The WALTHER REPORT
By Tony Walther
And the mighty and greedy keep falling. On the heels of the federal government bailing out investment house Bear Stearns, and then taking over the two mortgage giants, Fannie Mae and Freddie Mac (and banks, including IndyMac, failing), I’ve just read (Sunday) in the online New York Times that Merrill-Lynch, in the hole over bad deals in mortgage securities, is selling itself to Bank of America and the hapless Lehman Brothers, also caught in the mortgage crisis, is filing bankruptcy and headed toward liquidation because it could not find a buyer and the government refused to bail it out (thank goodness for that).
The economy really is the number one issue, or should be, in this presidential election, rather than the current popular attractions, “Lipstick on a Hockey Mom”, starring Sarah Palin, Queen of the Klondike, and “Escape From Hanoi”, starring aging playboy, Every time-I-Think-About-Being Held-Five-Years-in-a-Hole-I-Buy-Another-House John McCain.
It seems just like yesterday that I was listening to that smooth-talking stock broker-radio show host on KFBK in Sacramento with the tone of “greed is good” and if you make money you must be doing something right. And when he mentioned names such as Merrill-Lynch and Bear Stearns and Lehman Brothers there was that tone of reverence. And the message always was that if the government would just get out of the way, even more money could be made and we would all be the better for it under the God Ronald Reagan’s philosophy of trickle down economics (if my stocks are up, boy you can give me a shine). And the only French you need to know is “laissez faire”.
I’m sure that if he’s yet on the air he is still an apologist for the greed- is-good crowd, but I think it has been proven that all those money worshipers were not so clever as had been put forward. I mean basically they ran up a mountain of bad debt in the mortgage industry in the biggest Ponzi scheme ever perpetrated. Well maybe it was clever, but it was dishonest. But now their houses of cards have fallen, but they threaten to take down the country with it all.
I’m pleased at least that the government has decided not to come to the rescue of Lehman Brothers. I think there will have to be some failures and some lessons learned.
The danger, of course, is that our whole economy will collapse (and I guess 401Ks tied to investments are somewhat in danger), but really how strong is an economy built on deception? (we already know the answer to that.) And what good will it do to keep propping up a corrupt economy that will in the end bankrupt the nation?
As dire as things are, I think the economy will or can heal itself, if we let it, and if the conservatives, most of whom seem to call themselves Republicans, really believed in what they say, they would let it do just that with a minimum of government intervention, preserving the existing and limited federal bank deposit protections, of course.
And while I know nearly nothing of investment and securities law, it would not surprise me if existing laws on the books could go a long way toward protecting us from such imprudent and fraudulent investment schemes if only they were enforced by the regulating agencies.
P.S. With Bank of America already buying out the failed mortgage lender Countrywide Financial and now this, it is the largest brokerage house and consumer banking franchise in the nation, according to the Times. I wonder how vulnerable all this makes Bank of America.