For all the talk about “tolerance” and “diversity” from the media, entertainment, and political elites in New York and D.C., have you ever wondered how many people you personally know and interact with regularly who lost their home in a foreclosure, who have never driven a car newer than ten years old, or who have never flown in an airplane, or who coupon shop at the grocery store? I rub shoulders with people like that every week. Church is the great equalizer in that people aren’t accepted on what they have done for God, but rather what God has done for them.
In September 2007, a full year before the great financial collapse, I was aware that financial troubles were brewing, despite what my Republican colleagues were saying on command, directly from the talking points of the Republican National Committee.
It wasn’t because I was an economist or a sociologist. I just traveled, met a lot of people, and listened. I asked them lots of questions, and I listened some more. The evidence was overwhelming and obvious to all unless one had been living “in a bubble.”
One often hears of “trickle-down economics,” a popular conservative notion that when the economy for the top earners in our society gets better, the effect will “trickle down” to the rest of the people. That’s largely true. But what I never hear the pundits discuss is that the inverse is true; a good economy may start at the top and trickle down to the bottom, but a bad economy usually hits the poorest people first and hardest, and it eventually works its way up to the top. When it does reach the top, it’s catastrophic because it completes the full circle of the citizenry in the collapse.
One of the comical observations I have made is that each month when job numbers and economic growth are reported, the economists always express “surprise.” Being an economist must be interesting since they are paid handsomely to be wrong most of the time. If the economists were to spend more time in Bubba-ville, they wouldn’t be so surprised. They would start seeing the economic turns more quickly. Instead, every month, we learn how surprised the economists are about whatever numbers they are reporting.
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I well remember the derision I received from the Wall Street Journal editorial board and many of the TV commentators for my comments stating that the economy wasn’t working that well for the people lifting heavy things and getting hot and sweaty to make a living. After all, officially, things were going “swimmingly well” for the swell. I was pretty much labeled a bumpkin, uninformed, and lacking in the sophistication that the better bred elements of our party were blessed with.
My vindication came exactly a year later, September 2008, when America’s economy took a nosedive. It was in the heat of the 2008 Presidential campaign. By then, John McCain had long since surpassed me as the last man standing and gained the nomination. A young, energetic senator from Chicago, Barack Obama, had captured the nomination of the Democratic party. What had been a campaign largely about the war in Iraq suddenly became a campaign about the domestic economy. Major banks, huge insurance giants, and investment brokerage firms were said to be teetering on the brink of collapse. If they went down, we were told, the world economy as we knew it would go over the edge. It was the Apocalypse!
What was the remedy? To let the same people who engineered the train wreck drive the train and in fact even design the new train! Much to my chagrin, the Bush administration turned to Treasury Secretary Henry Paulson, former CEO of Goldman Sachs, who concocted a massive bailout for the nation’s banks and major financial institutions, including his old firm, Goldman Sachs. No cronyism, I’m sure. But it was $700 billion worth of corporate welfare that all good conservatives were supposed to salute, even though the notion of the federal government stepping in to rescue the most heavily capitalized institutions in the world seemed completely unseemly.
I was stunned at the people who crowed during the 2008 campaign that they were so much more conservative than me, yet they thought a legitimate function of the government was to take the money earned by the middle class and paid in as taxes and redistribute it to the wealthiest and most powerful companies in America. Every attempt to protest the TARP (Troubled Asset Relief Plan) was countered with, “We have no choice!” I said TARP was misnamed. It should have stood for the Congressional Relief Assets Plan, or CRAP. It was just that.
Then and now, I believe there is always a choice to be made on the basis of principle. And Republicans miserably failed in 2008 to apply principles. Instead, we caved to pressure from the biggest political donors who dug their own hole by turning Wall Street into the largest casino on the East Coast.
To my knowledge, I was the first person to call the actions of Wall Street a “casino,” where instead of investing in things of tangible value, investors instead wanted a quicker path to a bigger payday and began betting not on tangible goods and services, but on what a good or service might be worth in the future. The main difference between the Wall Street casinos and the Las Vegas casinos was that in Vegas, if you lose, you have to pay for your losses. In Bubble-ville, the government will offer other people’s money in huge amounts to protect the guilty at the expense of the innocent.
I feel now as strongly as I felt then—government had ceased to be about solving problems, but had become all about a level of crony capitalism that if practiced in the private sector would result in jail terms. Instead, the very people who had crafted the destruction of the American economy were rewarded with government bailouts and bonuses. At the other end of the economic class, a lot of middle- and working-class people were punished with the loss of their homes, the complete devastation and devaluing of their pension funds and retirement accounts, and a sudden loss or drastic drop in income that meant that they were unable to purchase durable goods that would have kept the economy stable.
The sheer size of the bailout for the big boys was mind-numbing. Most Americans lose track of the bigness of the numbers, but let’s put the $700 billion in perspective. When New York got a bailout in 1975, it was for $2.3 billion in loans; Chrysler in 1980 got $1.5 billion in loans. Even bailing out the entire savings and loan industry in the eighties was done at a cost of $292.3 billion. By contrast, in the bailouts of 2008–2009, Bank of America alone received $142.2 billion, AIG got $180 billion, Citigroup held its hand out for $280 billion, and Freddie Mac and Fannie Mae took $400 billion. All told, over $1 trillion.
Defenders of the bailouts attempted to tout the benefits, especially crowing that it had all been paid back and money was even made on the deal with interest payments. Right—tell that to the people at the bottom who didn’t get bailed out and lost their homes to foreclosure. (In 2008 alone, there were 2 million foreclosure procedures launched and 1 million Americans lost their homes. From January 2007 to December 2011, there were more than 4 million completed foreclosures and more than 8.2 million foreclosure starts.)
Those with a 401K saw their nest egg become a 101K and the destruction of their funds forced them to work an additional ten years past what they had hoped would be their retirement.
All the while, commentators kept telling us that the bailouts for those who were “too big to fail” were absolutely necessary to keep things from getting worse. Tell that to the people who lost jobs due to the miscalculations of the wizards on Wall Street. The “smartest guys in the room” did some really dumb things, but the rest of America paid for it.
One might think that in light of the generosity of the taxpayers to the biggest companies in the nation, those companies would be contrite and seek to pass on the good will to their customers. One would be wrong. In the latter part of 2010, JP Morgan Chase quietly decided to end a program that allowed active duty military members to defer their student loan payments until they were safely home. Kerri Napoli got a call from JP Morgan Chase indicating that her husband, Andrew, a soldier in the U.S. Army, would have to start making payments again, even though he was at that very moment fighting in Afghanistan. After several conversations with the bank, she told them she’d called NBC News, and they decided to make a special exception for Andrew. Then NBC News called, and JP Morgan Chase decided that the student loan deferral program would be reinstated for all active duty military members.
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While President Obama promised the “most transparent administration in history,” the reality of his administration was as opaque and obtuse as any ever seen. It took a lawsuit by Fox News and Bloomberg News—one that went all the way to the Supreme Court in March 2011—to obtain the details of federal bailout loan agreements. The banks argued that releasing that information could harm their reputations. I think the banks getting the bailouts failed to understand that their reputations were already ruined. They should have been more concerned about ruining the lives of their customers who trusted them and were left homeless or had their businesses bankrupted.
I’ve been forthright in criticism directed toward my own party, but there’s plenty of blame to go around. One of the more comical moments of political theater occurred when Debbie Wasserman Schultz launched her stint as chairperson of the Democratic National Committee in May 2011. In her first appearance at the podium in her new job, she slammed Republican Party Presidential candidates for not backing the Detroit bailout and said if it were up to them, we’d all be driving foreign cars. An astute reporter found out that Ms. Wasserman Schultz had driven to her news conference in her Nissan Infiniti. Oops! Of course, this is the same DNC chair who a few days after that embarrassing gaffe accused the GOP of wanting to make illegal immigration a “crime.” I kid you not! As comedian Ron White brilliantly observed, “You can’t fix stupid.”
Make sure you understand, I’m an unrepentant and unapologetic capitalist. Free markets—real free markets—are the backbone of a strong economy. The problem is that some of the very people who pretend to be the “most conservative,” believe in free markets until they don’t. Free markets, but juiced with government handouts to take care of the donor class is not a truly free market. Sometimes it’s hard to find out who really believes in free enterprise and who believes in having the government standing by in the event that big business needs a bailout.
In 2011, the Occupy Wall Street (OWS) movement was launched with the same level of media hype as a new Batman movie. It pretended to be a grass roots revolt of the excesses of capitalism, but was basically a “rent a mob” of professional protesters who shut down commerce and jobs for the very people they were supposedly fighting for. It was one of the most absurd political spoofs ever—unwashed protestors posing as aggrieved Americans who hated capitalists, but who very much enjoyed the fruit of capitalists like Steve Jobs, Mark Zuckerberg, Sergey Brin, and Larry Page.
If the Wall Street Occupiers had really been “fighting for the little guy,” they wouldn’t have been so boneheaded in their tactics that put many of those working people out of work. The owner of a New York City bakery reported $3,000 in damages to her bathroom. Many of the area restaurants and small businesses laid off employees because the OWS crowd had turned the neighborhood into a crime haven and people stopped going to the stores and businesses for fear of getting caught up in violence.
In the meantime, what happened to the one-percenters? The upper echelon of the financial world who were supposedly the targets of the movement? Did any of them lose their jobs? Their homes? Even their parking places? Nary a one, best anyone can tell. They did just fine.
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Back in 2008, when I was running for President and dared to criticize the government bailouts of so-called “too-big-to-fail” Wall Street firms, it made me a lonely target among many fellow conservatives. I was accused of attacking capitalism, or even being a socialist, which is downright funny. What I thought I was doing was defending the classic free-market model that said when you risk capital, if you win, you deserve the profits, but if not, you take the loss. Our current model isn’t capitalism, it’s corporatism and cronyism. Real capitalism gives anyone with a good idea a chance to compete with the big guys and become big themselves. Cronyism unfairly stifles competition. Well, several years and trillions of dollars worth of bailouts and government sweetheart contracts to donors later, and suddenly, it’s not so lonely out here. Even some of the conservative groups who attacked me in 2008 are now pressing Congress to rein in the lovefest between big business and Big Government. And now, even the intellectuals are finally catching on. In the summer of 2012, George Mason University kicked off a series of academic conferences on cronyism and government-and-business collusion, and how it’s undermining our capitalist system. All I can say is welcome to the party . . . but where were you guys eight years ago, when I really needed you?
As one of the few Republicans who opposed the $700 billion TARP bailout from the beginning, I took a lot of heat from people who claimed that not bailing out those “too-big-to-fail” banks would plunge us into a depression. Look, I never said the government shouldn’t take any action. But just shoveling money at banks that took stupid risks, without the government or taxpayers getting anything in return, did nothing but transfer their losses onto the backs of taxpayers. Many of those same taxpayers are still struggling with depressed 401Ks and underwater mortgages, and neither the government nor the big banks has rushed to bail them out. In its January 2012 issue, Bloomberg Markets published an eye-opening investigative report on what really happened behind the scenes during the Fed bailouts of the banks, how the Fed money dwarfed the TARP bill, and how much was kept secret even from Congress. It turns out that while the banks were assuring investors they were solid, the Fed was loaning them a total of $7.7 trillion—nearly half the annual GDP. The argument is that it prevented a depression and has all been paid back. The counterargument is that it preserved a “too-big-to-fail” banking system that’s made no serious reforms since and has so far profited by $13 billion off the Fed’s low rates while senior citizens watch their own investment interest dwindle to nothing. It’s the type of cronyism that infuriates all Americans, from Tea Partiers to the Occupy Wall Street crowd. Some Congress members say if they’d actually been told the details at the time, they would’ve changed their votes. It’s a long report, but well worth reading. Just be prepared to be furious when you’re finished. Especially at the thought that it took two years of Freedom of Information suits just to find out what was being done with our own money.
I have repeatedly said that government has a role in the economy, but it’s not to pick the winners and the losers. Government should be like the referee in the striped jersey. When he does his job well, neither team feels the referee’s preference. He simply calls the fouls and makes sure the game is played fairly. He doesn’t coach or correct, he makes sure that the rules are applied equally and fairly across the board. When the guy in the striped shirt puts on a team jersey and starts scoring points for one side against the other, he’s no longer a referee, he’s a player. Players are playing to win; referees should be indifferent to the outcome, but diligent about the process to insure it’s fair.
Bailouts were not limited to Wall Street, of course. In fact, once President Bush had persuaded Congress to give the big bailouts to the big banks and brokerage houses, the inevitable happened. Everyone in need ran to the trough. Some of the first at the government teat were the big automakers from Detroit.
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