Part of the problem with the Wall Street mess is, hardly anyone understands it. I was discussing this — in the sense that “exchanging instant messages” = “discussing” — with my boss last night, two reasonably smart people whose job it is to read the papers, and we both admitted we could just barely get our heads around it. It’s kind of like understanding precisely how large the universe is; just when you think you’ve got it, someone throws another intensifier at you. “Now multiply that by infinity, and that’s the answer.”
And yet, I still regularly come across the Grandpa Simpson explanation of the mortgage meltdown, from people who should know better: “Some dirtbags got in over their heads and didn’t make their house payments.” What a neat trick, shifting blame for a global financial disaster engineered at the very pinnacle of world finance onto the most powerless parties, the ultimate “you wouldn’t have gotten raped if you hadn’t dressed that way” hand-washer. Funny how that absolves a person of all those uncomfortable thoughts the current crisis arouses, the ones that whisper it’s even worse than you think and the people who are supposed to be overseeing this don’t have a clue, either. As long as you can blame some poor person in Cleveland, one’s hands and moral conscience remain clean.
If that’s true, if all the money extracted in second mortgages went for manicures and two-week cruises and cars, we ought to have some very rich manicurists and cruise lines and carmakers in the world, and I don’t see that’s the case.
Here’s a story I heard this weekend, and I can’t vouch for its veracity: On Labor Day, a few of us toured a grand old house in Palmer Woods in Detroit. It belongs to a friend of one of our little moviemaking crew, and he offered it to us as a spooky-mansion set, before restoration work really gets going on it. At one point I looked out a window in back and saw the real spooky mansion, another big house, not as magnificent as the one we were in, but a big solid house that once doubtless housed a well-to-do family. Unlike the one we were in, however, it was beyond salvation. It seemed to have been abandoned in the middle of a complicated renovation project. Tattered blue tarps and Visqueen flapped in the breeze. Particleboard walls had been exposed to the elements for several seasons and were bleached the color of bones. It’s a teardown now, and barely worth that. “Very sad,” said our host, and added that the house was at the center of vigorous fraud — that it had changed hands several times in recent years, each time delivering a tidy sum into the hands of someone, each time never welcoming a single soul who intended to live there. A lot of people had joined hands — buyers, lenders, appraisers — winked at one another, flashed their cufflinks and extracted cash from the house like an ATM.
I didn’t learn the punchline until this weekend, however: “Oh, that’s the old Romney house,” one of my dinner guests said. “When Mitt was campaigning in Michigan, they wanted to hold a fundraiser there, in the house where he grew up. And then they saw it.”
Certainly, that would have been very awkward, holding a GOP fundraiser in a house that stands at a living, tangible monument to what can happen when you turn greedheads loose in the world with no rules, and expect the invisible hand of the market to keep the playing field level, i.e., a very GOP, laissez-faire sort of economic policy.
So while, yes, it’s possible at this point to say the current crisis came from dirtbags not paying their mortgages and have it be technically correct, it’s equally possible to say that isn’t the whole story. Once again, for the best single explanation of the underpinnings of the current crisis, see “The Giant Pool of Money,” which you can download or stream free. (When you get to the part about 23 dead people in Ohio receiving mortgages, it should start to dawn that it’s a bit more complicated.)
And that’s only the beginning. What’s happening this week — the failure of Lehman Brothers, et al, and the bailout of AIG — is several steps beyond that, and sorry, but I can’t explain it, either. If you can, you know where to leave it.
Such excellent bloggage today. This is going around, but it’s too good not to share. Where I come from, this sort of thing is called poetic justice:
He met her in the bar of the swank hotel and invited her to his room. Once there, the woman fixed the drinks and told him to get undressed.
And that, the delegate to the Republican National Convention told police, was the last thing he remembered.
When he awoke, the woman was gone, as was more than $120,000 in money, jewelry and other belongings.
Actually, at this point it’s just called “getting rolled.” This — in which the victim is interviewed several hours before the fateful tumble into the honey trap — is what makes it poetic justice:
Live by the pork sword, die by it, feeb.
Now if we could only arrange the same treatment for the mortgage thieves, we might have ourselves some justice going on.
Have a swell day, all. Remember: Economic education in the comments. We all need it.