What Does it Mean that Our Rulers Didn't Learn from 2008?
Back in 2008 the problem was Lehman Brothers and the financial system sitting around with 30-year real-estate liar loans as the real-estate market tanked. This year it's just SVB caught with a bunch of long-term Treasuries after the fastest interest rate climb in U.S. history. But hey, it wasn't their fault. They didn't have a Chief Risk Officer through most of 2022. Coulda happened to anyone.
Back in 2008, the problem was that if you had borrowed to finance real-estate, then you really got wiped out when real-estate prices went down. For Lehman Brothers, according to La Wik, "a 3–4% decline in the value of its assets would entirely eliminate its book value of equity."
Here in 2023 the problem is that if you have borrowed to buy long-term Treasuries, then you really get wiped out if the resale value of long-term Treasuries goes down because short-term interest rates have gone up.
You know, back in the day, Warren Buffett said that he ought to hire a guy whose only job was to tell him not to buy airline stocks. Maybe we ought to have a law that every banker needs an assistant whose only job is to tell him how far its bonds have to fall to wipe out the bank. Although I would think this is not that hard.
Yet SVB operated without a Chief Risk Officer for most of 2022.
Of course, what's the problem when you are playing with other peoples' money, whether in finance or government or activism? But for people like you and me, it's our money. Know what I mean?
But is it too much to ask our educated, evolved rulers to fix this recurring bank meltdown problem? Goldfinger talked about first time happenstance, second time coincidence, third time enemy action. But I think it's more like: first time stupid, second time witless, third time delta-minus moron.
So let's just put Janet Yellen and Jerome Powell in a room together for a couple of days, and tell them to come up with a solution to the bank meltdown problem. Or no ice-cream for dessert.
Perhaps the problem is also, as Joel Kotkin writes, "witless billionaires'' funding the Left, with "climate-change apocalypticism, a belief in systemic racism and racial ‘equity,’ and radical gender ideology." To say nothing of the witlessness of their widows and divorced wives, and their legacy children.
There's another angle. Kotkin writes about "the managerial revolution of the 1950s" after which "business leaders were no longer upstarts" but social conformists living and working for "accolades from their peers, the press and the public."
You know, all of a sudden, I am having an Aha! Moment. It seems from all the foregoing that a lot of people in responsible positions think that life is just ticking the boxes: getting the right contacts, the right credentials, putting in the time, getting an okay job review, hiring the right Risk Officer, being a good little girl.
In fact, the opposite is true, and always has been. Life is about "noticing" when something is out of joint. It's about having the skills to jump your horse over the sunken "ha ha" fence, right now; it's about volunteering for a couple of semesters at the school of hard knocks. It's about setting yourself to read Kipling's "If" every now and again for that line about "If you can keep your head when all about you/Are losing theirs and blaming it on you." It's about thinking: maybe if I'm on exactly the same page as everyone else then I have a problem.
Back in the day, after the Crash of 1929, some wizard decided that 10 percent down on stock purchases wasn't too bright. So now you have to put up 50 percent of the stock price when you buy on margin.
So where was the wizard to convince us after 2008 that maybe it wasn't a good idea to have 30-year fixed real-estate loans with 10-20 percent down that could wipe out finance giant Lehman Brothers in a Wall Street minute?
Where was the wizard to convince us that boosting the money supply by 40 percent to fight a World War COVID wouldn't get solved by ramping up interest rates at the fastest rate in history?
Where was the wizard to convince us to wind up NATO after 1989 and make Europe manage its own defense and grow the cojones to deal with Russia on its own?
Where was the wizard to say that if the regulatory state is always subject to "regulatory capture" then we need to dial the regulatory state way down before it destroys this country?
Yet our rulers believe that ultra-MAGA Republicans are the problem.
Image: Public Domain