Reason #63: Turn Out the Lights, The Party’s Over (And the Taxpayers Have to Clean Up the Mess)

Wall Street suits and their political allies in Washington keep sipping their cocktails, ignoring the elephant of debt and delayed pain in the room. But that pachyderm is adding weight by the ton, and this may be the year that he crashes through the floor and takes all the partygoers-and the U.S. economy-with him.

Take the hedge fund company Peloton. In 2007, their “Asset-Backed Securities” fund reaped a staggering 87 percent off the housing bubble. But by March 2008, only months after posting those record gains, they went belly up. Peloton isn’t alone on the scrap heap. Numerous other hedge funds and investment firms have given up the ghost as well. Carlyle Capital, part of the giant financial equity firm Carlyle Group, kicked the bucket in early March-a victim of the same housing crash and credit crunch that killed off Peloton.

But the demises of Carlyle and Peloton are nothing compared to the biggest fish to fry in this mess: Bear Stearns, one of the oldest firms on Wall Street. In 2007, Bear Stearns stock was trading at almost $160 per share. By Friday, March 14, 2008 the price was down to $30 and still falling fast. Finally, that following Monday JP Morgan stepped in-with the help of the U.S. taxpayer-and bought their rival for a couple bucks a share. Bear’s value as a company fell over 90 percent in one weekend, and almost 99 percent in less than a year.

It seems like the only thing “free” about the free market these days is that big business doesn’t have to pay anything for its own bad judgments.

Bear Stearns bought the farm for the same reason Peloton and Carlyle and so many other financial companies have failed: Enough was never enough for them. They were one of the biggest gluttons when it came to peddling subprime bonds. They didn’t care if they were helping to put millions of people into homes they couldn’t afford. All that mattered were the inflated and short-term profits that they could put on their books.

Unfortunately, most of the people responsible for these disasters have walked away with nary a scratch. In fact, they’ve made millions off their own botched work. Peloton’s directors aren’t going to foot the bill for their mismanagement. Their investors will. And at Bear Stearns, four top executives cashed out almost $60 million in shares before the housing bubble blew.

It seems like the only thing “free” about the free market these days is that big business doesn’t have to pay anything for its own bad judgments. The rest of us do-not only because of the economic ruin left in the wake of their greed, but because Washington DC keeps shoveling our tax dollars at the very people who created our problems in the first place.

NEXT: Reason #64: Home Sour Loan