(my) money or socialism in reverse

Yesterday's N.Y.T. (Sept 6 '09) had some disturbing news about the unrestrained greed of the money people. Actually, I now tend to reach for the Times with a bit of trepidation as the news is more likely to be upsetting rather than entertaining. At my age, having met most challenges with equanimity and a few with spontaneous anger, I am now ready for the occasional uplifting story.

A front page article announced that Wall Street geniuses are busy developing financial instruments similar to the disastrous bundling of mortgages with this time using life insurance policies. It is speculation on the longevity of the policy holders: if they die early there's more profit for the bundlers than if they die later. It sounds weird and as a layman I immediately began to speculate about possible scenarios, none of them appetizing (no doubt because I don't trust those geniuses). For example, to realize the greater profits, the life insurance companies need only to have interlocking directorates with health insurers and get these to deny treatments for the many inventive reasons they practice already (one very large life insurer also offers health insurance and it would not be to difficult for one branch to snoop into the records of the other). On the other hand, the initial life insurers may want the insured to live as long as possible to collect more premiums and thus should support healthcare for all; this would not benefit the buyer of the bundled policies. Perhaps the bundlers will start supporting assisted suicide legislation, which would be progress! Bundling life insurance policies may seem a less risky speculation than the sub-prime mortgages as most life insurance premiums are budgeted a fixed expense and not subject to sudden increases in payments. But what happens if the ultimate holder of the bundled assets goes belly up like so many mortgage companies did? Will the insurance loose value, like the mortgaged houses or will there be no payments at all in case the insurer's insurer (one thinks of AIG) goes south? Has the S.E.C. not learned a lesson and can't it prevent these new adventures with other peoples money?

The Wallstreeters call it taking risks, but they themselves apparently still get huge rewards for risks that are not theirs in person and sometimes not even for their institutions, but the ultimate investors' in the bundled instruments. And clearly the initiators of the bundling get their huge bonuses regardless for their success is not measured in the end result but in the success of the packaging and sale of the bundles. Addendum: These new financial instrument finally made the NBC Sunday Evening News (10/11/09) and some experts made it clear that this indicated that Wallstreet hadn't learned anything and another remarked on the danger of manipulating individual policies.

The second article that got my goat was Gretchen Morgenson's column in the Business Section concerning the taxpayer (me for one) paying for the legal defence of the former CEOs of Fanny May and Freddy Mack when they are sued by stockholders for their mismanagement. These people are multi-millionaires as a result of, among other tricky practices, doctoring the books to misrepresent their success which allowed them to get bigger bonuses, and as I see it, they should be held responsible for having defrauded the shareholders. They certainly should not have their legal expenses paid by the taxpayer who is already in the hole for the billions in bail-out money. In fact they'd make good company for Mr. Madoff in his current place of residence.

It also appears that no one in gov't is really going to break up the so called "too big too fail" financial institutions which was much discussed when the Bush Admin. was demanding the "bail out" to save the economy. The message thus is not merely "business as usual," but "boys let's get as big as possible, for the taxpayer will end up footing our bills."

Once again I am reminded of the definition of property as theft by the French 19th Century writer Proudhon. These two articles describe the worst outgrowth of capitalism, i.e. taking from the many to give to the few, without the actual creation of benefits for the common weal, for example by investments in innovation. It is merely "socialism in reverse;" it raises the standard of living for those who already have the highest standard while lowering (and not only in comparison) the standard of living of everyone else. There's even a certain equalisation as upward mobility is interrupted or denied, The much vaunted policy of the 80s and 90s to promote home ownership has been set back by the prime-rate debacle engineered by the Wallstreeters and the number of foreclosures keeps growing. It has also created more unemployment. All of this demands yet more taxpayer money to help the victims of the GREEDY.

In the days of Proudhon, who was writing two generation after Adam Smith - when Smith's hopes were not being realized - capitalism generally meant the reinvestment of profit in one's enterprise. Today large parts of profit - including phantom profit resulting from the manipulation of the books - are taken out, mostly in the form of bonuses and invested, as often as not, in property (2nd, third and fourth homes for example i.e. Veblen's "conspicuous consumption") or in other greed satisfying enterprises, a practice Adam Smith would have censored. After all, he wrote his An Inquiry Into the Wealth of Nations not as an economist, but as a moral philosopher.

on socialism (1)

"redistribution of wealth" can be made to sound like socialism, but socialism actually refers to a system where all wealth is owned by a society in common and its management is controlled by the elected representatives of that society. One of the maxims used to describe it was "from each according to their ability [to produce] to each according to their needs." That's not the same as collecting taxes and redistributing them to fund such programs, for example representative government, i.e. members of Congress, their assistants, their health care and their travel, let alone public schools and universities that provide education that allows graduates to fill jobs in private companies that make the tools, tubing, etc. that permit Joe the Plumber to be a plumber or a governor to work at home or to give out a multi-million $$ contract to a foreign company for a study to lay a pipline. Or the military, whose members, officers in particular, are likely to survive unscathed and less in need of the special care of the enlisted G.I. Joe, who through such medical regulations of not recognizing certain illnesses and other shenanigans may not even receive them. Through the service of McC.'s grandfather and father, he has been a lifelong beneficiary of someone else's taxes and will receive medical benefits for life. Even his double dipping on retirement is paid for by someone (many actually) else's taxes.
In a previous blog I referred to McC.'s chairmanship of the Indian Affairs Comm., passing casino legislation and then gambling with profit in the casinos, which is a more pernicious form of distributing wealth.

As both the governor in question (who is proud of her faith and prays with her congregation for federal money for the pipeline) and McC. benefit from the redistribution of wealth, my QUESTION is:

Can anyone who "sins" as a matter of course, throw the first or any stones (John 8,7)?