So far, no chilly onrush of the new tidal wave hitting Wall Street can be felt on Bilerico. But the outline of the towering wave can definitely be glimpsed at media like Bloomberg and the Wall Street Journal.
Earlier this week, the aftershocks of that subprime-mortgage earthquake back in 2007, that shook a whole raft of lenders into bankruptcy, was finally sending a second wave that is hitting deep with the big investment banks. First was Bear Stearns, 5th biggest in the U.S., with its loss of $1.6 billion by two hedge funds that had invested in subprime-backed assets. Last week panicky Bear Stearns clients staged such a run that the firm was close to being swept away by bankruptcy. Yesterday its desperate CEO accepted a bailout offer by JPMorgan Chase & Co to buy Bear Stearns pretty cheap.
This is a gay issue? Let's see about that.
The Federal Reserve is supposedly riding to the rescue, like the U.S. cavalry in the movies, by saying they will underwrite the JP Morgan takeover with government bonds and other fixes. They have revived an old policy of the post-1929-crash era, one that lets securities firms borrow directly from the Fed. But some observers say that the Fed's lowering of interest rates, which is supposed to help in crisis situations like this, isn't working so well any more.
Just where the government is getting the money to do this, let alone pursue its expensive war in the Middle East and Afghanistan, and fling promises of financial aid in a hundred other directions, is anybody's guess. The government is almost as bankrupt as Bear Stearns. You get the impression of a desperate shell game going on behind the scenes, with billions in credit being shunted here, then there, then over there, in an effort to keep a lot of bases covered.
The other day, the New York Times business page pondered a possible domino effect. It said: "Wall Street firms like Bear Stearns conduct business with many individuals, corporations, financial companies, pension funds and hedge funds. They also do billions of dollars of business with each other every day, borrowing and lending securities at a dizzying pace and fueling the wheels of capitalism. The sudden collapse of a major player could not only shake client confidence in the entire system, but also make it difficult for sound institutions to conduct business as usual."
So...which firm will be next? Merrill Lynch, which is marinating in $30 billion dollars' worth of subprime exposure? There are rumors and comments about a dozen other shaky firms and banks.
On the political front yesterday, while the country was arguing about Obama's "perfect union" speech and the Hillary Clinton tax returns, Congress was quietly arm-wrestling with the U.S. Treasury about another bailout -- on private housing. Our own Rep. Barney Frank is in the middle of this one, as chairman of the House Financial Services Committee. The Democrats want the government to offer threatened homeowners the same TLC as Wall Street biggies, by stepping in to insure re-financed mortgages. So many millions of homes are already in foreclosure that lenders are aghast at the growing glut of empty houses that surely won't sell for some time. There is talk of programs that will allow at-risk homeowners to negotiate temporarily better terms on their loans, especially seniors. But it seems that the Bush administration is not as interested in helping you and me as they are in helping Bear Stearns et al.
Further headlines on today's Wall Street Journal indicate further deadly cross-currents. "Car Makers Prepare for Slump." "Three Banks End Federal Loans to Students." But not many Americans read the financial press. In the more popular media, like the AOL news board that I study every day for its profile on American insanity, there was nothing overt about the deepening Wall Street crisis. It was tabloid-time as usual -- the Spitzer scandal, and who's the latest to be axed on "American Idol." The idea is to keep us all so entertained that we won't notice the tidal wave coming in.
Listening to Obama's speech the other night, the question I asked myself was this: beyond the racism that still divides our country, and what Obama proposes to heal the rift, can Obama be a President who is capable of steering our country through this worsening financial crisis that the Bushies have allowed to develop? Obama doesn't have to be a financial wiz himself, but will he be smart enough to surround himself with financial wizes who will know the right things to do? By all accounts, things are going to get worse before they get better.
And yes, these Wall Street dramas are LGBT issues. They are affecting the soaring price of food and transportation, the scarcity of jobs and affordable housing. These are definitely LGBT issues -- right up there with marriage and transgender and porn and the other things that we discuss so often here at Bilerico. Definit-nit-nitely, as the Rain Man said.