Yeah, let’s deregulate everything. How about starting with traffic regulations? Hungry for a flesh-and-steel sandwich?

What caused the subprime market meltdown?

“Greed,” says John McCain.

“Greed,” echoes Sarah Palin.

Yeah, they say, and we gotta get those greedy, conniving, evil, predatory Wall Street lenders and show 'em what for.

Give me a break!

John McCain—deregulate, baby, deregulate—seems never to have met an economic problem that deregulation (and perhaps a few more tax cuts for rich corporations and individuals) couldn’t fix. After all, “market forces” balance everything out after a while. Right?

Small problem: “Market Forces” are a hanging judge. And the judge is currently hanging the entire economy of the United States from a very tall tree.

Of course the Wall Street guys were greedy. Greed is as American as apple pie. But blaming greedy bankers and predator lenders is like blaming a bullet for shooting you. Greed and predation is what they do. Regulating greed to keep it under control and thwart predatory behavior is what governments are supposed to do.

It’s deregulation that
shot the economy dead

It’s the function of government to protect us from the market manipulations that are a byproduct of rampant greed. Just as it used to protect us from greedy usurers. People used to go to prison for charging the kind of interest rates the banks are getting on credit caards now.

Marketplace regulation is no more onerous than government traffic regulations that help to shield us from highway traffic accidents. In fact, imagine that highway traffic accidents were the major campaign issue now.

People are still getting killed with a 65 MPH speed limit? Tell yuh what. Let’s deregulate speed and eliminate all speed limits. Get rid of those speed limit signs. Get rid of those rumble speed bumps. Get rid of that radar.

Even more people are getting killed with no speed limits? Easy fix. Just get rid of the highway patrol.

Still more people getting killed? Well, let’s take the dividers out between the eastbound and westbound lanes so that cars can go in any lane, any direction they want. And just to encourage “innovative” driving, we’ll give a tax break to anybody who takes a spin on the Freeforall Highway.

The “gotcha” doofus
will strike again

I should interrupt this rant to mention that some doofus with his finger on the “gotcha” button shoots me either an e-mail or a post every time I discuss this subject, reminding me that Bill Clinton signed the repeal of the Glass-Steagall act, one of the more important regulations that used to protect us.

Well, yes Clinton did—when it was attached to other legislation that he really needed and it all got shoved down his throat by mischief-making Republicans. And if Republicans are so offended now by its repeal, why didn’t they reinstate it during the six years they controlled both houses of Congress and the White House? And why didn't John McCain complaint about it once in those eight years?

There's no point in
bailing out the boat if you
don't fix the leak

Bailing out the banks will do us no good at all if once the bankers are bailed out (or even before that) they can jump into their 500 horsepower Greedsters and go roaring down the highway again.

But of course, I never met a Republican—John McCain and Sarah Whatzername most certainly included— who could think ten seconds ahead.

Oh, for those of you who are interested in such things, the Direct Marketing Association— those wonderful folks who brought you spam and junk mail—are holding their convention this week.

And just take a wild guess what they’re complaining about.

Dude, where’s my shareholder value? The money flying out of Wachovia bank is yours, if you’re a stockholder. But the bank blames customers.

Love those banks, dude! Take Wachovia, the North Carolina banking conglomerate that’s doing more than it’s fair share to bring down the U.S. economy – and train-wrecking it’s own stockholders in the bargain.

Fact is that if you invested roughly $5,500 in Wachovia, as I did on January 23, 2007, your investment, like mine, would have lost in excess of $3,000 of its value as of the morning of June 23, 2008.

I know, I know, I shoulda bailed out ten months ago. Woulda, shoulda, coulda, the old lament of investors since cave men began trading rocks on the Neanderthal Exchange.

I probably still should bail, take my roughly 70% loss, lick my wounds, and move on. Except, cranky old fart that I am, I take a perverse pleasure in assuming the authentic role of an increasingly aggrieved investor and skewering the bank’s former president, Ken Thompson, who recently seems to have been fired, earning  $8.7 million in farewell gifts for the job he did in shrinking shareholder value. 

The bank's cheerful message: 

What, me worry?

This rant was prompted by a letter I received from someone at Wachovia over the weekend. It told me about terrific things Wachovia is doing improve the bank’s, uh, situation.

So I went to Wachovia’s website to see what else I could learn.

The first thing I saw was a picture of the woman above, apparently grabbing cash that's flying in cyclone gusts out of Wachovia's windows. That advertising artwork was created to help the shaky bank lure some depositors into the house.

Then I went to the financial stuff. Here I learned that Wachovia is taking “initiatives” to “further enhance its capital base and flexibility.”

Wow, with “further enhancements” like this, we’ll all be able to afford bread and water in the poorhouse.

Shooting the stockholders

Specifically, Wachovia is going to “raise capital through a public offering of common stock and perpetual convertible preferred stock…”

Tell ya what that’ll do. That’ll further water down the value of the stock I already own. Then the bank is going to engage in:

Lowering the quarterly common stock dividend, which preserves $2.1 billion of capital annually, to build capital ratios and provide more operational flexibility.

Wow! Since my stock will generate even less dividend income for investors than it did last year, did it occur to whoever is now piloting this sinking ship that that this will drive down the price of the stock? And by the way, how did you manage to shrink capital ratios in the first place?

Blame shifting 101

And the website has begun pointing fingers. Rather than simply saying, “We screwed up, so we're going to resign, go home and gas ourselves in the garage, the way true gentlemen in the banking business used to do during the Great Depression,” the website points the gas hose at you and me.

You’ll have to plow your way through a sudden fit of turgid jargon, an odd shift from the simple English used elsewhere on Wachovia's website, so pay close attention as Wachovia tells us…

The update in the credit reserve modeling in response to the current and forecasted market environment and its effect on consumer behavior, particularly in stressed markets, resulting in a significant increase in the first quarter 2008 provision for credit losses. In addition, the scope of credit disclosures was increased to provide enhanced insight into the payment option consumer real estate portfolio.

Uh, got that, folks? Let me tell you what I get, in addition to shafted. I get that Wachovia is telling us it was “stressed markets” that did former CEO Ken in, as well as an evident lack of insight into what was going on with his bank. And what "stressed" those markets?

Why, it was...

...the precipitous decline in housing market conditions and unprecedented changes in consumer behavior prompted us to update our credit reserve modeling and rely less heavily on historical trends to forecast losses.

"Unprecedented" behavior? When people go bust, they're bust. When they don't have enough money, they can't pay their mortgages. That's it, pure and sample. It's as precedented as an empty wallet. But never mind all that.

The gist of Wachovia's argument is, it was your fault, you stupid consumers, for having the unmitigated nerve to purchase those outrageous home loans that Wachovia was either offering to the public or snapping up in the secondary market. And then you made it worse,“behaving” badly by failing to behave the way former CEO Ken's "model" said you would and make payments that the bank knew, or should have known that you couldn’t possibly afford.

Surprise! History goes back

more than 10 years

And now, as a consequence the bank will rely “less heavily” on “historic trends” – such as, “Hey, housing prices have been going up for ten years. So we can’t lose. Keep pumping out those variable rate junk mortgages!” Now Wachovia's going to “update” their credit reserve modeling – meaning, somebody going to try to be a little more sure you can afford a mortgage before they give you one.

Okay, even with all those brilliant minds  behind Wachovia’s operations, there’s still hope for badly drubbed stockholders that some takeover artist will buy the bank for a song and merge it into another bank, perhaps returning a tad more than the 30 cents we now have left for every buck we kicked into Wachovia's pot.

That’s the good news. But it’s also the bad news and here's why: The bigger that banks become by purchasing other troubled banks, the bigger the U.S. Government’s liability will be when the next dunderhead comes along to follow so-called “historic trends.”

Yo, Washington! It’s time to break up 

those oversized banking conglomerates

Apparently, a significant piece of history that Wachovia has somehow ignored is called The Great Depression, during which many banks failed. This gave rise to heavy, heavy banking regulations that kept banks and the economy in line. Or at least they stayed in line until “free market” cheerleaders started pouding deregulation into our ears.

One of the things this country really needs is some fierce anti-trust action to break up the few big banks into the many itty-bitty banks they used to be. Then, when a mismanaged bank goes down, not too much harm will be done to the stock market, depositors, and the U.S. economy. Write to your senators and congressman and tell them. Mention that the New York Crank sent you.