Mitt Romney's Entitlement Plan Is Crazy

By Matt Taibbi,
Rolling Stone
08 November 11

http://www.rollingstone.com/politics/blogs/taibblog/why-mitt-romneys-entitlement-privatization-plan-is-crazy-20111108

David Brooks, the [gratuitous insult deleted], wrote this
this morning entitled "Mitt Romney, the Serious One." In it,
he explained how Romney's recent decision to unveil a plan
for reforming the entitlement system "demonstrates his
awareness of the issues that need to define the 2012
presidential election."

   Romney grasped the toughest issue - how to reform
   entitlements to avoid a fiscal catastrophe - and 
   he sketched out a sophisticated way to address it.

So we had a giant financial crash in 2008 that necessitated a
bailout costing a minimum of nearly $5 trillion and perhaps
ultimately costing $10 trillion more, we have foreclosure
crisis with more than million people a year losing their
homes, and we have a burgeoning European debt disaster that
threatens to devastate the global financial system - and the
chief issue facing the country, according to Brooks and the
Times, is reforming the entitlement system?

The column goes on to throw bouquets on Romney's plan to
semi-privatize Medicare and Social Security. Romney's ideas
are not as draconian as Paul Ryan's, but they do pave the way
for Wall Street's ultimate goal - full privatization of
Social Security and Medicare.

Think about what such reforms might mean. Your typical
Medicare/Social Security recipient might already have been
ripped off three different ways in this era.

He might have been sold a crappy mortgage or a refi by a
Countrywide-type firm (which often targeted the elderly). He
might then also have unwittingly become an investor in such
mortgages and seen the value of his retirement holdings
devastated (many of the banks sold their crappy mortgage-
backed securities to state pension funds).

Lastly, if he paid taxes, he saw part of his tax money go to
pay off the bets the banks made against these same mortgages.

So now that Wall Street has ripped off this segment of
society three times, it makes all the sense in the world that
Mitt Romney - a former Wall Street superstar who was a chief
architect of the modern executive-compensation-driven
corporation - is coming back and telling us that we need to
cut their Medicare and Social Security benefits in order to
defray the cost of the previous three scams.

(Actually, it makes sense. If we don't cut health care and
retirement benefits for old people, how can we pay for the
carried-interest tax break that allows private equity guys
like, well, Mitt Romney to keep paying 15 percent tax
rates?).

There's another aspect to all of this that boggles the mind.

We've just witnessed an episode of industry-wide financial
mismanagement that surely has no parallel in history. From
Lehman Brothers to AIG to Goldman and Morgan Stanley (which
in 2008 needed the unprecedented emergency granting of a
commercial bank charter to avoid bankruptcy) to Citigroup
(which needed a $25 billion bailout and $300 billion in
federal guarantees to survive) to Bear Stearns (dead) and
Merrill Lynch (dead) and so on, virtually every single one of
America's leading financial institutions from the last decade
is either already out of business or functionally insolvent
and living off government life support and cheap cash from
the Fed.

Even leaving aside the fact that most of them are facing mass
litigation for fraud, dishonest accounting, and/or systematic
perjury (for robosigning financial documentation), they've
all proven their complete and utter incompetence to do their
ostensible jobs, i.e. the care and stewardship of money.

For instance, the top five investment banks in the country
sought to remove capital requirements in the middle of the
last decade, and all of them instantly jacked their debt-to-
equity ratios above 20-1, some of them going as high as 33-1
or 35-1. Of those five investment banks, three (Bear, Lehman,
and Merrill) went out of business during the crash, and the
other two (Goldman and Morgan Stanley) required massive
government aid to survive.

The commercial banks have not been much better, with two of
the biggest (Wachovia and Washington Mutual) imploding thanks
to bad investment decisions and three of the biggest
survivors (Bank of America, Wells Fargo, and Citigroup)
recently facing downgrades.

The recent downgrades, incidentally, were widely seen as Wall
Street's way of making two interlocking judgments about these
big banks. One is that their accounting is so fucked up and
dishonest that it simply cannot be believed, leading to
widespread expectation that one or more of them will
ultimately collapse. The other is that when they collapse,
the government may no longer be able or willing to completely
bail these companies out. The downgrades were spurred by
vague fears that implementation of new reforms via Dodd-Frank
will make it harder to get bailouts.

So the mere hint that these banks might be denied future
bailouts caused a company as massive as Bank of America to be
downgraded to just above junk status. That means, in other
words, that without the implicit promise of government aid,
Wall Street considers these banks to be junk or below-junk
businesses. Evaluated purely on their own merits, without the
implicit attachment to the taxpayer, these companies actually
have negative trustworthiness.

And these are the people we want managing the nation's Social
Security accounts?

If there wasn't such a very real chance that this could
happen, it would be worth laughing about, but unfortunately
it's no joke. It's a testament to the tenacious idiocy of our
national media that an idea like Social Security
privatization could continue to be publicly contemplated, in
the wake of a disaster on the scale we've just gone through.

Advocating the turning over of Social Security management to
Wall Street after the 2008 crash is a little like asking
Paris Hilton to pilot Air Force One, or tabbing Charlie Sheen
to manage the inventory of a hospital pharmacy - completely
nuts, but to David Brooks, that makes Mitt Romney the
"serious" candidate.

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