Has It Been Almost Two Weeks Already?

Time flies when you're in the shit. It's been almost two weeks since my last blog update, because I've been dealing with some horrors of my own.

Work horror, for starters, which can really eat me up. I'm always amazed at how quickly, how completely, work situations can consume me, body, mind and soul. It's a wonder more writers don't set horror stories in offices. Perhaps it's just too close for comfort, and editors, upon seeing a submission with that setting, would simply consider it a "dog bites man" story and consign it to the dustbin. Still, I think there's rich ground there for the right person at the right time, which would be me now.

Then there's weather horror, for that extra miserable flavor. Have you heard how cold it is here in Chicago? And snowy? This kind of deep-freeze always seems to set in some time after the holidays, a meteorological reminder that the fun is officially over and it's going to be a few months before anything changes for the better. If it's the least bit warm, you can bet the skies will be low and gray. If the sun is shining, it only heralds the arrival of a brilliant, biting cold. I've lived my entire life in the Midwest, and I'm used to this, but every year it seems a little bit worse, a tiny bit longer.

The steady drum beat of economic horror from every news source is also ratcheting up the tension. I think we're all wondering how long this will last, how bad it will get, how much more we can take, and how in the world we got here in the first place. Rightly or not, I blame a large, mostly faceless group of bankers and executives, and I carry a generalized but seething pot of anger with their name on it everywhere I go. For the first time in my life I understand what those bumper stickers that say "Eat the rich" are talking about.

Which leads me back to my work horror.

A good example of the national mood came as an aside during this morning's CNN broadcast. They'd just finished an update on the USAir crash into the Hudson River. The anchors were remarking once again -- and deservedly so -- on Captain Sullenberger's heroism and what a miracle it is that all 155 passengers and crew survived. Then, just before going to a commercial break, one anchor said to the other, "It's something, isn't it, when a plane crash can brighten the nation's spirit?"

It sure is.

An Open Letter to America's Distressed Homeowners

To struggling homeowners who are in danger of foreclosure and hoping for some assistance from either their lender or the government, I have some advice.

Fuck you.

Yes, I know the government is bailing out AIG and the investment banks and the mortgage lenders who caused this whole mess to begin with. I’m also aware that now the automakers – who cranked out gas-guzzlers by the millions while their CEOs and executives never imagined that oil might some day rise above $30 a barrel, yet literally made out like bandits – are also lining up to the public trough with their hands out and shit-eating grins on all their faces.

So given all that, why shouldn’t you, Mr. and Mrs. Homeowner-in-Trouble, receive some of the free money that’s suddenly being tossed out like candy from a parade?

Simple. Because this is all your fault.

If I’m not mistaken, the reason you can’t afford your house payments is because you bought a house you can’t afford. Am I right?

Now I know, that nice man or woman at the mortgage brokerage swore you were getting a great deal, and that adjustable rate mortgage you agreed to probably wouldn’t go up when its initial term expired, and even if it did it wouldn’t be that much, and even if it was that much you could always refinance and everything would be fine. Am I right?

So you went ahead and bought more house than you could afford with a mortgage that was going to do who-knows-what in a few years time. And why not? Everyone else was doing it, too, and you sure as hell couldn’t afford to look like you weren’t keeping up with the Joneses and the Smiths and the Hempstead-Heaths next door. Am I right?

And along the way you took out a home equity line of credit, because at the time your home’s value was increasing and you couldn’t afford to just let that cash value sit there and do nothing. As a matter of fact, for a while it looked like that big house of yours was going to make money for you the way pigeons produce poop. So you bought some furniture you couldn’t afford, and an expensive car, and some kick-ass vacations and probably a lot of restaurant meals that impressed the Joneses and the Smiths and the Hempstead-Heaths when you bragged about them Monday morning at work. Am I right?

But guess what? All those old clichés your parents used to repeat – things like “There’s no such thing as a free lunch” and “If everyone jumped off a bridge would you want to, too?” and “Chickens always come home to roost” – turned out to be old clichés for a reason. Because they’re true.

But you jumped off that bridge anyway, because some slick salesperson said there was a free lunch down there, and now those chickens have come home to roost.

And don’t say you were suckered into this. Guess what? Everyone in this whole world – from the bum in the gutter to the CEO atop his ivory tower – is trying to sell you something. And ninety-nine times out of a hundred it’s going to benefit them more than you. That’s their job. Yours is keeping your eyes and ears open, and doing your homework so you’re smart enough to tell the difference.

You failed to do that.

It’s not my fault. It’s not the government’s fault. It’s your fault.

Which is why you don’t deserve a bailout.

What you do deserve is to learn a hard lesson, one that’ll be passed on to your children so they don’t grow up to be as stupid and gullible as you some day.

So fuck you.

Am I right?

Watch This One

This is Neel Kashkari, the 35-year-old former Goldman Sachs vice president who's been tapped by Treasury Secretary Henry Paulson to head up distribution of the $700 billion from the Wall Street bailout program.

All criticisms aside about Washington cronyism (Paulson once worked at Goldman Sachs as well) or foxes guarding the hen house...

Is it just me, or does dude have some crazy eyes?

Worth A Look Back

Although saying, "I told you so," can be enjoyable, it's usually not very helpful. Because when you're up to your ass in alligators, reminding everyone that you warned them about the swamp just makes a bad situation worse.

And yet. Considering the current news and my lack of recent posts, there doesn't seem much reason not to give another look to this March 14th essay from my mirror blog entitled "Good Scares."

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The Bear in Bear Stearns

Today, the United States Federal Reserve and JPMorgan Chase & Co. provided Bear Stearns with a 28-day emergency funding package that the Associated Press calls "a surprise, last-ditch effort to save the 86-year-old institution."

Amount and terms of the deal were not disclosed. At the time of this writing Bear Stearns stock has lost approximately 40% of its value.

Though rumors have been rampant that the venerable investment bank was in truly hot water over their losses related to subprime mortgage-backed securities, Bear Stearns CEO, Alan Schwartz, denied them until today when he revealed "our liquidity position in the past 24 hours had significantly deteriorated."

In a memo to staff, Schwartz said the loan would allow Bear Stearns to "get back to business as usual."

Let's hope not, since business as usual for Bear Stearns has often included aggressive operations on the fringes of the mortgage loan business. Instead, let's hope this lifeline allows Bear Stearns time to clean house and change its course before it's too late.

Observations aside about CEOs who either lie or ignore the writing on the wall for an entire week, then blithely refer to returning to the very same "business as usual" that got them into their current mess, this development doesn't bode well for the United States, our economy, Wall Street, the banking industry, the housing industry, or ordinary people like you and me.

Because when the fifth-largest bank in America doesn't have the prescience to know shaky investment vehicles when it sees them -- or even that it's going to run out of cash in five days -- the credit crisis some experts say may be coming to an end soon is probably just getting started.

However, I think we can all take comfort in the knowledge that no matter what happens, Bear Stearns's CEO, its board of directors and executive staff will be well taken care of. Anything less simply wouldn't be the American way.

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3/16/2008 UPDATE: In today's Sunday New York Times business section, Gretchen Morgenson laments the Chase/Fed bailout of Bear Stearns and compares the current mortgage securities and credit crisis to the Drexel Burnham junk bond fiasco of the 1980s.

Among her more interesting -- and incisive -- observations is that

The beneficiary of this bailout, remember, has often operated in the gray areas of Wall Street and with an aggressive, brass-knuckles approach. Until regulators came along in 1996, Bear Stearns was happy to provide its balance sheet and imprimatur to bucket-shop brokerages like Stratton Oakmont and A. R. Baron, clearing dubious stock trades.

And as one of the biggest players in the mortgage securities business on Wall Street, Bear provided munificent lines of credit to public-spirited subprime lenders like New Century (now bankrupt). It is also the owner of EMC Mortgage Servicing, one of the most aggressive subprime mortgage servicers out there.

Bear’s default rates on so-called Alt-A mortgages that it underwrote also indicates that its lending practices were especially lax during the real estate boom. As of February, according to Bloomberg data, 15 percent of these loans in its underwritten securities were delinquent by more than 60 days or in foreclosure. That compares with an industry average of 8.4 percent.

Let’s not forget that Bear Stearns lost billions for its clients last summer, when two hedge funds investing heavily in mortgage securities collapsed. And the firm tried to dump toxic mortgage securities it held in its own vaults onto the public last summer in an initial public offering of a financial company called Everquest Financial. Thankfully, that deal never got done.

At the end of an excellent article, Morgenson concludes

But by offering to backstop firms like Bear, who were the very architects of their own -- and the market’s -- current problems, overseers like the Fed undermine a little bit more of that [investor] confidence.

Another worry? How many well-capitalized institutions remain at the ready to take over those firms that may encounter turbulence in the future? Banks just do not have the capital that is needed to rescue troubled firms.

That will leave the taxpayer, alas. As usual.

Scary stuff, indeed.

My Government Bailout Plan

The news about Freddie Mac and Fannie Mae -- and now AIG -- has inspired me. I think now is the time the United States government provided me with a bailout plan.

A bit less than a year ago I left a great job to focus on writing fiction full-time. Some may have argued with the wisdom of this decision, describing it as risky or even speculative. However, times were good, I was feeling optimistic, and believed that if things worked out the upside of my actions was almost limitless.

I've since sold two short stories -- which is great! -- but the few hundred dollars I earned from them hasn't been enough to cover my expenses. (Worse yet, some publications I sent stories to did not buy them, which had a further negative impact on my earnings.) Consequently, a significant portion of my savings is now gone and the truth is that I simply cannot continue writing full-time without some assistance from the government.

Some may blame my current circumstances on poor management. To them I say, no one could have predicted the dilemma I now face and, frankly, I consider it to be one of those "once in a century" things that just can't be helped. Would more or less regulation have made a difference? I believe it would take a federal commission, several years and a great deal of taxpayer money to get to the bottom of it all.

However, it would take only $1 million dollars for me to continue my current operations. While that is a lot of money, let me remind you that it will be used to keep hard-working Americans -- such as the folks at my mortgage holder, the utility and credit card companies, the grocery store and gas station -- employed. I might even find myself in a position to create jobs with that kind of cash on hand. I think it would be nice to have a cleaning lady come in once or twice a week, and I've been wanting to update our kitchen and bathroom for the longest time. Withholding that million dollars -- and allowing me to go under -- would only end up hurting more people in the end.

I, too, am "too big to fail."