Tuesday, August 26, 2008

Here We Go Again- And It's Not Even Father's Day Yet

In honor of the hard work, honesty and moral fortitude of my father and grandfather, I wrote an entry contrasting their behavior with the euphuisms bandied about Wall Street and the media to distract one’s attention from the fundamental causes of the credit crisis. Since then the government (both parties) have engaged in further conduct that disregarded the fact that people made blatantly bad choices and are now forcing the rest of us to bail them out. Bear Stearns was followed by foreclosure bailouts, and then Fannie and Freddie.

I suppose that I should not be surprised that the Detroit automakers are preparing to stick their hands out. For those of you in our profession who are helping them polish the cups that they intended to pass around Washington, you have my sincere condolences. But there is good news. I have found a solution that will solve all the problems that we face.

The solution is a comprehensive bailout for everyone. Rather than the piece meal approach, we simply prepare a bailout application form to be included in all the IRS form packages. The form will permit each US citizen to apply for a billion dollar bailout. They need simply fill out the form and answer a few simple questions to qualify for a check from Uncle Sam for a billion dollars.

Beyond the general identification information, they need to check one of four questions explaining their need for the bailout. The form will state as follows:

Please state your justification for requiring the bailout by checking one or more of the four boxes below:

1. I have run my business with the same skill as the CEO of GM, with similar results, but did not get anything near his salary.

2. I take private investors money, insuring them a great return by taking companies private and running them with my skill and judgment, and if things do not pan out, I will get my friends in DC to cover up my gross misjudgments.

3. Before I went to work on Wall Street I got a MBA from Harvard and no one there ever mentioned “risk” in the entire time I was at the Business School (My colleagues from Wharton, Yale and other business schools were not told about risk either).

4. None of the above applies to me, but they are such silly reasons, I deserve a bailout too.

Once every citizen gets his billion dollar check the housing crisis will disappear. People in foreclosure will be able to make their payments; prices will go up as the inventory is absorbed because everyone will be able to afford a minimum of four houses.

Admittedly, business in the US might suffer a little wage inflation because many will leave the workforce choosing a life of leisure. GM may have to move everything out of the country, but jobs for people in Michigan will be irrelevant.

Wait you say, we don’t have enough money to give out that kind of bailout. I thought about that –we are going to borrow it from China.

But what happens when it becomes clear that we cannot service the debt because we are not producing anything—China may threaten dire action—Got that covered too! We simply point out: “WE ARE TOO BIG TO FAIL.”

-Larry Salibra
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