A Ponzi Parade

As I listened to the sanctimonious hypocrites in Congress express mock outrage at the $195 million in AIG bonuses, I kept thinking: Where were these self-serving “legislators” over the past 10 years? Many were accepting campaign contributions from AIG and every other culprit in this drama, and few were doing anything to stop the Ponzi scheme that has overtaken the USA (and the rest of the industrialized world) during the first decade of the 21st century.

Nouriel Roubini of Forbes has it just about right when he writes:

Americans lived in a "Made-off" and Ponzi bubble economy for a decade or even longer. Madoff is the mirror of the American economy and of its over-leveraged agents: a house of cards of leverage over leverage by households, financial firms and corporations that has now collapsed in a heap.

When you put zero down on your home, and you thus have no equity in your home, your leverage is literally infinite and you are playing a Ponzi game.

And the bank that lent you, with zero down, a NINJA (no income, no jobs and assets) liar loan that was interest-only for a while, with negative amortization and an initial teaser rate, was also playing a Ponzi game.

And private equity firms that did over a $1 trillion of leveraged buyouts (LBOs) in the last few years with a debt-to-earnings ratio of 10 or above were also Ponzi firms playing a Ponzi game.

A government that will issue trillions of dollars of new debt to pay for this severe recession and socialize private losses may risk becoming a Ponzi government if--in the medium term--it does not return to fiscal discipline and debt sustainability.

Should any of us really be surprised that Bernie Madoff, king of the Ponzi scam artists, surfaced during these times. He’s just leading the parade.

For the first eight years, the grand marshall of the parade was George W. Bush and his marching band administration. They failed miserably to recognize the game and did nothing to stop it.

Now, the grand marshall is Barack Obama. The majorette is Nancy Pelosi and the marching band is the democratically controlled congress. Rather than stopping the Ponzi parade, they’re doubling down, using trillions of dollars we don’t have to pay off a wide array of constituents who put them in the parade in the first place.

And so, we see hundreds of billions flowing to save dishonest and irresponsible NINJA home owners and real estate speculators, more hundreds of billions flow to prop up banks who never should have loaned them money in the first place, and more hundreds of billions to bail out the Wall Street firms who left fiduciary responsibility at the door.

As long as Obama, Pelosi, Reid and company can print money, the Ponzi parade will continue. But unlike Bernie Madoff, who is now in jail, the marchers in this parade will sit in congressional chambers and criticize others while never taking a hard look at their own venal incompetence and self-serving dishonesty.