A continuing barrage of headlines reveals even more government bailouts of private enterprise:
- GMAC received bailout funds of an additional $3.8b on top of $13.5. (See BBC News report)
- The Obama Administration on Christmas Eve gave Fannie Mae and Freddie Mac, two government sponsored enterprises, a “blank check.” Previously each of their bailout levels had been capped at $200b. The New American reported that these two GSEs now have unlimited Treasury bailout funds until 2012.
- After a fourth bailout this year, AIG received $180b from the Treasury.
Private enterprise awards of obscene amounts of money from the Treasury are indefensible. No amount of government spin can mask this truth: private businesses which made massive mistakes in lending and insurance practices are now being given unlimited access to taxpayer funds. Why “unlimited” bailout funds? And worse is the Administration’s unknowing and ambivalent response as to future bailouts: “we sure hope not.” This is Viet Nam war thinking applied to the current financial crisis: “We are so far into the bailout now, how can we stop?”
Harbingers of Social Mood
Issac Newton theorized: “to every action there is an equal and opposite reaction.” Societies function because a broad consensus agrees upon accepted modes of behavior. Importantly, these behaviors are mostly voluntary rather than state coerced. The best example in the United States is the payment of taxes, as we have a largely voluntary compliance system, as the IRS cannot audit everyone. Two recent examples rips in the social fabric have appeared:
- Shoplifting – Father Tim Jones, a parish priest in York, England, encouraged the poor among his congregation to shoplift to feed their families:
‘My advice, as a Christian priest, is to shoplift,’ he said. ‘I do not offer such advice because I think that stealing is a good thing, or because I think it is harmless, for it is neither.’
But he said it was less harmful that prostitution, burglary, or robbery; he further said that the desperate should target large stores rather than small businesses, and take nothing they do not need. He wasn’t, I think, trying to set off a crime wave in his native York. If he resembled any other thoughtful vicar I have known, he was just trying to dramatise the plight of the local, unglamorous poor for a congregation which might prefer the objects of his charity to be on another continent. See The Guardian
- Jingle Mail – Jingle mail is the new jargon describing a homeowner’s strategic default and abandonment of his home, in essence mailing his keys back to the bank. Much has been written about mortgage foreclosures. For 2009 experts project 4.5 million mortgage foreclosures, with 1.5 million of these foreclosures from strategic defaulters. When a homeowner realizes that the value of his house is significantly below the amount of the mortgage, walking away may be the best financial option. This strategy would be even more appealing in non-recourse states like California. See Richard Benson, “Jingle Mail, Jingle Mail“
Consequences
Americans will not idly watch without reaction the bailout of private corporations at taxpayer expense. The preferred reaction would be through electoral changes in November. But even electoral changes can be subverted through lobbying and financial clout of big, politically connected corporations. And neither Republicans nor Democrats are immunized against the lobbying disease. Just examine the bi-partisan lobbying of insurance, pharmaceutical companies and financial companies in the health care and financial reform debates.
Hopelessness forces individuals to undertake self-help remedies. Today it is jingle mail and shoplifting. Tomorrow it could be refusals to pay taxes or credit card bills. Perpetual institutional bailouts can only be a path to further rips in the social fabric and ultimately to, anarchy.
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