With very little fanfare, a bearded bureaucrat about my age recently committed a bigger crime than our entry into the Iraq War.
Ben Bernanke, whose title is Chairman of the Federal Reserve Board, is committing half your country's capital -- $400 billion -- against securities he knows are bogus, home mortgages that should never have been made, collateral instruments that should never have been created. He compounded this crime yesterday by explicitly bailing out Bear Stearns, the investment bank which more than any other created this Big Shitpile.
The excuse, given even by liberals like Paul Krugman, was that Bear is "too big to fail."
Bullshit.
I am sick and tired of this crap about what "we" can't "afford" to have
happen. As far as I'm concerned, Bear Stearns has lost the right to
exist as a firm and its leaders have lost their right to walk the
streets. (What does J.P. Morgan think it's buying?)
You seize the firm, you appoint someone honest to oversee its operations, and you announce that liquidation will take place in an orderly fashion, over time, so as to minimize loss to the Treasury. Then you appoint a special prosecutor to make certain those so-called bankers do hard time.
Eliot Spitzer screwed a prostitute. The leaders of Bear Stearns screwed everyone. Who deserves jail more?
Even an orderly transition at Bear would hurt -- a lot. There are already too many sellers in the market, not near enough buyers, and this would just add more sellers. Which is why you announce you're holding. You do put that $400 billion at risk, but you don't toss it at people you know are crooks.
And what's at risk is, literally, everything. Bear's crimes have put the entire American financial system on the table, by creating trillions of dollars in securities backed by adjustable-rate mortgages that were bound to come apart at the first adjustment. Some will argue that Iraq itself is the proximate cause of this -- that the mass creation of phony money was done to pay for the war. Irrelevant.
That $400 billion the Fed laid out this week is money that's meant to protect your bank account, and mine, in case our banks fail. That's the money backing the deposit insurance which keeps us from running downtown, passbooks in hand, like our grandparents did 76 years ago. When that money disappears, there's nothing behind it -- no "good faith and credit" left to the United States. Your dollars, my dollars, all our dollars, become nothing more at that point than worthless paper. Argentine Pesos.
Fact is, this latest stopgap is not going to stop the rot. We're going to take the hit anyway. We should take it on our own terms, and not terms dictated to us by the criminals who got us into this mess.
When you bail out a criminal, you become a criminal yourself. Ben Bernanke has made us all party to the crimes of Bear Stearns.
Still just want to see Spitzer in jail?
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