The Bailout
September 26th, 2008Talk amongst yourselves. Keep it civil. o
Tags: 2008 financial meltdown, politics
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September 26th, 2008 at 4:22 pm
Step one — let’s not call it a “bailout”. Let’s say that us taxpayers are willing to buy those risky loans at a discount, providing we get the profits if they turn around.
Step two — let’s not have any more closed door sessions where Barney Frank does all the planning, and the ranking Republican on the committee doesn’t support or participate. Barney calls that “bi-partisan”.
Step three — giving any power to Henry “I was at the wheel as we went off the road” Paulsen is not a good idea.
September 26th, 2008 at 5:03 pm
Mmm. Can someone explain to me why Republicans always rail against the Dems and say “Democrats want big government” etc.
Seems to me it is always the reverse. In my lifetime, every republican presidency has resulted in:
more pollution
the economy tanks
crime rates rise
the rich get richer
usually a war somewhere
Coincidence? I think not…
Why should we bail these fat cats out? Shouldn’t they pay us back? Shouldn’t they all move out of their mansions and sell the yacht?
Once this deal is done, China will really own our asses and our grandchildren will curse us.
September 26th, 2008 at 5:48 pm
I’ll be the first to admit I am a financial retard. But this plan that someone sent to me via email sounds pretty good to me:
I’m against the $85,000,000,000 bailout of AIG.
Instead, I’m in favor of giving $85,000,000,000 to America in
a “”We Deserve It Dividend”".
To make the math simple, let’s assume there are 200,000,000
bonafide U.S. Citizens 18+.
Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up..
So divide 200 million adults 18+ into $85 billon that equals $425,000.
My plan is to give $425,000 to every person 18+ as a
“We Deserve It Dividend”.
Of course, it would NOT be tax free.
So let’s assume a tax rate of 30%.
Every individual 18+ has to pay $127,500.00 in taxes.
That sends $25,500,000,000 right back to Uncle Sam.
But it means that every adult 18+ has $297,500 in their pocket.
A husband and wife has $595,000.
What would you do wi th $297,500 to $595,000 in your family?
Pay off your mortgage - housing crisis solved.
Repay college loans - what a great boost to new grads
Put away money for college - it’ll be there
Save in a bank - create money to loan to entrepreneurs.
Buy a new car - create jobs
Invest in the market - capital drives growth
Pay for your parent’s medical insurance - health care improves
Enable Deadbeat Dads to come clean - or else
Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed
Forces.
If we’re going to re-distribute wealth let’s really do it…instead of trickling out a puny $1000.00 (”vote buy”) economic incentive that is being proposed by one of our candidates for President.
If we’re going to do an $85 billion bailout, let’s bail out every adult U S Citizen 18+!
As for AIG - liquidate it.
Sell off its parts.
Let American General go back to being American General.
Sell off the real estate.
Let the private sector bargain hunters cut it up and clean it up.
Here’s my rationale. We deserve it and AIG doesn’t.
Sure it’s a crazy idea that can “never work.”
But can you imagine the Coast-To-Coast Block Party!
How do you spell Economic Boom?
I trust my fellow adult Americans to know how to use the $85 Billion “We Deserve It Dividend” more than I do the geniuses at AIG or in Washington DC .
And remember, The Family plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.
September 26th, 2008 at 5:54 pm
To the last commenter, I hope you realize that 85 billion divided by 200 million is only $425.
But nice try.
September 26th, 2008 at 6:28 pm
Irishembi - Yes I have received the same e-mail. It is going all over the internet. I guess that concept would be a good idea IF it was government money. This is OUR money that is paying for the bailout.
September 26th, 2008 at 6:34 pm
WHOA, irishembi, that is is some brilliant stuff. Sign me up.
My house is already paid off, but I have 3 kids to send to college at some point and student loans to pay off as soon as my husband finishes college. Talk about boosting the economy, that would sure take care of it.
As far as bailing these morons, ridiculous. They got themselves into this mess, they can get out of it themselves. If all those companies officers just gave back their bonuses from the last 5 years, the problem would be solved.
And marimarimari, amen. That is exactly the same things I have seen from every Republican presidency in my lifetime. Thank goodness for the 8 years of peace and prosperity we had under Clinton.
September 26th, 2008 at 10:55 pm
I am not an economist and I too would consider myself a “financial retard.” We make less than $40,000 a year on a soldier’s salary. We support 4 children on this, I stay at home and go to school full time to further my education, we have 1 vehicle we make payments on and another that is plainly embarrassing to drive but it’s paid for. Our debt is minimal but we do have some. Outside of fixing the economy we need to fix ourselves. As American’s we have become so frivolous and wasteful. I have friends with 2 children who simply cannot make it on $65,000.00 per year. Our children go without a lot but they have all the basic needs met and some of their wants too. I adore photography but I have to make it with a $149.00 Sony. I don’t think we have ever been on a vacation but we are still happy with what we have. Most of our furniture is second hand but you would not know it if you walked into my home. My point is not to tell you how fabulous I am or how financially savvy our family is…because we are not and I can assure you that we have worked our way into a few financial messes….but that we need to learn to live without so much debt and to learn that that huge house on the hill…well…we don’t really have to have it.
What should the government do? I have mixed feelings on it to be honest. All I know for sure is I hope Americans can learn something from this (I have faith that we won’t learn a thing from it) and think twice before maxing out that credit card.
I would like to share this and God forgive me for opening this can of worms. I have a dear friend who is a fellow army wife. After not making the first attempt to lose weight and not suffering a single health problem due to her obesity, she just had weight lose surgery covered 100% by Tricare. The total cost was around $60.000.00. Who paid for that? Tricare did so in a sense YOU did. She has already been approved for a tummy tuck to be covered at 100% as well. Can you see the dollar signs adding up here? Darnall Army Medical Center at Fort Hood has a flat screen TV hanging on the wall of every room in that hospital. If there are two beds then there are 2 TVs, trust me I have been in that hospital many times. These are flat panel TVs that we could not afford on enlisted pay. I could go on for days about the equipment my husband was lacking in his 12 month tour to Iraq and again in his 15 month tour. Yes, I know these are different budgets but it is obscene nonetheless.
This is just one delicious example of government budgeting at its finest. I love our life in the army and we are proud to serve, but these boys sure don’t know how to handle a dollar.
September 26th, 2008 at 11:10 pm
I’m not an economist by any means. I just find it interesting that my husband, who is a financial advisor, has moved from being a very staunch Republican to vehemently supporting the Obama/Biden campaign. His reason: Obama’s economic plan simply makes sense.
I was raised as a military brat. I was on Tricare till I was 18 then moved to a private insurance that covered me while I was in college and a dependent of my parents (a gift I fully respect and am thankful for). Tricare is no gift. Military healthcare is deplorable at best. It covers what it wants for who it wants.
My view on Palin: http://adsoofmelk.wordpress.com/2008/09/07/why-we-love-palin/.
What I did during this debate: http://davethenovelist.wordpress.com/2008/09/25/presidential-debate-drinking-game/.
I love this country. My father served it for 24 years. But with the economy and the current state of affairs, I find it very eye opening that even the most staunch of Republicans (in my personal life) are gravitating towards the Obama side.
September 27th, 2008 at 6:56 am
It isn’t a bailout. In terms of investing in our own economy it could be a windfall for the future of our financial basis. I agree that the CEO’s of floundering companies should be the first to take the hit for doing a poor job. An 18 million dollar golden parachute walking away from a company that was bought out as it fails is terrible.
HOWEVER - a lot of this is our fault. Individually and at a local level we borrow more than we can afford. Credit cards, 80-20 loans on more house than we need and luxury items that we feel are required for the everyday.
Then we turn around and ask someone else to take the hit. If you borrowed the more at a variable rate to buy a house when the rates were low, then you took the risk of that rate going up and maybe you should have only borrowed the less you could really afford. Now you ask the government to force the banks to lock your rate or rescue your loan.
The banks lent you more money than you could truly afford, but they did and all these loans have to be insured by companies like AIG. It isn’t the insurance to individuals that brings the giant down; it’s the backing of the huge lenders who are not getting paid by the people at the ground level who can’t afford the credit card or loan they signed up for.
Companies make piss poor decisions everyday and the government does it because we let them. VOTE VOTE VOTE - but please do yourself a favor and learn the issues correctly first. READ and LISTEN to news. Not pundits not affiliated sources but NEWS. Make a point of balancing the information you receive. I like to go to BBC. It’s interesting to see what the closest ally we have thinks of us and it removes an inherent bias that is built in to any American reporter.
The price of gas is our own fault too. After the 1970’s the fact that Americans continue to demand, produce and drive vehicles like the Hummer or even trucks and SUV’s which get low mileage is a crime against ourselves. We could have demanded more fuel-efficient vehicles and forced GM and FORD to produce them HAD WE DEMANDED that by purchasing them and responsibly voting for better standards. The auto industry was powerful enough to demand that the EPA standards not be changed, thereby allowing them not to evolve and look what that has done. The American auto industry is an example of how our collective, individual greed has bought down an industry and created more problems for the future. Even if you don’t believe in global warming you have to believe in $5 gas…and $8 and $10 till its gone. There is only so much corn, so don’t get any funny ideas. Every resource is limited.
If we buy our own bad loans and take the load off the lenders, we free up the credit flow that every American depends on. “Held to maturity, they may be worth a lot more than Mr. Paulson paid for them. They’re called distressed securities for a reason.” “A stronger U.S. economy, with its financial players having clean balance sheets, will become a safe haven for capital.” This will mean a stronger dollar, which we haven’t seen on years and other countries investing in the US instead of buying the US out. “A stronger economy driven by industry instead of financials means more jobs, less foreclosures and higher held-to-maturity payouts on this Fed loan portfolio.” The fact that Warren Buffett is trying to get in on this is a sign that it is a move in the right direction.
Think of it this way, if we do what an earlier poster said and send $400 to everyone are you going to be able to pay off anything? Most people will spend it not invest it and then the $700 million is gone. We – the taxpayers and our government- will own the investment and it is in our best interests to pay ourselves back and STOP borrowing what you can’t afford.
September 27th, 2008 at 8:18 am
@Armywife
I agree with your point about people needing to be more realistic about how they spend money and what they spend it on.
That said, I think it’s a little disingenuous to say that people should be able to live of X amount of money.
In some areas of the state I live in, Illinois, 40,000 per year would practically be a king’s ransom. But in Chicago and its surrounding suburbs it isn’t much at all as far as living expenses are concerned. Me and my significant other make slightly more than that combined and a few years ago when we went looking for a place in a very modest suburb it was barely enough to afford the small condo we live in, much less a house.
I have a friend in a similar situation who was forced out of his apartment because when he and his wife had their third child it was considered “overcrowding” for the unit. He was fortunate and was able to transfer his job to a location over a hundred miles away where he bought an entire house for HALF of what they were paying in rent for their apartment.
Again these high prices are not in the city, but in very run-of-the-mill suburbia. We cannot afford to move far out in the state because of the location of our jobs, the gas costs alone would eat up any money we saved.
The sad part is had we waited a couple years we could have gotten our place for a lot cheaper due to the housing market crash, though at that point I doubt any bank would’ve given us a loan since they’re not giving loans to anyone these days.
Now we’re stuck in a place that is simultaneously expensive and undervalued, but there really wasn’t much choice given our situation.
September 27th, 2008 at 9:46 am
Once again, this would be so funny if it wasn’t so scary:
http://www.collegehumor.com/video:1831461
September 27th, 2008 at 10:52 am
Since you haven’t started a post yet about the debate, I just wanted to post this here. If I hear once more that he’s ready to lead us in foreign policy over John McCain I just might have to buy my first gun because it will be all out chaos if he’s ever put in control of the reigns. Seriously Jon, you can’t agree with Obama’s naive view on diplomacy with countries such as this? I surely hope not because, as McCain said, it’s simply just dangerous.
http://www.youtube.com/watch?v=o0YV2hxee3I
September 27th, 2008 at 11:39 am
Per Jon’s request…
to get some background on the bailout mess and how it relates to the current and past players…
http://www.youtube.com/watch?v=H5tZc8oH–o
September 27th, 2008 at 12:03 pm
And this one too…same, but a bit more concise and direct…
http://www.youtube.com/watch?v=AiEWCnpNnBQ
Seriously, if anyone can argue these facts, I’d seriously be interested…all “accusations” easily fact checked via the Net and government watchdog sites and traditional governmental public records!
I can’t imagine why anyone would trust this man. Huge, HUGE mistake. I’d bank on it. I hate Bush and I figured he’d be a fuck up…and he has been. But I simply won’t allow it again. McCain is our saving grace, no matter what party you align yourself with. Spoken from a life-long, reformed Democrat.
September 27th, 2008 at 1:10 pm
I’m more curious as to the link between Paulson and J.P. Morgan Chase.
1. Behind closed doors, fed arranges for J.P. to buy Bear Stearns for pennies on the dollar.
2. Fed takes over Washington Mutual and arranges for J.P. to buy its banking assets.
Paulson himself is worth about $700 million, how much is in J.P. stock?
September 27th, 2008 at 2:06 pm
An economic issue of this magnitude is not easily disected. I have an extensive economics and business background and this crisis is difficult for me to completely understand. I’m not alone. The Wall Street Journal has dubbed this one of the most complex, complicated and far-reaching economic crisis this country has ever seen. To blame Bush or Obama or Wall Street greed or the little man hiding in your refrigerator is short-sighted. Most everyone had a hand in this, from Greenspan to Fannie May to fly-by-night predator lending companies to you and me (greedy bastards) wanting higher returns on our investments. Until toxic securities (read: sub-prime mortgages and the like) can be sold and the credit markets loosened up, banks and business will continue to fail. This will spell increased trouble for regular folks, not just bank CEOs. All of the bailout plans are far from perfect, but the question that remains, whether you are for or against, is do we inject this money into the financial markets and hope it holds back further financial market meltdown and almost certain recession -or- step back and let the chips fall where they may? Given what I’ve read and know, I grudgingly prefer the former over the latter.
September 27th, 2008 at 4:29 pm
@ Ravenpen, I know what you are saying and I should have been much more specific. I was referring to a friend who lives in the same town as we do and has the exact same base house that we did but has to have her children in all sorts of classes and has to drive a very expensive vehicle x2 and has to eat out and has to…. You get the idea.
We just moved from a base in an area that is in the top 3 cheapest places to own a home to a VERY expensive area. We went from having money left over and able to tuck some away to a point where we are literally pulling pennies out of the sofa for gas. At our other base my husband also had a 10 minute commute and now he has a 45 minute commute with toll roads (ouch!). Thank goodness we just came up on the base waiting list for housing! That other area surely had very little to offer but the cost of living was cheap so I guess it is a toss up as to which is “better.” My husband and I met in Salt Lake City and we could not make it there, that is for sure.
Tricare is another issue all it’s own and not the topic here so I won’t go too far into it. As a mom of 4, the medical care is a constant aggravation to me. Which is why I get upset when you see those stories of someone getting something purely cosmetic covered 100% while I cannot see an oncologist yet because despite biopsy results my PCM put the referral in wrong. I use to think those stories were just military urban legend, nope they are true and now I have seen it for myself. I love the army, love that I can serve by supporting my soldier and holding down the home front while he is away, and I hope Senator Obama will take care of us the way I believe he will.
September 28th, 2008 at 7:23 am
@faydean, re: the debate. So instead of showing good faith and practicing diplomacy as a major world power, we should muscle our way into ‘dangerous’ countries with no contingency plan and then…stay there for 5 years? As armywife said, our government handled this war BADLY. We sent not enough soldiers with not enough gear and we CANNOT do that to them again. And don’t get me started on the fact that there are 4-5 countries that probably should have been above Iraq on the dangerous list, that was solely a political move. If you think Obama wouldn’t be able to pull the trigger if the situation called for it, you’re sorely mistaken.
In terms of the economy…I, too, am a financial retard. I put my money in a checking account and I take it out when I need it…that’s the full extent of my experience. However, I read a great piece in the NYTimes the other day about Sweden and how it handled the identical situation about 15 years ago: http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html?_r=1&em&oref=slogin. I think we need to be looking there for solutions, they created a program that enticed banks to be reregulated and it worked. Plain and simple.
September 28th, 2008 at 7:24 am
Sorry, second post: As a raging liberal, I can’t help but get some sick pleasure out of the need for regulation of the boys who cried socialism at the first sign of it in the past. Muahaha.
September 28th, 2008 at 2:22 pm
Thanks for the link to the nytimes article, krgosselin, it was very interesting. I hope the right people read it…
September 28th, 2008 at 5:37 pm
I also think all americans need to read this article in the Nation about McCain:
http://www.thenation.com/doc/20080929/wypijewski
September 28th, 2008 at 6:39 pm
Getting back to the bail out…I know absolutely nothing about financial stuff…so it’s hard for me to know what might actually be in the best interest of the country. What I do think is that the people running these companies SHOULD HAVE KNOWN enough to keep us out of this kind of mess. Shouldn’t they be held accountable in some way? If so, how? I’m at a loss, and I would be grateful to have people express varying opinions on it.
If I mismanaged my personal finances like this, I’d probably end up in jail.
September 29th, 2008 at 12:55 am
@Gacius, Paulson earned his money as head of Goldman Sachs.
The bailout as initially floated was a bad idea - too limited in scope and accountability. It won’t resemble that when it actually goes thru (and it will).
The Sweden article is an interesting one. My understanding is that the Swedish economy is significantly less complex than ours (aside from the similarity in percentage of our respective GDPs 4-5%, the $18Billion needed there for rescue is not quite like $700Billion). I do like the idea that the gov’t (aka taxpayers) will hold some of the paper of the failing companies in exchange for the loan. And the cap on remuneration for the CEOs of these firms. I can get behind that!
September 29th, 2008 at 10:54 am
Top 5 Reasons to Vote Against Paulson’s $700 Billion Bailout
There’s news of a congressional deal to bailout Wall Street fat cats with $700 billion of taxpayer cash. Though the deal negotiated between congressional leaders and the White House is better than what Treasury Secretary Henry Paulson originally proposed early last week, it remains an insulting atrocity, having omitted even basic aid to homeowners, bankruptcy reforms and any modicum of future financial industry regulation. Now, the New York Times reports that the Democratic leadership may not have the votes to pass this bailout. So without further ado, here are the top 5 reasons (in no order) why every single member of Congress - Democrat and Republican - should vote this sucker down. Please feel free to copy and paste this post into an email to your congressperson. They are deciding right now - let them hear your voice.
1. BAILOUT’S INHERENT FISCAL INSANITY COULD MAKE PROBLEM WORSE
When an individual consumer uses a new credit card to pay off astounding debt from an old credit card, it’s akin to check kiting, which is is illegal. Apparently, though, when the government does it, it’s billed as Serious Public Policy. Because that’s what this supposedly prudent bailout bill would do: Force taxpayers to borrow $700 billion from foreign banks to pay off the bad debt of Wall Street banks. During a crisis that is aimed at preventing interest rates from skyrocketing, nobody has been able to explain how adding almost a trillion dollars to the interest rate-exacerbating national debt would do anything other than undermine the plan’s underlying objective. Worse, the U.S. Treasury Department itself admits that the $700 billion number is “not based on any particular data point” - that is, they created it out of thin air because “We just wanted to choose a really large number.” Slapping that amount of money onto the national credit card when our government can’t even justify the amount is beyond absurd - it is insane.
It didn’t have to be this way, of course. As I noted in my newspaper column this week, Senator Bernie Sanders proposed a temporary tax on millionaires to finance part of this bailout. Similarly, Blue Dog Democrats proposed a future tax on financial firms if and when taxpayers lose cash on the deal. These proposals were discarded in favor of language asking the government to “submit a plan to Congress on how to recoup any losses,” according to the Associated Press. Not only is that language toothless, but it opens up the possibility of a plan being submitted that says we should raise middle-class taxes or slash middle-class social programs to pay for Wall Street’s misbehavior.
2. EXPERTS ON BOTH THE LEFT AND RIGHT SAY THIS BAILOUT COULD MAKE THINGS WORSE
Primum non nocere is the latin phrase for “first do no harm” - the priority principle for any EMT working on a sick patient. It should be the same priority for Congress at this moment - and a growing group of esteemed experts on both the Right and Left are insisting that this bailout bill could make things worse. Here’s a review:
* The Washington Post reported on Friday, almost 200 academic economists “have signed a petition organized by a University of Chicago professor objecting to the plan on the grounds that it could create perverse incentives, that it is too vague and that its long-run effects are unclear.”
* NYU’s Nouriel Roubini, the visionary who had been predicting this meltdown, says “The Treasury plan (even in its current version agreed with Congress) is very poorly conceived and does not contain many of the key elements of a sound and efficient and fair rescue plan.”
* Harvard’s Ken Rogoff, a Former Federal Rerserve and IMF official, insists that the prospect of this bailout is, unto itself, taking a manageable problem and making it into a more intense crisis. He says that credit is frozen primarily because banks want to avoid dealing with other banks that might drive a hard bargain, and instead would rather wait for free money from the government. Without the prospect of that free money, Rogoff suggests that credit would probably begin moving again, if slowly.
* Dean Baker of the Center on Economic and Policy Research says that spending so much cash so quickly on such a poorly conceived plan could have the effect of making it impossible to fund economic stimulus that is the real way out of this mess. “Suppose the Paulson plan goes through,” he writes. “It is virtually certain that the economy will weaken further and the number of foreclosures and people without jobs will continue to rise. This is the fallout from a collapsing housing bubble…When families respond to their loss of home equity by cutting back their consumption it will deepen the recession. In this context it might prove very important to have the resources needed to provide a substantial stimulus. [and] there is no doubt that this bailout will make further stimulus much more difficult to sell politically.”
Meanwhile, it’s not even close to clear that this is a problem that requires such an enormous response. As mentioned above, the Treasury Department admits it has absolutely no factual basis for requesting $700 billion - an amount equivalent to about 5 percent of our entire economy. Additionally, the Washington Post reports that “Banks throughout the United States carried on with the business of making loans yesterday even as federal officials warned again that their industry is on the verge of collapse, suggesting that the overheated language on Capitol Hill may not reflect the reality on many Main Streets.” Indeed, “many smaller banks said they were actually benefiting from the problems on Wall Street” and “even some of the nation’s largest banks, which have pushed hard for a federal bailout, deny that the current situation is forcing them to reduce lending.”
The questions, then, are simple: In the face of this bipartisan opposition from objective experts, why should a lawmaker instead believe the same Bush officials who helped create this crisis with their deregulation, the same Bush officials who just months ago said everything was AOK? Shouldn’t there be almost complete unanimity among both objective and partisan observers before spending 5 percent of our entire economy after just one harried week of White House demands? Fool me once shame on you, fool me twice, shame on me. It’s time, as The Who said, that we “don’t get fooled again.”
3. THERE ARE CLEARLY BETTER AND SAFER ALTERNATIVES
The mantra throughout the week has been that America has “no choice” but to pass Treasury Secretary Henry Paulson’s $700 billion giveaway - that, in effect, there are no alternatives. But that’s an out-and-out lie - one with a motive: Making it seem as if the only thing we can do is hand the keys to the federal treasury over to both parties’ corporate campaign contributors.
The truth is, there are a number of alternatives. Here are just a few:
* In the Washington Post last week, Galbraith outlined a multi-pronged plan shoring up and expanding the FDIC, creating a Home Owners Loan Corporation, resurrecting Nixon’s federal revenue sharing, and taxing stock transactions (a tax that would fall mostly on speculators) to finance the whole deal.
* The Service Employees International Union has drafted a plan based around a massive investment in public services and national health care, and regulatory reforms preventing foreclosures and forcing banks to renegotiate the predatory terms of their bad mortgages.
* For those in the mindless, zombie-ish “someone has to do something, so we have to do what the White House says!” camp, consider the possibility that you are under the spell of the same kind of White House fear that led us to invade Iraq because of Saddam’s supposed WMD. Consider, perhaps, that there may not even be a compelling basis for doing anything just yet (or at least not anything nearly so huge), and that the whole reason there is this urgent push right now has nothing to do with the financial situation, and everything to do with creating the political dynamic to pass a wasteful giveaway - one that couldn’t be passed otherwise without a sense of emergency. And ask yourself why you would listen to this White House instead of listening to those experts who have been predicting this crisis and are now advising against this bailout - experts like CEPR’s Baker. In two separate posts (here and here), he says that letting the problem play out could be the best path, because Treasury and the Fed may already have the tools they need. Following this path, the worst thing that happens is “The Fed and Treasury will have to step in and take over the banks [which] is exactly what many economists argue should happen anyhow,” Baker writes. “So the outcome of the worst case scenario is a really frightening day in which the whole world financial system is shaken to its core, followed by a government takeover of the banks. Eventually the government straightens out the books and sells them off again. But the real threat here is not to the economy, it is to the banks.”
* Then there is the idea of simply taking the $700 billion and simply give it to struggling homeowners to help them pay off part of their mortgages. This hasn’t even been discussed but the thought experiment it involves is important to understanding why there is, indeed, an alternative to the Paulson plan. If the root of this problem is people not being able to pay off their mortgages, and those defaults then devaluing banks’ mortgage-backed assets, then simply helping people pay their mortgages would preserve the value of the mortgage-backed assets and recharge the market with liquidity. That would be a bottom-up solution helping the mass public, rather than a top-down move helping only financial industry executives.
On this latter proposal, some may argue that giving any relief to homeowners is “unfair” in that those homeowners created their problems, so why should taxpayers have to help them? But then, is helping homeowners any less fair than simply giving all the money away to Wall Street, no strings attached? I’d say no - and helping homeowners also serves a second purpose: namely, keeping people in their homes, which not only helps them, but helps an entire neighborhood (as any homeowner knows, nearby properties can be devalued when foreclosures hit).
4. ANY INCUMBENT VOTING FOR THIS PUTS THEMSELVES AT RISK OF BEING THROWN OUT OF OFFICE
As a preface, let me state that I think we live in a country where politicians too often listen to their donors and to the Establishment rather than their constituents, not the other way around. America is a country where our leaders dishonestly invoke the concepts of “Statesmanship” and “Seriousness” and their supposed hatred of “pandering” to justify ignoring what the public wants (as if giving the public what it wants is somehow not the objective of a democratic republic). So, in short, I don’t think there’s anything wrong with this bill being “politicized” by coming down the pike right before an election - in fact, I think it’s a good thing because the election - and the fear of being thrown out of office forces our politicians to at least consider what the public wants. I mean, really - would we rather have this decision made after the election, when the public can be completely ignored?
Polls overwhelmingly show a public that sees voting for this bill as an act of economic treason whereby the bipartisan Washington elite robs taxpayer cash to give their campaign contributors a trillion-dollar gift. As just two of many examples, Bloomberg News’ poll shows “decisive” opposition to the bailout proposal, and Rasmussen reports that their surveys show “the more voters learn about the proposed $700 billion federal bailout plan for the U.S. economy, the more they don’t like it.” Put another way, this bailout proposal has unified both the Right and Left sides of the populist uprising that I described in my new book and that is now even more angry than ever.
Any sitting officeholder that votes for this - whether a Democrat or a Republican - should expect to get crushed under a wave of populist-themed attacks from their opponents. We’ve already seen it start. In Oregon, Democratic challenger Jeff Merkley (D) is airing scathing television ads hammering Republican incumbent Gordon Smith for potentially supporting the deal. Similarly, this morning on Meet the Press, we saw Republican Senate challenger Bob Schaffer (CO) dishonestly papering over his own votes for deregulation and ripping into his opponent Rep. Mark Udall (D) for potentially supporting the deal. Incumbents, get ready for that kind of election-changing heat in your face if you vote “yes.”
This, by the way, could play out in the presidential contest. Barack Obama has been taking the advice of the Wall Street insiders in his campaign in endorsing this bailout. McCain has endorsed the vague outline, but he may ultimately back off once he sees the details, allowing him to then run the last month of the campaign as the economic populist in the race. I’m not saying it would work, considering McCain’s 26-year record of supporting the deregulatory agenda that created this crisis. But such a move could end up help him flank Obama on the defining economic issues of the race.
5. CORRUPTION AND SLEAZE ARE SWIRLING AROUND THESE BAILOUTS - AND AMERICA KNOWS IT
The amount of brazen corruption and conflicts of interest swirling around this deal is odious, even by Washington’s standards - and polls suggest the public inherently understands that. Consider these choice nuggets:
* Warren Buffett is simultaneously advising Obama to support the deal, while he himself is investing in the company that stands to make the most off the deal.
* McCain’s campaign is run by lobbyists from the companies that stand to make a killing off a no-strings government bailout.
* The New York Times reports that the person advising Paulson and Bernanke on the AIG bailout was the CEO of Goldman Sachs - a company with a $20 billion stake in AIG.
* The Obama campaign’s top spokesman pushing this deal is none other than Roger Altman, who Bloomberg News reports is simultaneously “advising a group of investors who are trying to prevent their shares from being diluted in the U.S. takeover of American International Group Inc.” - that is, who have a direct financial interest in the current iteration of the bailout.
Add to this the fact that the negotiations over this bill have been largely conducted in secret, and you have one of the most sleazy heists in American history.
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If this bill passes, it will be a profound referendum on the dominance of money over democracy in America. That - and that alone - would be the only thing an objective observer could take away from the whole thing.
Money will have compelled politicians to not only vote for substantively dangerous policy, but vote for that policy even at their own clear electoral peril. Such a vote will confirm that the only people these politicians believe they are responsible for representing are are the fat-cat recipients of the $700 billion - the same fat cats who underwrite their political campaigns, the same fat-cats who engineered this crisis, and want to keep profiteering off it. Any lawmaker who takes that position is selling out the country, as is any issue-based political non-profit group - liberal or conservative - that uses its resources to defend a “yes” vote rather than demand a “no” vote. This is a bill that forces taxpayers to absorb all of the pain, and Wall Street executives to reap all of the gain. It doesn’t even force the corporate executives (much less the government leaders) culpable in this free fall to step down - it lets them stay fat and happy in their corner office suites in Manhattan.
Even if they believe that something must be done right now, lawmakers should still vote no on this specific bill, and force one of the very prudent alternatives to the forefront. They shouldn’t just vote no on Paulson’s proposal - they should vote hell no. Our economy’s future depends on it.
Call your senators and congressman RIGHT NOW and tell them to vote NO.
September 29th, 2008 at 12:37 pm
So far, so good! Let’s see what happens now.