Heads Will Roll on Wall Street

Some weeks ago in this space, we discussed the wisdom our grandparents shared with us, lessons they learned the hard way during the Great Depression. They were simple, folksy distillations of hard economic truths, such as "If you can't pay cash, you can't afford it," and "don't lend out money you can't afford to lose," and "a bird in the hand is worth two in the bush," and "don't buy a pig in a poke."
These are lessons most Americans have chosen to ignore. That's fine, of course. They are adults and can do as they wish. What's both heartbreakingly sad and screamingly funny is that now, as the financial crisis shows itself to be deeper, more severe, and more systemic with each passing day, the people are lining up to demand sympathy, blood, and a piece of the bailout action.
On the local TV news Monday night, they interviewed a fellow who said that he was retired and that all of his retirement savings were deposited into a single account at Wachovia. He was frustrated that he might lose more than 2/3 of his money, as he had $300,000 on deposit and the FDIC only covers $100,000.
It's always sad to see someone lose his shirt, but what did he expect? Did he not even notice when IndyMac Bank suffered a run in July? If he'd never heard of FDIC before, surely he must have noticed the insurance limits then. To have let all his money sit in an uninsured account all these months since then, well, what was he thinking?
In the coming weeks and months, we'll see more and more Americans demanding that heads must roll. Damn the greedy Wall Street robber barons who have taken us all to the cleaners!
As the crisis deepens, the Washington types will drag out scapegoat after scapegoat. Public floggings will be the order of the day and banker and businessman alike will be blamed for all the economic ills.
Never mind that every investment broker in the country tells you quite plainly that investments involve risk and that you should not venture money you can't afford to lose. Never mind that the Americans freely chose to invest in companies notorious for paying off their corporate management in multi-million dollar bonuses after they drive the business into the ground.
None of that matters. What's important is that we ventured our core savings on high-risk gambles, we lost our shirts, and now we want someone – anyone – else to be made to suffer for it.
Your congressmen and your presidents, your Democrats and Republicans, will be only too willing to give the people the bloodbath they demand while seizing even more power and wealth for themselves and their parties and government.
The source of the crisis is, in a nutshell, debt. We have constructed a house of cards. We demand our government spend exponentially more than it can bring in. We demand the same of our blue-chip corporations. You can sustain a system like that only so long as enough money is passing through your hands to keep the interest paid. But ultimately you owe more than you will ever have potential to pay back.
The federal debt has reached the point that it exceeds the entire gross domestic product; in other words, if the federals taxed every man, woman and child at a rate of 100 percent, they could still not balance their books. They would still be in a position of having to borrow.
Any good financial planner will tell you that the solution to debt in never found by going into even more debt. And yet, the federals have chosen to acquire $700 billion in new debt just this past week.
It hurts to see anyone, rich or poor, lose what they have. But the free market has got to be allowed to work. If a corporation fails, they should be allowed to die, to make room for new entrepreneurial opportunity. And as sad as it may seem, if someone foolishly risks his savings and loses everything, he should serve as a warning to ninnies.
For Washington to buy off lenders' bad accounts and let them keep their good ones is not only bad business, it is the height of corruption.
It's offensive to see CEOs loot their companies in the form of "golden parachutes." These bailout packages are basically a golden parachute for the entire money and power class. They are looting the credit of the American people while they still have credit. Government and bankers will siphon off as many dollars as they can and convert them into hard assets while dollars can still buy hard assets. The American people, the ultimate underwriters of all government debt, will be left holding the bag.