Saturday, September 20, 2008

The culture of entitlement calls in its loan

(Originally published 9/20/08)

$300 billion in two weeks.

That’s what it has cost American taxpayers to expunge the recklessness and willful irresponsibility of corporate mortgage giants.

The latest failure, of megainsurer AIG, was remarkable for its size and its speed; after it floundered almost overnight, AIG on Wednesday became the fourth financial institution overtaken by Uncle Sam this year.

Wall Street was in freefall, and leadership was scarce. “No one knows what to do,” Senate Majority Leader Harry “Henny Penny” Reid lamented Wednesday. When a 410-point resurgence in Thursday trading failed to calm world markets, congressional leaders began drowning in bug-eyed panic.

Lawmakers emerged from hastily arranged evening meetings with Treasury Secretary Henry Paulson and Fed chairman Ben Bernanke looking like bewildered youth. As administration officials outlined the great, great-granddaddy of all bailouts -– a gigantic government program to enable banks to get rid of “illiquid assets on financial institutions’ balance sheets,” Paulson said –- lawmakers became bobbleheads beside the podium. They would do exactly as they were told -– and on the double, too.

To put this in perspective, if we count the economic stimulus package from earlier this year, the U.S. government is now $400 million in the bailout tank for 2008.

By comparison, the plan Paulson outlined will enable the government to assume “illiquid assets” of at least $1 trillion – though the total could be twice that much.

One TRILLION dollars.

Hello, Austin Powers? Dr. Evil, line 1.

Republicans blame Democrats for failing to acknowledge the role of the individual in the mortgage mess. It is a willing, if unwise, borrower who assumes a loan he can’t repay. Democrats, in turn, blame Republicans for promoting a culture of deregulation that has allowed the financial services industry to prey on vulnerable Americans. After all, who doesn’t want a home?

They’re both right –- and wrong.

Republicans ignore the predatory nature of so many subprime lenders, which sought out such loans and happily wallowed in the rich interest rates they could charge before the loans inevitably ended in default.

Democrats neglect to mention that although they’ve been in power for two years, they’ve failed to institute whatever industry regulations they presumably believe could have stopped this mess.

Wait; I forgot. They didn’t know what to do.

Anyway, the reality is that this crisis began when Americans were seduced into this pervasive entitlement culture and began to allow greed to supplant personal responsibility. This is as true of the lenders as it is of the borrowers.

It’s what morphed capitalism into the grotesque, barely recognizable shell of itself that we now see. Is it any wonder the free market is on life support?

Analysts say that if it’s properly structured and executed, the government’s grandiose bailout deal might yet work out for the American taxpayer.

But even if we lose the money, we must determine to find in this tumultuous upheaval a renewed commitment to personal responsibility and self-reliance.

Because if the last two weeks are any indication, by the time this is all over, reliance on self may be all we have left.

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