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It's funny how something completely unrelated can inform us on the thought process driving Bush's decision to double down on his Iraq gamble. Twenty or so years ago I co-authored a book on the S&L crisis. It was back then, and in Texas, I learned something that explains everything about Bush's “New Way Forward” in Iraq.Back in the early 1980s when Ronald Reagan deregulated the savings and loan industry, Texas became the nation's biggest cesspool of S&L crookery.
At the core of their thieving strategy was a little trick they described thusly:
“A rolling loan gathers no loss.”
These wily Texas coyotes had figured out a win/win situation. S&L operators could help their buddies “borrow” money from their S&Ls, not pay it back, and still allow the S&L to book loan fees and other profits, upon which the S&L executives based their salaries and bonuses.
Ah, you say, but wouldn't bank regulators notice that the loans were in default? No. Because each time a loan came due the S&L would “roll it over” — renew it — adding all interest due into the new loan and booking it as income. The loans got bigger and bigger, and never got paid off. The bankers got rich, the borrowers got rich, American taxpayers got the bill. A classic Texas “win/win” business deal.
The other rule of Texas high-rollers back then was to never place your own money into risky deals. Instead use what they called “OPM,” Other People's Money. In the case of the S&L debacle, the money stolen and squandered was taxpayer insured savings.
That's precisely the kind of deal Bush has had going in Iraq, and wants to extend. He's not putting his own children's lives at risk, but OPK – Other People's Kids. And his rolling deployments gathers no loss. As long as he can keep feeding fresh troops into Iraq his project cannot be proven a failure. If Bush can just keep borrowing other people's kids to place at risk, and rolling over – renewing — his Iraq policy for just two more years, he's home free. It's another Texas “win/win” in which the perp gets away and the American people pay the price.
There are other analogies with the Texas S&L debacle – because this really is almost uniquely a Texas mindset. For example, every single Texas S&L crook I interviewed after the feds closed their bankrupt thrift and/or foreclosed on their projects, made the same claim – almost word for word. It went like this:
“My S&L (or project) would not have failed if the feds had just let me complete my plan. If they had just funded it to completion it would not have failed. They caused the loss by stopping us from seeing the project through.”
And that's precisely what Bush will claim if can just roll over his Iraq loans for two more years. He will leave office and go back to Crawford. The new administration will be forced to declare his Iraq project in default, bite the bullet and withdraw US troops. The lid will come off the already simmering Sunni/Shia civil war and that's when we'll hear from George again. He's sidle out from this ranch house, cozy up to Fox News microphone and declare:
“See, I warned that's would happen. I didn't lose Iraq, the new administration and congress lost Iraq. Had they stuck with my plan and let it run to completion, my Iraq project would not have failed.”
I used to try and figure out if the S&L sociopaths that made that claim actually believed it, or were just trying to escape blame and/or stay out of jail. I never could figure it out, but did finally realized it didn't matter. Either they were delusion thieves or liars and thieves. Either way I didn't want them anywhere near a bank.
The same goes with our current crop of Texas (and Texas-like) Neo-cons running US foreign policy. I don't care if they actually believe their own nonsense or are up to no-good on purpose. Either way they are writing checks in blood on our accounts for a cause not worthy of us and for behavior we used to denounce in others.
I also recall reading the text of lecture given at the height of the S&L crisis by a Texas developer. This guy had borrowed, and defaulted on tens of millions in real estate loans from thrifts that later failed. In his seminar he shared his secret of “success.”
“If you borrow a few thousand dollars from a bank, the bank controls you. But if you borrow a few million dollars from a bank, you control the bank.”
He went on to explain that a small borrower is at the mercy of the lender since the lender can foreclose if the loan is not repaid. But, he explained, if you borrow millions of dollars from a bank, the situation reverses. Because, the last thing a banker wants on his institution's books is a multi-million dollar “REO” (Real Estate Owned.) Bank regulators often force banks to write all or part of the defaulted loans off as a loss. Have too much REO on your books and regulators will the bank.
So, the Texas developer explained, he would borrow as much as could from a bank, then stop making payments. When the banker threatened to foreclose he would sit the banker down for a little, “go-ahead-make-my-day, ” reality chat. It would go something like this:
“Do you really want to have a $40 million, uncompleted condo development on the bank's books? If you foreclose, it's no skin off my ass, because I don't have a cent of my own money in it. So go ahead, foreclose and then you can finish it and try to sell the condos yourself. Or, you could roll the loan over for, say two additional years, build in a nice interest reserve so I don't have to make payments for two years so we don't have to have another situation like this. Oh, and one more thing. I've been crunching the numbers and I don't think I can make of go of this project with a $40 million loan hanging over my head. So let's say you write off $10 million.”
He said it worked every time. And, from the evidence I saw, he wasn't lying... at least that time.
I only mention this because, once again, it provides window into the workings of Bush's Texas brain. When he tells us “we cannot afford to lose in Iraq,” he is saying the same thing as the Texas real estate crook. He's sitting us down for the same kind of little chat in which, what he's really saying is:
“Look, you've made a huge investment in this deal already. You've authorized me to borrow over $400 billion and I've already cashed in over 3000 US lives as well. Do you really want to have that kind of a loss on your books (consciences?)”
That's what's at the bottom of Bush's argument for his “New Way Forward” in Iraq. He's demanding we roll over his already defaulted loans — demanding we make him additional loans in US lives, treasure and reputation and, though he has established a nearly unbroken record of a deadbeat borrower, he wants us to accept that his new plan is a good one. We must, Texas George says, provide what he says he needs to complete his plan. And, if we refuse, he warns ominously, the resulting failure will be entirely our fault.
It's another Texas “heads I win, tails we someone else loses,” deal. I know one when I see one, because I saw so many before. But at least when the S&L industry reached a point of collapse, Congress stepped up and took action. They passed new laws, staunched the hemorrhage and turned the feds loose on the perps. Back then as well it took Congress too way long to act, because many of those S&L perps were valued campaign contributors. But act they eventually did – and not with some meaningless, non-binding BS resolution calling on the crooks to stop looting taxpayer-insured thrifts.
Bush is way over-extended and in default on every one of his previous Iraq loans. Now he's back at the lending window with a mouth-full of “give-me” and hands full of nothing.
What Congress needs to do this time is to slam that window shut – right on his knuckles.
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Comments (4)
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Russell Wellen
said:
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Article of the Week Best article I've read on the Web or in print all week. It would be fatuous for me to add anything. Steven Pizzo said it all. |
a guest
said:
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The arguments are good but it seems like an editor would be in order… The missing words and improper conjugations make it a tough read. |
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