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Let’s plunge ourselves into the roar of time, the whirl of accident; may pain and pleasure, success and failure, shift as they will – it’s only action that can make a man.

~ Goethe’s “Faust”

Irrational exuberance.

~ Alan Greenspan, chairman of the Federal Reserve, speech at the American Enterprise Institute regarding the escalation of financial markets, Dec. 5, 1996

Last week, David Blake wrote an intriguing article about America’s growing financial crisis that, after I read it, inspired me to hearken back to my literary roots.

Perhaps the most significant literary contribution to 19th century Romanticism was the oeuvre by that magnificent German writer, Johann Wolfgang von Goethe (1749-1832), particularly his dramatic epic poem in two volumes, “Faust” (1808, 1833).

The narrative of “Faust” in brief was about an aging professor (Faust) toiling in his study, surrounded by books but painfully aware of the vanity of life – that he is running out of time. According to Michael Cumming’s synopsis of “Faust,” Part I:

Faust laments that though he has studied philosophy, medicine, law and theology he really knows nothing about the inner workings of the universe. Even his magic – powerful as it is – fails to lift the veil of mystery. On the brink of despair, he considers suicide.

Enter Mephistopoles (Mephisto), that suave, sophistic angel from the underworld (Satan) who eagerly offers to grant the hapless professor Faust his one last wish, but as usual when dealing with an irredeemable, evil figure like Satan, there is a catch: Mephisto “offers to show Faust the secrets of the world and let him experience the profoundest pleasures,” but when his life is over he must relinquish his immortal soul to him and do his bidding forever in hell.

With that synopsis of Faust, let us move to today and America’s current financial collapse. In this narrative, the American people are Faust. Everyone wanted a piece of the American Dream – the house with little or no money down, filled with furniture, cable TV, computers and all the amenities of life. There was only one problem: Millions of Americans who got homes over the last 25 years really didn’t earn them and couldn’t afford to keep them.

{Scene change, Supreme Court, 1991} Enter Supreme Court Justices Thurgood Marshall, joined by: Rehnquist, Stevens, O’Connor, Scalia, Kennedy, Souter. A year ago, I wrote a piece titled “A critique of Justice Thurgood Marshall” where I cited a landmark but misguided 1991 court case that sowed the seeds of “good intentions” for America’s current financial mortgage crisis. Here is an excerpt:

In Cottage Savings Association v. Commissioner of Internal Revenue (1991): The End = Giving the poor access to home loans. Justice Marshall weighed in on the income tax consequences of the savings and loan crisis, permitting a savings and loan association to deduct a loss from an exchange of mortgage participation interests. The Means = Overruling the common law traditions dating back to medieval England protecting the “right to contract” by mandating banks insure obvious bad loans of the poor and when defaulted upon, banks deduct the loss (i.e., pass the loss on to the taxpayers, “We the People”).

{Enter Alan Greenspan [Mephisto] stage left} Greenspan told those millions of homeowners: “I am Alan Greenspan, the chairman of the Federal Reserve. I am the man who saved the world. I and I alone have the power to control the most powerful economy in the history of world with just a lowering and a lowering and a lowering of the interest rates.” This fiscal irresponsibility led to the speculative bubble, which started to burst in late 2007.

My argument here is simple: Alan Greenspan, together with a litany of well-intentioned but boneheaded judicial opinions beginning with the Supreme Court, tried to be “fair” and “equitable” to people who had no business owning a mortgage or a home. These people should have remained renters until they had the 20 percent down to buy a home.

Thomas Jefferson’s “pursuit of happiness” idea meant people were to work hard for the American Dream. It was not to be given to them. President Jimmy Carter’s Community Investment Act (1977) raised home ownership from a “pursuit” to a constitutional right.

It was irresponsible to grant millions of high-interest loans to the poor, many times with little or no money down, so they could buy a home when the mortgage companies, the Federal Reserve, secretary of the treasury, Wall Street investment banks and their supposed watchdog, the Securities Exchange Commission, all knew that this contract was a Faustian bargain with the devil and in due course would prove disastrous to America’s economy.

These homeowners began to default on their loans en masse and went into foreclosure over the past 10 years. These delinquent mortgages I predict will cost America’s taxpayers trillions of dollars to cover the losses.

Meanwhile, the predictable cries from Wall Street, the mortgage industry, and soon the auto industry and other industries the experts haven’t even anticipated, will all demand a “bailout” (corporate welfare). They will also want to continue gorging themselves at the government trough and will all want to be rewarded for their incompetent and fraudulent acts perpetrated upon the American people.

On Sept. 18, David Blake wrote the following in Financial Times: “Where Mr Greenspan bears responsibility is his role in ensuring that the era of cheap interest rates created a speculative bubble. He cannot claim he was not warned of the risks.”

The main lessons of Goethe’s “Faust” we should have learned (if it was still taught in our Stalinist public schools and colleges) would be that you can’t get something for nothing. In the end, you must give the devil his due.

Unfortunately “We the People,” America’s taxpayers, are the ones that will pay for the sins of others – Wall Street, Congress, the president, the SEC, the IRS, the Federal Reserve, the mortgage industry, the Supreme Court and lower courts, and the millions of American citizens who accepted mortgages they knew or should have known they couldn’t afford.

Most to blame are the Democratic Party majority who exploited economic and racial differences by raising home ownership to the level of a constitutional right. As legislators, I hold them most liable in contributing to the tragedy of America’s financial collapse.

Financial expert Jonathan Hoenig, founder of CapitalistPig.com, said this week on FoxNews, “You cannot save capitalism with socialism.” I agree.

If Congress is foolish enough to pass a $700 billion dollar aid package for those corrupt, incompetent corporate executives of Wall Street and the mortgage industry that taxpayers will have to pay for, then perhaps the Preamble of our Constitution should be revised from: “We the People of the United States of America …” to “We the People of the Insane Asylum of America …”


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