I’ve been trying to put together my thoughts on this whole Cincinnati Tea Party thing that’s going on tomorrow, and this is probably about the best that I can do. This is gonna be long, so if you’re not interested in reading for a while…well screw it, I don’t know how to collapse the posts anymore so you’re just going to have to suck it up.
Two disclosures right off the bat. First, I confess that my financial knowledge and know-how regarding the whole banking crisis is pretty limited. I’ve done as much reading up as I can to try and understand the whole mess from a realistic standpoint, to try and figure out how we got into this mess and what our options are (and TPM has done about as good a job day in and day out covering the nuances of everything).
Second, I have just about zero respect for this entire tea party concept. These people stood silently as the Bush administration spent hundreds of billions of dollars on a war that we went into with manipulated intelligence, created a $300B+ giveaway to the pharmaceuticals, and kept pretty quiet when they flooded AIG/Citi/BOA etc. with massive amounts of cash. But when the Obama administration created a program to bailout distressed homeowners (the majority of which are good people that caught a few bad breaks, not the speculators who got interest only loans like some would have you believe), well that was just too much to take. So they followed the lead of a CNBC douchebag who had to make his case in front of a bunch of stock traders, and was too scared to face down a comedian in a one-on-one interview so he sent a co-worker to take the lumps for him. So the whole thing is quite silly and disingenuous to me.
Most of them are likely opposed to any further bank bailouts. Well, as best as I can see, there are three overall options that we have to solve this whole financial crisis: allow the banks to completely fail and go bankrupt, continue to prop them up with bailout after bailout, or place the failing banks into receivership/nationalize them. You can build any number of permutations off of those three, but as overriding options I think those are the only possibilities.
From the looks of everything, it seems that the only options that are going to work are some combination of 2 & 3. Any argument for option 1 is just ridiculously unserious and should be dismissed out of hand, and anyone telling you that’s what should be done hasn’t made any effort to understand the entire financial situation.
You see, the further we get into this quagmire, the more I think we’re coming to realize just how interconnected all of these parts of the different major banks & financial institutions are. If we just let one of them completely fail and say ‘screw everyone involved’, that’s going to lead to the failure of another one (and if we’re lucky just one), which then will likely lead to another failure, etc. So, for those who want to just let them fail, if you’ve got a plan to deal with the domino effect of subsequent failures, the utter meltdown of the major financial markets, the ensuing collapses of corporations, political and civil unrest, and the inevitable rioting in the streets, then I’m all ears.
Like it or not, at some point we’re going to have to subsidize at least a portion of this mess, and it’s not going to be cheap. We’re probably going to end up spending hundreds of billions of dollars cleaning up this mess, and even with that we’re still going to have to go through some pretty rough times. Hopefully, when the smoke clears (or at least subsides), we’ll get some useful regulations in place to ensure that this never happens again, something I'm sure that the financial institutions that got us into this mess will fight like hell to block.
Which brings me back to the whole tea party movement. I’m assuming that the great majority of those who are participating are of the republican/libertarian persuasion, who thinks that government can do no good and should stay out of everyone’s way and things will just work out from there. To that, I guess I can only say…this is what you get when government abdicates any oversight role. You get banks who get involved in investment banking and financial advisories. You get institutions that engage in ridiculously risky investments, and create shady products like CDS’. You get ratings agencies jumping into bed with the very institutions that they’re supposed to be monitoring. You get the creation of home ownership loans and products like interest-only loans, NINJA loans, and zero down payment or 105% financing. You get the establishment of mortgage brokerages who originate loans to people who have no business buying a house, and then sell off those loans with zero responsibility for whatever might happen after that point.
This is what ends up happening. For over 30 years Congress (and Democrats are partially responsible for this, but the greater blame still lies with the right) has slowly undone all of the regulations put into place to prevent something like this from happening. And the companies that engaged in these practices have privatized their profits for years, and now that things are falling apart they’re getting to socialize the losses. Some free market this is.
Maybe the tea partiers will realize this, and demand that Congress implement better oversight mechanisms. Heh, that was funny. No, I’m sure that their solution will be to let the economy implode, and then cut the capital gains and the highest income tax rates (but not payroll taxes, because that would help out the poor people), followed by an Earl Grey-flavoring of the Ohio River, because that's all these guys know how to do - tax cuts fix everything.
And if that's what they want, that's fine. But it's no longer acceptable to just protest and say no way; this is stop screwing around time. If you don't like it, fine, but then you have to come up with an acceptable (and realistic) alternative. Otherwise...well, elections have consequences.