And now for something completely different

[catsidhe]

So, the Great American Capitalism Meltdown. How about those crazy bankers, eh?

Now, it seems to me — a simple man, uneducated in such lofty matters — that these things are very complicated. Very complicated. And when I investigate reports on how this happened, there is a very good reason for this: because those who set up this whole house of cards made it as complicated as they could deliberately, so that they wouldn't be pulled up by auditors asking pesky questions like "is this a good idea?", or "is this moral?". or "is this legal?", or "could this undermine the very foundations of the money markets which are vital to the rest of the economy?"

And now that it looks like the answers to those questions are "no", "no", "technically" and "yes", the US government has come out with a Solution. Well, I say ‘US Government’, when really it is ‘a guy who made millions out of one of the companies now going broke, and sees his own worth disappearing if he can't give them lots of taxpayer money’. Po-tay-to, Po-tah-to.

But something strikes me about all this. This whole mishegas is based around people giving money to people who can't pay the money back, in the form of mortgages. These mortgages are, I would imagine, fungible things. I mean, several people might have invested in shares of a mortgage, and be entitled to a proportionate share of the profit, or someone might have taken out two mortgages, but each mortgage is one thing, especially from the point of view of the shlub paying it.

And now these companies, having done something silly by buying all of these mortgages, have gone bust. Who owns the mortgages? Who gets paid if the person can pay? Who is it who forecloses if they can't? I have no doubt that foreclosures will continue as normal, but is that legal if the person to whom you owe the money is effectively dead? I imagine that estates administrators haven't had time to get installed yet... maybe they have.

Moreover, what happens when the people who they borrowed the cash from to give to the people who couldn't pay it back have themselves gone titsup?

As far as I can tell, the deal with the $840e9 is that the government is effectively nationalising those institutions which can't be allowed to fail. (Who is determining whether they can be allowed to fail or not? Almost universally, people who do, have, or want to work for one or more of them. Conflict of Interest, much?) So, those who haven't already been fired will continue to get their 6- and 7-figure salaries playing roulette with other people's superannuations, and the sorry mess can continue to stand while it gets sorted out.

...

Sorry, I had to suppress a fit of giggles at that thought. “Sorted out” hahahaaaaa

Ahem.

So of the several ways this could be played out, there are three main tacks which I can think of, which can be summarised as ‘help the bottom’, ‘help the top’ and ‘help the middle’.

‘Helping the bottom’ would be to give the support (and money) to the cause of helping the people who are watching their debts go out of control. Either by declaring a debt amnesty on debts held by the broke companies, or by buying the mortgages from the holders or their estates administrators at knock down prices (’this or nothing...’), and setting up a corporation to handle the now less onerous repayments (or simply write off the worst).

Oh, wait, last time they did that it was called the FNMA. And they're one of the companies who dumped us all in this mess. But still, while it lasts, it could help the economy by putting money back into it at a human level, and the shitstorm could play itself out overhead and not get in the way of people actually making and doing things. (Really, though, wasn't the whole point of the FNMA to help mortgagees when it was more economically important that people have places to live than that Wall St bankers make 6 figure commissions? And didn't these troubles really start when, in the seventies, the Government looked at the FNMA and said “why are we running this? We have no business interfering in economic matters. We can't be trusted to: only private and unaccountable corporations can be trusted with this much money.” Oh, the sickly sweet irony.)

‘Helping the top’ is to let the companies involved fail and die as normal, sort out who their debtors and creditors are, and cover their creditors to a reasonable proportion of the bad debts. That way, those who screwed up get punishment (the companies die, the executives get sacked with prejudice), the mortgagees aren't any worse off (they still have their debt, it's just been passed on to some other, different, faceless corporation. The creditors are better off than they would have been, and can still do their thing of lending money to people (hopefully a little more wisely this time), and the Gordian knot of who owes what to whom gets Alexander's sword through it.

‘Helping the middle’ seems to me to be the worst of all worlds. Those responsible for making spectacularly bad decisions, and in the mess they made in the attempt to cover it up, proving that they knew it was dodgy from the get-go, get to stay alive. Under new owners, sure, but new owners who have a stated policy of not owning anything like this. So we can probably assume that things will go as they have, and those who have been getting exorbitant paychecks will continue to get them, and nothing will be sorted out in any meaningful sense. Those who have mortgages will be pumped for money they don't have by the people who should never have given it to them in the first place, and foreclosures will drive the price of homes through the floor (and while it would be good to have any US house price bubbles going at the moment be deflated, there are limits), which means that what money might have been recovered won't be, not when every house in the estate is on sale for pennies, which means that those debts will vanish: no good to the person whose house has been taken away, and no good to the person who takes away that house, because it's not worth a damn thing to them.

Oh, I don't know. I do know, though, that if the people who used to work for an industry and who now run the organisation which ‘oversees’ that organisation, ask for hundreds of billions of dollars to keep individual companies fat and happy functioning in the same way that caused the fuckups in the first place, then it is almost guaranteed to be a bad idea for everyone except for those companies.

And now I see on the news that it's gone through the House, gone up from the original 700e9 to 840e9.

I am not surprised.