Billions for Bailouts! Who Pays?

The current financial crisis facing our country has been caused by the extreme right-wing economic policies pursued by the Bush administration. These policies, which include huge tax breaks for the rich, unfettered free trade and the wholesale deregulation of commerce, have resulted in a massive redistribution of wealth from the middle class to the very wealthy.

The middle class has really been under assault. Since President Bush has been in office, nearly 6 million Americans have slipped into poverty, median family income for working Americans has declined by more than $2,000, more than 7 million Americans have lost their health insurance, over 4 million have lost their pensions, foreclosures are at an all time high, total consumer debt has more than doubled, and we have a national debt of over $9.7 trillion dollars.

While the middle class collapses, the richest people in this country have made out like bandits and have not had it so good since the 1920s. The top 0.1 percent now earn more money than the bottom 50 percent of Americans, and the top 1 percent own more wealth than the bottom 90 percent. The wealthiest 400 people in our country saw their wealth increase by $670 billion while Bush has been president. In the midst of all of this, Bush lowered taxes on the very rich so that they are paying lower income tax rates than teachers, police officers or nurses.

Now, having mismanaged the economy for eight years as well as having lied about our situation by continually insisting, "The fundamentals of our economy are strong," the Bush administration, six weeks before an election, wants the middle class of this country to spend many hundreds of billions on a bailout. The wealthiest people, who have benefited from Bush's policies and are in the best position to pay, are being asked for no sacrifice at all. This is absurd. This is the most extreme example that I can recall of socialism for the rich and free enterprise for the poor.

In my view, we need to go forward in addressing this financial crisis by insisting on four basic principles:

(1) The people who can best afford to pay and the people who have benefited most from Bush's economic policies are the people who should provide the funds for the bailout. It would be immoral to ask the middle class, the people whose standard of living has declined under Bush, to pay for this bailout while the rich, once again, avoid their responsibilities. Further, if the government is going to save companies from bankruptcy, the taxpayers of this country should be rewarded for assuming the risk by sharing in the gains that result from this government bailout.

Specifically, to pay for the bailout, which is estimated to cost up to $1 trillion, the government should:

a) Impose a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers. That would raise more than $300 billion in revenue;

b) Ensure that assets purchased from banks are realistically discounted so companies are not rewarded for their risky behavior and taxpayers can recover the amount they paid for them; and

c) Require that taxpayers receive equity stakes in the bailed-out companies so that the assumption of risk is rewarded when companies' stock goes up.

(2) There must be a major economic recovery package which puts Americans to work at decent wages. Among many other areas, we can create millions of jobs rebuilding our crumbling infrastructure and moving our country from fossil fuels to energy efficiency and sustainable energy. Further, we must protect working families from the difficult times they are experiencing. We must ensure that every child has health insurance and that every American has access to quality health and dental care, that families can send their children to college, that seniors are not allowed to go without heat in the winter, and that no American goes to bed hungry.

(3) Legislation must be passed which undoes the damage caused by excessive de-regulation. That means reinstalling the regulatory firewalls that were ripped down in 1999. That means re-regulating the energy markets so that we never again see the rampant speculation in oil that helped drive up prices. That means regulating or abolishing various financial instruments that have created the enormous shadow banking system that is at the heart of the collapse of AIG and the financial services meltdown.

(4) We must end the danger posed by companies that are "too big too fail," that is, companies whose failure would cause systemic harm to the U.S. economy. If a company is too big to fail, it is too big to exist. We need to determine which companies fall in this category and then break them up. Right now, for example, the Bank of America, the nation's largest depository institution, has absorbed Countrywide, the nation's largest mortgage lender, and Merrill Lynch, the nation's largest brokerage house. We should not be trying to solve the current financial crisis by creating even larger, more powerful institutions. Their failure could cause even more harm to the entire economy.

Comments

[BAVirago]

This is a man on the side of the voters. He needs to be in President Obama's cabinet when the dust settles.

[budmagoo]

I heard Sen. Sanders make this point earlier today and I agree. The only thing I would add is that the assets of all the key executives and board of directors should be frozen as collateral on any taxpayer money spent.
Somebody other that a disabled vet should be worried about where they are going to sleep tonight.

[Indubio]

Mr. Sanders has some terrific ideas but I wouldn't hold my breath waiting for any of them to get approved. The only, and I mean the only reason, Bush is doing any thing at all is because of the upcoming election in 6 weeks and the fact that he has to deal with a Democratically controlled Congress. No election and a Republican Congress and these people would be crowing about letting the chips fall where they may and relying on "market solutions." I don't believe for one minute that Paulsen or Bernacke or Bush for that matter have any faith in regulation or bailouts. The bailouts are cosmetic aimed at doing everything possible to make free markets survive. I only wish Sanders' ideas would be enacted. I'm tired of paying taxes out the butt while those making 100 times my annual salary pay a lot less both with respect to percentage and in many cases in terms of actually taxes paid.

[gottatellya]

Senator, you've well articulated the problem, and the solution. If only the Democratic hopefuls could repeat nationally exactly what you've said, we all might stand a chance. They've proven not to have done a very good job of this for ages. Without this kind of direct linear thought presented on a grand scale, so many ignorant voters will continue to succumb to the prolific rhetoric that the Republicans perpetrate, especially through the 'right' owned media such as Fox. It would be very difficult for the likes of Hannity, O'Reilly and Limbaugh et al to spin this differently if it was concisely laid out just as you've done here, placing blame with facts to back it up, plainly in public view, accompanying it as you've done here with the appropriate solutions. Maybe then some people would actually hear and finally understand why they need to vote for the Obama/Biden ticket.

[nrgee]

I appreciate your comments. Thank you. While it may not be the most important piece of the debacle, I keep thinking about the foreclosed houses that have become collateral damage in this financial crisis. In my area, several of these houses are left neglected and being ruined by mold. Whether or not true, I have the impression that present financial rewards for banks encourage neglect and ruin of foreclosed houses so that these properties will fully represent unrecoverable debts to be picked up by government guarantees. Taxpayers end up on the losing side while the involved financial institutions continue on a contrived winning side. What a waste!

[idyl]

Everyone appears to be passing the buck. AIG goes to Bernanke and says, "we're going under and are too big to fail. If you don't help us, the economy will collapse, and it will be known as the Bernanke failure." So he bails them out. Paulson and Bernanke now go to Congress and say "the problem is too big." Express grand delusions of apocalyptic panic and uncertainty, and say, "if you don't act, it will all be your fault." So the ball gets kicked further down the field. Next, it will be the global community, the world of international finance. "We're in trouble. One Trillion was not enough. If you don't bail us out, the problem will spiral out of control, a solution will be beyond our reach, it will all be your fault." Other countries to the rescue.

And one thing we keep missing (the fundamentals). The stock market is hugely overvalued. GDP grows at a paltry 3%, and the stock market has been growing at 10-12% for years (hugely outpacing earnings). Perhaps we just reached a limit and were due for a correction. Isn't this, too, a fundamental feature of the market (and the way in which value is determined)? What is anything worth if we keep printing money and bailing out failing companies to keep the DOW at 11,000?

Just some speculative rantings … I may change my mind about all of this tomorrow.

[HappyDae]

An honest, well-considered response. I like it.

Happy Dae.

[UnbiasView]

Sure nice of you to ask the question Benie but I can't name 5 politicians that have stood up for the taxpayer in the the last 20 years . . . earmarks, pork projects, increased spending, etc.

[HappyDae]

To be successful, politicians must rise above their principles.

Happy Dae.

[perk]

As much as I hate the thought of this bailout, something big had to happen to reverse a train headed to global financial catastrophe.

I do not think the average man on the street realizes that we headed to a meltdown so horrific that a huge percentage of people may not have had access to their accounts by Tuesday afternoon. Yes, really. No ATM withdrawals , no check clearing, no selling of stock, nothing. If you have a friend at a high level in a financial organization, just ask them. It was THAT close.

What was really interesting is the world wide effect of the US meltdown. Russia CLOSED THEIR STOCK EXCHANGE for a day and a half. Only to reopen after the US announcement. I am not sure we can pay for what we promised, but when your life is at stake, you will promise to pay a ransom that is many times what you have in the bank.

[chronic5]

I hope more and more Americans figure out what is going on here and when they do there is going to be unimaginable anger and turmoil. If we bail these institutions out then I certainly think we all should become "shareholders". Otherwise I see class warfare coming to a democratic republic near you.

[razelesscornNrazemorH]

Great article Senator.
If the debts can be Nationalized then the profits should be Nationalized also.
Nationalize the oil companies the telephone companies.
Lets start by doing things that “promote General Welfare” for all rather than the few.

[mounthood]

The motto seems to be: "Privatize the profits, but nationalize the losses."

What's wrong with this picture?

[vietveter]

Well then please, please

when it is time to vote for giving my money to these people

JUST SAY NO

and... oh yeah, tell all your friends

[MsCanadian]

Thank you Senator. This is one of the most intelligent responses to the economic crisis that I have read. Your ideas have great merit, and can work with the cooperation of all concerned, if there is a genuine desire to do so.

[wallygator]

I'm so angry. I say let it BURN!

[NoOneSpecial]

Citizens of the USA... behold the true costs of "trickle-down" economics

Or as its often been called: "the rich get to piss on the poor and middle-class"

[UnbiasView]

The housing crisis had little to do with "trickle down economics"

Ever heard of government trying to get these banks to give risky loans?

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

Representative Barney Frank(D-MA) claimed of the thrifts "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." Representative Mel Watt (D-NC) added "I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing."

[NoOneSpecial]

Ah, yes.

The right wing blogs have been floating their trial propaganda balloon to lay the blame for this mess on Jimmy Carter of all people.

Nice to know where you get your info from.

[jahzilla]

Read between the lines.
It would also be a tad naive to quote the mere definition of an agency (CRA) without also grasping the lack of regulation and oversight neo-cons have concurrently built into (now) virtually every agency and department charged with protecting the country's exo/infrastructures. From the IRS to EPA to Justice to Education to SEC to, well, SCOTUS and everything in between, the primary thrust of this 30 year iteration of the GOP has been to look the other way (and even misrepresent) for the purposes of maintaining a physical, metaphoric and spiritual "trickle-down" boot to the necks of the middle-class.
In this last instance, the SEC has completely ignored the enforcement on thousands of felony violations by those speculators involved in abandoning legal and financial responsibilities associated with "naked short selling".
If this particular behavior was overlooked by the SEC, how many more thousands of violations, for all the other de-regulated sectors, have been knowingly overlooked?
As for denying including the mortgage debacle as an example of "trickle-down" economics, you overlook the obvious. Within the same design framework that has those at the top reaping the cream, converse economic consideration starts at the bottom when "trickle-down" turns to a negative "trickle-up" where the taxpayer incurs the eventual burden of unfettered greed. Sorry, can't have it just one way.

[WayUpNorth]

Ha-ha-ha "Unbias" that's too funny. Repeating the talking points Hannity gets from the Bush administration every morning. That's really unbiased.

I suppose deregulation and pressure on regulators trying to enforce what little remained had nothing to do with the Savings and Loan crisis either.

http://en.wikipedia.org/wiki/Keating_Five (ordinarily I wouldn't use Wikipedia as a source as anyone can put anything up there but since you like it so much...)

I suppose Phil Gramm and his monomaniacal pursuit of deregulation had nothing to do with EnRon or our current financial turmoil either.

http://www.realclearpolitics.com/articles/2008/09/mccain_and_the_meltdown.html

At least I don't have to listen to Hannity to get the RNC talking points anymore. I just look for "UnbiasView" and I know I'll get the latest.

[Helomech59]

Critics claim that government policy encouraged the development of the subprime debacle through legislation like the CRA, which in effect forces banks to lend to the same otherwise uncreditworthy consumers they are now being criticized for accepting. [6] Defenders of CRA disagree, pointing out that half of all subprime loans were made by institutions that are not subject to CRA and another substantial share of subprime loans were made by subsidiaries of banks that do not fully come under CRA. They estimate that the substantial number of riskier loans banks were forced to accept by CRA were not enough to be a problem.

WHich goes right back to reality, which is you and the all the other wingnuts are pulling
half truths out of your ass, instead of actually looking at the real problem and WHO really caused it.

[sparafucilli]

Remember that the Bush-McCain fundamentals are the backs of ordinary Americans. And if you take a close look at those backs you'll see the unmistakable outline of $1000 Italian loafers. Sure those backs are strong and they better be since they have now got to absorb the crushing step of the financial jackboots that Bush-McCain and their ever-cons have just now brought into fashion.