Wednesday, September 17, 2008

Little Romans Burning

The initial Palin Feeding Frenzy seems to have been swallowed up by real news. There's no doubt the Repubs are responsible for much of what's happened on Wall Street and maybe most Americans are realizing -- or at least intuiting -- it.

The revised Bankruptcy Law passed in 2005 (which, I have to say is Your Bad, Congress, and including yours, Joe Biden from Delaware) was the initial inkling that credit card companies were worried about the average American being waaaaaay over-extended . If Congress hadn't passed that bill -- which basically left people with severe hardships totally unprotected -- the credit card companies would have shut down easy credit much earlier. Instead, the new law provided carte blanche to put the screws to consumers. With consumers no longer able to attain debt forgiveness under any circumstances, the credit card companies couldn't lose. But that wasn't all. Now protected from consumer defaults, the credit card companies instituted unconscionable late fees and mammoth interest rate increases for the smallest infraction. Big Money wins.

Enter Bad Repubs Two: Lower and lower interest rates. For most American families, real earning power -- and associated "savings" -- have been stagnant or declining for a decade. Even with two or more people in the household working, people are barely making it. The solution? Offer cheap money for mortgages, which, in turn, boosts market demand for housing, which, in turn, inflates housing "value," which, in turn, inflates the value of consumers' only remaining real asset -- the family home. Voila! Easy access for the average American to huge amounts of "paper" wealth .. which they promptly converted into REAL debt -- sometimes extravagantly for vacations and digital toys, but more often for paying off those skyrocketing credit card bills, housing repairs they couldn't afford otherwise, ballooning health care costs, college tuition hikes, and those alluring SUVs (also made cheap and easy to buy) that burned oil like no tomorrow.

The people setting monetary policy were totally responsible for stopping all this. Instead they fueled it. The might have injected some market discipline by boosting interest rates, but they didn't. The Republicans knew that real income was declining for most Americans, but consumers didn't realize it because they were suddenly "wealthy" from mortgage "refi" that the financial "experts" told them was going to be "fine, folks, just fine." Meanwhile, the Republicans fiddled no end, because their political futures were looking very solid. Moreover, the Republican policymakers' colleagues were/are/and always have been the credit card companies, the financial institutions, the global congolomerates, and the oil companies ... all of whom were ecstatic, guzzling the new cash flow. Meanwhile, the public was feeling "rich" and happy. Yep. Great psychology for the 2008 election.

So, yes. Make no mistake about it. Blame the Republicans who have always protected Big Money. But now they're burning, too? Well, yes, except that now policymakers are coming to their rescue ... while Little Romans burn.

No comments: