Big bailouts, but small relief 

Heather Mallick
CBC.ca
September 21, 2008

"The cost of a funeral can be more than $10,000," American International Group was telling – OK, threatening – Canadians in a TV commercial on the same day the memorial service for its U.S. parent was held courtesy of the Bush administration. The cost of the funeral for the world's biggest insurer was $85 billion. Even as they expired, the insulated Canadian branch that shares the AIG name was trying to sell low-income Canadians insurance to pay for their own coffins.

These huge, shambling gambling firms haven't caused enough trouble for their sentient customers; now even the corpses are headed for a pauper's grave.

But what does one say to a fallen giant? Shame on you? You Lehman boys go straight to your rooms and think about what you've done!?

So the Lehman lads are weathering it out upstairs because they didn't technically do anything wrong and they won't suffer. They created jewels out of old chunks of sewer brick and played them in a casino. The laws that sent Conrad Black to jail were ye olde obvious ones that anyone would have been a fool to break. What Wall Street did en masse was greedy and stupid, but there are no rules against that. Quite the contrary: everything in our modern ethos encourages it.

Derivative economics

So much money had been floating around that there was in a sense a shortage of products. Investment bankers have grown ever more inventive since the Milken debacle of the 1980s; they can take anything you or I would consider unsalable – a used ear, Slobodan Milosevic's mankini, a billion dollars worth of bad debt – slice it into small pieces, give fancy names to the new portions and sell 'em.

"Derivatives are like atoms," Kate Jennings wrote in her 2002 Wall Street novel Moral Hazard. "Split them one way and you have heat and energy – useful stuff. Split them another way, and you have a bomb."

There were as many bombs on the financial markets as there were improvised explosive devices on the dirt roads leading into Baghdad. But they were beautifully disguised.

"You say dodgy debts, I say structured investment vehicles," as the comedians John Bird and John Fortune would put it. I know this (I think opinionators should lay bare their own failings) because I bought some of these several years ago before I came to my senses. I took my mother's advice and put my savings in the investment firm she has always used. And I found my money in the oddest places. The Saxony Stout and Sturdy Stable Income Fund. The Enhanced Strategic Capital Growth Fund of Albion. One day I even discovered to my horror that I had $9,000 invested in Wal-Mart, which is 9,000 too many. And I put a stop to it.

My savings are now in the You Won't Beat Inflation but You Won't Lose the Whole Pig Either fund. Plus my savings account, which is earning me, oooh, one per cent, but it's one per cent more than the credit default swaps that brokers bought from AIG are getting for their clients.

To the rescue?

George W. Bush has now rescued or nationalized a string of companies at a cost with money he doesn't have. His budget deficit will be $407 billion this year. The current three bailouts have cost $300 billion and they're estimating the planned huge bailout at $2 trillion. The great irony is, it's borrowed money. He is waist-deep in the Big Muddy, the moral hazard of rescuing badly run financial institutions.

It is very hard for Bush to admit that he has been wrong about the wisdom of market forces, or as Gordon Brown says greasily, "the ingenuity of the markets." So Bush won't, even though he's happy with euphemism.

But surely someone – and I'm pleased to see that it is Barack Obama – must say that unregulated markets have been a recipe for disaster and that he will lay out new rules the minute he takes office. John McCain disagrees with himself so frequently now it's embarrassing. It's like watching your grandpa get drunk at a party, but he shouts and his teeth fall out whenever you gently try to urge him out the door.

Defending his comments on the economy, vice-presidential candidate Sarah Palin told Fox News that it's "an unfair attack" to question him "based on the verbiage that Senator McCain chose to use." We should instead, she says, try to figure out what he means instead of focusing on what he says.

How depressing

Letting these passive-aggressive markets rule is taking us into something that looks very much like a new Depression, although everyone hastens to deny this. Did Alan Greenspan really mean to say that the U.S. is mired in a "once-in-a-century" financial crisis, given that he was its enabler? I doubt he's referring to the Crisis of 1907.

His words scream The Depression, with its dust bowls and droughts (already happening), its Herbert Hoovers (Bush and McCain) and its Joads (us). Yes, it's hay bales for beds and ferrets for dinner.

What's disarming for boomers, as opposed to their parents, is that they have never seen poverty up close. They have suffered so long from affluenza that brokitude will look like another planet, say, Disintegratius. (I was intrigued to discover that there is a minor planet named Abundantia. I do not think we will be welcome there.)

Clearly, the government will step in to rescue huge corporate failures. You, your huddled family with your suburban home and the rusting SUV that you can't unload, are a small failure. There will be no help for you. I doubt if they will even unlock the massive reserves of the parsimoniously restrictive Employment Insurance fund.

Stephen Harper's repeated assurances that Canadians are fine are therefore doubly unnerving. He is, after all, on the same team as the world leaders who turn financial lemons into Lehmanade. I suggest that the prime ministerial candidate who most fully grasps what trouble we're in, and will do the most to fix it, is the candidate you should vote for.

Hmm… Would I rather live in a covered wagon pulled by mules while (choose one) the Conservatives are in power, the Liberals are in power or the NDP are in power? Actually, the Green party might be fine with us all living in covered wagons. It may in fact be their dream. Well, at least give them credit, it's fresh thinking.