Monday, September 22, 2008


It's hard to know what to make of the financial meltdown we've seen over the last week.

Big financial firms are vanishing, the government is buying insurance companies, and by the time you read this, the government may have agreed to spend 700 billion dollars of our money to buy bad mortgages from banks.

On one hand, I guess I should be proud that, as a taxpayer, I now own thousands or perhaps millions of homes. I look forward to spending the night in some of them the next time I travel. And it certainly is exciting to own the world's largest insurance company. I trust I can look for a discounted premium next time I need car insurance?

But on a less silly level, I'm stuck with a vague sense of anger, but I don't know enough about economics to know if it's justified.

I know about the sub-prime mortgage mess and how people who shouldn't have had mortgages were given them anyway and now these loans are traded between financial institutions. And I know that these financial instruments may now be worthless and it's causing a lot of banks and investment houses to crash.

But the rest is a mystery to me. The simple facts don't add up. A bunch of people made some bad loans, but they made a lot of money making those loans. Those people still have that money they made, even though the loans are bad. I never made any money in the go-go era of sub-prime lending. Yet now I'm being asked, as a taxpayer, to buy those bad loans so the banks that were poorly run can keep from destroying the economy.

We're told the nation's financial markets are on the brink of freezing up, and if that happens, the entire American economy will collapse. What exactly do they mean by "collapse"? Do the stores run out of food and we all lose our jobs? Does our money immediately lose its value? I'm not being sarcastic, I'm being serious. Is this what happens? Because I have no idea, and if you sent me to school for another 12 years I still may not be fully equipped to evaluate the claims some in the financial sector are making.

So we're all supposed to pay a lot of money to help fix a problem wealthy financiers have made... or the economy as we know it may collapse. But I have a sinking feeling those financiers will still be wealthy when this is all over. And most of the rest of us will somewhat worse off.

If we are indeed facing the end of the world as we know it, then I guess it's worth the money we're going to spend. But I don't know, and I don't have a way of finding out. Instead we have rely on the types of people who got us into this mess to get us out.

In a world where nothing is certain and money is nothing more than an idea, that's hardly a comforting thought.

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