Shock Doctrine Redux

Now that Naomi Klein's book Shock Doctrine is in paperback, we all have to read it. Read her September 22 post on Huffingtonpost.com. Because guess who is going to administer the $700 billion bailout of Wall Street?

It won't be a new federal bureaucracy. It will be the same financial services and mortgage companies that got us into this mess in the first place.

So the money is going to bail out Wall Street double-time. First, the money will buy up the bad debt that was often fraudulently sold to many homeowners, knowing that the monthly payments were absurdly high. You and I will own those mortgages although you might be losing your own home

Second, the money will pay for the financial services companies to assess, bundle, and sell the same mortgages they underwrote and bundled and sold. So, we have a federal welfare-to-work program.

This seems to be the legacy of the Bush administration: turn every disaster into private profiteering, whether it's Katrina, Iraq, Ike, or the subprime mortgage meltdown that Henry Paulson, Treasury Secretary, didn't see coming. Or did he? While Paulson was still CEO of Goldman Sachs, the investment house was as busy as most bundling subprime debt as safe investments for sale to its customers. However, Goldman hedged its holdings in subprime mortgages. In the third quarter of 2007, after Paulson left, Goldman had a 70% increase in income while other houses were already writing down bad debt. Goldman made money if the price of these bundled bad mortgages lost money. And so the investment house did.

It's hard work living in a democracy, because we have to remain informed, even if it gives us a headache.