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March 26, 2008 02:54 pm
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The Tonawanda News
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No fun to be the sober guy at the parade
Column: Had an adult stepped in and warned lenders not to speculate on risky mortgage practices sustained only by rising housing prices, we wouldn’t be in this mess.
By Eric DuVall
CNHI News Service
— Being a responsible member of the middle class in this economy is like being the sober guy at the St. Patrick’s Day parade.
For the past decade, those who pay their bills, save for the future and work for a living are the designated drivers of this society. And those of higher and lower income are having all the fun.
Investment banks and brokers got fat selling mortgages and extending credit to people who probably didn’t deserve it. And those who got it lived beyond their means at little or no cost, at least up until now.
All the while, we taxpayers were the responsible friend at the parade — the guy who knew someone should stay sober to drive home.
And, to steal a phrase, our over-indulgent friends’ chickens are coming home to roost.
Take this whole mess with Bear Stearns. Why an investment bank would name itself after a bear is beyond me, but they rolled the dice and — like many, many others — pushed the bet too far on our housing market. The result was having trillions in low valued investments and millions in assets. And to avert a titan of Wall Street going bankrupt, the Federal Reserve and Treasury Department stepped in to engineer a taxpayer-subsidized buyout that left shareholders holding decidedly undervalued shares.
Or, in layman’s terms, we gave our drunk friend a ride home — again.
I, for one, am getting sick of it. Capitalists will argue that wealth isn’t a zero-sum game - that just because a CEO gets $300 million upon being fired, the rest of us aren’t held back. They argue, essentially, that the rich getting richer doesn’t necessitate the poor getting poorer.
Empirical evidence suggests otherwise.
Middle class Americans are making less now than they were 10 years ago. The richest among us have gotten tax cuts and deregulated markets that let them dangle on the margins of just about every industry you can think of. We get cost-of-living raises and gas at $4 a gallon.
If there had been some government oversight of the housing market and mortgage investments, this whole housing bubble would never have blown up in the first place. Had an adult stepped in and warned lenders not to speculate on risky mortgage practices sustained only by rising housing prices, we wouldn’t be in this mess.
The rich got richer, all right — and in the case of this housing foreclosure crisis, they did it by selling the American Dream without explaining the fine print. So don’t tell me that the Wall Street speculators who made a mint on this for the past decade didn’t do it at someone else’s expense. If the banking tycoons were up against foreclosure of their own homes, you might be able to make that argument, but we all know that isn’t the case. Sure, in the short term, stock prices are down, credit is tight and everyone is waiting for the other shoe — inflation — to drop.
In the long run, though, the people who ran Bear Stearns into the ground will be just fine. They might have to buy a slightly smaller palace on the Upper East Side — one worth 20 of those bum mortgages they speculated on, as opposed to 40 or 50. Forgive me if I’m not crying.
In the meantime, the people who were sold a dollar and a dream, only to have it morph into a nightmare, are left searching the classifieds for an apartment with low rent.
Call it class warfare, liberal elitism or whatever political buzz word you like — it isn’t right.
And who’s left holding the bag? As always, the responsible among us who work a job, raise decent kids and hope we don’t have to work until we’re dead. Our tax dollars will go to bailing out banks and throwing a lifeline to those whom the banks helped sink.
Basically, we’ll do what we always do: Give our over-indulgent friends a ride home - extend a helping hand to those who actually need it and lecture those who shouldn’t.
The least they could do is pick up the next round.
Eric DuVall writes for Tonawanda (N.Y.) News. Contact him by e-mail at duvalle@gnnewspaper.com.
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