Truth is Inconvenient Again

by Doug Thompson
“Wall Street fears nationalization because nationalization destroys shareholder value,” some doofus said on the radio about banks as I drove home one night.
Actually, losing all your investors’ money is what destroys shareholder value.
I don’t have an MBA but even I know that.
If banks hadn’t lost their investors’ money then nationalization wouldn’t come up. The prospect of a government bailout rather than a buyout is the only thing that gives shares in many major banks any value whatsoever. The government “destroys” shareholder value only when taxpayers declare that they’re not going to pay the blackmail.
I’m thoroughly tired of being blackmailed. I’m also getting tired of getting nothing for our bailout money but promises that Wall Street will do better.
I’m not a socialist. I’m a capitalist. I don’t spend money — especially borrowed money, deficit money — for nothing. When I spend money, I want two things: To own something and to have a receipt for it. I bet many of you are the same way. We are the American government. We are “We the people.”
Longtime readers will recall that I was unenthusiastically for the mortgage banking bailout. This was mainly because the idea we’d spend half that money and have nothing to show for it didn’t seem real to me, despite being warned subsequently by a couple of readers.
What I’m really, really tired of the most is being suckered.
Let’s be blunt here. The money’s gone. It’s not coming back. This is mainly true because it was never really there in the first place. This has real-world consequences for investors in major national lending institutions. It also has consequences for people who bought more house than they could afford, confident they could sell it in a couple of years for more than they paid for it.
I bought a fixer-upper, paid my mortgage and other bills and my taxes. I lived within my means and have no desire whatsoever to bail out people who didn’t. My sympathy is reserved for people who had real-world jobs and got laid off after the companies they worked for got caught in the collapse.
The scariest thing about all this is that there’s no excuse for not knowing better. During the salad days of the boom, Wall Street bragged about how information traveled at the speed of light. Thanks to computers and analysis, there’s no excuse for not knowing exactly what you were buying.
Instead, derivatives and other financial packages didn’t minimize risk by spreading it around. They spread risk more like a virus. Make that a plague. Companies with more computer processing power and well-trained, talented people to run it than the whole world possessed in 1960 didn’t bother to take a close look at what they were buying.
The market has to keep its eyes open to work.
If we open our eyes and let the market work, it’s pretty clear that the government is the only entity willing to buy junk. We the people should buy it, let the chips fall, and sell these junk mortgages when and if they’re worth something. This isn’t socialism. It’s realistic market appraisal.
At least I’m feeling a little better about the stimulus package. In Arkansas at least, we can apparently use a lot of that money to fix up schools and make them more energy efficient. That means jobs to contractors large and small all across the state. The question I have now is whether that money will have to go through the state Department of Education’s facilities program. That organization is a careful steward, I suppose, but isn’t known as the fastest flowing pipeline for money ever invented.
Sen. Shane Broadway, D-Bryant, grinned when he said we’re glad to have that facilities study now. That study was rolled out a couple of years ago to mass consternation and derision. There’s no way we needed that many repairs in schools, people screamed. We’ll see how many of those “unnecessary” repairs are insisted upon now.