Treasury Opens Vault; Gangs of Robbers Rush In

As the fierce lobbying and politicking proceed on the government’s proposed bailout of banks and other lenders holding iffy paper (not necessarily related to mortgages, it now appears), one thing is perfectly obvious: if you invite people to steal from their fellows, using the government as a middleman, a great many will avail themselves of this opportunity.

The government’s proposal was originally aimed at aiding commercial and investment banks, ostensibly to relieve the so-called credit crunch. Other plutocrats resented being left out, however, and they have quickly marshalled their political forces to gain a piece of the action. As the New York Times reports today, “nobody wants to be left out of Treasury’s proposal to buy up bad assets of financial institutions.”

So, the Times reports, the Financial Services Roundtable is urging that “a wide variety of institutions should be able to take advantage of the bailout, and that these companies should be able to sell off any investments linked to mortgages.” And why, pray tell, “should” they have such a privilege? Why, simply because the booty is there for the taking, and no one should get it while others go without!

Already the scope of the government’s proposal has been widened to allow the Treasury to buy not only mortgage-related paper, but “any other financial instrument.” After all, why be stingy, especially considering that it’s not the Treasury officials’ own money they’ll be spending, but yours and mine, dear taxpayer?

Small banks want the government to buy “loans they made to home builders and commercial developers.” Big banks want certain accounting rules suspended “to avoid taking big losses on the assets they sell to Treasury.” I want a maid, a gardener, a valet, and a cook, along with a few billion dollars to tide me over until my next mistake.

Other bankers are pushing to include municipal securities in the plundering free-for-all, “as part of a broader effort to restore investor confidence in money market funds”—and, by the way, to save their own rear ends.

Big financial firms are angling, too, to become the government’s agents in handling all the “securities” it is about the acquire with the $700 billion (or—don’t be surprised—more) it will spend to carry out this travesty of saving civilization.

Not to be outdone, the Democrats, ever the friends of the Little Man, are bleating for a broadening of the bailout to reach distressed homeowners directly. So, the Treasury should not simply absorb the mortgages and other rotten paper in the lenders’ possession, but also should suspend the contractual obligations of John Q. Deadbeat, who took on a mortgage he could not afford to pay off under the assumption that house prices would rise forever and, if they didn’t, he would simply walk away from his promise to pay, having no equity in his house anyway.

I hold in my sweaty hands a news release from thirty-five “leading consumer, labor and civil rights groups” that advocates: “bailout must include relief for homeowners facing foreclosure, not just Wall Street.” This manifesto, which is addressed to “Dear Member of Congress,” states:

The undersigned organizations strongly urge you to include court-supervised mortgage restructuring for American homeowners to allow them to save their homes in any legislation that would use our tax dollars to bail out the financial services industry from its self-imposed crisis. Purchasing subprime and Alt A private securities will not provide the government with any legal ability to modify loans and keep families in their homes, which is necessary to stop the crisis. We cannot support legislation that fails to help the millions of families in danger of losing their homes, while spending hundreds of billions of dollars of taxpayer money to bail out those who caused the problem.

In other words, the government’s humongous bailout for fat cats is a looming disaster; the only way to make it acceptable is to multiply its disastrousness by a factor of two or three. As for the taxpayers, let them eat cake.

This letter/press release is signed by the usual suspects on the left, including the AFL-CIO, Consumer Federation of America, NAACP, National Council of La Raza, Rainbow Push Coalition, U.S PIRG, and the National Fair Housing Alliance. It’s an almost complete list of the groups that faithfully support the Democrat in every election, no matter who or what he or she may be in addition to being the Democrat—a set of groups, in other words, for whom the currently sitting president has never shed a single tear.

No matter. At times such as the present, when politicians and well-connected interest groups are attempting to stampede the public into acquiescing quietly as it is being plundered mercilessly, everybody with any political clout is a potential looter. Come one, come all.

Robert Higgs is Senior Fellow in Political Economy at the Independent Institute, author or editor of over fourteen Independent books, and Editor at Large of Independent’s quarterly journal The Independent Review.
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