02 Oct Catastrophe huh? Carlini skeptical about reasons for financial rescue
Chicago, Ill. – “We’re in a big crisis. We need an immediate response. This could be a catastrophe.”
Where have we heard that before? It goes without saying that $700 billion is a lot of money. The U.S. put this bailout package together too quickly.
Giving a three-page document to two people to coordinate and manage without adequate (if any) oversight and without any court and judicial oversight is a very bad idea. It didn’t fly when it was first proposed. It didn’t fly when it was augmented with more than 100 pages of stipulations and restrictions.
Everywhere I have gone in the last week people have been talking about the financial bailout. The conversations haven’t been positive. Chicago mayor Richard Daley spoke at the Illinois Municipal League Conference at the Hilton Chicago on Friday. He mentioned the criticality of this crisis. He also said it’s a complex issue.
He also questioned who should be bailed out. Should it just be the financial institutions?
What about the individual homeowners? Which ones do you help? Do you help the ones who have reasons (like they lost a job and can’t make payments) or the ones who just overbought while trying to parlay it into a big payday? What about bailing out the ones who bought an extra house or condo as an investment? Mayor Daley made a great point. How far do you go?
At the breakfast civic series on intelligent infrastructure at the University Club of Chicago on Tuesday, this was also a concern of people who attended. We discussed the growth of the financial implosion starting with residential foreclosures. These have now mushroomed into defaults on car loans and student loans as well (not to mention a faltering market of the commercial real estate sector).
I pointed out that my first column about foreclosures ran back in Dec. 2006. At that time, many “experts” weren’t even focused on this rise of foreclosures let alone predicting anything as dire as a full financial implosion. Now we’re supposed to be on the brink of disaster. What if they just agreed to the original three-page strategy? What if we just hand out the $700 billion?
Who really benefits?
Who really benefits? Is it the average taxpayer or the failed CEO who made bad investments in the millions or even billions? Do these executives still expect a $30 million bonus for the year? I would put my money on the CEO getting his or her bonus.
“We have to act swiftly!” That is clear message being sent to the American people. What happens if we don’t? Who really gets hurt? Many people are against the bailout. What about the individuals who overextended their mortgage and bought an $800,000 house when they should have been more conservative and bought a house for $400,000?
They gambled by signing onto an adjustable rate mortgage with no money down. They thought they could dump that house in three years for $1.2 million and make a tidy $400,000 profit. While you could do that at one point in certain markets, those days are long gone. What happened to the free market? What about capitalism? This is socialism.
It’s funny how great cheerleaders for capitalism (like CNBC’s Larry Kudlow) want to see Wall Street get the bailout. A U.S. senator put him on the spot by pointing out that Kudlow would have vehemently objected if it was the government funding health care. That is socialism and would have been demanding the rejection of its passage.
It’s funny how he changes his tune when it comes to his friends on Wall Street. What about damages done to the American economy by these CEOs? Thousands of people suffer while a few wait to calculate their latest bonus that they didn’t earn. Do you hear much about investigations or indictments for corrupting the markets?
Where are the people clamoring for investigating some of these CEOs? They seem to be slipping off into the night with bundles of cash while everyone else has to figure out what to do now with the financial implosion. Where are the U.S. Department of Justice, the Securities and Exchange Commission and all the other regulators that are supposed to oversee the markets?
As one of my friends said, “enough is enough.” What about sending some of these CEOs to jail? They send a guy robbing a 7-11 to five years in prison for trying to steal a couple hundred dollars. What about the CEO guiding a company to rob from thousands of people millions if not billions of dollars?
Some of these investment bankers and speculators should be classified as economic terrorists. They have created havoc in the markets and should be dealt with accordingly. Let me and you take over. We could not do any worse than all these CEOs. To me, no CEO gets a parachute, no bonus sweeteners and maybe some heavy indictments.
What Happens in Las Vegas should happen on Wall Street
Gambling on Wall Street is just like going to Las Vegas. You put your money on the table, you thought you had a sure bet, you didn’t and you lose. End of story. This goes for individual investors as well as corporate investors. People talk about how bad it will be if this bailout doesn’t go through.
Who will that really hurt? Will it be bad for the guys holding all the “toxic” deals that were being packaged off internationally and hawked as great real estate investment derivatives? That’s too bad. They stayed too long at the craps table and the roulette wheel. There are no “do-overs” in Las Vegas. There shouldn’t be any on Wall Street, too.
Do you ever see when someone gains a lot at a table, a wheel or even a slot machine? They get greedy and they eventually put it all back into the house and sometimes pull out another couple hundred dollars from an ATM machine thinking they might make it back. The stock market and housing are no different.
While people made some huge amounts of money on these financial instruments, they stayed at the table too long. They enjoyed all the trappings of success – including big houses, cars and comped vacations – but now the last wheel spin has come up empty and they tried parlaying their fortune one too many times.
If you believe in capitalism, there is no bailout. It’s a tough game. While everyone is happy when it’s working, it’s as fickle as being at that craps table. Just when you think the success is never ending and you keep betting everything on the table, that wrong number pops up and you lose it all.
Carlinism: If we are capitalists, let the market be the market.
This article previously appeared in MidwestBusiness.com, and was reprinted with its permission.
The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of Wisconsin Technology Network, LLC.
WTN accepts no legal liability or responsibility for any claims made or opinions expressed herein.