We are all suffering from the effects of the “credit crunch.” We saw the same thing in the mid-eighties, but with prohibitive interest rates. Thank God that is not happening now. But clearly we have not really learned a thing from the past, so we are doomed to repeat it as the saying goes.
Here is the scenario that’s playing out:
Bank officers want huge unearned salaries (greed). They think they earned them and will take “bailout” money without conscience and put it in their pockets. After all, the deserve it. They create products to sell that make no sense, like loans to those that can’t afford them (stupidity), but they succeed in writing this business and selling them off. This makes their institutions bottom-line look good temporarily, but creates huge liabilities that they conveniently ignore. The greed-mongers use these products to justify obscene bonus for themselves. And they are the ones that vote for their raises and bonuses.
Then the liabilities raise their ugly heads and bite everyone in the butt, but the officers have already run off with their loot (criminal, but rarely prosecuted). The stockholders and the public then pay to save the failed institution (more stupidity). We’ve seen this time and time again and there is a solution besides the guillotine, which is not a bad idea. Simply, a law that restricts combined salaries, benefits, and bonuses to a maximum of five or ten million dollars, unless approved by vote by all the stockholders. Fifty percent of stockholders would be needed for added compensation up to one hundred percent of base salary and bonuses. A seventy five percent approval would be needed for more then one hundred percent. This should be all it takes to prevent the debacle from reoccurring. You want a hundred million dollar bonus, great, get your stockholders to agree with that level of gluttony being justified. If not you’ll just have to panhandle with your barely above poverty level multimillion-dollar salary. Does that sound like I lack compassion for the plight of the execs? As their heads roll-off the block I just might feel something.
Ultimate greed, thy name is banker:
Now that the excrement has hit the fan, what do the banks do, return to common sense lending? No, they move to the opposite extreme, closing down the credit markets. Now, no one has credit, viable businesses shut down, and the economy comes to a rapid halt. BRILLIANT! Forget the extremist Muslims, and anyone else that wants to destroy this country. All they can do is exacerbate the situation. We will destroy ourselves! The gambit called unbridled capitalism is shown as the gluttonous stupidity it is. We cannot allow “free market capitalism” free rein. We cannot allow corporate execs to steer their companies in ruinous actions, while allowing them to rape their companies, grabbing large payouts. Gone are the days of loyalty to the longevity of the company. All that is left is unbridled shortsighted greed.
While this is going on we must beware of who buys our politicians, and who therefore influences rulemaking. Why it is the very corporations, directed by their execs that got the government to turn a blind eye to the unbridled debauchery that has destroyed our country. We must wake up, we’ve allowed all this through our complacency; it will not go away.
In conclusion the credit market must reopen immediately. Not as it was, a free-for-all, but not strangling everyone either. No doc mortgages with excellent credit, why not have them, but make sure there are severe penalties for lying and require accurate appraisals. The subprime market, only part of our economic issues, was nothing more then lending to those who clearly could not repay and did not have the credit worthiness that showed they would. Clearly it was a formula for foreclosure. But why has it affected everyone else. The concept of thesis, moving to antithesis, is supposed to balance out to synthesis, not return to thesis again, only to repeat. Yet, this is what we’ve seen.
Solution: Open up the credit markets again and arrest the thieves who looted their companies! Beheading their attorneys who protect them and showed them how to do this while avoiding prosecution is not a bad idea either.