ESSAY- Monster's bail: What Grandma said about global finance
I remember Grandma clearly:
"I don't care what anyone else is doing."
"If it sounds too good to be true, it is."
"What goes around, comes around."
Unfortunately, as the burgeoning destruction of our financial system illustrates, she is again right on the, well, money– even though it's been 30 years since she dearly departed.
With the bailout passing Congress, following the federal buy-out of Fannie Mae and Freddy Mac, we are all paying for the liars who took sub-prime mortgages and the con men who sold them– regardless whether we borrowed money we never intended to pay or took golden parachutes for running a company into the ground or threw money with disregard that prompted Illinois Senator Everett Dirksen to hiss a generation ago, "A million here, a million there, and pretty soon you're talking about real money."
At something like $2,300 a head, we citizens are bailing out the people who've been running the three-card Monte of financing because, if we don't, they tell us the whole house of economic cards will collapse as the money men run around like headless chickens– another of Grandma's sayings.
I don't pretend to understand an economy in which two-thirds of its value is consumer spending. Or a mortgage lender that only backs three percent of its loans with hard cash. These questions– How do you lend money you don't have? And how do you keep buying when little is coming in?– are beyond my limited financial ability, but they are certainly concepts that Grandma would have fought tooth and nail.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke must be right that the financial panic must stop. But in the long run, as a society, I think we need to listen again to Grandma and the other "old wives" who once taught basic lessons for living.
If we continue to bail out those who learned from President Clinton's bully pulpit that "it's not what you know, or even who you know, it's what you can get away with" – which was then taken to the foreign policy extreme by President Bush– that, even if this bailout works, what goes around in our society will indeed come around someday.
And I submit someday soon.
There were plenty of people a decade ago who were clearly saying that allowing subprime mortgages, and then bundling and selling them like stocks, was a disaster waiting to happen. Even more in the banking world were saying that excluding Freddie Mac and Fannie Mae from the reserve rules which have prevented panics for seven decades would lead to another panic.
But politicians seeing "what's in it for me" opportunities– and what was in it for them were the votes of people seeking "what's in it for me"– kept allowing the rules to bend until the chickens should be "coming home to roost."
Except that we're bailing them out.
We seem to have forgotten the old wives' concepts in order to become "The Smartest Guys in the Room" – as a book about Enron put it – without any hint of personal responsibility. And we've coined phrases like "greed is good," "democratizing luxury," and "conspicuous consumption" in other affronts to the old wives' attitudes.
Author Robert Bly points out humans are the only animals that store their instincts in stories and through evolving business stories– from Humphrey Bogart's Sabrina to Tom Cruise's Risky Business to Mike Judge's Office Space– we can see today's "everyone is doing it" – as the ultimate relativist rationalization.
Besides finance and politics, where we have Democrats William Jefferson, with a $90,000 bundle in his freezer, and Charles Rangel finally admitting the killings he's made in renting his off-shore vacation home, and Republicans Ted Stevens getting $250,000 in free home repairs and Duke Cunningham already in prison, we can see the destruction of Grandma's attitudes everywhere.
We have D.C's tax office riddled with scammers and our own state governor dismissing the most rational transportation policy because "That's logical and therein lies the problem."
We have celebrities, Paris and Nicole, providing nothing of value to society yet enjoying "first name" coverage, and we have rappers singing how tough it is in the ‘hood with $100,000 in gold bling around their necks.
In business, with manufacturing jobs fleeing the country like scared rabbits, we have executives ensuring their golden parachutes have more air than corporate survival. Lehman Brothers, while collapsing, was negotiating multi-million dollar exits for their high mucky-mucks.
In sports, we have Manny Ramirez dogging it in Boston– ask any Red Sox fan– to escape a contract which paid him $10 million a year and rush to Los Angeles where he's playing, again, with the talent God, or nature, gave him. No doubt, his demanding more money, he'll say: "I love the game so much I'd play it for free."
During this financial crisis, the question in a 2007 book, Are We Rome? should be especially pertinent, I submit, except that we should remember it took three centuries for Roman to collapse.
We seem determined to do it in three generations.
Randy Salzman is a former journalism teacher at Virginia Union University and a transportation researcher who lives in Charlottesville. This essay first appeared in Style Weekly.