Many years ago when I was beginning my first career in the mental health field and taking as many courses in special education and psychology as I could manage, I began to consider the definition of insanity. It seemed to me that the line between those considered sane and those considered not moved back and forth quite a bit through history. I recall reading Arthur Miller’s The Crucible in which he used the Salem witch trials and the approved murder of people determined to be evil as an analogy for the mass hysteria of the McCarthy era. I saw one of the first stage adaptations of Kesey’s One Flew Over the Cuckoo’s Nest in which insanity seemed to be defined as both rebelling and conforming with the only sane option being observing and creating one’s own reality. Some time later, in the middle of a heated argument in which I was arguing against the drastic increase in kidney damaging psychotropic drugs for one of my patients I was told by the Deputy Director of the hospital that the Department of Mental Hygiene was an agency of social control and if I didn’t like it I should get out. And so I did.

 

The subject of the societal definition of insanity seems to be one that we should consider again now. Almost every day we are confronted with another piece of news about the collapse of the financial system and a new explanation about how it has occurred. Eastern Europe is demonstrating behavior equivalent to those who took out sub-prime mortgages. Switzerland may be on the brink. There was a story in the UK’s Daily Telegraph last week about a secret EC document that estimates that “impaired assets” may make up 44% of EU bank balance sheets. We have all been told to brace for a second wave of residential mortgage defaults and that commercial property will be the next asset to deflate.

 

Each time we hear one of these stories the mind struggles to put it in context. It’s getting more difficult. We seem to be in some strange holding pattern where everyone knows that things are going to get worse, some of our government leaders are telling us things are going to get worse but no one wants to take the steps that would move the process into greater pain than is being experienced now – even though we all know it is coming and unavoidable. 

 

Let’s consider the Obama administration’s effort to deal with the financial system and the housing crisis. We really only know the number for the financial system program – somewhere in the neighborhood of $2.5 trillion. If AIG is any measure of what will be done, banks will be given more money (through a variety of loans and/or equity investments) to provide them with the reserves necessary for them to stay solvent. These reserve requirements are being raised as the result of defaults on loans and/or collateral requirements that result from requirements in derivative contracts. So we are keeping the patient alive through transfusions but we haven’t yet dealt with the multiple bullet wounds that keep bleeding.

 

For homeowners, if they can meet the requirements and if their lender voluntarily wants to negotiate they can get their 20 year loans turned into 30 and 40 year loans that will lower their monthly payments and potentially their interest rates. But they will still be paying the full amount of their mortgages; an amount that their houses are no longer worth. In essence, this is another way of pumping money into the financial system without requiring the banks to write down the mortgage loans to the diminished value of the houses.

 

We are still pretending that things are worth what we know they are not worth. For all the talk of good bank/bad bank (a scenario in which the band bank would take all the “toxic assets”) no one really wants to move on that front because valuing the “toxic assets” would likely result in a calamitous collapse. A recent PBS sponsored analysis revealed that a middle of the pack mortgage backed security was worth 1 to 1 ½ cents on the dollar. Other reports have suggested that $500 trillion in derivatives in the global market are worth about $.20 on the dollar – that a $400 trillion write-down.

 

Timing is everything. Confronting a fragile patient with harsh realities could lead to a psychotic break. On the other hand, prolonging the agony by medicating the patient into a somnambulant state just delays the inevitable and can prolong recovery. The fundamental problem is that we can’t get on with rebuilding what we don’t recognize as being broken.  The new definition of sanity that has to emerge begins with acknowledging the lunacy that we have collectively participated in and accepting the consequences. We need to move a little faster and get on with it.