It's About Coalitions, Not Purity, Part Forty-Six

The Chickens Come Home To Roost, But It's Too Hot In The Hen House ... The Financial Meltdown, Part 3

As the nation continued to struggle with record oil and gasoline prices, the best we could get from the Bush administration and many Republicans was how this was all part of the free market at work. On top of this, reports of escalating foreclosures began to scare the hell out of many people, including people who worked on Wall Street, or who were in some way connected to Wall Street, as they began to wonder when the financial consequences of large numbers of foreclosures would become more evident. The consequences began to show up.

In March 2008, large investment bank "Bear-Stearns" teetered on the brink of insolvency, largely as a result of the then developing mortgage and foreclosure crisis. Bear-Stearns could not get loans from other banks, as confidence in the old bank (the bank dated from the early 1920s) went out the window, and financial markets were shaky over the whole situation. The Federal Reserve (aka, "the Fed") stepped in and through a complex deal, including bailout money, orchestrated a deal whereby Bear-Stearns was acquired by J.P. Morgan Chase. Fed Chairman Ben Bernanke said the Fed's decision to intervene was made in order to prevent a spill over into the rest of the economy if Bear-Stearns went down. The "free marketers" nearly had a collective stroke, as this whole process went against their vaunted principles of "free market capitalism;" known to some of us as "dog-eat-dog capitalism." I also explain the concept as, "We can do ANYTHING to the public, and we mean ANYTHING, and they can't do a damn thing to us. We don't a give a good damn about people, only about money!" I actually think the public should return the "favor," and not a give a good damn about these miserable, insatiable merchants of greed.*

The Fed intervention didn't come close to righting the miserable shape of the American financial system, but it calmed things briefly. A few months later, it became more and more evident the American banking system, and, therefore, the entire American economy (and the world's, for that matter), was on the ropes, and that the predicament with Bear-Stearns had not been an isolated incident. We waited for the other shoe to drop. Lehman Brothers, another large investment bank, dating to the mid 1800s (yes, 1800s!), was next to suffer the consequences of irresponsible capitalism. After serious declines in its stock price and announced layoffs of personnel, clients abandoned the bank in droves, withdrawing their money and assets almost instantly. The bank announced it would file for bankruptcy, and the DOW dropped 500 points in one day, with further staggering losses to follow. The Fed did not intervene, thus giving the "free marketers" their wish. With Lehman's collapse, the situation became so serious, the Bush administration, that bulwark of "free market capitalism," having oft essentially said about American economic problems, "we can't do anything about anything, because its a free market economy," announced, along with the support of the Fed, that they needed a special fund of $700 billion (with a "b") to shore up the financial system or that the country faced a new DEPRESSION, perhaps worse than the one dubbed "the Great Depression." With that name taken, what the hell would we call it?

Folks, having principles is one thing, but carrying principles to an extreme is lunacy. Driving off a cliff doesn't make you pure, it makes you NUTS, and then DEAD!

With the economy unraveling before our very eyes, the nominating process for candidates to succeed George W. Bush was taking place. On the Republican side, John McCain, who had made a run for the nomination in 2000, faced a number of candidates, most of whom dropped out of the race early on, with only Mike Huckabee of Arkansas posing any real challenge to McCain until March 2008. On the Democratic side, New York Senator and former First Lady Hillary Clinton made a strong bid to become the first woman to secure a major party nomination for president, but she was challenged by Illinois Senator Barack Obama, a powerful speaker and a man of mixed black and white racial background. So Democrats had two choices, one of which would be for the history books: the first female presidential candidate or the first African-American candidate. 

Next, the economy plunges and the political coalitions of the election of 2008 ...    

* The basic argument by the "free marketers" is, capitalists take risks hoping to make a profit on something. If that risk blows up on them, they should suffer the consequences, and government should do nothing to help them out. I would dare say, most of us probably agree with that whole concept "on paper." The problem is, these banks had become so big (remember "too big to fail?"), the failure of any one of them posed a threat to the entire economy and people's livelihoods. Further, suspicions were then rising that Bear-Stearns was not the only big bank in serious trouble.

WORD HISTORY: 
Melt-This word, closely related to "smelt,"^ and related to "malt" and "mild" (all from Germanic), goes back to Indo European "meld," with the meaning, "to soften, to make soft." This gave Old Germanic "meltanan," which meant "to melt, to dissolve." This gave Old English (Anglo-Saxon) "meltan," meaning, "to melt, to turn solid to liquid with fire, to dissolve;" thus also, "to digest." This then became "melten," before the modern form. By the way, the adjective "molten" is simply the adjectival use of the archaic past participle of "melt." The relatives of "melt" in the other Germanic languages tend to be directly connected to the closely related "smelt," and, as far as I can find, only English has both forms, "melt" and "smelt," with the latter being borrowed from Low German or Dutch, and more typically applied to the process of melting metal; whereas, in the other Germanic languages, it means the more general "melt." Icelandic has "melta," which means "digest;" that is, "the dissolving of food in the digestive system."  

^ This is the word meaning "to melt metal." English also has used the same spelling for a form of the past tense and participle of "smell," more common in England and other parts of Britain, although not uncommon in "spoken" American English.