Who Has the Old Maid Now?

My apologies to any matrons I might offend, but the erstwhile popular card game of Old Maid is surely no more insensitive to mention than the now-politically-incorrect lyrics of Stephen Foster's "Old Folks at Home" or Mark Twain's common racial slurs in Huckleberry Finn.

The Old Maid in the card game was the one card you didn't want to hold at the game's end, or you lose. Many games have a jinx or gamebreaker property that defeats all the strategies and holdings a skilled player may otherwise amass throughout the game. In pool, for example, you must sink all the balls, but if you inadvertantly sink the 8 ball before the others, you lose, as your opponents cheerfully yell "Scratch!" in derision. Other games of acquisition like Uno, Monopoly, orEuchre penalize you for your properties or card values held at the end of the game. I'm not sure where the expression someone was "left holding the bag" came from, but it represents the symbol of scorn, the "white elephant" no one wants in the end.

And now we come to the sudden, staggering financial crisis of Wall Street, Main Street, New York Washington, world markets--everywhere--coming out of nowhere, taking all the banks and financial firms of Wall Street and all the politicians of both parties (and both Presidential candidates, who were apparently clueless as well) by total surprise and without apparent warning rearing up to ruin our credit, plunge us into homelessness and joblessness, general destitution and deep recession--perhaps depression, perhaps the end of capitalism and free market economy before it's over. We're being forced close to socialized medicine and health care, pushed toward government-controlled energy policy and production and, and now we may be pushed into socialized, government-run economic policy as well, if the trillion-dollar bailout mess doesn't buy the Old Maid card.

Make no mistake, the Old Maid card is the toxic, overvalued mortgages banks greedily made as loans-for-a-day to anyone with a pulse. Never mind whether the sub-prime, low-to-average income borrower understood them or had the faintest hope of making mortage payments; the lender quickly sold them to thirsty investment banks in bundles, passing the Old Maid around the table to somebody else, and getting more money to make more bad loans every week. There was no bad conscience in the lender's heart; the borrower got a nice big home, the mortage company got some good mortgages in the bundle along with the chancey ones and spread the risk, quickly rebundled them and sold them off in mortgage-backed securities to Fannie Mae and Freddy Mac, and the Old Maid went on around the table. Everyone was willing to overlook the unattractiveness of the Old Maid in the bundle they held, everyone was willing to say she was beautiful and continue to increase her dowry to suitable suitors as if she were the most beautiful card in the deck.

Then came the mortgage meltdown, the failure of the mortageholders to be able to make their house payments in the face of skyrocketing gas prices along with higher property taxes and insurance premiums based on inflated home prices. Ten thousand homes per day go into foreclosure; two million homes nationwide in foreclosure, jobs lost, factories closing, unemployment lines growing--. It's not that sudden, this crisis. It's the coming to a head of many crises since 9/11. But it was happening to someone else. Someone else had the Old Maid, not us.

Finally someone decided the Old Maid wasn't worth putting more asset risk into and stopped the credit flow. The effect was devastating as one investment firm after another sheepishly admitted they held Old Maids in their hands, and we witnessed the fall of giants: iconic firms like Bear-Stearns, Lehman Brothers, Merrill-Lynch, AIG, and finally Freddie Mac and Fannie Mae themselves, which were created after World War II to make sure home loans would be available to everyone, especially GI's returning from the war. They all failed, and their CEO's scurried off with the good cards in multimillion-dollar golden parachutes.

It took the fall of these giants to awaken the stock market to the crisis the rush to pass on the Old Maid to someone else had caused. And when the Congress failed in its frantic call by the Treasury Secretary to pass a 700-billion-dollar bailout to purchase all the Old Maids from all the banks left standing so the credit could flow again, the stock market lost over a trillion dollars in one day with the largest single point drop in history.

It took a week to make the timid representatives come around and rescue the plan, and they still did so reluctantly, only because of pork sweeteners they could offer their constituents to appease their anger with their own re-elections looming, and only after reassuring themselves about their own careers and fortunes. I think many realized it would be better to face the loss of their political seats than the loss of their own derrierres and personal fortunes in a financial armageddon.

Friday the House of Representatives passed the modified bailout. What it did was agree to take the Old Maid cards from the banks and investment houses--the federal government would hold the bad card through purchase of the toxic mortgage-backed securities from any firms which wished, for a discounted price which would provide immediate relief to revenue flow so that credit could once again flow freely and the nation could avoid a total panic and collapse into another Great Depression that might make the 1929 one seem pretty mild.

When times got better (?) the Treasury could sell them at at least the value paid or perhaps greater price, for after all the homes did not disappear and many had very substantial value and would be attractive to private and institutional investors to buy and sell and live in again, and the revised mortgages could enable many to refinance, stay in their homes, and stem the tide of foreclosure by overanxious, credit-strapped banks and other lenders. The Government was the one place which could afford to wait for several years for a chance to pass the Old Maid on back to the lenders which had originally created her, with a much-improved chance the game would not end before she could be paid off. The bailout this past week bought time for the game to go on, for the Old Maid isn't a threat to anyone so long as the game continues. Only if the game ends does she obtain.

But in the meanwhile, who holds the Old Maid in the deck? Every taxpayer. Welcome to the mysteries of the financial world, neighbor.