Too big to fail vs. too little to be saved

I called Washington to say I’m ready to help ease the financial crisis.

“We appreciate that,” said Washington. “What are you offering?”

“I’d like you to bail me out.”

“Pardon?”

“As I understand it,” I said, “you’re about to spend $700 billion giving top dollar to banks for their bad mortgages.”

“That’s correct.”

“Because if you don’t,” I continued, “the banks will fail and cause a catastrophe.”

“A huge catastrophe, sir.”

“So I thought it would be patriotic to have the government bail me out, too. It’s bad enough that Freddie, Fannie and AIG were about to fail. We can’t let me get in trouble, too.”

“It’s different. Wall Street faces unusual forces.”

“Actually, Main Street faces the exact same things: The collapse of real estate and the Dow means our net worth is down and our debt is up. So we can use a bailout, too.”

“To be frank, sir, you’re not bright enough to understand what Wall Street is going through.”

“Which is?”

“The paradox of de-leveraging.”

“Isn’t that an intentionally complex phrase to force us to trust you? And actually, I looked that up and it means government will hugely overpay to buy bad mortgage holdings so Wall Street doesn’t have to take a hit by selling them at face value.”

“Sir ...”

“I’ll admit that, like Wall Street, I lived high off the housing bubble and stock market and relied on fantasy projections to tell myself my net worth would forever go up. But there’s still one big difference.”

“Which is?”

“I didn’t base bad bets on suicidal amounts of borrowed money like Wall Street did. Which I guess means they were even more irresponsible than Main Street, so remind me why they get a bailout and I don’t?”

“You’re implying that Wall Street’s beneficiaries are a privileged class.”

“Aren’t they?”

“Not at all. Just like normal folks, they put on their $3,000 Yves St. Laurent tailored pinstripes one leg at a time.”

“They do?. But that $700 billion breaks down to $2,000 per American, which means my family of five will be on the hook for $10,000. Since you’re investing my tax dollars in Wall Street firms, can I at least get some stock in return? That way, if things turn around, I’ll get a payoff for my investment.”

“Sorry, we have to reserve those profits for the CEOs. For example, the ousted CEO of AIG was promised a $47 million parachute and the head of Lehman Brothers last year made $34 million on his way to bankrupting the company.”

“Then how about this: I had a bunch of stocks once worth $20,000, but now they’re only worth $10,000. Could you buy them off me at $20,000 so I don’t lose money?”

“Are you crazy?”

“Well, you’re giving $85 billion to AIG and $25 billion to Fannie and Freddie to make up for their losses. So why not make up for mine?”

“Sir ...”

“By the way, how could a mega-insurance firm like AIG whose business is managing risk have so catastrophically mismanaged it?”

“It’s not their fault. It wasn’t in their computer model that millions of financially borderline people encouraged to take on huge mortgage debt wouldn’t be able to pay.”

“That reminds me: My house is down in value. Could you buy it off me for what I wish it was worth? That’s basically what you’re doing for Wall Street.”

“No can do. You’re too small. And frankly, your finances are nowhere near as bad as Wall Street’s.”

“So, as The New York Times said, you’re telling me that regular folks who are neither rich nor reckless have to bail out those who are both?”

“Exactly.”

X Patinkin writes for The Providence Journal. Distributed by Scripps Howard News Service.