The financial chickens are coming home to roost, but alas, it’s the consumers of chicken that are getting deep-fried in the meltdown.
After the Sept. 15 failure of the giant Lehman investment firm, the rescue takeover of Merrill Lynch by Bank of America, and worries that worldwide insurance giant AIG might go under — all that wiping out more than $400 billion in stock market value in just one day — we may now be paraphrasing Caesar’s warning to “Beware the ides of September.”
Millions of Americans watched the value of their IRAs, 401(k)s, homes, and other investments plunge into yet another freefall, amid the ongoing failures of financial institutions considered rock solid, spiraling inflation that’s erasing the value of their stagnant earnings, and a deepening recession that evokes fears of even worse to come.
In that grim scenario, the half-hearted assurances of the Fed chairman, the president, and others that things will be OK if we, like Peter Pan, clap our hands and only believe, rang somewhat hollow.
How ironic that in recent decades the long-held image of the gimlet-eyed, staid, overly cautious banker and financial manager, fiercely protective of the money entrusted to him, has morphed into that of a high-flying manipulator of complex investment vehicles that involved abnormal risk, but promised rich rewards as long as the house of cards didn’t collapse. Under-30 brokers have routinely been knocking down million-dollar-plus salaries and bonuses, while the head honchos of their firms got hundreds of millions in compensation and perks.
All this was aided and abetted by presidents and Congresses assuring the public that if government stepped aside, got out of the regulatory/oversight business, and market forces were allowed to work, well, hey, everything would be hunky-dory.
McMansion and Mercedes became the goal du jour and the country went on an unparalleled binge of credit, piling up massive amounts of personal and government debt. It turns out a huge chunk of the personal credit being extended by the supposedly rock solid financial institutions was unqualified or downright fraudulent mortgage loans.
Meanwhile, a spendthrift government was racking up record debt after record debt, only exacerbated by the hundreds of billions of dollars funneled into the Iraq war. And when the oil/energy noose started tightening and an even greater gusher of dollars began flowing to the Mideast, an already shaky U.S. financial situation became all the more vulnerable.
Members of Congress, increasingly embroiled in partisan wrangling and the constant fund-raising necessary to perpetuate themselves in office, abandoned more and more of their regulatory/oversight powers, hewing to the administration’s mantra, “Get government out of business — let the free market work.”
So, let’s see, the rewards of that laissez faire approach have been an airline system that’s a joke, a railway system that’s a national shame, a telecommunications system far behind other leading nations (South Korea, for heaven’s sake, is leaps ahead of the United States in broadband access), and a crumbling infrastructure of roads/bridges/waterways that needs many hundreds of billions in upgrades.
But not to worry: the high-flying execs of the failed brokerages and banks have their millions as a result of our hands-off approach.
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