By on October 7, 2008

President Richard Nixon’s transcripts of the missing 18.5 minutes on the Watergate Tapes admitted that he’d contemplated the possibility of suborning evidence. “We could do that,” the words read. “But it would be wrong.” Of course, Tricky Dicky said no such thing. As we all know, politicians are sleaze-bags who’d steal $700b of your children’s taxes just for one more shot at re-election. But it’s a nice thought: a man of power contemplating a quick fix– who pulls back at the last second because of moral qualms. I’m sure there was an occasion when Fannie Mae and Freddy Mac’s guardians faced a similar [real] moment of truth. “We could write billions of sub-prime mortgages to people who can’t afford them… but it would be wrong.” By the same token, GM didn’t have to rely on “Zero Percent Financing for Anyone with a Pulse” to keep factories chugging along. (Ditto Ford and Chrysler.) They chose to do so. If American automakers didn’t understand the implications of their actions, we should not protect them from the consequences of their decisions. If they did, we should still stay out of it. Responsible companies find new ways to make mistakes. Irresponsible ones adhere to Albert Einstein’s definition of insanity. More than that, enabling Motown to “have another go” at doling-out easy money will only hasten their destruction, not prevent it.

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17 Comments on “Daily Podcast: All of the Responsibility, All of the Blame...”


  • avatar
    menno

    I had no idea that the $850 Billion bail-out included a section where the government can simply “change” a contract (mortgage) to reduce the amount of interest AND PRINCIPAL owed by the borrower. I wonder how many of our esteemed (?) Congressmen and Representatives even knew ? (OK I’m sorry for the extreme SARCASM but that’s their title) And if they did know, they just committed illegal acts in passing this bail out, which makes the law null and void (illegitimate) along with THEM – but just try to reason with anyone about THAT fact and see what happens. Kind of like arguing with the Stazi before 1989 that East Germany was an illegitimate government – know where that got folks?

    See for yourself. Have a listen to the only sane man left in Congress, Ron Paul, talking to the Christian New Service.
    http://www.cnsnews.com/public/cnsnewstv/video.aspx?v=e4kUZuZu6U

    Know what this means? It means this country is finished. Think there’s a “liquidity” problem brewing now where people can’t get loans? Like new car loans now 20% successful even for people with good credit instead of 95%?

    What’s going to happen when the salient fact about mortgage contracts sinks in at the banks? Look at it from any sane lender’s point of view.

    Who is going to lend out ONE RED CENT to anyone when the government (illegitimate as it is makes no difference) can simply alter the contract – always to the benefit of the borrower?

    Add on top of that the fact that our government is actually insolvent – BANKRUPT. As in, we collectively owe way more than we can earn, or ever pay back. As in EVER pay back.

    We’re screwed. So are Britain, Europe, Japan, China, Russia. We’re all on the Titanic re-arranging deck chairs as of now, and slipping on iceberg ice on the deck while we’re about it.

    India might survive economically. They don’t rely upon exports, but have their own economy. Ironic that India might be the only solvent, only super-power left in the world by next year, isn’t it?

  • avatar

    Someone on NPR said that Fannie Mae got bailed out after a phone call from China to Bush, where they said that if Bush didn’t fix the problem they’d stop buying U.S. debt.

    Anyone know more about this?

  • avatar
    AKM

    Totally right. However, let’s be honest too: anybody who chose to borrow while actually not being able to afford the associated cost is in the same predicament, whether they’re bankers, lenders, or people maxing out their credit cards or buying more car/house than they could afford.

    I personally don’t think the world is coming to an end, but we’ve had a long, long party, and the hangover is really bad. But deserved.

  • avatar
    Casual Observer

    I would trust an NPR report on Bush to be about as accurate as a Limbaugh report on Obama.

    We’ll be fine; it’s not time to freak out, and you don’t do yourself any favors by letting your life be consumed with gloom and doom. We are the strongest country in the world, and we will continue to be. Now is not the time to retreat to the basement.

    Football stadiums are at full capacity on Sundays, you still need a reservation to get a room in Vegas, and I still see 8 people at the pumps everytime I pass a gas station.

  • avatar
    michaelC

    Michael,

    re: Fannie Mae

    I cannot confirm that claim. In bailing out Fannie and Freddy, the powers that be had a choice between sticking it to the shareholders or the debt holders. The shareholder paid the price and not the Chinese, Arab states (SWFs), Pimco and others who hold the debt. It’s usually not hard to figure the political calculation in Washington. In this case the foreign investors were protected using taxpayer money.

  • avatar
    bunkie

    “…India might survive economically. They don’t rely upon exports…”

    As an IT guy, I have to challenge this assertion. India relies heavily on the export of their labor, because every one of those call centers and IT shops is doing work for US and European companies. It just doesn’t look like conventional exports.

    And what do you think will happen when unemployment in the US and Europe goes through the roof? There’s going to be an awful lot of pressure on politicians to change the laws to make off-shoring very, very expensive.

    And, finally, the power to modify contracts after the fact has always been held by the courts and, specifically, by bankruptcy courts. At least it was like that until the last bankruptcy-reform law passed which took much of that power away. As I understand it (and I could be wrong), the bailout bill restores that power to the courts.

  • avatar
    bjcpdx

    Those who are devoid of conscience don’t refrain from doing something because “it would be wrong”. They refrain from doing something when the risk is too great that they will be caught and prosecuted.

    Nixon thought he could get away with it and it turned out he was wrong. Fannie, Freddie and the rest of them thought they could get away with it and it turned out they were right.

    When we rely on “self-regulation” of corporations, we should not be surprised at the results. Government is bad when it wants to regulate you. Government becomes good overnight when it wants to give you a $700 billion bailout.

    And now the Treasury is being looted because the politicians know they can get away with it.

    Who says crime doesn’t pay?

  • avatar
    Richard Chen

    Odyssey sales were almost that good: 10,783 last month, more than total Flex sales. It’s down 14% YTD, 112k vs. 130k vans moved last year.

  • avatar
    jkross22

    Yes Menno,

    We’re all so screwed.. if only Ron Paul was here to save the day, all would be right with the world.

    The days of easy credit and lax lending are over with (for now). While just anecdotal, I’m in the middle of a house refi, so the people running around with their hair on fire about no credit being available aren’t telling the whole story.

    Yes, it’s tougher to get credit, but it is available if you haven’t been completely irresponsible.

  • avatar
    Vorenus

    Guys, why are you SO cordial when recording these podcasts?

    Can you greet each other with insults *just once?* I’m just trying to confirm that you’re *not* from the Victorian era.

    Thanks!

  • avatar
    mel23

    @Michael Karesh:

    I haven’t read specifically about a call to Bush, but I’ve read several times about a reduction in foreign buying of our debt. In the last month though, the USD has gone up substantially re. the Euro. Hard to understand that so many additional dollars being pumped out don’t/won’t dilute the value of each at some point. The seizing of credit goes beyond the US of course, but we’re champs in inflated housing prices and huge credit card debt.

  • avatar
    NickR

    They refrain from doing something when the risk is too great that they will be caught and prosecuted.

    More like ‘They refrain from doing something when the profits aren’t so vast and their own arrogance isn’t so great that they completely overlook the (remote) possibility of being caught and prosecuted.’ Just look at that f**ker from Lehman testifying yesterday.

  • avatar
    jaje

    A very large number of those who were rejected by Toyota or Honda went to Mitsubishi or D2.8 to buy a car – the ones who were too big of a credit risk. Great that b/c of the need to sell cars b/c they built waaaaay too much of them to individuals who at the time had very, very bad credit (for a reason), our gov’t has to bail them out. People are fickle and jump from one crisis of concern to another – D2.8 is trying to match their production to this after the fact. So instead of creating a lineup that is competitive across the board they are a step behind during each fad. All examples of incompetent management and bureaucracies that would make even the Federal Gov’t blush.

  • avatar
    Gottleib

    “The road to hell is paved with good intentions.”

    ever hear that one? well we now see that helping the marginal buy houses is what has led us to this hell, that and making credit the solution to our economic problems. Now is the time to get real, begin working on solutions to our economic problems and realize that the consumerism is not the answer.

  • avatar
    geeber

    mel23: The seizing of credit goes beyond the US of course, but we’re champs in inflated housing prices and huge credit card debt.

    There has been a great deal of speculation in European housing, too (particularly in Great Britain and the Netherlands), and their governments are facing debt problems even worse than ours. So I wouldn’t say that they have ncecessarily been more prudent or responsible than the U.S.

  • avatar
    menno

    “Someone just blinked”

    The South Koreans have stopped lending to the US.

    Next?

    BTW, I stand by my assertion that India may financially “survive” when all others fall.

    Indians buy physical gold, the rest of the world seems content to buy US debts (well, except for the South Koreans, now).

    And yes, Britain and Europe and Russia are even worse off than the US.

  • avatar
    Landcrusher

    RF,

    Well said.

    Menno,

    If gold made for good economies, Spain would STILL rule the world. In fact, it was gold wealth that prevented Spain from ever building a good economy.

    The reason everyone buys US debt is simply a vote on our high level of private property protection and lack of socialism. That is why those loans will start to dry up as we continue to watch capitalism be voted down in the US.

    EDIT – I forgot the fact that we are militarily the biggest dogs on the planet. There are lots of folks who realize that means something.

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