Published: October 08, 2008 06:15 pm            

DeKAY: United States Socialist Republic?

“Democracy and socialism have nothing in common but one word, equality. But notice the difference: While democracy seeks equality in liberty, socialism seeks equality in restraint and servitude.”

— Alexis deTocqueville

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Grandmother was always compassionate, she and Grandpa —Fannie Mae and Freddie Mac — wanted to help their children and grandchildren become homeowners. They believed that owning a house was part of the American dream, and as such, wanted their offspring to share in that great dream.

Susie, one of the grandchildren, was a nice girl, but she had what some might call a stubborn streak. She loved doing things her way. Sometimes doing things her way didn't agree with her employer. As a result, Susie’s work record was spotty at best, and she was never able to save for a good down payment on a home. One day while driving home after collecting unemployment, she noticed a great house for sale in her neighborhood. Tired of living in her one bedroom apartment, she decided to call her Uncle Ted. Uncle Ted worked in the mortgage department of the local bank.

Uncle Ted checked Susie’s credit, and finding it wanting, he decided to help her “heal” her credit which was in critical condition. Although it wasn’t a complete cure, it went from critical to stable in a few short weeks. Uncle Ted then put her in touch with a Realtor. The Realtor enrolled Susie in a “partnership” program, designed by the federal government to give potential homeowners who can’t afford to buy a home, a free down payment.

Uncle Ted wasn’t worried about Susie's lack of credit, or down payment, or inability to repay, because Grandma Fannie Mae and Grandpa Freddie Mac would stand good for the loan if something went wrong. So far, everyone was very happy. Uncle Ted was making a lot of money and so was his bank. Susie got another job, and her free down payment, and moved into her new home.

In no time, lots of Susie’s cousins heard about her good fortune, and went to Uncle Ted to get a loan. Over the next few years many of Susie’s friends and cousins purchased homes with the help of Uncle Ted, and his bank. Uncle Ted was making so much money that he moved into a big, new house, and his bank bought a new building downtown with a shining corner office for Uncle Ted.

Meanwhile, Grandma and Grandpa are standing firmly behind the loans that Uncle Ted is making. One day, Grandma's financial adviser, Uncle Publican thinks that Grandma and Grandpa are too lax about backing all of these loans. Against Uncle Publican’s best judgment, they continue to back the loans.

Things go well for a while. Susie’s house falls into some disrepair over the years; after all, Susie doesn’t make the kind of money it takes to keep the house going, but she does manage most months to make her house payment. Then the worst happens, her job as a data entry clerk is replaced by a high-tech scanner and she is laid off. Susie can no longer make her monthly mortgage payment.

Many of Uncle Ted’s other customers are also having trouble. Their monthly payments have increased dramatically because the interest rates on their mortgages are going up, some are going up every month. His customers don’ understand why the monthly payments are increasing, after two or three years at the same level. They didn’t read their loan contracts. Now suddenly that $700 per month mortgage payment has ballooned to $1,000 per month and they can’t make the payments.

Uncle Ted is up to his eyeballs in bad loans. His shiny corner office is moved into the basement, and the bank puts his former office up for rent.

Faced with bankruptcy of the bank, or a decrease in the bank’s ability to extend credit, he calls on Grandma and Grandpa to begin making the payments for his borrowers. Grandma and Grandpa do all they can to make the payments, but are embarrassed for everyone to know that they, too, are in financial trouble.

One day, after reading about the dip in the stock market because of all the bad loans being written off by banks, Uncle Ted gets a bright idea. “I'll call Cousin Barney — he’s the neighborhood association chairman and he can surely get the association to save us,” Uncle Ted thinks to himself.

Uncle Barney begins to convince his fellow association officers and members that they will be in jeopardy if they don’t help Uncle Ted and his bank with their bad debt. Uncle Barney gets money for his campaign every year from Uncle Ted’s bank, and from Grandma and Grandpa.

Many of the association’s conservative members don’t believe that Uncle Ted, his bank or his customers need to be helped. They say that Uncle Ted, his bank, Grandma and Grandpa, and the others made their beds, and that they should lie in them.

But the officers of the association begin to scare the members with horrible tales of how they will all end up in the poor house, and sadly, some of the conservative members give way to the myths that are being touted as true, and suddenly, the association is forcing its members to bailout the bank.

Many of the liberal board members of the association, like Nancy Polltaker, say that the “little people” who make up the association don’t understand what is best for them. She and many of her fellow officers don’t believe that people who make bad choices should pay for their mistakes; they believe that other people, who have made better choices, should pay for their mistakes.

Polltaker believes that banks shouldn’t have to stand behind their bad decisions, and that the association should solve everyone’s problems. She and her fellow liberal members and, unfortunately, even some of the conservative members, think that bureaucracies like the association can make better business decisions than the market and the people.

The association members write letters, send e-mails and make phone calls to Nancy Polltaker, telling her that they don’t want a bailout; it does no good. Polltaker and her fellow officers override the concerns of the people and bailout Uncle Ted and his bank anyway. The bank is happy because the association took all of their bad debt and made it go away.

But what about Susie and the other homeowners that Uncle Ted “helped” get into a house? They will still have to make their mortgage payment, and if they can’t, they may still lose their homes.

That is how what was once a proud, beautiful dream of a neighborhood became a rundown, debt-ridden slum where everyone looked to the association to save them, and no one looked to their own ingenuity and resources. Soon the association began providing medicine, and telling businesses how they should work. Since the association needs lots of money now to pay the bad debts, it takes more and more money from businesses and from its customers. When the businesses fail, the association hires more of the people to work for them. Soon, most of the people work for the association, and no one works for private businesses.

As the association becomes stronger, the families become weaker; as the association coffers are filled, the family bank accounts are emptied, until finally, the families had no more desire to be strong. They couldn't remember the time when they were independent.

That is how the association became the United States Socialist Republic.

“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”

— Winston Churchill

“Thoughts from the Hungry Side of Daybreak” are written by Peggy DeKay of Clark County, a business and freelance writer. She can be reached at pldekay@insightbb.com.

        

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