by Daniel Haverty
As a landscaper employs a leaf blower
to blow the leaves from an assigned area and never picks them up, a nation that fixes problems by moving monies or assets to another area is avoiding the root problem. The mess simply moves to another area. Unfortunately, our government seems to move assets or bail out conglomerates, while we have people losing their homes and children going hungry. While the bailout money is used to fund corporate retreats and incentive bonuses for executives, the plight of middle America is accentuated by this sweep it under the carpet mentality. Financial problems that are not solved by finding the source of the difficulty are doomed to continue until the root iss
ue is resolved.
Just as anyone would push a pile from one side of the desk to the other, America has continued a path of avoidance, especially in regards to finance. The core difficulty of our national economy is that it is built on speculation. Just as any house or structure that is built on a faulty foundation is doomed to collapse, the same has happened to our economy. Until we fix the problem at the source, we will experience repeated events of insolvency. The Fed has repeatedly bailed out banks and other financial entities that are deemed too big to fail. Referring to the bailout as economic stabilization gives the American people a new term that has a friendlier connotation, and placates the general public with a more acceptable term for something they would otherwise be outraged by. It is not unusual for government to designate policies or events to make them more readily digestible, such as referring to war as a police action or torture as enhanced interrogation.
An economy built on speculation as ours is can be unstable. The whims of a few investors can set the trend of mass selloffs that will send the industrial averages spiraling toward yet another recession. Selloffs can lead to recession and recession can lead to depression, which will cause large banks to fail and bailouts will occur. Bailouts will be termed “economic stabilizations” to soften the grievous financial jurisprudence. The total of bailout funds ends up being a very large sum of money and it has to come from somewhere. The American taxpayers are footing the bill for large corporate bailouts, the same middle-class American taxpayers on the verge of losing their homes and possessions without any chance of a bailout. The people who do not have enough to eat are paying for the corporate retreats some of the boards of directors have given themselves with the hard-earned dollars the Fed gave them to keep their proverbial ships afloat. The really awful thing about this scenario is the greater percentage of the population does not know who paid for the mess to be cleaned up, and how it can affect them in the future. John Q. Citizen paid for Big Bank to stay afloat and with the trickle-down effect John Q. will continue to pay in irregular installments.
The latent effect for the Middle American consumer is when recession hits, the basic essential commodities that bolster our existence become more expensive and some unaffordable. Healthcare has to be considered a luxury in some homes, and with food costs escalating at an exorbitant rate many households are cutting back on fresher healthier items because they simply cannot afford them. Unfortunately for the American people they cannot elect someone who can fix these problems in one term. The probability of economic recovery in less than ten years is remote at best. An overhaul of our financial structure is required and the present government is not moving in that direction and not likely to be any time soon.
The super Pac backing that puts our leaders in office will not allow such changes to take place. As long as elected officials depend on campaign contributions to get them in office, the public is doomed to walk the same path for as long as it takes to amend the election process. Until the election process has been rectified, the financial changes, which are necessary to bring America back to some semblance of financial global leadership, will not occur.
The Government enforced no requirements on banks for disbursement of cash. The financial stipulations were written into the original document, but later revisions were added because the banks threatened not to accept the money (Taibbi). Monies that had been originally earmarked for home lending and small business the Government reduced from their original intent to an insignificant amount. In theory the billions had been intended to help Middle America, but after a great deal of political maneuvering the end result was that big banks became bigger and if they had once been considered too big to fail, they became even bigger and created a more substantial safety net for themselves. The proverbial candy dish offered by big government and intended for homeowners and small business was snatched away by a bully of enormous size and financial hunger. Had the original restrictions been adhered to, this probably would not have taken place or at the very least not to the extent that occurred. Furthermore, if systems are in place and they are ineffective and or not enforced, what recourse do the American people have at this point? Can the courts become involved after the fact to undo any financial injustices that need rectifying? If the American people were swindled out of seven hundred billion dollars, some percentage of which should have been distributed to the aid of small business and home lending, would the possibility exist that someone could say we want our money back, and if so, could there be a reasonable course to retrieve said funds and reroute them to their original intended destination?
As rivers that flow into the sea become salt water, funds that become intertwined with big business grow tainted to the extent that they can never be fully recovered or returned to their pristine mountain stream state. With exploration of how bailout funds were dispersed and the discovery of certain irregularities therein attained, it would be reasonable to commence a recovery effort to reclaim monies from bonuses and corporate retreats in violation of the original bailout stipulations. Even if a small percentage was recovered it could be used to save a home or feed a child who might otherwise go hungry.
Turning back the clock has never been a viable option for financial misdeeds; as a gambler would relate, once the bet is lost it is gone forever. This has not been the case for large banks and other financial conglomerates. They have been given a third free throw, a fourth strike or a mythical second chance after overextending themselves and ill-advised lending. They gambled and lost, yet are given a second and more than likely third chance to speculate yet again. This would be acceptable if big business was playing the game with their money, contrary to John Q. Homeowner who if he were to gamble on a not so affordable mortgage and lose his job, there will be no Fed or any other financial entity to step in and pay off an ill-advised mortgage. If the average citizen revises his retirement stock portfolio to include higher risk and larger gain investments and loses his retirement, he will simply have to continue working.
The fact that our economy is built on speculation is the prime factor of our financial dilemmas. Factoring the loss of funds through too many layers of bureaucracy and simple mismanagement, our financial backbone has been systematically gambled away to the extent that financial recovery is seemingly impossible. Speculation in moderation is an acceptable form of financial gain. However, if speculation is the primary form of profit or as in America’s case, the cornerstone of our financial system, changes need to occur and rapidly in order to ensure some form of financial security for the future. As profits become harder to attain the more the tendency to speculate is utilized by corporate America. The desire for quick solutions is understandable, but the obvious pitfall of the nation when funds that do not really exist are gambled and lost is not. A gambler’s thoughts are often described as innocuous musings and rationalizations to commence a dominance of the internal dialogue regarding when to quit and the irrepressible one more roll to recoup losses. National addiction to gambling is at an all-time high, and that is without factoring in speculative behaviors such as the stock market and short-sale real estate. It is no big mystery that our populace at all economic levels participates in games of chance, whether financial or otherwise. These behaviors manifest in a desire to attain wealth quickly. Sometimes that desire is born out of desperation because of debt, and sometimes originating from the inability to procure a level of financial comfort in reference to savings and retirement. The speculative nature of our national economy has a trickle-down effect from the Wall Street boardrooms to the living rooms of Middle America, where each entity will bet more than can be reasonably lost in an effort to better their respective financial situations. The main difference between the two being that an errant boardroom decision which precludes billion dollar losses has a good chance of being underwritten by the Fed, because that boardroom entity is considered too big to fail.
The deceptive nature of those involved in the procuring and spending of the bailout funds cannot necessarily be deemed criminal, but the audacity in which it was achieved goes beyond measure. The original proposals for small business written into the verbiage to pacify doubters and essentially to sell the proposals to Congress were readily disposed of, not being deleted just simply ignored. So the good faith and intention that was the inspiration of the Home Affordable Modification Program (HAMP) act and its successors were subsequently purged from the active applications of the bailout and not to be mentioned again until more funds were sought. When original bailout proposals were being drafted, some objected that if there were too many restrictions the banks would not participate (Taibbi). This could have been a turning point in this financial debacle; if financial institutions would not accept government money because of too many restrictions, then let the game continue without them, and provide the bailout money to those who are willing to participate within the prescribed guidelines. A wake-up call was missed at that juncture, for the same banks that would not participate because of conditions were more than likely the same that dealt out bonuses and funds for corporate retreats, which would have created an incendiary reaction by public and media in regards to the cavalier attitude in which the public funds were being dispersed. This would not preface enlightenment that the authors of the first bailout would be once burned and twice warned. In the subsequent bailout maneuvers, the recipients of federal funds used what was intended for economic simulation to pay off their previous TARP loans and what turned out to be a reduced interest rate. The American taxpayers were duped again, although indirectly as they were represented by the Fed and Congress. If financial conglomerates were subject to the same scrutiny and stipulations that a homeowner would have to face in initiating a new loan, one would find a great deal less irregularity in their financial behavior.
Legalities aside, the corporate bailout proved a travesty to the sanctity of American jurisprudence, since the regulators assigned to oversee the giant nest egg were out sleuthed by the media. If overzealous media personnel did not actively investigate the whole TARP fiasco, it’s highly possible that a great deal of the improprieties that occurred would have gone unnoticed by the government personnel assigned to the task. If the federal government were left to its own devices many financial misdeeds would be swept under the carpet or better described as blown away from the immediate area as the landscaper’s helper blows leaves from one yard to another.
It is criminal to allow funds to be diverted from their intended destination, to be invested in an ill-advised manner, and one must tread a fine line to follow the cash trail and then determine if legalities are infringed upon. Intent is a hard thing to prove and if the subject is a well-informed financial professional, the burden of proof becomes even more taxing. It is an honorable thing to catch and prosecute individuals that tamper with enormous sums of cash, although once accomplished the cash is rarely recovered. Even if a conviction was attained it accomplishes little for the people that suffer the most, the lower income citizens who least could afford financial difficulties. It seems as though good intention by the president and Congress was thwarted by corporate moguls whose thirst for profits has driven them to erroneous investments that result in financial hard times for everyone but themselves.
When the large conglomerates fail, the government will have to pay regardless of whether a bailout occurs, or have to subsidize thousands of workers who are suddenly without sustenance. The point of concern is whether the amount of cash can be monitored and directed to those who would most require the assistance. Essentially it would be ideal to have what human nature dictates, the innate behavior of helping beings in distress to be directed to feed the hungry not overload the coffers of the fabulously wealthy.
Confidence lost would be an accurate description of the bailout and its aftermath as the American people try to dig themselves out of a financial pit that was created when Congress allowed seven hundred billion dollars to be entrusted to unscrupulous financial entities that did not use their windfall as prescribed.
Exhaustive research has revealed financial ramifications of not only the bailout of corporate America, but also the core problems that led to the downfall of some of our largest and seemingly indestructible financial institutions. The leanings of our government, however noble in their original ideas, are to fix problems in an easy manner rather than solve issues from their core, which would be the most beneficial for the future. The continuance of these financial problem-solving philosophies will only add to their complexity and the longevity of their existence. If some semblance of restraint is achieved and a more critical thinking approach is adopted toward these financial endeavors there could be a chance for economic recovery. Leadership on all levels would have to work in unison to achieve financial recovery, as the political infighting is counterproductive to the process. The foibles of corporate America parallel a gardener blowing a mess of leaves to another yard rather than picking them up and mulching them, or at the very least just picking up the mess and moving on.
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