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Friday, March 28, 2008

John McCain opposes irresponsibility -- but not for potential campaign contributors
Posted by Jill | 6:53 AM
It's unusual for a Republican to so baldly declare himself to be a friend of the financial community and stern parent to individuals. Even Ronald Reagan used his eye twinkle and friendly, grandfatherly smile to convince working Americans that his shifting of wealth to the richest Americans was somehow in their best interest.

But John McCain has no use for such niceties. You can tell how bad the Democratic infighting has gotten when Senator Keating Five knows he can so baldly declare himself on the side of big financial companies and their highest-paid managers and not worry one bit about potential consequences. Yesterday he wagged his fingers at those Americans who answered the siren song of homeownership and told them they had to grow up and face the consequences of their actions (h/t: Steven Reynolds):

"I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers," McCain said. "Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy."

[...]

Asked whether the Fed went too far in helping Bear Stearns, McCain said: "It's a close call, but I don't think so." He said he doesn't support federal bailouts unless it has catastrophic effects on the entire financial marketplace and there were indications that a Bear Stearns failure would have rippled across the entire economy.


Of course he doesn't say what those "indicators" were or where they came from. Somehow I suspect those "indicators" took the form of lobbyists.

As the New York Times notes, McCain's stern father bit, like that of George W. Bush, only extends to Americans who work for wages and aren't the "have-mores":

In practice, the Democrats have not really had to confront the full fury and magnitude of the crisis. Measured in dollars, their biggest proposals are small compared with the hundreds of billions of dollars that the Federal Reserve has decided to lend to struggling institutions, and compared with the magnitude of losses in home values and defaulted mortgages.

Mr. McCain and the Bush administration, meanwhile, have staunchly supported one of the biggest government interventions in the last century: the Federal Reserve’s decision to lend as much as $400 billion at rock-bottom rates to banks and Wall Street firms.

The Fed’s rescue operation involves a sum many times more than Democrats proposed spending on homeowners, and it comes on top of a host of other injections of government money into the economy. First came the bipartisan economic stimulus package, which this year alone will provide about $152 billion in tax rebates and temporary tax cuts to help spur consumption.

Then came a series of moves to greatly expand the roles of Fannie Mae and Freddie Mac, the giant government-sponsored mortgage finance companies.

And this week, the Federal Home Loan Bank Board decided to lend an extra $100 billion to member banks for mortgage financing.


Did people who took option ARMs and interest-only mortgages behave stupidly? Absolutely. Are people who charge multiple credit cards up to the limit irresponsible? Absolutely. They've succumbed to the lure of the apparatus I mentioned yesterday that made luxury homes and luxury cars and luxury products within the reach of ordinary Americans, and they didn't stop to think about payback time. Of course, why should they, when their president has been borrowing money from China at a furious clip to pour into the pockets of Halliburton and KBR and Blackwater and other corporations that are profiting off the war in Iraq? But even the quaint notion of there being consequences for one's actions doesn't apply to the titans of Wall Street that John McCain thinks are more worthy of assistance than a family about to lose its home:

Bear Stearns Cos. Chairman James Cayne on Thursday dumped his entire stake in the embattled investment bank for $61 million as it appears closer to a takeover by JPMorgan Chase & Co.

Cayne sold 5.66 million shares for exactly $10.84 a share on March 25, according to a filing with the Securities and Exchange Commission. His stake was once valued at about $1 billion when the stock was trading at $171.50 per share.

His stake at one point plunged to about $27 million when JPMorgan announced nearly two weeks ago it would acquire the No. 5 U.S. investment bank for $2 per share. JPMorgan later upped that offer to $10 per share, and agreed to acquire 39.5 percent of the company without a shareholder vote to block any rival offers.


Now admit it. You're going to cry all night tonight because James Cayne is only going to walk away with $61 million instead of the billion dollars his stock holdings were worth while his company was gaming the mortgage system. What could YOU do with $61 million? For that matter, what could you do with HALF that? Or a quarter of that? I'll tell you what I'd be doing with it -- I wouldn't be sitting here watching every fucking penny I've put into my employer's retirement plan since the beginning of the disappear as the markets tank, and I wouldn't be worrying every day about what happens if the research grant money runs out and if I end up unemployed in my fifties.

George W. Bush vetoed $35 billion for children's health care, but the Fed has $29 billion to help J.P. Morgan Chase take over Bear Stearns and help James Cayne walk away with $61 million. And John McCain thinks that's perfectly OK.

Shall we talk about sending a message? The message is now that if a Wall Street firm just screws up badly enough so that its failure will cause a ripple effect in the markets, it's going to be entitled to a Federal bailout to prevent even more damage. In other words, just as we've found with Bush Administration corruption, once you reach the Tipping Point of Evil, you're home free.

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3 Comments:
Blogger The One True Tami said...
This comment has been removed by the author.
3/28/08, 8:53 AM  
Blogger The One True Tami said...
And yet, when I tried to take advantage of the sub-prime insanity that let first-time home buyers pay 3% down and still get a decent rate, I was too late. No one will give you a decent rate for anything less than a 10% down payment, now, and even that might not happen unless your credit score is - according to the Fannie Mae guidelines - over 740.

I expect that in 10 years people will send their mortgage payments directly to China, and they will blame whomever the president is then, instead of understanding that it's fallout from now.
3/28/08, 8:54 AM  
Anonymous Anonymous said...
Jill, your recent analyses of the economic situation are spot on.

Nouriel Roubini, an economist who has been predicting this shit since early 2006, was on tv this morning on Washington Journal. Everything he said can summarized as: "We're totally fucking fucked, and there's not a single fucking thing we can do about it."
3/28/08, 5:18 PM  
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