My New Retirement Plan, and Accompanying Economic Rant

My new retirement plan is very simple. My 401k and IRA are in the toilet, and I'm too small for the Feds to worry about bailing out, so I'm going to take my last assets and start up my own investment bank, run it into the ground, and then ask for a bailout. It can't miss.

Given the marvelous economic news of the last few months, my current retirement plan involves looking for a nice, big refrigerator box to live in. I may as well just sign everything over to rich investment bankers now rather than wait for the government to do it later.

That's how it works, of course. They're too big to fail, but you and I are too small to matter.

I thought there was hope today when the government decided not to bail out Lehman Brothers, but then I realized that Lehman Brothers was in the same boat the rest of us are - they weren't too big to fail, so the feds cut them loose.

And just so you can feel better about the Fat Cats' raids on your savings, here's a quote from the CNN Money article about the Lehman Brothers collapse:

"The Federal Reserve announced a series of steps to support the financial markets. The Fed said it would expand its short-term lending to banks by starting to take all investment-grade debt as collateral - instead of just Treasurys and other high-grade securities."

The emphasis is mine.

Now let's be sure I understand this...the Fed is going to lend to banks which have already demonstrated their irresponsibility and greed by accepting "all investment-grade debt" as collateral. What's "investment-grade debt?" Isn't that what got all these greedy bastards into trouble in the first place?

I really wish I knew more about economics. No, actually, I don't. If I really understood the depth of the greed of the "financial institutions" and the level of smug arrogance that leads white-collar thieves to assume they can get the government to crush us to save themselves, I'd probably either kill myself or want to declare open season on "investment bankers."

Washington Post business columnist Steven Pearlstein wrote an article last week titled "Don't Like Bailouts? Consider the Alternatives" that spun me up in several ways:

First was his assertion that "History shows that rather than costing taxpayers, the rescues have often wound up making money." He then listed bailouts he claimed actually benefited the government, concluding that "...if (the government) is willing to wait until housing markets finally recover, there's a good chance the government will recoup most of its investment, along with a 10 percent annual dividend and a hefty guarantee fee." I find that very comforting as I look at the wreckage of my retirement accounts. Even if this long-term fairy tale is true, it will do nothing toward helping those of us who have been fleeced first by the crooks, and then by the government that helps them out.

Second was Mr Pearlstein's tossoff of "moral hazard" (the argument that those who abuse their trust must bear the consequences) by suggesting that "...using moral hazard to argue against the carefully structured rescues of Bear Stearns or Fannie and Freddie is a bit likely arguing that any sentence short of capital punishment is insufficient to deter bank robbery."

And then was this statement: "Remember that even with the rescues, top executives at Bear Stearns, Fannie Mae, and Freddie Mac lost their jobs, their reputations, and most of their net worth, while long-term investors lost all but a tiny fraction of their money." You may recall my discussion a few days ago about the severance packages of the Fannie Mae and Freddie Mac CEOs...if I lose my job, I doubt that I'll get a severance package valued in the millions to cushion the supposed loss of my reputation. And I may be wrong, but I believe the losses those long-term investors suffered ("all but a tiny fraction of their money") are the losses you and I are being expected to make up through our hard work and taxes.

Was the cost of the alternative worse than the vast cost of bailing out these greedy fools? Perhaps. But unless we make some real, fundamental structural changes to how the financial markets are operated and regulated, we'll just keep riding this same old fiscal merry-go-round to a future of continuing financial chaos.

And you and I will keep buying the tokens to pay for the big guys to ride.

Have a good day. More thoughts tomorrow.

Bilbo

P.S. - Agnes's parents arrive this afternoon for a two-week visit, and so my posts may be a little irregular as we spend time with them. Bear with me. I'm still out here.

B.