700 Billion Worth of Prozac

I need a drink.

Because as a tax-payer I guess it's now my job to ward off the Great Depression.

Or as I call it, the deregula-pression.

Because this economic shit-storm is absolutely the result of deregulation.

See before the GOP got their greedy little hands on government there were a few teensy safeguards against this kind of thing.

They were called "regulations".

But the Republicans have adamantly insisted we must "reduce the size of government!"

Which is code for, "throw out all regulations on business, no matter how sensible or necessary!".

This ironically has led to a bigger government than we ever dreamed of in the form of a 700 billion dollar bail/buy-out.

Maybe this shows us that people who don't believe in government shouldn't be running the government.

Even more ironically this rampant, rapacious, unfettered capitalism has now become socialism of the worst kind.

Because we are socializing ownership of failing mortgage and insurance companies, banks and other financial institutions.

In other words we are socializing risks (for fat-cats) and privatizing profits.

So when everything is riding high it's, "Hey, get the government out of the way!" but when it all goes to shit it's, "Um, do you have 700 billion I could borrow?".

My answer to them is the same I used to give to the crack addicts outside my apartment in Hollywood every night.

"Fuck off and get a real job."

Folks it's hard to sum up all the factors that have lead us exactly to where we are today.

But I can try.

Here's my take and I'll try and keep it as simple as possible.

First the laws on credit were relaxed to a point where anybody could get a loan.

ANYBODY.

Interest rates were also kept artificially low (paging Mr. Greenspan) to ward off inflation.

This facilitated the handing out of risky loans to risky people.

Second the Glass-Steagall act of 1933 was repealed by the Gramm-Leach-Bliley Act of 1999. The former prevented banks from offering investment, commercial banking, and insurance services all at once. The latter allowed them to consolidate into a single institution.

Basically it allowed them to take FDIC insured deposits and then speculate with that money.

Your money.

As of 1999 they could now take your hard-earned $ and not only hand out risky mortgages, they could also buy risky mortgage securities and then insure other risky mortgages, thus taking insurance premiums every month and hoping the piper never had to be paid.

Does that sound like three times the risk to you? Well it is.

All with your $.

Folks this is what we call deregulation. This is what we call a bad idea.

For this brilliant change in law you can thank Phil Gramm - McCain's chief economic advisor.

I'd blame Clinton too but he was facing a veto-proof majority in the Senate so what option did he have?

All of this eventually led to a housing boom in which the market was artificially inflated by speculators flipping houses for huge profits in an artificially short period of time.

This also led to lower-level mortgage salesmen and re-fi shysters getting people approved for mortgages they couldn't afford by telling them that surely they'd be able to re-fi when the time came because the market would obviously keep going up and up and up in an artificially short period of time and their house would be surely be worth more than when they bought it in an artificially short period of time.

The mortgage companies and banks then took these bad loans and did two things.

First they repackaged them as securities to sell on Wall Street (thus the downfall of Bear Stearns, Merrill Lynch, etc.).

Second they insured them with folks like AIG who kept on insuring them because they thought, "Hey, these premiums are free money because of course houses will keep going up in value in an artificially short period of time.

Since the debt to asset ratio of 15 to 1 had been removed (by more awesome deregulation!) this was all possible.

See you no longer had to have a reasonable amount of capital no matter how much debt you took on.

This model of profit-making was all predicated on one thing - PEOPLE WHO COULDN'T AFFORD THEIR MORTGAGE WOULD SOMEHOW BE ABLE TO AFFORD THEIR MORTGAGE.

If that sounds shifty to you that's because it is.

Essentially the banks, the re-fi people and such all gambled that the value of homes would keep going up forever thus allowing people to refinance every few years or whenever interest rates were raised.

Goodbye old model of buying a home you can afford and living in it for 30 years.

Hello buying a house out of your means in the hope you will be able to re-fi and re-fi and re-fi again!

Hello buying a house on an interest-only loan and selling it for a 100K profit in three months!

Obviously this had to come to an end.

It has.

Now they want 700 billion to bail them out.

I don't want to give it to them because, hey, this is the free market at work.

Also I'm in Vegas right now. If I put my life savings on one hand of blackjack and lose should I expect the government to help me?

Of course not. Because I'm gambling and that's all Wall Street really is.

Gambling with a nice suit on.

I don't know if denying a bail-out will lead to another depression or not.

All I know is my parents are probably going to move in with me.

Which means we'll all be living in a Honda Civic Hybrid.

Anybody got a Xanax?