The government is finally about to start buying up the garbage assets that all the big banks are holding. From the WSJ, still owned by the same people who brought you When Animals Attack:
This one is going to be a public-private partnership, wherein the government will pony up a lot of the capital ($500 bil to $1 trizillion) and private investors will pick up the rest. Ideally I assume this would make a portfolio of 2,000 distressed credit-card receivables cheaper than current prices, such that someone out there would still be able to collect on enough of them to make it worthwhile.
I think this is what needed to happen all along, and for all the correct arguments about moral hazard — I met enough arrogant bankers in New York to know that they completely disregarded the idea of consequence long before this debacle — the Republican preference to let the national ship sink for the sake of principle is callous and stupid. I don’t know about you, but if I was just some working-class Detroit guy chillin’ homeless and broke in the event of a complete financial crash, I wouldn’t be telling myself, “Dude, I really showed those bankers.”
And as for tax increases to fund the spending, there’s always the Chinese and Japanese, who will keep lending us money as long as we buy their stuff and maintain a favorable exchange rate for their exports. That fact worries me more than the rest of this, but hey, one thing at a time here!
Though I was busy finishing up Winter A for the past week, it doesn’t mean I haven’t kept up with the world. (Sage RSS sidebar = a favorite of mine.) So here’s a burst of opinion:
My newest senator Roland Burris grows more as an embarrassment each day, but what’s even more embarrassing is the way the Senate was originally going to block his appointment, yet instead completely rolled over and let this dude sit with the nation’s foremost legislative body. Lame. And now proven so!
Next topic of choice is Rick Santelli, a reporter for CNBC who went on a tear about subsidizing foreclosable homes via the stimulus package:
I was reading this NY Times Opinionator roundup of people’s take on the matter, and naturally there’s absolutist sentiment on either side: either the nation is only angry at people who took out bigger mortgages than they could afford and put the country in this predicament, or they are solely angry at the traders and capitalist machinery that went beyond common business sense and put the country in this predicament.
First off, nobody outside the financial community watches CNBC in the first place, so this is hardly cause to nominate the reporter for president. (For real, I mean there’s hyperbole, and then there’s hyperbole.) Secondly, those traders in the video do seem to be completely ignoring their and their bosses’ own role in the mess, but I think if the country’s angry at anybody, it’s angry at both groups. Plus, the thing that both have in common is a desire to live beyond their means outside the bounds of rationality, so you’re really talking about two sides of the same coin.
“I think they’ve always been a good value to consumers,” Ettinger said of brands like Spam, Dinty Moore stews and Hormel Chili, which all grew in the quarter ending in January. “Our company really prides itself on being a leader in value-added meals that feature meat.”
Goofy b-school terms are often running through my head while I eat meals, so I’m proud to now put the rest of you in the same predicament.
I did learn a nice history of the lending industry from the article, in particular the industry’s shift in focus from demanding repayment to collecting fee-based income off of ever-rolling debt. While the credit-card industry, and certainly the mortgage industry of the past few years, often embodies the term “predatory capitalism”, it does seem that the article shifted too much of the onus for America’s debt problem away from the public. This is similar to media outlets who generally avoid putting any blame on the voting public for America’s political messes, for obvious business reasons. (What audience wants to be told that it’s the proverbial box of dull tacks? I prefer my mental tack sharp, thanks.)
Maybe I’m too harsh, though, because the writers and editors might have been making a point on the sly about the general public by choosing the subject that they did. Ms. McLeod — no relation to Connor, who has a far better repayment cycle with which to work — really makes one unfortunate (read: not well-thought-out) decision after another. From spending her already debt-addled medical recovery cruising QVC, to adding her 20-year-old son onto her second home-refinancing and ruining his credit too, I really don’t understand what made her do what she did.
So that raises the question: What really has made debt-laden ‘Mercans turn away from the admirable saving habits of back in the not-that-far-off day? Why is “I gotta have it” such a seemingly more powerful motivator across society now than it was then? This was the topic of conversation between The Wife and me. We came to one important conclusion that’s both seemingly unrelated but not that surprising: television.
The modern debt cycle really started to germinate at about the time the TV-raised Boomer generation was earning enough money to buy homes, sign up for credit cards and pop out Millennials like your gracious host. Boomers had grown up with TV, which based on its sheer volume of audio and visual stimulation was inevitably packed full of product pitches and brand names. Sure, their parents — the Greatests — were watching TV too, but the Depression experience burned the saving ethic into their parents’ heads for life. Greatests learned back then to do things like wearing the same six velour jumpsuits for 30 years. (Which is smart — over time this actually becomes cool, what with the roundabout cycle of retro hipness.)
Boomers weren’t about to wear velour jumpsuits; velour is too hot in summer, and after a childhood of American prosperity and the enveloping nature of TV advertising, they had to get that fine narrow-lapel suit to go with the Commodore 64 for the kids. Advertisers, too, were well-aware of just how good a job TV had done to implant the “buy stuff” message into America’s collective mind. Over time they shifted from making their products attractive to making access to their products a moral right — “You deserve a break today” and “Live richly”, not just “Our McNuggets taste totally rad” and “Hey, peep out this low interest rate.” This newly created sense of entitlement grew strong until too many people didn’t bother to use their better instincts, and the things they felt they needed encompassed even luxury goods that were previously — and still probably should be — considered impractical on the average income. Cue up many of my generational peeps growing up in this environment, who should nonetheless know better than to spend that percentage allotted for savings on Manhattan rent and cosmopolitans, and the cycle continues. (Also, thank you, Mom and Dad, for teaching me how to save cash and how to avoid becoming a spoiled jagoff.)
