We Are the Caterpillar

Scientists in the Netherlands have discovered a species of "hyperparasitic wasp," meaning a wasp that lays its eggs in parasitic wasps that lay eggs in caterpillars. These hyperparasites are sometimes parasitized by other hyperparasitic wasps, a potentially infinite regress of parasitism. “A common enemy of a hyperparasitoid therefore is another hyperparasitoid," notes the Dutch researcher. A caterpillar may play host to two, three, maybe even four tiers of parasites, a veritable daisy chain of staged mortality, one resource depleted by the next.

It's a perfect allegory of corporate capitalism. Here's how it works. Let's say that, a few years back, some poor sap succumbed to the blandishments of Citibank or Wells Fargo and unwisely took out a mortgage which was, in his private economy, highly leveraged - high risk, as the banks used to phrase it back in the day when banks were required to calculate risk. The holder of the mortgage then bundles it up with other high risk mortgages and sells the bundle on the market as a financial derivative. It is purchased by the high-return mutual fund in which the hapless and unsuspecting mortgagee owns shares. When the holdings of the mutual fund prove worthless, the cancer spreads back to the bank, which now holds toxic paper it cannot sell. The bank's assets are heavily devalued and the bank faces financial ruin.

To avert the cataclysm, the bank politely reminds the Treasury Department that its failure will mean economic disaster for the entire country - other markets which depend on the bank's solvency will collapse and ruin will spread across an innocent population in the shape of widespread home foreclosures. America will become a nation of citizens sleeping on sidewalks. The offending bank is concerned, however belatedly, about the plight of its fellow citizens (banks being people too, my friend).

Bankers Without TARP

So Presidents Bush and Obama, in succession, go before Congress to plead for public funds to keep the insolvency at bay and the banks afloat. The money is required, Congress is assured, to help countless unfortunates with their mortgages. Eventually, Congress commits something in the neighborhood of $3 trillion in assistance, part of which was earmarked for mortgage assistance. The money was quite naturally drawn from public funds contributed in part by mortgagees whose mortgages were submerged by the banks who received the money. 

The Treasury Department now holds a large sack of money, part of which is to be disbursed to the banks to help their mortgage holders, another part to buy up the toxic assets the banks had created in the first place. The banks, with the complicity of the Treasury Department, keep the money and use it to leverage further investments, which remain legal. Since the banks cannot qualify for bailout money unless they are solvent, they use one federal bailout program to make themselves solvent enough to qualify for other bailouts - in effect double dipping the bailout money. Between the Treasury Department and the banks, the foreclosure epidemic was allowed to proceed largely unchecked, making the banks more solvent than before the crisis they manufactured.

Who says we can't make anything in this country any more?