Reader Question: WuFlu and the Bailouts?

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Here’s the latest reader question, along with my reply!

Chris writes: I participate in a “Book Club for Men” at the local library and this month’s selection was “Stress Test” by Timothy Geithner, Treasury Secretary under Obama and New York Federal Reserve president under Bush.

In it, Geithner defends the financial bailouts after the 2008 banking crash and offers his reasoning behind them. He stated how Obama told him “you don’t let a neighborhood burn down because someone was irresponsible and smoked in bed” to illustrate how the administration would have to do unpopular or seemingly immoral things like bail out reckless financial institutions who paid outrageous bonuses to their CEOs while the economy tanked, interfere in private loans and stock purchases, etc., because to do nothing and let the economy fail would be far worse for the country. He felt that since the stock market recovered and the economy grew under Obama, this vindicated his actions as treasury secretary, as he and his team saved America from another depression.

At the end he writes: “…to solve a major financial crisis, you have to do things you never do in normal times or even in a modest crisis. This is the central paradox of financial crises: What feels just and fair is often the opposite of what’s required for a just and fair outcome.”

This sort of “end justifies the means” thinking is rather unsettling to me, but I feel the same precedent is being used in the WuFlu “crisis.”

I often wondered why liberals/progressives didn’t fight back against the lockdowns, when they were the biggest general assault on civil liberties we’ve seen in the U.S. Geithner’s comments kind of answer that though — the lockdown and “mask mandate” proponents see the suspension of civil liberties as necessary toward their “outcome” — the supposed eradication of WuFlu, even if they wouldn’t be tolerated in more “normal” times. How can one argue with logic like Geithner’s? There’s something not quite right about it in my mind, but he seems to use the “can’t argue with success” line of thinking, and the WuFlu “fighters” seem to be just as confident they’ll be successful.

My reply: Well, first of all, there was a financial crisis – whereas the “crisis” we’re dealing with now is a manufactured one. Also, everything being done to ameliorate this manufactured “crisis” is causing more damage than that (allegedly) caused by the “crisis” itself. Without even addressing the fact that almost all the deaths attributed to WuFlu are in fact deaths of the very elderly and the very sick – i.e., the “virus” isn’t much of a threat to almost everyone – we have the fact that tens of millions of people have had their lives crippled because something on the order of 250,000 people have died from WuFlu.

The “cure” in other words is worse than the “sickness.”

I understand, of course, that many believe otherwise – but that is beside the point. And the facts.

As regards the bailouts: Geithner is disingenuous at best and dishonest at worst. The ’08 crash affected greasy large-scale financial cartels such as Lehman Bros. –  not the average person. It is true that many people lost their jobs, but they would have found new ones as capital re-allocated to sound businesses. Instead, money was redistributed from the taxpayer to unsound businesses – like GM, for instance – which were thus spared the discipline of market forces. Had GM gone bankrupt, the unsound parts of the company would have been sold off while the sound ones reconstituted. Instead, the fundamental unsoundness was protected and thus propagated – with the result being that, today, GM sells virtue, not cars.

Fundamentally, I think it’s a mistake to adopt an ends-justifies-the-means approach to public policy as it enables bad people to do bad things while claiming they’re doing good things. Our moral compass ought to always point toward the right thing, even if it means remaining “on course” leads to short-term consequences we’d rather avoid.

Because the long-term consequences are worse – and last longer.

. . . .

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10 COMMENTS

  1. 08 and now are apples and oranges. Back then, no diapers, lockdowns or essential/non-essential boogie. Yes, there is a plan now by TPTB, but it is much deeper.

  2. Geithner should be in jail, along with all the other criminal Wall Street banksters who got rewarded for bad behavior with the taxpayers money. Many thousands lost their homes while the financial fraudsters walked away with big bonuses for themselves. I highly recommend the movie “The Big Short” (or the book it’s based on) for a good explanation of how they got away with it. At the very least they should have gone bankrupt and lost their private jets and houses in the Hamptons; that was the point the Occupy Wall Street movement was trying to make. Instead the MSM treated them as nut jobs while the banksters were wealthier than before. It’s going to happen again in the not too distant future and I think even if the torches and pitchforks come out this time they’re still going to get bailed out.

    • Hi Mike,

      I loved The Big Short, I thought it was a terrific movie. I have probably watched it 5 or 6 times over the years and am still absolutely amazed what Corporate America got away with. It still pisses me off a decade later how the very companies who made these horrible decisions never felt the repercussions that had a traverse effect on every US taxpayer. No one was reprimanded, no one went to jail.

      I remember doing bookkeeping for a real estate firm back in 2005/2006 and seeing some of these contracts that were coming through the door. I clearly remember one that the couple made $120k a year and were approved for an $800k home. In RE I was always taught you never buy more than 4x your total income (max). I brought it up to the RE agent inquiring how this couple was able to afford such a pricey home (they were new home buyers and did not have another home they were selling to make up such a huge difference). The home was financed, you can probably guess, interest only.

      The RE agent said the bank approved them. I stated, but the numbers don’t add up. She told me that was not our problem. I stated I thought it was important to practice due diligence. At this point the agent was starting to get irritated with me and snapped back, “I have a family to feed, too.” I dropped it at that point. The moral of the story, the Almighty Dollar always wins.

      That was my first real taste of what was to come. I wasn’t surprised by what came next…. those who made all of the right decisions were the ones who ended up paying the price either through the loss of their job, the loss of their retirement, or quite possibly, the loss of their home. Once again bailing out those who bought more than they could afford and the decision makers who allowed it to happen.

      • Hi RG,

        My experience with the RE bubble was very instructive. I bought my first house in the middle ’90s, before The Chimp and his Wall Street string pullers hyper-inflated home prices. It was a small,’70s-era ranch built in a Brady Bunch kind of suburb, in Loudoun County – not far from Dulles Airport – called Sugarland Run. It needed a lot of work but it was cheap – $150k – and I am handy. I beavered away on it for a couple of years. By the early 2000s, something weird became noticeable. The prices of homes in my neighborhood were going up by on the order of 20 percent annually. By circa 2003, the little house I’d bought for $150k was “worth” $400k – and while I’m pretty good with a hammer, I knew that something wasn’t right with that. I knew it could not possibly continue. And that when it all fell apart, a lot of people would be screwed. I decided to not be one of them. I sold my house for far more than I paid for it and burned rubber out of there. I used the money to buy the house I own now. A house that cost me less than my Northern VA house. Something almost no one seems to do anymore.

        The people who bought my old house for “stupid” money? About two years later, that house cratered in value, to not much more than I paid for it back in the mid-90s. The people got foreclosed on; the house acquired another owner. I found out about all this through my realtor friend – the one who is now a Sickness Psychotic and no longer my friend.

        • Hi Eric,

          I know where Sugarland Run is, my sister lived in Sterling Park just about a
          mile down the road for a few years. My customer, the RE agency was located in Chantilly. Prices were skyrocketing in NOVA. They were absurd. I don’t live in NOVA, but one of the bedroom communities and we bought our house in the early 2000s before prices jumped. It is a nice house, but five years after purchasing it no house should have accelerated over 100% of its original market price, which it had. I chose to sit rather than move. Of course, it dropped in 2008, but today it is pretty close to the value that it was in 2005, thanks to all of the city dwellers trying to escape.

          Glad you were able to play the market and get out at top dollar. RE is usually a great investment. I prefer it over the stock market, at least, I have somewhere I can lay my head at night….stock certificates, not as comfortable. 😊

          • Morning, RG!

            Sugarland was a great place to live 20-plus years ago. Far enough away from DC to still feel at least somewhat normal; reasonably sized homes, reasonably priced. This was prior to the eruption of 6,000 square foot McMansions on half-acre lots. I liked living there. But it began to sour circa 2001 as the WarnnTrr amped up and the ballooning prices caused my Spider Sense to tingle. I began to look for a place in the area where I live now, which is about 30 miles from Roanoke and thus far enough away from Roanoke.

            I also did the oddball thing of using the money I got for my Sugarland house to buy a much less pricey house – exchanging a mortgage for no mortgage (though I, like everyone, am still obliged to pay rent to the government in order to live in the house I supposedly own).

            I am very glad I bailed whenI did. Living in Northern Va among the Diapered would be intolerable.

            • Hi Eric,

              Every time I visit NOVA (which lately has been very little) I always return home angry. I am not an angry person by nature, but just being up there and seeing no resistance to what is going on around them, the tattling on neighbors, the cars on I-66 feeling the need to tailgate your ass, ugh, too much. When I start seeing more farmland than houses I know I have made it back to sanity.

      • Hi RG,
        Thanks for the insight, it’s interesting how the RE industry and banksters keep moving the goalposts. When we bought our house in 1974 the guidelines were no more than 2 1/2 x annual income, and my wife’s income couldn’t count towards that amount – she might stop working to have kids doncha know – which she did a few years later and paying the mortgage on just my income was no problem because we had planned for that from the beginning. It did keep us from getting the house we really had wanted, but we got a fixer upper that turned out to be great and we’re still here after 48 years. The biggest obstacle was the 20% down the banksters required then, we could easily afford the monthly payments but coming up with a big chunk of cash was tough that early in our careers. Luckily both sets of parents were willing and able to loan us enough to get across that threshold, but it still irritates me to this day that the guidelines were loosened so much down the road. Guess it gave them a bigger pool of victims to fleece.
        Nowadays that original mortgage payment pales in comparison to our property taxes, the “rent” as Eric says, for the privilege of being allowed to live here. Our original monthly payment of principle, interest, and taxes was about a third of what we pay now in taxes for our paid off but always paying rent on house.

        • Hi Mike,

          I never understood why the schools (or parents) pushed financial education. I tried for years in to get the Virginia Secretary of Education to introduce it as part of the curriculum, to no avail. I even tried teaching a class at the local college, but they refused to allow me to since I was not a “teacher” and did not hold a Master’s in the field. I guess decades of experience doesn’t count toward anything?

          I agree with you if the government keeps them dumb they are easier to take advantage of. It is sad really. I know most don’t consider ignorance an excuse, but I consider it a very valid one. If you don’t know what to learn how are you supposed to learn it?

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