Tuesday, September 30, 2008

No bailout just yet

I am not sure how I feel about this whole economic bailout thing. Well, I know I don't like it, but on the other hand, we need to do something, right? Or the whole country will implode. Or something like that.

I am the first to acknowledge that I don't understand financial markets or how they work. It's all so much hocus-pocus to me. Hell, I can hardly balance a checkbook. OK, actually I can't. But I at least understand the theory behind it.

So anyway, it seems to me that there are lots of banks that made lots of really bad decisions. They gave out loans and mortgages for zillion-dollar homes to welfare moms, Wal-Mart employees and others whom they knew would be unable to make payments should the interest rate ever go above, say, four percent. Now it begs the question here - if someone is on an income that is essentially fixed - social security, pension, low-wage, dead-end job with no prospects of a substantial raise, EVER, why would you write a loan with a flexible interest rate? Why would you do that? Do you really want to repossess that double-wide? How many properties does the bank really want to own when things get tough?

I have never understood the appeal of variable-rate mortgages. They seem like a big gamble and a bad idea. Take a fixed rate loan, even at a higher rate (say 7 percent instead of 4 percent) but at least the poor schmo paying the bills is not going to see his mortgage jump from the $800 a month he can mostly manage to the $3,000 a month he hasn't a hope in hell of meeting. Why would you write something like that? I don't get it.

I know enough about life to know that all things go in cycles - weather, hemlines, politics, interest rates. Stuff goes up for a while and everything is happy, then it goes down and the world has to readjust. Sometimes we find a gold mine and go crazy mining it, and then the gold (or sea urchins, or lobsters, or whatever) runs out and people have to find some other way to make money.

My Congressman in Washington is Mike Michaud, a Democrat from the Millinocket area - a paper mill town, for those of you from away. I wrote to him yesterday before the big vote on the bailout package. I didn't even say "support this" or "don't support this." What I said was: this whole thing stinks. I am not crazy about bailing out people who made bad decisions with someone else's money.

A few years ago, I went through bankruptcy. It sucked. I didn't have much, but what I had I lost. Land that my grandfather had bought. I was left with my car and some tools. Oh, and a big fat student loan that I still have to pay off. My creditors lost some on the deal, I don't doubt it. Not much in the grand scheme of things, but enough that they won't be giving me any loans right away. That bankruptcy will be on my credit for 10 years. It will take all of that time and more for me to get my shit back together. It will take the economy probably 20 years to get to the point where there is enough money and credit available so that I can buy a house. That would be nice - to own my own home. Only in 20 years, I'll be 63. That is NOT when I had planned to be getting a mortgage, it's when I had hoped to be making the final payment.

But what I told Mike was that when I filed for bankruptcy, nobody bailed me out. There were (and remain) some harsh consequences for my poor judgment, and the world treats me differently than it would if I had a respectable credit score. I lost things that were dear to me. It sucked. It changed my behavior and my outlook.

And I want the same thing for those guys on Wall Street. I want them to know what it is to live close to the bone. I want them to lose things they value and hold dear. I want them to have to figure out a new way of living.

And this is not because I am bitter about my own experience. Truly, that painful process was the only thing that could have brought about the changes that came. Pain is often necessary for growth. Without it, we have very little incentive to not repeat what we have done if it felt so good (spending money we don't have).

So anyway, I wrote some of this to Congressman Mike. And yesterday he was one of the guys who voted down the anointed solution and is now getting all kinds of crap from all corners. But I wonder. I wonder how many people there are out there like me - people who have had a rough time financially and who resent the hell out of bankers getting bailed out while families lose their homes. I wonder how many of us wrote to our Congressmen and I wonder how many Congressmen listened.

There was an interesting coalition of opponents to the bailout plan yesterday. There were conservative Republicans who saw the whole thing as four quick steps in the direction of government-controlled markets and socialism, and there were some liberal Democrats who saw the bailout as rewarding bad behavior. That was enough to throw a wrench into the works and make it stop for a bit. On the other side there were the two-thirds of the rest of the Democrats who pretty much have been doing what they've been told to do by the Bush administration lo the last seven years.

Finally people got fed up and bucked the "leaders" who were really more like apologists for the administration. Mike Michaud is generally one of the guys who goes along with the majority. It was nice to see him take this stand.

I have faith that Congress will now go back to the drawing board, open its ears just a little more, listen to what people are saying, and come up with something that does not make the American populace retch. If Wall Street bankers have to freak out in that time, let them. It is good for them to be afraid. What I'd really like is for them to start getting phone calls at home from bill collectors. In the morning and in the evening, right at supper time. Preferably when they have company over. That'd be a nice touch.

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