Failed Financial Geniuses

Five weeks ago Wall Street joined various federal officials in sounding a fire alarm to convince taxpayers to support more than $700 billion to buy up the bad mortgage loans that caused the economic mess we're in.

I am not old enough to remember the crash of 1929. I had to learn from history books not to borrow money to buy stocks. Too bad today's financial geniuses skipped those lessons. They leveraged bundles of bad loans to invest in other securities, diluting the value of the mortgage bundles and over-inflating the value of the other assets.

Now Treasury Secretary Henry Paulson has changed his mind about how to use the bailout funds. Apparently Paulson figures the best thing to do is give the bailout money directly to the same failed financial geniuses who got us into this mess.

And now the Federal Reserve refuses to disclose what they did with more than $2 trillion in additional taxpayer dollars or to disclose what assets provide collateral for the loans. Bear in mind that Congress chartered the Federal Reserve in 1913 specifically to avoid exactly the same kind of massive bank failures we have seen in recent months. And now they refuse to account for two trillion dollars?

These reports come immediately after 80% taxpayer-owned AIG is caught trying to conceal a third post-bailout executive bash at a posh resort in Arizona which cost AIG, and therefore taxpayers, $334,000. AIG execs justify these lavish events by explaining, essentially, that this is how they are accustomed to doing things.

Meanwhile, since US auto manufacturers haven't managed to make competitive products for 20 years, Congress wants to open another bailout fire hose for them without even waiting for any bankruptcy filings.

Is it just sheer gall that qualifies these fat cats for their exalted positions? Will we bailout Hollywood next? Is there no pattern of brazenly irresponsible practices that our elected officials are not willing to reward at taxpayers' expense?

What about responsible citizens who lived within their means and planned for a future which has now been shredded by these failed financial geniuses? They didn't buy stock on margin, like the fools who caused the 1929 crash. What should prudent Americans learn from this? What can we do to avoid this kind of debacle in the future?

Some say, "Nothing; there's nothing we can do." But that is wrong.

The ultimate culprit here is Congress. Congress deregulated the financial industry, then strong-armed lenders to make risky loans to unqualified homebuyers. It is Congress which can't think of any solution that does not involve confiscatory tax rates and profligate spending. Congress gave Paulson the power to override Congress itself. Congress empowers the Federal Reserve (which is neither Federal nor a reserve) to defy the people's will for federal governance conducted with transparency.

Yes, we are another marathon two-year reelection cycle away from our next opportunity to toss these jackals out on their ear. Meanwhile, voters should begin now to invest time, talent and treasure toward building a third party into political viability to permanently eliminate any single-party majority. That is our lesson. That is the only way to ensure that the two major political parties cooperate to serve taxpayer's interests rather than those of big campaign contributors.

Until then, elected officials in Washington deserve all our calls and letters explaining how we feel about bailing out failed financial geniuses.