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Hugh Hewitt Book Club

Mark Steyn on the road to Antigua

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HH: We begin this hour as we do when we are lucky on Thursdays with Columnist To the World, Mark Steyn. You can read all of Mark’s work at www.steynonline.com. Mark, let’s start with mortgages and car companies. I’ve asked Kristol, I’ve asked everyone who’s come on the program, what’s your opinion on what the country ought to do vis-à-vis the request from GM and Chrysler and the mortgage crisis?

MS: Well you know, one of the oldest conservative principles, Hugh, is that if you reward bad behavior, you get more of it. And I think that is the case with the present parameters of both deals at the moment in terms of mortgages, and in terms of the car industry. The car industry has a problem. The cars are still relatively popular. I drive Chevys myself. I like Chevys. But the problem is that GM cannot make a vehicle at a price any customer is prepared to pay for it, so they make a loss on every car. Unless you address that, there’s no point shoveling money at them, no point at all. The difference is that even in difficult times, Toyota and Honda still make a profit on their cars, because they are essentially not vast retirement homes and medical plans that happen to have a small auto making subsidiary, which is what the so-called Big 3 auto makers are in the United States. So essentially a retirement home, a vast retirement home that happens to have a small auto making subsidiary.

HH: How about mortgage relief?

MS: Well, I’m…on the mortgage problem, I think if you look at the defaults of those whose…the re-default of those whose mortgages were rescued as it were, in the last time we tried to prevent foreclosure, I don’t think there’s any…I think in a sense, foreclosure, I think you’re better to let people go ahead and be foreclosed on. I mean, in realistic terms, when people say we want to keep people in “their” homes, many of these people have no more equity in their homes than the security deposit if they were renting an apartment or whatever. Essentially, in realistic terms, I believe this is where the market would correct swifter, better than the government can.

HH: Okay, now Mark Steyn, there is some political risk in that, and I talked about that yesterday at length with Bill Kristol, which is a lot of Americans know someone who are in trouble on their home, and they don’t believe, for whatever reason, they don’t believe it’s the responsibility of that homeowner who borrowed, because of a variety of reasons. Should the Republicans attempt to explain this on principled grounds, because it’s going to be awfully heavy weather to do that.

MS: Well, I think you can explain it on principled grounds, and I think you can also explain it on practical grounds, which is that there are ups and downs when you have a lot of foreclosed properties on the market. One of the ups, for example, is that if you’re trying to buy your first home, they’re out there and they’re a lot cheaper than they would be when they were all going up at ridiculous prices. And that’s the lesson here. One thing I’ve always loved about the United States compared to Britain and Australia and parts of Europe is that it has a sane housing market. And if you say essentially what the government has been trying to do since October has been to re-inflate a credit bubble, to say that people should be able to get spectacular returns on mediocre assets as a permanent feature of life. And that is simply unsustainable. And my objection to what started back in mid-September is that no matter how much you pump into it, you cannot re-inflate a credit bubble, and you shouldn’t try. And that is something that if necessary, people have to take a bit of temporary pain, because the temporary pain will be a lot less painful than the long term pain in erecting this vast expansion of government over one of the few remaining dynamic economies in the Western world.

HH: Now I want to talk about something that’s fairly exotic. I was thinking about you today because of the story I listened to on BBC this morning about Sir Charles Stanford, and the fact that the SEC missed this, just like they missed Bernard Madoff. And I was reminded that your former boss and friend, Conrad Black, was pursued pitilessly over what was in essence, it appeared to me, to be a legal series of transactions. And yet the SCE missed these massive, massive scandals, just people stealing by the billions.

MS: Yes, and that is the objection. I don’t think it’s any secret, I was one of those who petitioned the President to commute Conrad Black’s sentence, and the President chose not to listen to me and the other people who wrote to him. But in essence, as you say, a trial found that all those transactions were perfectly legal, authorized, and had been approved by the relative independent directors and oversight committees. Yet Conrad Black is sitting in this ghastly jail in Florida for the next five and a half years. You mentioned this fellow Stanford who I believe he lives in the U.S. Virgin Islands, but he also took a knighthood that was bestowed upon him by the governor-general of Antigua, obviously in the Queens’s name. But he took Antiguan citizenship, and Antigua in the Caribbean decided to raise him to the Antiguan Orders of Knighthood. And I would imagine that simply as a practical proposition, he will be feeling rather more Antiguan than American in the years ahead.

HH: (laughing) Well, I was listening to this report, evidently 20% of the employment in Antigua depends upon Sir Charles Stanford…

MS: Yes.

HH: …as does the British Cricket Society, for whatever reason. He is one of their benefactors. But how do we miss things like this, and yet pursue like the hound of Heaven people who are apparently doing legal things?

MS: Well, I think the politicization, actually, I spent quite a lot of time on the Conrad Black case, and it does seem to me that there is a political aspect to so-called SEC oversight, that there are well-connected people who can draw your attention to the, who can bring your name to the SEC, and the SEC essentially have a lot of discretionary powers that they can bring to bear on you. You know, they have these things called wells letters. If you send that to somebody, basically sending them a wells letter, you can basically put them out of the independent directorship business. And a lot of independent directors, you know, former ambassadors and former assistant deputy secretaries of this, make their living from serving on boards of companies. So the SEC is able, essentially, to apply a lot of pressure to people just by threatening to make it impossible for them to serve on boards again. But the point is, they do this selectively. Essentially, I think from my acquaintanceship with the SEC, that it’s an entirely arbitrary process. People become suddenly unfashionable, and attract SEC attention. Other people that the SEC ought to be keeping an eye on like this fabulous Antiguan knight, escape all notice whatsoever, just fly under the radar until everything collapses.

HH: Yeah, I’m just reading a Wall Street Journal alert that the Stanford ponzi scheme may be as much as $8 billion dollars in certificates of deposit…

MS: Right.

HH: …which brings me to my last question, Mark Steyn…

MS: Which goes a long way in Antigua, by the way.

HH: (laughing) It certainly does. Well, I was thinking about this today. Journalism is a fine profession, and I’m not complaining about the living I have made from it. We’re never, however, going to be fabulously wealthy multimillionaires jetting around the world, and that’s just fine. But I’m wondering about the people who are, and what is it about the lives they lead that they give their money in such vast amounts to such, I think, obviously con artists, if they’re promising you 12, 15% returns. Who did Madoff and Stanford dupe? Who are these people?

MS: Well, I think that is part of the general, part of this general bubble that I was talking about earlier, that I think that people came to accept ludicrous returns as a permanent feature of the landscape. I think this is in part because if you’re successful and you’re under a certain age, you really have no memory of bad times.

HH: True.

MS: You can only distinguish between great times and good times. And I think to people who were, you know, say, 18 years old in 1981, essentially there’s a couple of generations now that have no institutional memory of the possibility of downturn. They just think you waft upwards by ever greater percentage marks.

HH: Now I did hear a somewhat alarming comment not long ago. I think it was on Rush’s show, a warning to the super-rich that if they didn’t get in line, that the people would be coming for them. And do you think that kind of envy is going to actually develop in the country? It’s never really been here before.

MS: Well you know, I think I’m with Sir Charles Stanford on that if nothing else, that if they come for you, you get on the plane and you move to Antigua. That’s what they’re doing in your state, Hugh, in California.

HH: Oh, you bet.

MS: The rich and successful and dynamic are voting with their feet and voting to go and settle somewhere else. In New York City, 1% of the residents of New York City pay 50% of the taxes.

HH: I heard Bloomberg say that. That’s remarkable, isn’t it?

MS: Yeah, it is, and I think that’s…you have to ask yourself well, if the commies took over tomorrow, could it be any more redistributive than that? I mean essentially, we have in this country, where we have never really subscribed to socialist notions of redistribution until Obama gave the game away last fall, we somehow ended up at the point where tiny, tiny percentage pay the bulk of the taxes.

HH: Mark Steyn, thanks, www.steynonline.com.

End of interview.

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