Okay, this is the last one, I promise. I am voting for President Obama because of what caused our recent recession. What caused it you might be asking? Unregulated speculation* and vulture capitalism is at the heart of the problem. We can argue all day long about debt, deficit, who has made the economy worse or better since the financial collapse but it’s pretty clear about what actually caused the recession.
The housing bubble fueled unregulated speculation and investment companies engaged in vulture and “chop shop” profit making. The housing bubble and the collapse is very well documented, so I won’t go into it much. Suffice it to say, the banks** gambled with our money to make a profit for themselves and they lost our money. Romney does not support the regulation that would prevent the banks from doing this again. Romney would let the banks screw us again.
The “chop shop” is something different but still hurts the economy in much the same way. This is when an investment company, i.e., vultures, buy a company either because it is vulnerable to a private takeover or it is already on the market. The company being bought is often not in trouble at all but sometimes it is. The vulture then takes that company and uses it’s credit to raise cash and buy other companies. Once the first company bought is maxed out in debt, the vulture company 1) restructures it by drastic cost cutting measures like lay offs, outsourcing overseas, closing facilities, eliminating product lines, etc, or 2) they put the company up for sale but only in parts*** or 3) they force the company to file for bankruptcy (and 1 and/or 2 occurs anyway).
So no matter what action the vulture company takes, people suffer and the economy shrinks. The strangest thing about it is that the vulture company usually, but not always, makes a profit. How? Well, in the case where they buy other companies, those companies may not be leveraged for their credit and are instead resold for profit. Other companies they may keep because the profit margin is very high. And sometimes when they file for bankruptcy on the first debt ridden company, they end up paying out less than if they’d tried to save the company or if they’d resold it, debt and all. How could they pay out less in a bankruptcy? Bankruptcies, particularly business bankruptcies, are negotiated affairs. He whosoever negotiates the best can get away with paying out less than what is owed. And sometimes if the vulture’s gambles don’t pay off, he can ask the Federal Government for a bail out. Bail outs paid by the Federal Government come directly out of our taxes. So the vulture makes it either way…whether he makes a profit by destroying companies or loses this gamble and gets a bail out, the vulture is fine and the economy isn’t.
You know who was a master at destroying companies this way? You know who profited by shrinking the economy, devastating thousands of families, manipulating the system and taking our tax dollars? Mitt Romney. Why is this part of the crisis? Because every time Romney and Bain destroyed another company likes this our national deficit and debt increased. Every time he did this more families could not afford to consume anything. Every time he did this our GDP shrank. Every time he did this there were less taxes to be used for other, more worthy things. And to top it all off, he paid an effective tax rate half of what you or I paid out.
See the thing is, it is always easier to destroy than to create. And the system allows him to do this. So was what Romney did Legal? Yeah, probably. Moral in any way, shape or form? Not in my book. Was it legal for the banks to invest in risky bundles? Yes, apparently. Was it moral? No. I understand profit making. I’m a capitalist at heart****. But there is a right way to make money. A way that helps more than just me and there is a wrong way. Romney has done it the wrong way and the President has never engaged in such behavior, nor do I believe he would ever behave this way.
The last thing we need is a leader who would engage in and encourage the very policies that came darn close to destroying not only our economy, but the entire world’s economy. That’s why I am voting for President Obama.
* from http://www.thedailybeast.com/newsweek/2008/10/18/keeping-economics-real.html When asked what caused the financial crisis Paul Krugman responded:
Regulation didn’t keep up with the system. As the shadow banking system evolved, more and more of the world’s transactions were conducted by institutions that were not subject to traditional banking regulation. And because of the ideological environment of the times, there was no attempt to expand regulation. I think now it will be expanded, and securitization will be reduced, and mortgages in South Florida won’t be held in Norway. I think it will be interesting to see just how much of the financial innovation we’ve seen turns out to be regulatory arbitrage. Someone once said that buying these derivatives [which brought down the banks] was like buying insurance for the Titanic from someone on the Titanic.
**If the banks had been a person, they’d be in jail for fraud and theft.
*** Hence, the “chop shop” metaphor, because some things are more valuable in parts than they are as a whole
****One can be a liberal and a capitalist–to mean it simply means that I want to make a profit not just for myself but for my community and my country. To me it means patriotism. Taking from the vulnerable and using others as tools and then destroying them to make a profit, is not moral and not patriotic. In fact, to me it is “evil” to knowingly do this and Romney most certainly did these things on purpose.