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Adam Hanft

Adam Hanft

Posted: September 30, 2008 04:32 PM

Defuse the Rage: How to Sell the Bailout Plan


Here's what must be said to the American people.

"For a long time there have been two economies in America -- the Elite Economy and the Everyday Economy.

Let me define the Elite Economy for you, because it might not be what you think. It isn't all of Wall Street, or banks in general. It's not the people who lend money to small businesspeople to help them get started, or who lend to farmers to get them from spring through harvest.

By contrast, the Elite Economy consists of the traders, the packagers, the creators of the chimerical.

They have a parasitic relationship with the economy -- adding nothing, bringing nothing, merely sucking blood from the host. Namely: us.

The people who are largely responsible for our current economic crisis were all prime actors in the Elite Economy.

The truth is that Elite Economy has one objective -- to generate profits for itself. Sometimes that relentless mission benefited the people in the Everyday Economy, or at least superficially and temporarily did. For example...when there were profits to be made by extending credit to people who really couldn't afford their houses. As long as those mortgages could be chopped up, packaged up, and sold, their argument was -- repeat was -- that everybody won.

But make no mistake. The people pulling the strings of the Elite Economy have no munificence flowing in their veins. They can't sit back at the end of the day and say, "I helped this business get started and now it's expanding into Europe" or "I helped this company get through a rough patch and now it employs 150 people." They had no interest whatsoever in spreading the glories of home ownership and the American dream to more people out of any motivation beyond pure greed.

At the same time, though, much of what went on in the Elite Economy didn't really touch the Everyday Economy. Foreign exchange traders would toss tens of millions over the global net every day, leveraging a few basis points into seven-figure salaries and huge trading profits for their now logo-less firms.

But until recently, none of that really changed the underlying direction of global finance, never had an impact on the Everyday Economy -- the small business owner, the farmer, even the high-tech entrepreneur.

After all, even the most aggressive defenders of Wall Street would agree: traders don't change fundamentals, they just make money by being smart enough to spot pricing anomalies before the free market catches up, adjusts, and eliminates inefficiencies. That's the argument, after all, that hedge funds give when they maintain that speculation didn't drive up the price of oil. )And for the most part, they're right.)

What's happening now, though, is that the Elite Economy has come crashing into the Everyday Economy. Complex concepts like collateralized debt obligations and credit default swaps suddenly matter to everyone. These glitzy baubles that were packaged up as alluringly as the Prada boxes that streamed out of Barney's are now poised to choke credit, devalue savings, and cause an economic aneurysm.

So now, the Elite Economy -- who scorned the schmucks and schleppers in the Everyday Economy -- are now stuck in the lifeboat with them. It's like a Hollywood movie when a building collapses, and the crooked contractor who used substandard steel in the skyscraper is trapped in an elevator with the maintenance man. Suddenly, each needs the other to escape and survive.

I understand how infuriating it is to be in that position. I know that you're completely suspicious of the Elite Economy and anything they have to say. They've never cared about the Everyday Economy, and in fact, did what they could to make money at its expense. And here they are, expensive hat in manicured hand, asking for a handout from the same people who they've scorned for years.

So yes, I understand your rage at the likelihood of your money going to fund a bailout that will further enrich the Elite Economy. Especially since the people who will help the Treasury department run its new business -- billions of toxic mortgages -- will largely be the same people who put us in this glorious mess.

But you need to channel your anger in a different way. Don't channel it at the bailout, or the rescue plan. We need that, or millions of everyday people who lives and families make up the fabric of the Everyday Economy will suffer in ways they haven't even contemplated yet.

We need to get this plan approved by Congress and then turn our attention to the Elite Economy. We need to ask ourselves how it ended up in a position to cripple our economy and our future. And it's more than a simple matter of "more regulation." Yes, we turned out watchdogs into lapdogs, but the problem is deeper than that. Our framework is broken.

For example, our tax code doesn't make a distinction between someone who earns a dollar by lending money to the entrepreneur or farmer, and someone who earns a dollar by finding a sliver of inconsistency between the yen and the Euro, and borrowing 30 times that sliver to turn it into the twinkling of an eye?

Is that right? I don't think it is. We should use our tax code to encourage the right kind of behavior, corporate actions that benefit the greater good. We need more money flowing into our economy to help it grow, and less money shuttling from one computer terminal to another, betting on tiny burps in the global financial system.

We need to make the Elite Economy work for the Everyday Economy. It can and it must, but before that can happen, we need to get both economies out of the lifeboat.