Bent Notes

A mugging by reality being, of course, the transformative experience involved in the definition of a neoconservative put forth by pioneer neocon Irving Kristol (father of Weekly Standard editor Bill), himself a former Marxist.

Larry Kudlow is not alone in his glowing assessment of the economic team Obama is assembling.

Along with the tone of being encouraged, though, sources such as Kudlow acknowledge that it remains to be seen how all this translates into legislative relations once the conversation along the length of Pennsylvania Avenue turns to levels of taxation.  So many options for limiting human freedom and confiscating Americans’ hard-earnd money: to look like a fairly sharp and wealth-friendly guy and let the W tax cuts run their natural course and sputter out when scheduled, or stay more true to the Fher promise: repeal those evil, oppressive cuts right away, or - Heaven forfend! - betray the base and do what makes imminent sense to anybody with half a brain and institute yet deeper cuts in taxes on income, corporate earnings, and capital gains?

And on the spending side?  So many beleagured elements of our recession-ravaged society.  How to decide the most deserving of bailouts?  Then there are those crises the FHers have been ranting about for decades: health care, the global climate, infrastructure.

Are they crises or not?  If so, we don’t spare the largesse just because we’re in this icky financial meltdown, do we?

That debate will come up, however grown up the members of this economic team.  The Chicago Marxist will be the moderator, given that he’s now the boss of the whole shootin’ match.

Where will he personally come down on the whole deal?

From the get-go of this bailout approach to the frozen-credit debacle which has now metastasized into a general meltdown, it was clear that a basic truth would soon manifest itself - that being that when desperate people smell easy money, they stampede toward it.

1994, Citibank.

None of that “affordable-housing” nonsense that would fill the coffers of ACORN ande La Raza, and no mark-to-market accounting.  Ditto judges being able to arbitrarily adjust mortgages.  Ditto some union heavy-handedness.

So now we know what the market will be reacting to at the opening bell tomorrow morning.  What remains to be seen is how it will react.

As of this writing, congressional leaders of both parties, both presidential candidates, and economic advisors are meeting in Washington to discuss the bailout plan W outlined in last night’s address to the nation.

The idea is that it will restore the financial system’s health quickly enough that the American taxpayer will realize a return on its outlay of $700 billion.  Sounds good, but also quite iffy.

It doesn’t look like a purely free-market solution to this is in the offing, since this catastrophe has its roots in a fuzzy melding of the public and private sectors.  That said, I hope and pray there will be a camp within the assemblage meeting with W that will press for the way forward that comes the very closest possible to such a plan.

As every grown-up knows, the other side of the freedom coin is responsibility.  Underneath the layers of bundled mortgages and deals and cleverly wrought instruments for growing wealth and government guarantees against failure lie actual exchanges of money for for promises to pay it back at a given interest rate.  Someone said, “Yes, I’ll loan you this amount of money on terms involving this amount of time for paying it back at this rate of return,” and someone else saying, “Okay, is this the dotted line where I sign?”  If either of them thought it unlikely that he or his organization could make good on what they were freely obligating themselves to, they’re not particularly wise individuals, are they?

Now, compound that by all the subsequent operators who saw home prices rising and said, “Hey, man, even if a lot of these loans are risky, bundling them together in this favorable market is a cool way to make some cheddar!”  We have to presume that the folks on this level understood the degree of risk in what they were doing as well.  Don’t we?

It looks to me like our culture’s zeal for ever-more slickly designed gizmos, with ever-more bells and whistles - think iphones and Blackberries and voice-activated GPS devices - permeated the financial world.  The main difference, it seems to me, is that microchips and plastic and steel and aluminum aren’t inherently risky substances.  You combine them into this product or that, and you can rely on them to do their thing as what they are.  Mortgages and other loans, in contrast, may, shall we say, decay over time.  They may fall prey to slow payment or even default.  This makes designing super-fancy financial products out of them kind of a shaky proposition.

So what I hope gets trumpeted loudly at the gathering in Washington today is this:  Let’s determine to the best of our ability who is responsible for each of the various aspects of this mess and hold them accountable as much as possible and minimize the burden to the American taxpayer, who needs to see his or her overall burden reduced anyway, as much as possible and as soon as possible.  Free people keeping their own hard-earned money is the real key to moving pst this perilous moment.