Bale Out
In what could be caused by my attraction to the fashionable time at Ascot, before Eliza Doolittle’s enthusiasm for the race reduced her to her previously unfortunate state of behavior, I have always had an interest in attending the Kentucky Derby. As the season of the Triple Crown of Thoroughbred Horse Racing fast approaches (Derby Saturday, May 1st, Preakness, May 18th , and the Belmont Stakes, June 5th), there has been some inevitable media interest in the horse racing industry.
On Tuesday, The New York Times published a story about the sad, bankrupt state of the industry in the bluegrass state. Reporting that farms, thoroughbred buying, 100,000 jobs, and over $4 billion tourist dollars are all threatened in the region due to the economic downturn, the Times identifies the losing gamble of “betting the farm” on the future of horse racing.
Dynamics similar to those that brought down subprime mortgages have been at work in the horse business: no-money-down lending and a breeding market based on the assumption of ever-rising prices.
In stating, “Gambling is the core of the thoroughbred industry,” it acknowledged that in order for the industry to make money, it must take risks.
Has the thoroughbred industry acted illegally, or at least unethically, to promote this downturn? It seems unlikely given that all of their livelihoods depend on its success. It does appear that they were unable to predict the future and therefore assess their risks perfectly, but, of course, that would be impossible. It does make me wonder if the people who have invested in enormous stud fees only to find that the progeny products are not worth as much as the fees paid should look to the government to discover if they, in tandem with their mares, were intentionally screwed. And now that all those jobs and regional income are in decline, should the federal government jump in to restore them?
No. It’s safe to assume that these people had some knowledge of the risks inherent in their chosen professions.
So I’m confused as to why, in the financial sector, the same behavior, bad risks taken by those with the inability to accurately predict the future, have been subject to (and I do mean subject to) federal bail outs, and recently, congressional interrogations about the very morality of the business of making big money based on taking big risks. Can we not assume at least the same level of horse-sense and lack of clairvoyance in financial buyers and sellers as in the horse racing industry?
We could, but assuming otherwise and publicly appealing to complexity and emotion provides a perfect pretense for government intervention.
I hate to be a nag, but there are no guarantees in life. We must be aware of the implications of increasing government control over the economy: In attempting to remove all risks from every transaction under the false pretense of “consumer protection,” this gratuitously growing government is strapping on the feed bag and putting us all, along with our personal responsibility, out to pasture.
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