Where Have You Gone, Oscar Gamble or, Will '70s-Style Fiscal Haircuts Ever Make a Comeback?
Over at The American, Jay Weiser asks whether '70s-style investor-debtor haircuts will make a comeback. Weiser teaches law and real estate (?) at Baruch College in New York and explains that when the feds helped out Abe Beame's Big Apple in the 1970s (contrary to headlines of Gerald Ford telling the city to "drop dead"), they "offered limited guarantees only after creditors and debtors took hits." How things have changed:
The post-Ford pattern has been for the feds to pay 100 cents on the dollar with no creditor concessions. Think Fannie Mae and Freddie Mac's implied federal guarantee (originating in the Rockefeller era with the same off-the-books motivation), investment bank credit backstops, and AIG's credit default swaps. Just as bad is after-the-fact insurance for hot-money depositors who chase yield in uninsured, lightly regulated instruments—jumbo savings and loan CDs in the 1980s, money market funds after Reserve Fund insolvency in 2008. (America leads a coalition of the willing: the governments of Ireland and Iceland guaranteed themselves into insolvency with ex post facto insurance for the obligations of their bloated private-sector banks.)
While I'd rather see the feds and taxpayers everywhere tell bankrupt states and cities and "implicit"GSEs everywhere to drop dead, I could get behind the notion that stupid investors cum debtors who made really awful bets on bonds, houses, commemorative plates, you name it take the biggest hit in any sort of restructuring plan.
That sort of first-order responsibility is simply not jettisonable (?) in a market economy, whether the bad actor is a public entity or a private firm. It's the very essence of the system: You bets your money and you takes your chances, whether you're the mayor of Idiotville or Warren Buffett, World's Greatest Investor and Omniscient Oracle of Omaha who somehow missed the fact that his left-hand man was playing fast and loose with petty change.
Indeed, there's something so freaking wrong (morally and economically) with letting willing debtors skate free or mostly free with all of their scalps, much less hair, intact.
Which brings me to Weiser's titular quesion, "Will 1970s Haircuts ever come back into style?" In terms of baseball—a gaping maw of government-subsidized slack if ever there was one—they already have. Take it away, Coco Crisp: