, seemed not to hear what the Fed Chairman was saying and instead thought it appropriate to congratulate himself and his colleagues in Congress as well as their minions at Freddie and Fannie for creating conditions that allowed for what he believes to be 70% of Americans. The arbitrary figure, which is surely wrong, is not the central issue. What is the issue is that these megalomaniacs in the Senate, epitomized by people like Dodd, think that they and their ability to manipulate the machinations of government are responsible for whatever good fortune should befall the American people. The hard work and effort of the people has nothing to do with either our individual successes or the strength of this nation and itâ€™s unique place in the world and in history. For people like Dodd, government is the genesis of all good things, and therefore must be intricately involved in all aspects of daily life, lest we me left to make our own decisions without the benefit of their assistance.
What this demonstrates is that our worst suspicions are confirmed; our elected representatives are completely detached from reality. This is further confirmed by the recent events wherein these same people, specifically Senator Dodd, refuse to accept any responsibility for the current financial situation. So, here is the quick recap: we are all indebted to government officials like Chris Dodd for helping us to live in a nice house and obtain credit to get lots of stuff we want but may not be able to afford by creating the conditions and the atmosphere where such things are possible. So, if this is in fact true, then how is it that these people escape any responsibility for the bad times now upon us? Any decent manager ought to know that if you want to take credit for the good ties then you better be ready to face the music when things go south. But these are not managers, theyâ€™re politicians, and that means theyâ€™re mostly lawyers, which explains why the vast majority of them have not the slightest understanding of how free-market economics work; and, specifically, the proper roles to be played by government and the markets. This is not so dangerous to our economy as the fact that they think that they understand how it (the economy) works. Again, further confirmation that these people are not lucid. But, they are guilt, or at the very least, complicit in this great scam they sought to perpetuate.
As the article â€œBailing Out Ourselvesâ€ puts it so very succinctly:
The guilty deserve such attention because those two government-sponsored enterprises did so much to turbo-charge the credit mania. By providing subsidized rates of return to global investors, they helped fuel the bubble in housing and mortgage-backed securities that is now haunting so many financial institutions.
Members fought furiously against any attempt to make Fan and Fred less dangerous. The Bush Administration was on the right side of this debate for eight years, as was the late Clinton Treasury. This was a scandal in plain sight that all but a few ignored.
And now, having done so much to create this mess, many of the same Members who protected Fan and Fred are denouncing the “bailout” as a favor to Wall Street. Who do they think were Fannie Mae’s business partners? Who marketed mortgage securities to the Chinese, for a tidy fee? Main Street investors also loved Fan and Fred while they were making private profits by taking inordinate risks with a taxpayer guarantee.
What this is is a classic example of what happens when the people become too complacent and let government continue to stick itâ€™s tentacles into stuff it shouldnâ€™t be messing with, like the economy.
People like Chris Dodd, Democrats and Republicans alike, misled the American people into believing that it is a Constitutional right to have anything you want, even if you cannot afford it. They created the conditions where, at least on paper, you could â€“ through credit; and the people who couldnâ€™t afford to went crazy with credit and the nation spent itself into oblivion, while the overwhelming majority of those who were supposed to know better, the banker, financiers and government officials did either little or nothing at all to stop something even Alan Greenspan knew was unsustainable. And so now here we are about to get an even bigger and much more expensive â€œcrap sandwichâ€ with a couple of extra sides of crap crammed down our throats and put on our tabs because those who donâ€™t understand the workings of free market economics in the first place and therefore obviously have no understanding of how to â€œfixâ€ it because they donâ€™t understand where things went awry have decided that the best and only solution is to do what they always do â€“ throw lots and lots of money at it. These people have absolutely no idea what they are doing.
In an attempt to further erode any remaining shred of confidence anyone may have in a demonstrable inept government, just consider where the government came up with the $700 billion figure being touted as essential to â€œfixâ€ the economy. According to Forbes, â€œsome of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy. â€˜It’s not based on any particular data point,â€™ a Treasury spokeswoman told Forbes.com Tuesday. â€˜We just wanted to choose a really large number.â€™â€
So, letâ€™s get back to this big â€œcrap sandwich.â€ In essence the Senate passed something they couldnâ€™t have all read, much less understood. They picked a number out of thin air and have made it Gospel. Then they figured that if theyâ€™re going to spend that much they might as well spend some more and try to make a â€œcrap sandwichâ€ not taste so much like crap, but more like crap with Sweet and Lo or Splenda on it. Even as the crisis loomed the Senate Majority Leader admitted that, â€œno one knows what to do.â€ â€œJust do something,â€ seems to be the mantra. You know things are really bad when everyone is looking to Congress to act to save the economy. And act they did. Here is a little sampling, an appetizer if you will, of the sides of crap being served up by the Senate:
New Tax earmarks in Bailout bill
- Film and Television Productions (Sec. 502)
- Wooden Arrows designed for use by children (Sec. 503)
- 6 page package of earmarks for litigants in the 1989 Exxon Valdez incident, Alaska (Sec. 504)
Tax earmark â€œextendersâ€ in the bailout bill.
- Virgin Island and Puerto Rican Rum (Section 308)
- American Samoa (Sec. 309)
- Mine Rescue Teams (Sec. 310)
- Mine Safety Equipment (Sec. 311)
- Domestic Production Activities in Puerto Rico (Sec. 312)
- Indian Tribes (Sec. 314, 315)
- Railroads (Sec. 316)
- Auto Racing Tracks (317)
- District of Columbia (Sec. 322)
- Wool Research (Sec. 325)
Obviously such nonsense will do nothing for the economy but cost us more money, and that is exactly the point. So, what is the best way to protect the financial system and save the economy? Iâ€™m not sure either, but how about we begin with involuntary term limits starting in November?
Chad MacINNES is an independent conservative author who originally hails from Massachusetts and is now living in Orlando Florida with his wife and children. He is a former pilot for a large US carrier, a former police officer and a veteran of the US Army where, incidentally, he was cured of his disordered liberalism. He has studied politics and government, international relations, philosophy and theology. His blog may be found at http://freebornman.blogtownhall.com/. Chad is a frequent contributor to landofthefree.net and may be contacted via email at email@example.com.