Socializing Failure - Privatizing Greed

Part 1

Facing financial ruin due to their own greed and reckless behaviors, taxpayers were forced to bailout the banks and investment firms that were allowed to grow, encouraged by weakened and nonexistent regulations, to the point where they were considered “too big to fail.” Now that the numbers are in, we can see the success of the Bush/Obama bailout of the failed banking and investment industries. After hundreds of billions of dollars in federal (i.e taxpayer) bailout funds, the banks have recovered to the point where they are poised to pay out record bonuses, projected to be as much as $144 billion this year.

Who are the bankers that are in line with their hands out to receive this largesse? The very same executives and vultures who led their companies to ruin while designing and selling questionable mortgages and financial instruments to the taxpayers who were told that we had no choice but to rescue these folks from their own colossal failures. That same $144 billion (the equivalent of $1,230 per taxpayer) that will be used to purchase high end products like $1,000 bottles of wine, expensive cars, real estate and jewelry could pay for health insurance for 29 million Americans for one year, contributing to the economy in a way that high end products do not.

As if that is not enough, the bailout folly gets even more interesting. When the Obama administration was faced with the imminent meltdown of General Motors ad Chrysler, they turned to the old tried and not so true response, throw more taxpayer money at corporations that are failing because of their own incompetence. Crawling to Washington with their hands out, General Motors executives were able to wrest $22.5 billion from the White House, and their compatriots at Chrysler were able to get $9 billion. The third US automaker, Ford, did not ask for nor did they receive any bailout funds.

Coincidentally, in the current Consumer Reports Annual Reliability Report, only 20 of 48 models produced by GM received a rating of average reliability or better; and, fully 1/3 of Chrysler models were rated below average. On the other hand, the one company that did not come crawling to Washington with its tail between its legs, Ford Motor Company, receive a rating of average or better on 90% of its models. So once again, we found ourselves in the position of rewarding incompetence at the expense of the already stressed American taxpayer, who was left to fend for themselves, whether or not they contributed to their own woes or were the innocent victim of another’s greed and unscrupulous activity.

In contrast to the quick bailout of Wall Street and US auto manufacturers, little has been done in Washington the stem the foreclosure crisis. The main stumbling block to providing massive government aid to help keep people in their homes, prevent increases in homeless families and stabilize communities across the country, is the fear that we may be using taxpayer dollars to help people who bought houses they could not afford. This line of thinking completely ignores the role of the very same investment bankers that created the sub-prime mortgage and other gimmicks to trick people into buying homes they could not afford or signing onto variable rate mortgages with huge interest rate increase built in. So we, as a society, can only see our way clear to help bailout companies whose failure is monumental and caused by their own greed or lack of ability, while we let families flounder forcing them to “take responsibility for their own actions.” If responsibility for one’s own actions even existed in the lexicon of Wall Street, they would not have the audacity to pay themselves huge bonuses mere months after begging for public funds.

The irony in this whole scenario is that while the government sits back and allows millions of families to lose their homes, while making it easier for new home buyers to purchase these foreclosed homes, these families who are faced with economic ruin are forced to contribute to the bailout of the same people who sold them their faulty mortgages or built their unreliable cars. The cost to each and every taxpayer to prop up GM and Chrysler so that they can continue to build unreliable cars with a made in US label is approximately $269.23. That added to the estimated cost of the $787 billion Wall street bailout of approximately $6,812 per taxpayer, totals more than $7,000 for each and every US taxpayer. That same $7,000 spread across families facing foreclosure could have prevented 100,000’s of families from losing their homes, helping to stabilize many communities that are experiencing a free fall from the spate of foreclosures in recent years. These families get nothing, their communities get the fallout of risky banking, but the Wall Street bankers get to keep their $114 billion in bonuses, laughing all the way to the bank – so to speak.

In part two of Socializing Failure – Privatizing Greed, I will look at the impact of the financial meltdown on nonprofit organizations. Just as the failing economy has resulted in vast increases in need for the services provided by these groups, the resources that they depend upon to survive are drying up, but there is no talk of a government program to help stabilize these organizations that provide stability and support for communities in every corner of this vast country, while employing millions of people.