Yesterday afternoon in a surprise decision, Congress voted to reject the bailout intended to save Wall Street. Despite stern warnings about the possibilities of massive economic disruptions, members from both political parties couldn't bring themselves to support a plan that effectively ships a big crateload of money to Wall Street banker types, because seriously, fuck those guys.
Although this attitude is understandable (seriously, fuck them) it reflects a misunderstanding of just why we have banks in the first place. What is it that banks do you ask? Cocaine parties, sure, but what else? As it turns out, the primary function of the banking system isn't to afford young men the opportunity to impress shallow women with their Ferraris. Somewhat boringly, the point of banks is to move money around to where it can do the most good. An example: You run a really promising young company that's managed to get a toehold in the market for, let's say, anatomically correct dolls. But to expand your business and build more doll factories you'll need money. That's where banks come in. They can either lend you that money directly, or go to all the rich people they know and get them to give you money. Naturally the banks take all sorts of fees off the top of these transactions, which get funneled almost entirely into their noses, but so long as you can start making more unsettlingly realistic dolls, who cares?
But what happens when banks stop lending money to people (that's this credit crunch you've heard so much about) or if they go out of business entirely? Then you can't expand your business, and you're the poorer for it. And the same goes for your employees who work so hard stitching together genitals. And again with your suppliers of flesh colored felt. And all those people themselves will now start spending less money on groceries, trips to the waterpark, and gas turbines. Which affects everyone in those industries. That's why bank failures are such nasty business. It affects us non-dickish folk as much as it affects the dicks.
The explanation of how we got into this mess is long, and honestly not that funny. You can read a good general primer on it here. (Just imagine the word "testicles" is inserted throughout if that helps.) But really really briefly, here's the main problems:
1) Banks own a huge volume of crap that no-one wants to buy, because no-one knows what it's worth. The value of this crap is fundamentally tied to the value of mortgages. In turn, the value of a mortgage depends pretty much entirely on how likely it is the home-owner is going to pay it off, which is itself hugely dependent on whether his mortgage is worth more than his house is. And when you realize that the housing prices are probably nowhere near their bottom yet, you realize that all the dominoes are poised to collapse onto the supports of this financial house of cards, which is itself built on a foundation of shaky metaphors.
2) As the price of this crap drops, it forces some of the stupider banks who owned the most of it into bankruptcy.
3) Thanks to some clever new derivatives invented quite possibly by Satan, every financial company in the world is now extremely tightly tied together, so that if one bank goes under, every other bank may have to write down huge chunks of their own assets, pushing them closer to bankruptcy.
4) Banks then stop lending money to each other. This is partly because those other banks have recently developed a nasty habit of exploding messily, and partly because each bank is trying to keep as much cash on hand themselves to stop themselves from exploding.
5) When the banks stop lending money to each other, they stop lending it to us, which impacts our yacht purchasing power amongst other things.
What this last version of the bailout intended to do was take all that crap off the hands of banks, and put it in the hands of the government, who are of course adapt at handling fecal matter. It was hoped that would stop, or at least slow down some of the above chain reaction. Men and women in suits are going to argue about the failed bailout for the next couple days and try to hammer together a new version of it. But whatever form their efforts take, the ultimate goal of all this is to get a bunch more money into the hands of the banks, who, let's not forget, remain fuckers. And it's because these guys are such fuckers that this first bailout failed: no-one wants to give their money to these guys.
I have a solution however, based largely on the financial expertise I've accumulated from having read cnn.com for much of yesterday, and also my third year of college, where I watched just a ton of Win Ben Stein's Money. If no-one will give money to the banks, where will it come from? From the banks themselves. And how you ask?
The single largest asset every bank owns is their customer database. The banks can solve all of their capital problems easily by simply selling that information to the right people in the right places. Here I'm pretty sure that the "right people" are Eastern Europeans, and the "right places" are any number of shady laundromats across the country. You know the ones I'm talking about. Can 15 billion dollars fit inside a laundry bag? I don't know.
I know there will be nay-sayers out there, and quite frankly, they disgust me. They'll call my plan "unworkable" or "short sighted" or "the fevered dream of an opium addict." And although all those things might be true, the thing of it is, no-one has any better ideas.
And that's how fucked we are.