I’m not a financial expert, and I don’t pretend to be. I can barely balance my check book, and when I say that I’m investing in CDs, I mean compact discs.
Still, I’ve got a little money put away and a couple of private pension plans that I’ll be drawing from in less than a year. I guess that makes me, if not an expert, then certainly an interested party in the current financial meltdown taking place. And like you, I’ll be taking a bath financially due to lower market values, reduced real estate values, and higher taxes.
As I understand it, the various banks and financial institutions that are vaporizing right before our eyes are in the position they’re in primarily because they made bad loans, bought unsecured or under secured debt, and did it all with minimal or no regulation from the Federal Government. A product, largely, of the Reagan and G.H.W. Bush days of rampant deregulation without regard to the public needs and the trust that government is supposed to exercise on behalf of that public.
Now there is a proposal floating that will allow the government to expose up to $700 billion at a time to bail out these bad boys of Wall Street. That’s not $700 billion total, as I read it, but $700 billion at any one time. That means that if they invest that amount of our taxpayer dollars in the initial bailout, and then liquidate some of the debt, even at a loss, then they can bailout somebody else for the amount collected from the liquidation, as long as the total exposure at any one time does not exceed $700 billion.
This whole business of essentially nationalizing our financial markets may be the biggest political capitualation in the history of the Union. It’s both socialistic and fascistic, and I don’t think the full significance of vaporizing any legitimacy the Conservative Movement might have had has fully dawned on our rightwing friends. It erases the validity of their 75 year complaint on The New Deal, as well as ANY credibility about ANYTHING economic. What else do they have left now but the culture war, abortion, and bombing Iran?
But to the rest of us, we’re seeing the means of financing national health insurance go right out the window. Not only that, but any spending on schools, infrastructure, and any other causes dear to progressive Americans will not happen because the money is being stolen from the people and given to a few elites in the world of high finance.
At least when you’re mugged on the street, the perpetrator has the decency to stick a gun in your face. These spineless politicans will, as Wood Guthrie said 70 years ago, rob you with a fountain pen. But they’re not just robbing you. They’re also robbing your children, grandchildren, and probably great grandchildren. It’s kind of like the Sarah Palin-as-mayor-of-Wasilla, Alaska-plan. They’re charging us for our own rape kits. And we’re forking over the money without complaint.
I personally think it’s time to get out the pitchforks and torches and storm the castle walls but I know that won’t happen. After all, the fall TV season is beginning and football is on the tube to take our minds off of things that should incense us. And some gay couple somewhere wants to get married, and some woman is contemplating an abortion, and we’re all working more hours for less pay, and who has time to think all of this through and actually do anything about it? I guess we do have to keep our priorities straight, afterall.
Is it just me? I have this Thomas Nast-like cartoon in my mind of these Republicans sweeping out the last of the people’s money from the vaults. It’s their last chance for awhile to get what’s left. It took them eight years, but they managed to get it all. The war, private contractors with no-bid contracts, the oil companies, deregulation, and the fleecing of America. These Republicans started their tour of duty eight years ago with the coffers overflowing, flush with cash and managed in that time to pillage and plunder every cent. They’ve even managed to get hundreds of billions more from Chinese, Japanese, and other foreign lenders that we euphemistically call “federal debt.” They got it and we’re stuck with paying back the loans. And now they’re making their final raid on the treasury, and we have to pay more.
What worries me the most about this bailout, besides the inherent boneheadedness of the entire scheme, is Section 8 of the bill. It reads as follows…
“Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”
This means that Secretary of the Treasury Paulson, and/or his successor has carte blanche to distribute money, strip or rebundle assets/losses, or whatever the hell else they may feel like without any oversight, regulation, or legal recourse. Wasn’t it deregulation and lack of oversight that lead to this entire fiasco?
This is the same Henry Paulson who spent his career on Wall Street working for Goldman Sachs. Oh yeah, they’re an investment firm. Can you spell collusion? How about special interest? And isn’t this bailout really just going to dump money on the jackasses who caused this crisis in the first place? Golden parachutes for everybody. Yeah, that’ll shore up the shaky financial markets.
I love the fact that the “rescue plan” for the crisis brought on by the deregulation of our financial industry requires that Congress deregulates the actual “rescue plan” itself. There are no rules whatsoever on what Secretary / Former Goldman Sachs CEO Paulson chooses to do with the taxpayers’ $700 billion.
Before we agree to send these scumbags the money, can we at least force them to sign over the keys to the Rolls, the Jetstream, the house in the Hamptons, and the ski lodge in Aspen? I mean a trillion dollar mistake ought to cause at least one of these guys to lose a house or something. Assuming they’re at least as well off as McCain, they will still have half a dozen or so in each of their portfolios.
But the poor schumucks out here in the hinterlands who are buying one house and have gotten tangled up in this mess aren’t hearing one word about how to save their homes from foreclosure. No talk about revaluing their homes to a more realistic price, nor any provisions for renegotiation of mortgages. Even though those solutions would be cheaper and would put the money into the bailout at the ground level and ultimately be more likely to shore up the industry.
So what then is the correct solution? Like I said early on, I’m not an expert. But I do possess a modicum of common sense and a tad of critical thinking skills. I propose that the government should simply manage the liquidation of these firms, unroll the mortgages in these debt packages into Freddie Mac/Fannie Mae and refinance as many of the bad mortgages as possible under short-term favorable rates, that slowly increase to market rates. Executives and investors get nothing. They screwed the pooch, but they shouldn’t get the puppies.
If taxpayer money is being put up to finance a solution, we would all be better served if as few foreclosures took place as possible. It would be vastly preferable to get 4% from a mortgage for the next year or two than trying to liquidate a property at 20% or more below market rate. The fed has Fannie and Freddie available to do this, so turn them loose.
There also might be some long-term advantage to taking the foreclosed properties that are out there and put together a new GI bill to help vets acquire housing. You could also create a more comprehensive housing package, giving preference to people willing to teach in inner-city schools, and that sort of thing.
That still leaves a lot of pain to deal with, but it sends the right message to Wall Street (we’ll help you liquidate, but not save you), to taxpayers, and helps diffuse a lot of the problem closer to where individuals will feel it.
Oh, and a capital gain tax rate increase most certainly should accompany any bailout. Start paying for this bailout from the source. It can be a progressive tiered increase from the current rates, so small capital gains distributions stay at the current rate, but the more you take in during a year, the higher the rate you pay. That wouldn’t hurt small investors, but again puts the burden on those who contributed to this mess in the first place.
Finally, I’ve been advocating for over twenty years for a tax on stock transfers. Something along the line of one quarter to one half percent of the value of each transfer would generate billions of dollars a year. This money could be used to pay down the debt and would have minimal impact on the earnings of those involved in the stock market. Yet it would make a significant contribution to paying down our debt. This would free up more money in the private sector, leading to more economic growth where it counts. From the ground up.