Enviros target dairy industry

Many farmers and ranchers no doubt cocked their heads in disbelief as the grim news about Wall Street’s troubles percolated to the front pages of America’s newspapers.

Let’s back up a little and go to the beginning of the financial debacle that has Congress pledging to bail out Wall Street’s finest.

In the beginning, there were houses. People borrowed money to buy them. To get the loans, they had to make a down payment and show they had good credit and the earning capacity to repay them. They produced their tax returns showing their earnings history.

Then something very wrong happened. As housing prices went up, some banks and mortgage brokers loosened lending requirements. The requirements got looser until a borrower needed no down payment and could get a “stated income” loan. These “liar loans,” were based on what a borrower said he earned. If a borrower said he made $1 million a year, the bank took him at his word. You can see where this was heading.

Many loans could not be paid off early without penalty. That meant borrowers could not refinance them. Many loans also required “balloon” payments, which meant the borrower paid interest only for the first few years, then a “balloon” payment was required to cover the principal.

All of which theoretically would work out as long as housing prices went up. If prices leveled off or dropped, uh-oh.

In the meantime, some Wall Street wizards repackaged these loans in derivative investments. As the housing markets cooled, some Wall Street companies and banks found themselves in deep trouble. They couldn’t cover their losses, and the insurance companies like AIG couldn’t cover them, either. Double uh-oh.

Not all investment companies, banks or insurance companies participated in these types of “investments,” of course.

Now Congress has been called upon to help. These mortgages that may never be paid off will become the property of Uncle Sam. Ultimately, the government may recoup some, or even most, of our money by reselling the houses. Other borrowers may be able to refinance their homes without penalties. Still others may be able to renegotiate their mortgages.

Congress should make sure the Wall Streeters and others who crashed their companies do not profit from the bailout. U.S. marshals should seize the assets of those involved and make sure that any “golden parachutes” are replaced with lead ones. Any illegal activity should be punished.

Farmers and ranchers know about risk. Market prices; the weather; feed, fuel and input prices; the availability of seed; regulatory changes; legislation; and dozens of other factors combine to make the number of “sure things” in agriculture infinitesimally small.

No other industry can compare to the risks farmers and ranchers take every year. Yet most stick to Warren Buffett’s principles: Invest your money in well-run businesses you understand.

That’s something the folks on Wall Street could learn a thing or two about.

Unsigned editorials reflect the opinions of Editor Dean Brickey and General Manager Jeanne Hoffman. Other columns, letters and cartoons on this page express the opinions of the authors and not necessarily those of the newspaper.