The Wolf Howls Correctly

Crazy meeting day and Mrs. Fundman and I have a "date" later, so not much posting today. However I couldn't resist a little something from the best column I've read critiquing the Bank Bailout Plan by Martin Wolf. The key quote:

the government has ruled out the only way of restructuring the banks’ finances that would not cost any extra government money: debt for equity swaps, or a true bankruptcy. Economists I respect – Willem Buiter, for example – condemn this reluctance out of hand. There is no doubt that the decision to make whole the creditors of all systemically significant financial institutions creates concerns for the future: something will have to be done about the “too important to fail” problem this creates. Against this, the Treasury insists that a wave of bankruptcies now would undermine trust in past government promises and generate huge new uncertainties. Alas, this view is not crazy.

If he's right, Obama is putting a HUGE bet on the "too big to fail" argument with a plan, heavily subsidized by the Feds with our money, that most serious people believe won't solve the underlying problem. He notes earlier in the column that IF this plan fails after hedge funds and bankers have made money from the government subsidizing the risk involved in buying these bad assets, the banks will still be screwed up. He worries that this situation "is going to convince ordinary Americans that their government is a racket run for the benefit of Wall Street."

Don't worry Martin, most Americans already know that. However in the past most of us were making money along the way, so we tolerated it like a successful business tolerates paying protection money. The real problem now is that we are transferring the funds to Wall Street while we're all getting killed in our investments. That's too much to bear. Let me provide an example from U.S. history to illustrate.

In Mike Royko's classic book Boss, there's a police scandal in Chicago in the 1960's, which sounds weird because the Chicago Police Department was one of the most corrupt in America in the 1960's. But this one was different. Officers were literally breaking into people's homes and businesses, not just shaking down criminals or taking bribes. As Royko put it:

The public was genuinely shocked. It's one thing to take a few bucks to overlook an illegal U-turn; but even Chicagoans could become indignant at the thought of policeman jimmying the locks of appliance stores and loading up their trunks, on city time yet.

We'll put up with Wall Street owning both sides of the Duopoly, as long as we are largely left alone, not unduly burdened with taxes, AND making a decent living. When it gets out of control all bets are off. Obama's from Chicago; he should pick up Daley's book and study it. Then he should tell the bankers, and their whiny powerful creditors, to sleep in the beds they both made and stop asking the rest of us to bailout out their audacity and stupidity.