“If you think that you are, ‘too big to fail’… ” You have got another think coming!!! is what I optimistically edited in for our President, even before he could stutter out the balance of his thought. Oh, what a transport can occur in a moment! Loyal, or even repeat readers know that the President’s oratory drives a swelling in my chest and a welling in my eyes, as it does for all true Americans. As is so for many ordinary Joes though, my Hope for Change sometimes outpaces our man’s um, deliberative ah, rhetorical        pacing. In that brief instant of the swallow and the blink, I thought President Obama might actually make something like my modest, long held and grammatically based objection to that obnoxious oxymoron, “Too Big To Fail” or any real examination of its perverse implications. It would be appropriate to shatter that particular impediment in Allentown Pennsylvania. This is a perfect demonstration of a Rustbelt burgh older than the nation that has had boom and bust including the commercial defenestration of the eighties chronicled by Billy Joel. Somehow the series of industries with which the citizens of Allentown fed their children and paid their taxes; emerging from nothing and returning thereto in a decade or a century, were never considered Too Big To Fail in their long history. So fail they did and turn a serious fraction of the Lehigh Valley’s population out on the street without warning or ceremony. And just as certainly did some new, sometimes better businesses replace them. Bailout was something you did in a leaky skiff as you fished for your family’s dinner.

I understand a full-throated assertion of rugged individuality might not be Our Guy’s cup of tea but there are plenty of reasons to revile Too Big To Failism, from Left and Right, from Practicality to Ideology. Take your pick. He could have said simply, we will not bail you out again. Is that so radical a notion? And that would not require any real repudiation of his earlier decisions, so much in concert as they are with Bush’s previous decisions and McCain’s declared intentions. No, he could merely say we could afford the bailouts before, but not now. Or far short of that, he could say that any more bailouts would have much higher standards of solvency and performance. Could anyone from Barney Frank to Tom Delay object to that?  A Bushism might be appropriate, Fool me once shame on…..  uh, you. Fool me twice and well, ya can’t get fooled again! But just standard Bush buffoonery is a distant star we may only aspire to as of late. The above abortive marriage of folksy aphorism and ill-recalled WHO lyrics is a model of clarity compared to what we were delivered. It was a dagger thrust to my rising heart though nearly painless because of its incoherence… What had the arrogant they who think they are Too Big To Fail best consider before they make another move?

“well, you had better have sufficient safeguards in place where we don’t have to come and bail you out….”

So, don’t they have that now? Um, no, actually. What would these “safeguards” be, look like and cost? That is all prospective… that is for a future summit perhaps or to be added to Tim Geithner’s groaning inbox. But whatever these safeguards are, you had better have them, or else.

Or else, what?

Jeez, is it too much to ask that at least PART of the Or What? were NO MORE BAILOUTS? Why is this so hard for some people to understand? Barack was half-way there, especially since these prepared remarks were certainly authored, edited and vetted by the White House bigs like Axelrod. Just to draw the phrase Too Big To Fail (which we will abb. as 2B2F) into public criticism is a huge movement toward a real insight and one that it is crucial our President grasp if the economy is to be anything other than disastrous in the next forty years. Quite simply, any declaration of 2B2F towards any industry or corporation or interest group WILL MAKE THAT THING BIGGER AND GUARANTEE ITS FAILURE. Why? How? Because you reward Bigness with fiscal immortality. Darwin has his way. And once you declare their failure an impossibility there is no system of discipline within that thing. Is this not what we have seen? No? Okay, I guess we will have to see it yet again.

You want “safeguards”? Well, here are some that are time-tested though these may seem like radical notions. First off, let’s have no more of this nonsense that no one knows the market value of this or that. What they mean is that they do not like the market price for a particular asset that they are holding. But these genius traders and financial tyrannosaurs should know that the seller never likes the bid and the buyer never likes the ask…. until they do. You decide when to buy and sell according to your need and the price, CRAZY, I know! So how do you emplace this measure of discipline? Stop Bailing.

Let’s say a heavy consumer industry has been raided by its union and strangled by its management until they are billions in debt with little prospect for continuing in business. Well, how about if this giant gets the same treatment as all the midgets in bankruptcy court or whatever venue, especially since these are the terms they signed on for? Solution? Stop Bailing.

Suppose you are a finance company holding grillions of mortgage backed securities which are not being paid. Unless you foreclose and flip these properties, and quickly, you are in serious trouble. On this one it is especially egregious as it is the mandated “safeguards” that have encouraged and rewarded lending to poor risks, covering the notes when they are in default while ALSO plumping up the noteholders but with straight cash which, guess what? Does not last. The solution is an accelerated program of foreclosures, getting these properties back into the hands of paying borrowers before they are spoiled in long and drawn out proceedings. Too much? One can compromise and just adhere to the current law but even THAT is subject to bailing. Slow or even STOP the foreclosures, isn’t that what they say from the courthouse to the outhouse? But that will also cost piles of money. How to put this all right? Simple. Stop Bailing.

But are any of these simple (in)actions on tap as the “safeguards”? Oh no. Nope. What? Are you kidding? Where have you been?

No, there is no principled case being made against 2B2F from anyone who makes these decisions however well it is understood in Allentown, but that is okay. The President’s stumbling upon the simple fact that 2B2F is the author of nearly all our economic woes is no accident. It is a rare intrusion of Reality through the fog of Ideology but it will happen again and again and again. As reality dictates so much at home and abroad we can be certain it will poke through more acutely with time and the abrasion of grit against goo. These woods are full of truffles, and our pig is perhaps not blind, just well blind-folded. Here’s hoping.

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