Bailout fever

"Well, here's another nice mess you've gotten us into."* As Hardy always blamed Laurel for his buffoonery, it’s hard not to blame the recent administration and its free-wheeling approach toward market economics for the crisis we find ourselves in. But in reality, the problems created by unregulated banking and predatory lending run much deeper, and go far further back into history, than the era George W. Bush represents.

I could go all the way back, to the original Jefferson-Hamilton debates—whether we should have a federal central bank, and federal treasury at all—if these in fact violate the notion of, and the possibility for a free republic. But that’s another blog. Instead, I’ll refer to the far distant past of 1991 when I was 17, and an unsolicited Citibank credit card came to me in the mail. It wasn’t an offer, like today’s credit solicitations are. It was an actual, usable credit card, that I just had to call in and activate. The letter said something like, “As a student, you are a valued member of the future economy. For all your education needs, let Citibank be there for you.” I couldn’t vote yet, or choose to have a drink legally, but I was somehow considered capable of making complex decisions around borrowing and credit, without even an income—just a future. For this and many other abuses of the current enormous, now multi-national banks, Thomas Jefferson has, I’m sure, been rolling in his grave.

Now a Citi-group, which has $2 trillion in assets and 200 million customers worldwide, Citi is one of the institutions our government has designated “too large to fail”—referring to the far-reaching economic impact that would result from such a corporation’s demise. Our 401Ks are all invested in these multinational mega-banks, even if your choice has been a “socially responsible” account. After years of repeatedly asking retirement account consultants why investing in the world’s largest banks, that engage in rampant predatory lending is socially responsible, I have received no satisfactory answers. Asking them if they know anything about the structural adjustment programs that force small economies to cut social services, and basic health and welfare as a condition to receive “financial aid” in the form of loans from large banks, I have heard only silence. Inquiring whether they knew that big development projects in places like China (that are guilty of rampant human rights abuses) are made possible by the availability of capital from global banks, and provide the avenue for big governments to push out the interests and often the livelihoods of average people, I was returned only blank stares. In fact, the only answers I received at all, told me how investing in large banks is considered a solid growth bet, that these are the “blue-chip stocks” that support the core of the market, and the stability of my portfolio.

After even the most basic studies in political economy, it seemed obvious to me, that this financial structure was a house of cards waiting on one small, unregulated catalyst to instigate a collapse. And now, so many financial advisors are suddenly willing to say the same thing—it should have been obvious. Even after being caught for feeding off of an unregulated housing and insurance market, the large corporate banks are the ones first to be considered for a bailout, rather than dealing with the loss of profits as a consequence to gambling on our economy. Whereas one or two missed payments by consumers during hard times, elicits a pronounced reaction by large banks, who carelessly raise credit account rates to 24.9 or 30.9% interest. Their response to this crisis, even when being bailed out by our tax dollars, is to continue to “raise credit interest rates for many customers,” lay off tens of thousands of workers (Citigroup announced 53,000 more layoffs last week), and to raise banking fees. “Overall, fees are on the rise throughout the banking business as financial institutions look for ways to increase profits.”* $2 trillion is assets isn’t enough for some, I guess. Even though Citigroup operates in 107 countries, it’s somehow my responsibility as an American taxpayer to bail out their corporate jets, and try to come up with 29% interest payments too.

This isn’t about George W. Bush. These are policies, or maybe better said the lack-of-policies, of many of his predecessors and their financial experts, including Bill Clinton. In 1998, after Citicorp and Travelers announced what was then an illegal merger, the protective Glass-Steagall Act of 1933, was replaced by the Gramm-Leach-Bliley Act of 1999, which allows insurance, investments, credit and consumer banking all to be the business of one corporation. Glass-Steagall was drafted after the dire situation faced in the Great Depression of 1929 precisely to prevent the abuses of power, and risk-taking inherent in combining so many financial services. And by the way, you read that right, the law was changed in response to, or in a way that accommodated the violation of the law that Citicorp had already committed. Subsequently, and to our misfortune, we have allowed a situation wherein the control of our money is held by global institutions willing to take great risks with our future, and who are truly beholden to no one. The trick is, we are all also so deeply invested in their success, with our insurance and 401Ks, that “we can’t let them fail.”

What did we do to deserve to have such spoiled children running our money and our economic stability as a country? Do they have any idea how to face the consequences of their actions, besides asking for the help of those who have been the victims of their predation? We know it is not beneficial to protect young people from their faults, unless we want to have children, and future leaders, who don’t know how to act responsibly in the world. I agree with Mike Huckabee on this one; it is absolutely not the government’s job to bail out private, corporate interests, consequences or not. My choices did not create their Goliath-mentality, and my descendants do not deserve to be paying for their mistakes. I’m already paying 29% interest! Bailout or not, unregulated financial trading, lending, borrowing, and investing is a mistake we will be paying for a long time into the future, if we don’t make the necessary choice to regulate it now. These companies will continue at great lengths, to gamble with our future. Let’s not wait for another great depression to show us how diligent we must be to keep an eye on those who control so much.

What we must envision, and work for, is a world of personal responsibility and corporate responsibility—where ExxonMobil actually pays for the Exxon Valdez oil spill, and where we encourage our children never to rely on credit for basic necessities, where we personally take the stand to de-link investment accounts from companies that have a history of predatory lending, and where Citigroup can only get a bailout if they forgive some of the massive consumer debt. That is not too much to ask. It’s balanced, and it’s fair, and it is not right to pay for what continues to act as a predator toward most of us. The investors are not the majority; the consumers are—200 million strong, and counting.

*(from Laurel and Hardy, "Well, here's another nice mess you've gotten me into," first spoken by Oliver Hardy in the episode “The Laurel-Hardy Murder Case” in 1930, a year where people truly understood the realities of an economic mess)

*(financial quotes from smartmoney.com and Financial Times at ft.com)

Post-script: I wrote this blog over this week. But the striking news today is a new bailout agreement offering Citi their own $326 billion package, and giving the U.S. government a 7.8% stake in the company. Also for your educational benefit, it was in 1929 that Citi, then the National City Bank of New York, became the largest commercial bank in the world, benefitting by absorbing smaller banks that were struggling in the midst of the country’s largest economic crisis.

True change?

There is no question. Everyone I talk to is excited about the new President. Even those who didn’t vote for him, in general see the historic nature and significance of this turn of world events. And it is a world event. People everywhere look to this election as a point of inspiration, reminding themselves of the feeling that anything is possible. And that’s why it changes things.

Young people now feel they may have a role in the political—no longer “waiting on the world to change.”* The texts I received on election night from my young friends said things like, “Let’s continue to lead America in a better direction!” and “America believes in hope over fear—thank goddess for it!” After decades of fear-based politics, there is a true and meaningful sigh of relief for this “better” direction. Young people aren’t naïve though; they know the feeling of what happens may turn on a dime. Fear has been the mode of the realpolitik for so long. Even with a Democratic majority in Congress, the politics of competition, special interests and party may still significantly rule the day.

The difference that Obama makes however, reminds me of the best role of a leader, and really the best role of government. It is to inspire—to get people to believe in the coordinated effort of individuals, and to assure them that the government will either help the cause, or get out of the way. What the people want should be what the government wants. But the truth is, “we know that the fight ain’t fair,”* and that the difference will be how we feel about what is available to us in this new direction. The myth of an apathetic citizenry should be dissolved by the overwhelming turn-out for this election, but we must be careful that we do not again accept that lie as the hidden reality behind our choices.

I’m counting on President Obama’s grandmother. She chose to leave this plane the day before the election. What a interesting coincidence. Or is it? I believe that our higher selves have much to do with the time of our birth and our death, and even if that’s not a concept you’ve ever thought of before, come on, Obama’s grandmother dying the day before the election! That’s not cosmic nihilism at play; that’s cosmic meaning at work. She must have known that she could watch over him (and us) better from the other side. She must have felt how much he needed to let go of the past, to feel the turning point between worlds that this moment is, to best serve in the healing role that he has been offered. And she must have felt what she could do, to join us, in guiding this new leader to define a better day in America.

I know what grief does. It makes you realize the importance of every moment you have. It makes every decision feel like the last decision you will ever make. And that kind of clarity is what we need to pull our condition out of the downward-sloping spiral we have been on—with war, with the environment, with human rights and economic justice. We are on the razor’s edge of more catastrophes than I care to count. And a serious tone, a deep view of life and death, and a sober mind are what we need to find our way out of here. Our leaders won’t be able to do it all for us, but they can resolve to be a part of the solution, and not a further part of the problem. As Obama reminded us, “we are the ones we’ve been waiting for.” May we find it within ourselves to assume that the best outcome is possible, and to know that we do have help—that we have assistance from the world of the seen and the unseen, to make the change that is needed, for all our sakes.

*(thanks and credit to John Mayer’s lyrics in Waiting on the World to Change)