Blumneconomics V

Robyn Blumner, that pinata of The St. Petersburg Times, allowed her demon of demagoguery full rein this week.

In an editorial titled "Robyn Blumner: Socialism bails out a big bank," Blumner offers her analysis of one of the proposed fixes of the subprime mortgage problem. The federal reserve loans to troubled banks, she says, represent socialism.

I understand that economic disaster may have ensued had Bear Stearns simply been allowed to go bankrupt and had the machers in the investment world been left trying to pawn their collateralized securities for what they could get. But what a sweet gig it is to be a member of the master-of-the-universe class. First, you are awash in money created by risk-laden investments that disregard all warning signs; meanwhile, the rest of working America lives with stagnating wages even as the economy expands. Then, when all those investments collapse, you are considered too big to fail and the government swoops in to keep you afloat.

Socialized risk is what this is called. Heads they win, tails we lose.

So. Even though Blumner supposedly understands that the loans helping to maintain Bear Stearns' solvency may be averting economic disaster for us all, somehow "heads" simply means "they win" while "tails" simply means "we lose." Can Blumner justify the claim? Hopefully she will at least identify which aspect of the coin corresponds to which outcome of the scenario.

Hmmm. No such luck. But at least there's ample brain-dead analysis.

What I can't get out of my head is the way we've been suckered again into believing the malarkey sold by Milton Friedman, Ronald Reagan, Alan Greenspan and a long list of conservative think tanks, that the market is our savior. It is so convenient to make government the bad guy, the one who interferes with everyone's pot of gold, and make open markets the answer to what ails, as Reagan did so often. But the historical reality is that the free market has a dark side that causes social displacement and instability, and by its nature it is an uncaring thing.

The subprime mess has its origins in government regulation, though it would probably kill Blumner to admit it even if she was aware of it. Under President Clinton, the government made moves encouraging high-risk loans. It was justified at the time as a salve to supposedly racist lending patterns. Lower income (many black) people had trouble securing loans. President Clinton wanted to make home ownership easier. As part of being the "first black president," I suppose.

There is a problem with high risk loans.

They are risky.

So here we have those "greedy" banks. At first they're greedy because they won't share the benefits of home loans with the high risk borrowers including the poor. Then they're greedy because they will share the benefits of home loans with high risk borrowers and the poor.

So we know they're definitely greedy, at least if we share Blumner's starting assumptions.

Blumner paints right over the truth with her broad brush. No doubt some loans were made based on selling a bad financial product to a consumer who was misled. But the problem is shared by consumer "greed"--the desire to have a home that one can barely (if that) afford, which makes the consumer more apt to accept a risky loan arrangement.

The Clinton administration was right there encouraging risky loans. But the problem stemmed from the free market?

The market is not the best part of America. Not even close. Our government is the best part — or at least it used to be before the current gang took over.

Blumner should submit the above in a competition for a "Progressive Pledge of Allegiance."

America's greatness comes from its ideas and its people. The greatness of the government stems from the early recognition of what should be forbidden to the government (the right to infringe on unalienable rights, among other things). Blumner's claim simply points up a blindness to history as well as a blinding bias in favor of her own political views.

So after the government's done rescuing Wall Street, the rest of us could use some kind attention too.

"I understand that economic disaster may have ensued had Bear Stearns simply been allowed to go bankrupt ..." No, you don't, Ms. Blumner. Or else you would have recognized that "the rest of us" get attention via the loans to Bear Stearns. Heads we all win a bit more than we lose, tails we all lose a bit more than we win.

Blumner would have my vote as the worst editorialist on the planet. But maybe I'm just not sufficiently aware of her competition.

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