The players never lose

In December of 2000, when the rest of the country was caught up in the Bush v. Gore mess, Senator Phil Gramm put an amendment in a must-pass budget bill. No lawmakers had time to read it. Nobody understood Gramm's explanations of what it would do. This bill deregulated a particular chunk of the financial market. It gave banks and other financial institutions a gigantic playground hidden from government eyes. The consequence of that bill is the current subprime mortgage disaster. Hard to tell which is worse: Gramm had no idea what the amendment would do or Gramm knew what it would do and did it anyway. So where is the father of millions of foreclosures? Serving as Vice President of a Swiss Bank and as financial advisor of McCain's campaign. If McCain wins, Gramm becomes Secretary of the Treasury. Not a bad payday for screwing the American poor. As McCain's advisor, Gramm has proposed a free-market health care system. Give each person $5000 an tell them to buy their own health insurance on the open market. The magic of capitalism thus fixes our health care mess (see my recent post about the purpose of health insurance is to make money, not keep you well).

The role of Conservatism in all this? We're back to moral hazard, the idea that the victims of the subprime mess have only themselves to blame and shouldn't be bailed out. However, the truly moral hazard is a system in which risk and reward are asymmetrical -- one person gets the reward, the other gets the risk. And if the one who is supposed to get the reward doesn't, well, then bailouts for him are necessary to keep the whole system afloat. Conservatism creates a secret casino. It is always open and the players never lose. As for the rest of us, we get stuck with the bailouts and the damage to our communities.