Last night, our judicially-installed president poked out of his brush-cutting vacation burrow and said some curious things, or so they sound to my inexpert ears:
Before long, these [mortgage-backed] securities became so unreliable that they were not being bought or sold [by] investment banks, such as Bear Stearns and they could not sell. They ran out of money needed to meet their immediate obligations, and they faced imminent collapse ... [A]s markets have lost confidence in mortgage-backed securities, their prices have dropped sharply, yet the value of many of these assets will likely be higher than their current price, because the vast majority of Americans will ultimately pay off their mortgages.
The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal.
To summarize: (1) The investment banks cannot sell these securities, so their prices have dropped. (2) Taxpayers should buy these securities that no one in the market wants to buy because they're currently hurting the feelings of Bear Stearns and other Wall Street welfare queens. (3) But don't worry, they're "likely" to increase in value over time. (Trust me! When have I ever lied to you?)
So much in this "analysis" of Bush's hangs on the claim that "the government is the one institution with the patience" to buy assets that are "likely" to appreciate in value. What time horizon are we talking about? Ten years? Fifty years? A hundred years? A thousand years? Ten thousand years? A few years after we leave Iraq?
Let me get this straight: there aren't any private investors with the requisite "patience"? None? No buyers out there with a long-enough investment horizon? Bullshit. Is this anything short of a straight admission that we taxpayers are being cornered into buying value-less garbage?
Bush also warned of what might happen if we don't hand every penny in the treasury (plus several trillion pennies we don't actually have) to Secretary Paulson to give to his needy Wall Street pals:
Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And, ultimately, our country could experience a long and painful recession.
Um, I realize this is perhaps the least original insight available, but isn't that exactly what's supposed to happen under Free Enterprise? Isn't that straight out of the Gospel of Adam Smith, Ayn Rand, Milton Friedman, and the Great Greenspan himself? Namely, for a variety of reasons -- say, because banks have been careless and unscrupulous in their lending practices -- defaults spiral, the supply of money available to be lent dwindles, and lenders become more selective (and charge more interest) for the lending they subsequently do. Isn't this precisely the cycle of life we're supposed to revere in this Invisible-Hand-cradled world of ours? Why shrink from its glorious balances and cycles and creative destructions now, and at such astonishing expense?
Finally, Bush says, giving about a trillion dollars to Comrade Paulson ...
will free up banks to resume the flow of credit to American families and businesses, and this will help our economy grow.
Resuming the flow of credit under what terms? This is the nub of it all, right? If this just frees the banks to get back to sloppy, unscrupulous, careless lending practices -- and Bush's proposal certainly doesn't tighten regulations,
regulations being anathema to his Free Enterprise outlook -- then we're proposing to delay the comeuppance, and at tremendous expense.
This sounds absolutely rotten.