Where is the Outrage

Two stories came out last week that should have caused a huge outrage, but the relative silence was deafening. The first story was the one that told how the big banks were bailed out to the tune of over $7 trillion not the $900 billion of TARP as originally thought. The bailout came in the form of Federal Reserve Bank asset purchases and loans with such low interest that banks were able to profit from the spread of investing those funds in U.S. government bonds. In essence, the Fed gave banks money below 1% and they turned around and lent it back to the Fed at over 3%. This enabled banks that were for all intents and purposes insolvent to be able to post profits. This of course was kept secret because had the news gotten out that these banks were getting a further bailout from the Fed, there would have been a run on the stock causing market turmoil. But that’s not the part that should have caused the outrage.

The part that all of us should be really ticked off about is not the bailout itself. I truly believe the Fed was acting in what it thought was the best interests of the economy and the country. The benefits of this action will be debated for years to come but I’m willing to concede the point to the professionals on this one. What should anger everyone is that the bailout came with no strings attached, no modification of bank behavior and zero help to struggling homeowners. More on that later.

The other story that should cause outrage is the front page story in last Sunday’s New York Times profiling billionaire Ronald Lauder and the legal tax breaks he takes advantage of. Again, the outrage is not for the reasons you may think. I for one think Lauder and any other American should try and pay the least amount of taxes legally allowed, this country was built on a tax revolt, it’s inherit in our culture and basically logical. No, the part that should have everyone up in arms is the attempt by many in the media and certain political circles to turn the financial crisis into class warfare. It’s not about class warfare; it’s about a lot of things but class warfare it certainly is not. It’s crucial we separate corporate greed and a system that places the shareholder over a corporation’s social compact from wealthy people holding on to their money. Also, say what you want about Ronald Lauder, but he got no government bailout and no excessive bonus for doing nothing. Sure, Lauder made money the old fashioned way; he inherited it, but so what? I don’t begrudge him any of it and I’m pretty confident most Americans don’t either. What the New York Times was doing was simply trying to inflame passions away from the core issue; the relationship between money and politics and focusing it on scapegoating. I don’t care if the scapegoats are the rich, scapegoating is the precursor to persecution and we should be outraged by it.

What we need to focus on is not more taxes per se, but figuring out a way to save homeowners and the housing market, creating jobs and modifying the behavior that got us to this point. I for one am not against regulation; I’m in favor of smart regulation. How many of us would board an airplane that the FAA will not vouch for its safety? How many of us would take a pill not approved by the FDA? Why can’t we apply smart regulation to the financial markets?

I’m not against taxation; I’m just in favor of smart taxation. Why should someone who earns all of his living on interest income pay a lower rate than a working stiff? Why should an heir pay prohibitive taxes on money left to them by a parent who worked their whole life to earn it and paid taxes on it already?

I’m not against bailouts; I’m just in favor of setting conditions to the bailout. Why should banks be able to write off bad loans, get bailed out and then sell the distressed asset and make money again, while the struggling homeowner is put out on the street? If we can reward banks for “bad” behavior, we can certainly help individual citizens for no worse behavior. Let’s not forget that most of the foreclosures are no longer from sub-prime loans to undeserving borrowers, most come because of the financial crisis and unemployment by people who did everything “right” but just got screwed by circumstance.

I don’t profess to have the answers but I do know how to identify unfairness and imbalance. I don’t want to punish anyone in particular; I just want a balanced playing field. I don’t care if you’re a Teabagger or OWSer; I just want competent leadership and overall fairness. Is