First off, a soothing note for my readers who don't give a rat's ass for my political / economic rants, raves and, obviously well-informed opinions: next week I'll be in Baltimore for Bouchercon. That is essentially going to be the kick off of my Fall 2008 Drive-By Book Tour. So soon you'll get your fill of amusing anecdotes from the treacherous road of book promotions. Still, in the meantime:
What's all this constant bullshit and whining about "Main Street" this and "Wall Street" that?
This morning I saw a story in my L.A. Times headlined: "Lehman collapse suspends Ritz renovation." That's as good a place as any to understand why you can't possibly separate the needs and activities of "Main Street" from those of "Wall Street."
Lehman Brothers was the primary lender to the Ritz Carlton, Rancho Mirage hotel. Lehman goes belly up, the money stops flowing to the hotel group, then on to the construction companies involved in the project and everything comes to a crashing halt. Think about what that means.
How many workers have now lost their jobs because of the halt in construction?
How many suppliers of materials to that job - many of them small,local companies - have now lost a customer? If too many of their customers disappear, how many people are they going to have to lay off?
How many local businesses are losing the laid off workers as customers because they now have to pinch even more pennies to get by, or even have to move out of the area to find work elsewhere? And, once again, if their business suffers, sooner or later they're going to have to lay off workers.
What does that do to the local tax base, and consequently things like school funding, police and fire services, road repairs, etc.
I could spend a very long time listing all of the potential negative affects that the halt in construction on this one major project will have, due to the bankruptcy of a huge "Wall Street" institution.
And you can bet that there are plenty of small companies that borrowed money from Lehman Brothers, too. And they're scrambling like mad to find someone to take up those loans so that they can continue to do business. And these days, until things are worked out, they're not finding those loans. What's happening to their workers and suppliers and communities?
The worst pain of the collapse of Lehman Brothers is being felt all along "Main Street." Like it or not, "Main Street" has a huge vested interest in the health of "Wall Street."
Where do you think the money comes from for all those small and other business loans? Who's providing the credit cards, the mortgages, the student loans, the insurance policies, the management of 401-K and pension fund money, the trade finance, etc?
Now it is true that that money isn't made by "Wall Street." It is made, earned, generated by "Main Street" and then filtered through "Wall Street" for purposes of management, manipulation and protection.
And that's a necessary part of the process. If a stranger comes to you and asks for a loan to buy a house in your neighborhood, are you going to directly loan them the money? If the Ritz Carlton wants to build a fancy new hotel in your town and that's going to create a lot of jobs and knock on business opportunities, are you going to reach into your pocket to loan them the money? Of course not.
You put your money in the bank, buy stocks and bonds with it, etc. all so that big institutions can more efficiently put it to work - hopefully paying you something for the right to use your money - and you don't have to personally take the risks involved in making those loans or higher risk investments.
The problem isn't the system. The system - sort of a partnership between Main and Wall Streets - actually works quite well so long as everyone does their part in good faith. The problem rose when, for all sorts of reasons and made possible by willy-nilly ill-thought out deregulation without concurrent oversight, the stewards of all that money that was raised on Main Street, started taking enormous, ill-considered risks with the money. And, the people on Main Street did the same thing; taking out loans they couldn't really afford. Everyone figured that a steady, never-ending upward spiral of the economy would let them get away with it.
Only it came crashing down, as it was inevitably bound to. Regardless of who should take the blame for it, all of us now need a bailout. Even those of us who played no part in causing the problem. A bailout is not a good thing. But it's a necessity. We are in a situation where a bailout of Wall Street is also a bailout of Main Street. You just can't separate the two.
That doesn't mean it shouldn't be well thought out. There ought to be some potential for taxpayers to recoup their money, if not even make a profit. There needs to be oversight so that we aren't simply throwing good money away. There needs to be a means of ensuring that the avaricious assholes and nitwits who got us into this mess to begin with don't reap windfall profits from saving their asses from the mess they got us into. (And that means all of those people: no big executive parachutes, and also no debt relief for people who snapped up two, three, four houses using sub-prime loans that anyone with a lick of sense knew were too good [sounding] to be true.)
But that's all there ought to be. Right now the job is to stop the bleeding and settle things down so that they can get better. Once the patient is stabilized there will be plenty of time for figuring out what to do to make sure this doesn't happen again. It's not unlike a heart attack. Diagnose it, treat it, and only after the patient is back in the recovery room read him the riot act about how he needs to lay off the triple bacon cheeseburgers, fries and super-sized drinks and maybe throw in a little exercise from time to time.
In this morning's paper I also read about the Senate bailout bill that will be voted on today. It includes a provision mandating that companies above a certain size that provide health coverage to their employees, have to make sure the coverage treats mental and physical ailments equally.
HUH? What the fuck does that have to do with it? What's next, a bunch of earmarks finding their way onto the bailout bill? Ted Stevens may be on trial, but I'm sure he can think of something to attach to the bill, a rail line to nowhere perhaps.