Bailout V: The Fix Is In

My many fans might recall my posting of Sept. 9, Crisis Basics: What Else Can The Fed Do? So, you don't remember it? Let me refresh your memory with the money quote:

Want to get freaky? Well, one thing the Fed could do, at least in theory, is become a mortgage lender in its own right, most likely by refinancing existing mortgages at lower rates. A more plausible "radical idea" would be for Congress and/or the federal regulators to raise the limits on the mortgages that can be held by Freddie Mac and Fannie Mae, and encourage them to buy busted mortgages. (If that works like, say, Medicare Part D, the prescription drug benefit, they'd even forbid Freddie and Fannie from buying bad loans at a discount!) Then, as those loans go bad, the Fed would bail out Freddie and Fannie.

Look at what Bernanke just proposed. And note the reaction of Sen. Chuck Schumer, who in addition to supporting torture is a shill for the banks. Hey, what's a senator from New York for? The money quote:

In response to a question from Committee Chairman Sen. Charles Schumer, D-N.Y., Bernanke suggested that mortgages eligible for government guarantees be capped at $1 million. "I think that's a very good idea,” Schumer said of the guarantees. “In fact, legislatively, it's something that I would try to introduce and get passed.”

What can I say? I love being right. Oh, one more thing. Bernanke's proposal is a sign that the banks are scared. The latest mantra is that this will be the size of another S&L bailout. Folks, you heard it here first: It's going to be a lot bigger than that.

A Curmudgeon's 50th Birthday Rant

In early November, a friend asked me for a favor. Or maybe he did me a favor. Or maybe a little of both. He runs a multi-billion dollar investment fund and wanted my opinion about solar power companies.

My friend knows that, on account of multiple sclerosis, I lack stamina and have significant impairments of other skills. But, for some reason, he trusts my powers of general reasoning enough to want my overall impressions of this emerging industry. Both flattered and curious, I agreed to spend a few days listening to alternative energy companies pitch themselves and their technologies at a couple of conferences in the San Francisco Bay Area.

I came away with the following key impressions.

• Solar energy is real. Within five years, you’ll see lots of homeowners and businesses installing panels on their roofs.
  

• Before the middle of the next decade, electricity derived from solar panels will cost the same as power generated by the combination of nuclear, coal, and natural gas that now powers the utility grid.

• Pardon the pun, but here’s a real shocker: Draw a circle 30 miles in diameter and place it in the big desert that runs from southeastern California to western New Mexico. Then fill the circle with currently-available solar panels. The power coming out of that circle would satisfy 100% of this country’s electric power needs.

• For the same amount of money that the U.S. will spend on the Iraq War – about $1.5 trillion -- we could have powered all of the homes in this country.

• If we’d also avoided the $500 billion real estate bubble simply by enforcing current lending regulations, we could have installed enough solar panels to power the rest of the economy, too.

• None of the numbers I’ve quoted include indirect costs. The $1.5 trillion cost of the Iraq War is conservative, once you consider the precedent it sets for American intervention in oil-producing regions. When I compare the cost of solar power to nuclear, oil, and natural gas, I’m not accounting for the "externalities" such as waste disposal, carbon emissions, or wars of conquest.

• The $500 billion cost of the real estate bubble doesn’t include the losses in value to be suffered by homeowners who aren’t having trouble with their mortgages. Nor does it include the spinoff effects of job losses in the financial, retail, and municipal government sectors that are already feeling the impact of the bubble’s deflation. If the Federal Reserve goes ahead with its plan to bail out the banks by inflating the money supply, the resulting costs of a weak dollar, inflation, and economic stagnation aren’t in my numbers, either.

• My numbers don’t include any economic benefits from switching away from oil. Once you’ve installed solar panels, the resulting power is free. That eventually lets money be directed elsewhere. And there are the jobs created when a new industry is born, not to mention spinoff industries like electric cars and improved batteries.

I’m sure it sounds like I’ve drunk the Kool-Aid on solar power, but it’s not so. I'm referring to what's here now and cost reductions that are in the near-term pipeline, not to something I was told at a solar fair where they also sold bongs, rainbow shirts, handmade soap, and bongo drums. The future for solar will be better than I've portrayed it, not worse. Still, power will never be 100% solar. The utility-operated electric power grid will, and for a variety of reasons should, exist for at least the next century. We’ll still use fossil fuel, but much less of it. There’s a massive infrastructure built on oil, and it’s not going to go away overnight.

My point is a different one: As a society, the United States is critically dysfunctional on a scale that threatens our principles, our well-being, and quite possibly our existence. My point is that our problems are not technological. We have the means to solve our most pressing issues, including energy and the wars we (some of us, that is) fight for them, and the emerging threat of global warming.

My point is this: Our failures are generated by a political system that is growing more dysfunctional every year. These failures, and the system that produces them, can no longer be overlooked.

We must ask ourselves: What sort of society devotes almost 20% of a year’s output to an oil war when foreign oil can be, in technological terms, irrelevant? What kind of society allows rampant financial fraud to go unregulated and unpunished – and in fact soon to be rewarded by a bailout of those responsible -- eventually resulting in millions of people being evicted from their homes?

That sort of society is the United States of America, circa 2007. We are a country that is addled by 200 channels with nothing on. We are medicated for depression and for our lack of sexual performance. We can’t spare a half-hour a day to read the newspaper or even listen to the headlines on what passes for television news programs.

Half of us don’t vote, and many of those who do vote make their decisions on the shallowest, least relevant criteria imaginable. Then, when things don’t go well, we look for someone to blame. And it’s always someone else, be it "Islamofascists" or people who smoke a cigarette within 25 feet of a building entrance. Americans are some of the most talented victims this planet has to offer. Let us count the ways.

So, folks, as you max out your credit cards to keep the mortgage payments flowing and to buy another toy made by a Chinese dollar slave, you might want to pause for a second or two and ponder the costs of indifference, complacency, and irresponsibility on a national scale.

This country has tolerated, and even demanded -- from both parties -- a level of waste, corruption, and destruction not seen since the second world war. As we’ve done so, what have we talked about? Viagra, big-screen television sets, the government reading our e-mails, the threat of Mexican gardeners, gay marriage, the missing white girl of the month, and the second coming of someone who died 2,000 years ago for our ever-expanding list of sins. The rest of the world can be forgiven for its growing disgust with us and everything we represent. We take more, and offer less, every year. Courtesy of George W. Bush, we can't even hide behind the "human rights" figleaf anymore.

Chickens do occasionally come home to roost. Why, I think I hear some wings flapping off in the distance. What to do? We can start by waking up and taking a look around, including in the nearest mirror. Mark my words: Paying attention is going to become cool again.