Reject Subsidization of the Rich
The bailout plan, both Treasury Secretary Paulson’s original draft and the version Congress tried to pass yesterday, is a massive blank check to the wealthiest, privileged and non-productive members of our society. It is corporate welfare at an unprecedented scale, effectively rewarding years of financial gambling and a housing bubble. Handing hundreds of billions of dollars to the same folks who have weakened our economy would be something bordering insanity, for the following reasons (and others).
Key problems with the bailout are:
- Despite rumors to the contrary, the revised bailout bill (which failed yesterday) does not put restrictions on CEO pay. And even if it did, restricting the salaries of a handful of executives in a handful of firms is not going to make this bill more accountable nor going to prevent any of this from happening again. (How much of a punishment is it to pay someone $400,000 a year?).
- Oversight of the bailout is unclear at best, and effectively absent at worst.
- Henry Paulson, the same man who insists that our economy is on the edge of collapse, whose plan included giving him unprecedented, non-reviewable power to distribute $700,000,000,000 with full immunity, was the former CEO of Goldman Sachs just a few years ago – one of the same institutions that he’s proposing giving billions of dollars to. Even if he has the best of intentions, despite having the very definition of a conflict of interests, he’s the same guy that said in early August that “We have the strongest global economy I’ve seen in my business lifetime,” How is this not a case of the crazy people running the asylum?
- The drumbeat of disaster and economic ruin if we do not immediately give a third of the U.S. annual budget to banks is eerily reminiscent of the passage of the PATRIOT Act and the vote on the war on Iraq.
- There’s no guarantee that the huge bailout will actually fix the problem!
- In the past week, we’ve seen false reporting from NPR to the New York Times to columnists like David Brooks. It is not possible to make a rational, appropriate decision in such a short period of time in such a misleading and frenetic environment.
- There’s much more to comment on (keeping this short in the interest of getting this post published).
Where do the Democrats stand on this?
Obama, unbelievably, has privately urged the Democrats to not support bankruptcy reform. This is the most fundamental component of any economic stability package, would affect the folks trying to pay their mortgages, and according to Dennis Kucinich, the Democrat Presidential candidate is opposed to it. Given that Obama’s top contributor is Goldman Sachs, with JP Morgan, Citigroup, UBS, Lehman Brothers, and Morgan Stanley in his top 16, we should not be surprised.
Some folks are bringing some perspective and courage to the debate. Marcy Kaptur (D, Ohio) gave this revealing and measured response before she cast her “No” vote. Sheila Jackson also delivered some words of wisdom on the floor of the House: “America has been diagnosed, but we need a second opinion”. And recall it was mostly Republicans which stopped the bailout from being passed. What we’re witnessing is the tug of war on politicians between the people who fund them and the people who vote for them.
What to Do!
1.) Call Your Congressperson!
This is a list of how every House Representative voted for the bailout – how did yours vote? Call your House Representative (find them here) and tell them not to pass the bailout – tell them the current bailout bill is unacceptable, and anything that they pass to address the situation must include comprehensive and wide-ranging relief for those who are paying off home mortgages.
2.) Join organizations like CODEPINK and United for a Fair Economy in calling for alternatives to the bailout, like a Bailout for Main Street.
3.) Read more, get informed, know what’s going on. The greatest problem we have right now is a dearth of information and understanding. This is not a topic that’s going to go away soon, so we better know what we’re all getting (or are being put!) into.
1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has led to a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.
2. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt. This problem is especially severe because everyone took on so much debt during the bubble years.
3. Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs.
4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse. This vicious circle is what some call the “paradox of deleveraging.”
This post was written by Jeff Napolitano on September 30, 2008