Fiddler’s Wages and the Golden Parachute

I wrote this the day before the "bail-out" was announced. The announcement the next day rendered it somewhat unpublishable, but still fun! I was going to re-write it but thought I'd just let 'er rip.

Posted here for your review. Pick away!

*****

Fiddler’s Wages and the Golden Parachute

The latest calamities some financial institutions and insurance giants now suffer are a comeuppance. They are the fiddler’s wages for lacking patience and faith in the American economy in this past decade and the penalty for gutting the credit model we have depended on for generations. Unwilling to grind their way through slow markets and falling (some would say correcting) market values and interest rates, they elected to supplement their portfolios with bad loans and bad lending policies made for all the wrong reasons. The fiddler is now at the door seeking his due.

Lenders routinely sought to dupe homeowners into trading their home equity for consumer debt. They routinely loaned 125% of the value of real estate against inflated appraisals. They routinely rolled ridiculous amounts of unpaid balances back into auto and other consumer loans. They did all of this with such abandon and with such frequency that, for millions of Americans, billions of dollars of false real estate and retail equity simply disappeared like a puff of smoke.

Now, the millionaires who traded our economic equity for a few more years of riding this artificially pumped-up, overvalued market want somebody to save them. Their smug shareholder’s who once savored the formerly robust dividend banquet, now taste the bitter pill of the truth. The truth is a lot of the “money” they think they stand to lose, never really existed. It was all a lie. Their stock values were inflated by the same false equity of the 125% loan based on a “drive-by” appraisal. The market was propped up by the loans and interest payments of folks who still owe $20,000 on a car now only worth $5,000. The fiddler knows it and now he wants the keys to the joint.

I say turn them over. I have long believed we have been living for a long time in a partially socialized healthcare/insurance/financial economy and simply weren’t willing to face reality. With 30% of the average family’s earning power being spent on insurance premiums to protect the health and well-being of our families or our personal property, we have to choose to submit a huge portion of our net worth to pay for coverage that may or may not be actually rendered. We’re in so deep we can never opt out. We labor under a huge financial burden paying nearly all of our after-housing/food income to avoid the prospect of a huge financial loss. Does anybody see the irony here? We are spending everything we have, hoping to protect ourselves from losing everything we have.

Our healthcare system is exclusively self-administered by these same insurance providers, not the healthcare industry or even a public patient advocacy, let alone an agency charged with a sense of social responsibility or even a passing interest in the common good. There has never been a more accurate example of the fox guarding the hen house. So, it comes as no surprise we find that the top of the economic pile, where the profitable applications of healthcare services lie, is the realm of the insurance company playing the role of their own administrative middle-man. Their profits are easily controlled by limiting loss, containing expenses and restricting services. They may seem, or even claim, to be working on our behalf but, the temptation to simply maintain a steady and growing stream of income from this multi-trillion dollar river of money is pretty strong, perhaps too strong to safely place so much of the public trust in so few hands.

The bottom of the heap though, is a different story. This is the part of our national healthcare/insurance/financial economy where there are only losses. This is where benefits are delayed, withheld or denied. This is where financial loss is assumed. This is where people housed within the best healthcare system in the world are left to die inside the building because it’s just too expensive to offer treatment and services from down the hall. It is also the part of the healthcare economy we get to pay for. This part of the picture is quite literally, socialized healthcare and has been for decades.

Does our having carved off the sweet, profitable, top of the cake for these corporations only to leave the rancid crumbs of the bottom to be paid for with public funds really preserving capitalism? This isn’t a glorious example of a free marketplace that any right-thinking patriot must defend to his last breath, this isn’t an attack on a pillar of public trust that cannot be made to stand the insult of public scrutiny, this isn’t the best we can do and it isn’t being honest. It’s shameful and not worthy of the American people. It must change and we cannot expect the middle-man to change it simply because we want him to. They will submit to temptation and greed like they always have. This isn’t capitalism either, it’s human nature and the very reason we have laws, to protect the public trust from weakness and greed.

We’ve allowed the insurance industry to pick and choose the portions of their industry that are profitable for themselves and pass the certain losses on to the American people. They willingly participated, along with our financial institutions in a dangerous game of chicken with our economy and will unashamedly ask us to pick up the tab now that they have become road kill. Now, the same corporate “me-first” mentality that gave us a broken healthcare system that seems to be able to generate billions of dollars in compensation for their corporate leaders but just can’t afford decent services for policy holders have worked their magic on our financial institutions too. How could we do worse?

Here’s the deal. The CEO’s will all exercise their “golden parachutes” and land softly in piles of cash and the shareholders will lose the false stock value they never really had anyway. I say give the keys to the fiddler, let the American people take over the ownership and operation of a few of the big insurance companies. Heck, run several of them competitively to keep them honest too. Give one to the Republicans, one to the Democrats and one to the Independents. The only thing left are the poor employees and insured clients anyway so what’s the harm? There will never be another opportunity like this. How could we otherwise assume public control of a large chunk of the insurance industry? What is the risk? That we may force the rest of the industry lucky enough to remain financially solvent to compete fairly? That the credit side of the actuarial tables might actually profit the common good rather than the next generation of gilded corporate skydivers? We don’t need to bail them out, use them to make money, insure the common good and level the playing field.

I have always believed that the free marketplace gets the final word in determining value. I believe the free marketplace has determined, quite eloquently, that the decision-makers of these financial and insurance institutions have misplaced own values and lost everything. As the folks who are going to be left holding the bag anyway, I believe we should take the keys and regulate their respective industries by forcing those companies fortunate enough to remain financially viable to compete with the American people as the owners of our own healthcare/insurance/financial companies.

If I had a choice, in a free market system, to either invest 30% of my families earning power in healthcare, property insurance or related financial instruments from a company owned by the American people or from one owned by some corporate Fat Cats who get paid a multi-million dollar bonus for screwing up so bad their companies become worthless, the choice is a no brainer. It’s a great marketing decision to give the American people an opportunity to competitively purchase their insurance coverage from a public insurance provider. It will significantly change the healthcare/insurance/financial playing field overnight, return the capitalist ideal to our most important economic sectors and will collectively give the American people a fair piece of the American Dream.

Socialism? We’ve been socialized for decades; we simply need to admit it. We’ve just never had the keys to the joint and now is our chance. I say we check Mr. Fiddler’s resume and offer him a great salary with decent benefits if he can do the job well. If he doesn’t, we can show him to the door too, without a parachute.

bwana

****

Now that we own 80% of AIG, methinks we should keep it and become capitalists too! Maybe they'll even offer a Golden Parachute to Joe the Plumber.