The Catskill Chronicle

By Mort Malkin

In the first years of the 21st century, the investment banks of Wall Street – the Houses of Mirrors – in cooperation with go-go mortgage brokers inflated the housing market and then bundled dubious mortgages into creative financial derivatives and sold them to investors. Then, derivatives of the derivatives were added to create a giant Ponzi Scheme. Nothing was real. The evaluation of homes and properties was illusory. The rates stated in the elevator mortgages always ascended. The Collateralized Debt Obligations (CDO), assorted securitized derivatives, and Credit Default Swaps (CDS) became a shell game. [See the Gadfly column “Plain Words and Smoke & Mirrors.”]

Well, the reality check arrived in 2007-2008, and we all heard about a) the Glass Steagall act of 1933 that had regulated banks and kept them honest for so many decades, and b) the 1999 Gramm Leach Bliley Act that repealed Glass Steagall. After 2000, banks could make money in whatever creative ways they could devise, and the big aggressive ones did. When the bubble burst we heard about subprime toxic mortgages, the government bailout, and Goldman Sachs whose CEO Lloyd Blankfein thinks he is “doing God’s work.”

The illusionists of Wall Street who caused the financial crisis have expressed no regrets – nor have they given back any of the bonuses they received during the bubble years. Indeed they are ready for another round. Yes, they are looking around for another money lode to mine. Alas, Fort Knox has held no gold and silver for many years. There’s little old-growth timber left in our National Forests to turn into paper dollars, or wooden nickels. The real estate market seems permanently depressed, with a large inventory of homes in bankruptcy. The aero-defense industry is already in corporate hands, and Wall Street certainly won’t go after the salaries & bonuses of the CEOs and other bandoleros. That would set a bad example. Even Google couldn’t come up with anything better than Yuan-Mondo Province, west of Shanghai.

Then, one of the elders in the Gadfly Revelry & Research Council had a senior moment. Right in front of his eyes stood all those 401K retirement funds and the Social Security Trust Fund. Amoral Wall Street would surely see them both as appropriate for predation. It is not enough for Gigantic Finance that most 401Ks are invested in Wall Street’s own mutual funds. Why not also leverage the funds into a new debt bubble. You say you have no cash for a new car or the latest electronic combo-gismo? That’s a poor excuse when you can take an emergency loan against your 401K. The emergency is, of course, urgent; but don’t worry, you can take your time about repayment.

The Social Security Trust Fund and its money flow has stared the neo-cons in the eye like a great bullseye for many years. [See the Gadfly column “Starve the Beast.”] The newly elected majority in the House of Representatives is already lamenting the state of the economy – how we have to limit the National Debt, eliminate the deficit, and reform Social Security. Facts, of course are irrelevant when shouting “The sky is falling.” Actually, Social  Security is so rock solid that it can pay out all its obligations until year 2039. The Congressional Budget Office says so. A simple fix of eliminating the cap on income subject to Social Security tax (presently it is $106,800) would guarantee Social Security into the next century. The right-winged Chicken Littles, according to the late Molly Ivins, “… do not want to fix Social Security; they want to kill it.” If Molly were alive today, she would view the conservatives more kindly – they only want to recycle all that money through Wall Street. They are true conservationists.

There is another source of money, though, one which can solve all the financial problems in one lump dump. All the money that is spent on lobbyists adds up to many billions. Virtually all industries employ thousands of real live men and women to prowl the halls of Congress: the CONG group (Coal, oil, nuclear, and gas), Large Pharma, Hugely Health Care, Behemoth Beef, and the Incredible Hulk of Investment Banking … Coincidentally, the money that goes into political campaigns has just had all restraints removed, courtesy of the Supreme Court, which declared corporations to be people but forgot to limit their life spans to, say, 100 years like the rest of us. We could use some of those billions of dollars for: clean renewable energy, public education, a National Academy of Diplomacy to teach the arts of conflict resolution, primary preventive medicine programs in every community, National Universal Health Care, and an assortment of organic vegetables in every salad bowl. We could mandate that every political dollar spent would have to be matched by a socially responsible dollar. The result would likely be that corporate contributions to influence the political process would be reduced, and there would be a bonus of some much needed money for projects for the people. Corporations might even go further – they could start acting like real people who look after their neighbors and their community.

The next Gadfly column will be, appropriately, “Capitalism vs Caring — Part 2.” Watch this space.