Drill, baby, drill
September 12, 2008
On Sept. 7, the nation’s second easy credit party in the last 30 years ended exactly as the first one ended: A fiscally conservative president named Bush put American taxpayers on the hook for billions of dollars of bad debt after years of lax lending, lax regulation and lax monetary policy.
The first after-party clean-up, the savings and loan bailout engineered by the first President Bush, whacked you and me for $125 billion.
The second, engineered by the second President Bush, will cost considerably more. William Poole, the former prez of the Federal Reserve Bank of St. Louis, reckons the tab for vacuuming up this party’s confetti – the now-shredded mortgages backed by the now-shredded mortgage giants Fannie Mae and Freddie Mac – will top $300 billion.
If Poole’s estimate is close, the lovely Catherine and I will have been plugged for a little more than $3,400 to bail out stupid bankers who made stupid loans despite neither of us ever having been a customer of a stupid S&L, ever holding a stupid Fannie- or Freddie-packaged mortgage or ever voting for a, er, Bush.
If Poole’s estimate is too low – some economists believe the current 25 percent crash in housing prices, the blowtorch that fried Fannie and Freddie, will plummet another 15 percent – then the cost of nationalizing the terrible twins will be closer to $500 billion, or $1,700 per every man, woman and child in America.
My goodness, that means Catherine and I will be drilled for nearly $5,000 in the Bush bailouts of the lending industry.
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Kinda’ gives a whole new meaning to the Repub’s adopted slogan for this presidential campaign, “Drill, baby, drill,” doesn’t it?
But, of course, we – you and I – haven’t forked over a single penny of the 5k; it’s simply been added to our growing (a near-record $407 billion this year; a record $438 billion next year) federal deficit. As such, we’re taking the same path Freddie and Fannie followed into insolvency: failure to see an evident reality because we’re too cowardly to even look.
And that’s gonna’ cost us and the nation for years to come.
None of this new, of course. Another important lender of some repute, the Farm Credit System, nearly cracked up in the early 1980s when it forecast an endless dawn for American agriculture despite growing signs of farming calamity.
Stupid drunk on its fast growth and fat profits of the wild-eyed 1970s, however, FCS continued to lend money on the sole belief that tomorrow’s surefire rise in land prices would easily cover fast-growing debt.
But as every kindergartner knows, overfilled balloons do pop and the ballooning land prices that underwrote most FCS loans soon popped. Then the Farm Credit System popped.
In 1987, Congress stepped in to, in essence, redesign the once-elegant, now-crippled System. And, importantly, it gave the Farm Credit Administration, FCS’s regulator, new authority to keep the massive lender on an honest path.
But the crack-up and reinvention carried a terrible price for farmers and FCS alike. Between 1982 and 1996, commercial banks tripled their farm real estate business while Farm Credit land lending volume fell 47 percent between 1984 and 1994.
In fact, FCS saw its land lending business decline 11 consecutive years before farmers – many from a new generation – returned to the once-proud, proud-once-again Farm Credit System.
FCS’s near-failure is a hiccup, however, compared to the commercial death and federal resurrection of Fannie and Freddie. FCS’s mess was a thunderstorm; Freddie and Fannie are Katrina and Rita: back-to-back hurricanes that will take years to clean up.
And billions upon billions. But never fear, we – you and me – got it, right?
So drill, baby, drill.
© 2008 ag comm
Write to Alan Guebert at agcomm, 21673 Lago Dr., Delavan, IL 61734, or by email at firstname.lastname@example.org