[EagleEye: This is GREAT!]
Blame the record bailouts on Mister Rogers.
Mister Fred Rogers, the children’s TV star, who, beginning in 1968, started every show telling us that we were “special” just the way we were.
Better yet, blame the bailouts on everyone who forgot the most important part of the Mister Rogers’ Neighborhood show, a willful ignorance that has led to a mass dereliction of civic duty, of civic vision–Rogers’ emphasis on “neighborhood.”
Blame all of those child-rearing experts who encouraged an excruciatingly costly culture of entitlement, a culture of narcissism, of excessive self-righteous self-indulgence, where generations grew up believing they were entitled to follow their own codes of conduct, a chronic “me first, I get what’s mine first” attitude–to the point where one survey shows one in three teenagers expect to be famous.
A post World War II culture of “me-ism,” of individuality over community, of “I’m special, you owe me,” a culture of anything goes in this Age of Aquarius.
A mindset which has resulted in half of the country’s annual GDP, $7.8 tn, a quantum leap in fiscal debt, now being committed to bail out the economy.
Concrete proof that equal opportunity means everyone will have a fair chance at being incompetent, says Laurence J. Peter, author of the “Peter Principle.”
A staggering bailout sum that has any semi-conscious, prudent taxpayer who pays their bills on time lying in a stark awake coma at three in the morning, taxpayers who grew up with their personal motto, “I think, therefore I’m debt-free.”
A crisis fueled by a housing finance system distorted for seven decades by the government, which has now gone begging for a government bailout.
Congressmen practically herniated themselves before the crisis blew up to defend the mismanaged, near insolvent mortgage finance giants Fannie Mae and Freddie Mac, their political cash machine, with chest-beating, stiff-necked fulminations showing when it comes to your tax dollars, they have Van Gogh’s ear for fiscal probity.
In one year, households have lost in net worth the equivalent of about half of the country’s annual output, $7.1 tn, from $63.6 tn in the third quarter of 2007 to $56.5 tn in the third quarter of 2008, Federal Reserve data show.
Has your head exploded yet?
What US Taxpayers Got
US taxpayers now own investments in 174 banks, without knowing the guidelines that were used to waste their money, says bank analyst Richard Suttmeier.
Fannie and Freddie have been allowed to expand their mismanaged multi-trillion dollar portfolios, along with $200 bn in taxpayer money to cover their losses.
And despite the open fire hydrant of liquidity the US government has pointed at the financials, a new wave of writedowns could cut deeply into these funds, as securities built on risky loans are still priced for the Ice Age.
Meanwhile, in the runup of the credit bubble from 2002 to 2007, Goldman Sachs, Morgan Stanley, JPMorgan Chase, Merrill Lynch, Lehman Bros. and Bear Stearns had paid an estimated total of $312 bn in compensation and benefits to its employees, compensation largely based on false profits.
And what have taxpayers witnessed in this fiasco?
The Orgy of Juvenilia
*Ten million borrowers, many of whom should never have borrowed what they did to begin with, could go bellyup on their mortgages when all is said and done. Monthly foreclosure filings, most of which are in suburban middle class neighborhoods, could grow to 303,000 monthly from 259,085, says RealtyTrac.
*In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000. A nanny for a mortgage-bond trader at Deutsche Bank bought, along with her sister, five townhouses in Queens, New York after lenders got them to refinance to keep buying.–Michael Lewis, “The End of Wall Street’s Boom.”
Proving that when people are free to do as they please, they usually imitate each other. Here’s more:
*Less than a week after the government rescued AIG with an $85 bn loan, AIG executives spent $440,000 of company money on a week-long executive getaway at a beach resort in California, including $23,000 on spa charges. This, after the insurer also promised $20 mn in compensation to AIG’s former chief executive Martin Sullivan. AIG’s bailout cost to date: $150 bn.
*AIG ostensibly told market watchdogs it was freezing its bonus pool for executives, but then disclosed “retention” payments for 168 employees, including 13 executives, up to $4 mn for certain managers. The insurer said it disclosed its initial list of 130 managers in a September filing without saying how much each of the recipients would receive, but then added another 38 employees.
*Citigroup’s $306 bn bailout, a massive government backstop of bad assets, carries no demand from the government that any executives who mismanaged Citi resign. Included in this sum, the government also bought $27 bn in preferred shares in Citi which carry an 8% dividend, lower than the 11% dividend Citi owes the Abu Dhabi Investment Authority, which invested $7.5 bn in Citigroup’s preferred shares in November 2007. The deal “was not about punitive, it was about financial stability,” said Citi’s chief financial officer Gary Crittenden.
*Citigroup’s top executives, including Robert Rubin, have yet to announce they actually have given up their bonuses this year. Rubin denies responsibility for the bank’s massive losses stemming from its incompetent bets, despite the fact he encouraged more risk-taking at the bank in 2004 and 2005.
*Wall Street institutions “are now gone or re-organized and our financial system is in crisis,” says Sen. Chuck Grassley. “As [SEC] Chairman Christopher Cox said himself,” the SEC’s Wall Street oversight “program was an utter failure.”
*SEC Chairman Christopher Cox blames the current crisis on “real estate boom-and-bust cycles” of markets. Cox confesses that regulators failed to take into account that “secured funding..could become completely unavailable,” and that regulators and Wall Street firms firms never used “risk scenarios based on a total meltdown of the U.S. mortgage market,” the most serious and likely realizable risk of all.
*Nowhere does Cox admit that the SEC “utterly failed” in its oversight of the credit rating agencies, who rubberstamped triple-A ratings on mortgage-backed paper at the root of the crisis, notes Barry Ritholz of the Big Picture Typepad, or that the SEC relaxed rules in 2004, which subsequently let firms “lever up to 40-to-1″ in 2004.
*While touting their Bear Stearns hedge funds to investors, funds that have collapsed, behind the scenes, fund manager Matthew Tannin called the subprime market “toast,” and manager Ralph Cioffi moved $2 mn of his own money out of the funds without telling investors. Cioffi allegedly told a Bear economist in March: “Don’t talk about [the February results] to anyone or I’ll shoot you…I can’t believe anything has been this bad,” later noting “the worry for me is that subprime losses will be far worse than anything people have modeled.” Both are under arrest.
*In a rare bit of candid marksmanship, Arnold Kling, former economist at Freddie Mac, testified to Congress that a high-risk subprime loan could be “laundered” as a Wall Street triple-A-rated security, obscuring its true risks.
*”Let’s hope we are all wealthy and retired by the time this house of cards falters.”–Email from an unidentified S&P employee who helped goldplate rubbish subprime securities with triple-A ratings.
*”It could be structured by cows and we would rate it.”–Email from an unidentified S&P employee about a structured finance deal.
*After the auto execs flew to D.C. on private jets with tin cup in hand, they were shamed into driving fuel-efficient cars for the next Capitol Hill go around, to which Sen. Sherrod Brown (D-OH), said: “We didn’t ask the CEOs of banks drive to town in a Wells Fargo armored truck.”
Congress Rushes to Defend Fannie and Freddie
Prior to the bubble bursting, here is Congress defending Fannie and Freddie:
“The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities [Fannie Mae and Freddie Mac] that are fundamentally sound financially and withstand some of the disaster scenarios.”–Rep. Barney Frank (D-Mass.), who voted for the current bailout.
“I do not think we are facing any kind of a crisis.”–Rep. Barney Frank, (D-Mass.), on Fannie and Freddie.
“I, just briefly will say, Mr. Chairman, obviously, like most of us here, this is one of the great success stories of all time.”–Sen. Christopher Dodd (D-Conn.), who voted for the current bailout.
“And my worry is that we’re using the recent safety and soundness concerns, particularly with Freddie, and with a poor regulator, as a straw man to curtail Fannie and Freddie’s mission.”–Sen. Charles Schumer (D-NY), who voted for the current bailout.
“Yet another case of habitual self deception: “These assets are so riskless that their capital for holding them should be under 2%.”–Franklin Raines, former head of Fannie Mae. Raines was forced to resign amidst a massive accounting scandal, was later sued to give up his compensation, though Fannie’s corporate directors’ insurance largely covered his forfeiture.
“If I had better foresight, maybe I could have improved things a little bit. But frankly, if I had perfect foresight, I would never have taken this job in the first place.”–Richard Syron, former head of Freddie Mac.
Again, Has Your Head Exploded Yet?
So again blame the bailout on how generations were raised, on an overweening sense of narcissistic entitlement.
Yes, Mr. Rogers helped those of us, too many of us, who had to endure obnoxious abusive parents to get through the day. I get that.
But again, I’m talking about the culture of entitlement that’s behind bailout fever.
Miss Louise of Romper Room never encouraged this behavior–remember the Bumble Bee telling children to behave: “Do Bee a Don’t Bee Doer”?
Romper Room’s Miss Louise Mugged
“Former Romper Room hostess Mary Ann King (in Los Angeles from 1966-76) was mugged in the parking lot of a Hometown Buffet in Los Angeles on December 17, 2003. The encounter gave King, 70, a broken arm, rib and punctured lung.”
“Besides her injuries, the thieves stole a black taffeta bag that contained the original Magic Mirror (white plastic mirror frame) used on the Romper Room program so many years.”
At the end of every show, Miss Louise would delight children across the country, saying Happy Birthday through her Magic Mirror to children on camera, naming their names.
However, in an act of generosity and kindness, “King began carrying the magic mirror around with her to satisfy the wishes of people who confronted her with the allegations ‘you never said my name.’”
Nice to put your neuroses on a sweet senior citizen who made you happy. The Fellowship of Juvenilia grows (although Miss Louise’s Magic Mirror does suspiciously look like a destrung badminton racket).
[EagleEye: The revolution is at hand. Will you be a leader or a follower?’]