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Changing the Rules of the Game

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

I have watched every Super Bowl game, from the beginning at the Coliseum in Los Angeles, where Green Bay won, until the miracle on 42nd Street directed by Eli Manning. I even attended one of the games at the Rose Bowl with my late father-in-law and my brother-in-law (both from Minnesota), where Minnesota scored first with a field goal and Oakland scored all the rest of the points. It was still fun! What didn’t happen through all the years of Super Bowl games was a announcement that could have gone in this manner: “While the teams are making their halftime adjustments so are we. We have decided to disallow any points scored by a field goal, in order to make this a more enjoyable game. Thus we are taking 9 points off the score board.” Las Vegas would have to be locked down to keep the gamblers from killing anyone, including themselves. Or maybe we could expect the PGA to announce that the next tournament would require all who make the cut play from the left side of the ball. Interesting! If we can change some of the important things in our daily lives and financially bankrupt a few unlucky chaps who simply were in the wrong situation at the right time, why not drop a few surprises on the “toy department of life” sports entertainment . Makes sense!

Picture this: you go to sleep on Thursday, September 18, 2008, with visions of financial rewards dancing in your head as you are short (sold stock you didn’t own, but was borrowed from your brokerage house), 1000 shares of Morgan Stanley at $28. You figured being it closed at the bottom of the $20 range that tomorrow, September 19, you would cover (buy back the stock and return the borrowed shares) in the middle teens and you would have your New Year’s skiing trip to Switzerland paid for. You never counted on, nor would ever consider, a change in the rules in the middle of the game. As you reach for the first cup of your morning beverage and flick on the T.V. to the stock market station, you can’t believe your eyes. Everything is going up, not down and your bet is heading the opposite way. How could this happen? They, the ubiquitous they, changed the rules. They outlawed the shorting of 799 financial stocks, including Morgan Stanley, and you my friend have just gotten the shaft.

I know it’s hard for a lot the folks reading this to feel sorry for a guy who can’t go skiing in Switzerland with his newfound profits. But, I deliberately used this example because if you are true to your beliefs—and I’m talking about belief in the free market here—you need to back the type of situations that you personally abhor, such as guys richer than you’ll ever be running off to St. Moritz. It isn’t easy to have strong beliefs! I would like to say that this is a first for financial markets to change the rules in the middle of the game, but it isn’t even the second or third time this has happened. People who bought houses with over 20% down with good credit scores, good reserves, and acceptable loan-to-values but did it with stated income loans have been sabotaged also. After years of playing by the (old) rules, they won’t be able to refinance the ARM that is coming due because there aren’t any stated loans, for the most part.

Want to hear about another group of worthy borrowers who got the switcheroo? Both Freddie Mac and Fannie Mae will no longer loan to investors who have more than four mortgages. Why are they hurting people who have invested their money to give other people a home that they can rent? Doesn’t it seem that if someone has more than four houses and maintains good credit, that something is being done right? What should they do?

We made an explicit contract in our country to act honestly and fairly in all our business dealings. Who gave anyone the right to unilaterally change the contract by changing the rules and at minimum not grandfathering in those who will be directly affected? Why can’t those who have done everything required of them continue in the same manner that they started to the culmination of the transaction? If we don’t reconsider our current actions, we might save the economy but kill the business.

When I started this column, everything was on the table, until the table was turned upside down and reset. Secretary of the Treasury, Henry Paulson, decided that we need a momentous move to end the credit crisis, so we are now debating the need to spend $700 billion. First of all I believe Paulson has done a marvelous job and that we need to do exactly what he states without delay. The main worry with the Paulson plan is to make sure the world doesn’t start selling back all of our paper and sink our economy. I am not convinced that his plan will be as productive as he believes. The main goal, the unblocking of the credit channels, will obviously work. But even with the path cleared, the lenders might not start lending again because of the negativity throughout the lending community. Making a loan to them means probably creating another loss, while not making the loan means not incurring additional losses.

I have several thoughts to push or at least pull the lenders out of their malaise which I will explain in my next column. They include governmental mortgage insurance, akin to what we have with FHA and VA loans, and rewards for borrowers who stay on the straight and narrow. But for now I will finish up with a thought that is really bothering me. I am not a fan of what our electoral process has become, and I bemoan the misinformation that not only affects the future of this country but also the chances of getting this recovery started. I would like to see a delay in political scare ads about the economy (I know it isn’t possible especially without people from both sides of the aisle screaming about trampling on our free speech rights) for at least a month while we get the financial mess under control. The biggest problem is a candidate says something that proves incorrect, even though it sounds good, and then we start chasing down why it isn’t so. We therefore “take our eye off the ball,” making the false statement into a good strategy for its owner who wants to throw up dust to obscure his/her own weaknesses and inconsistencies. Meanwhile, other politicians (and that includes cabinet secretaries and agency heads—all political appointees) offer kneejerk solutions to sooth jittery constituencies who are now even more frightened by election season blather.

In closing, I want those who aren’t sold on some of the conclusion of this column to spend a little time envisioning what it would be like to do nothing. In my opinion it would make “Psycho” seem like a sequel to “Bambi.”

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