Main Street and Wall Street -- We're in This Together
The defeat of the financial rescue plan in the House of Representatives on Monday dealt a needless blow to an already faltering economy. Investors lost $1.2 trillion in wealth. Confidence that our elected leaders are capable of solving big challenges was further shaken. And, we continue to invite an economic calamity of epic proportions every day we delay addressing this crisis. It's time for Congress to put aside partisan differences and act in the national interest.
Major opposition to the bill stems from the mistaken belief that this is a rescue of Wall Street, not Main Street. What escapes many people is how dependent one is on the other. Both must be successful.
Pitting Wall Street vs. Main Street is wrongheaded and unproductive. They are inextricably connected. The funds that flow through Wall Street drive the activity on Main Street that creates jobs and generates income. Businesses rely on the financial markets for their daily operations, for purchasing inventory, and for writing paychecks. An inability to borrow money means businesses can't expand production and create new jobs.
Families also rely heavily on financial markets for loans to buy everything from cars to furniture. They invest in 401(k)s and other financial instruments to help provide a secure retirement. A collapse of the financial markets would prevent individuals and businesses from getting the funds they need to consume and invest--the two things that drive economic growth. Without them, our standard of living declines and our economic future is imperiled.
One of the basic benefits of an integrated financial system is its ability to make credit available to both large and small entities in every geographic location. However, one of the fundamental drawbacks of such a system is its interconnectedness. When a fundamental piece of that integrated system undergoes a complete meltdown, it is a problem for everyone. That is what is meant by systemic risk. That's why it's essential we do everything we can to save and strengthen a financial system that has benefitted all of us--Main Street and Wall Street.
An old adage warns us, "don't cut off your nose to spite your face." Americans have every right to be mad at a handful of reckless businesspeople who made off with millions while their businesses failed, our outdated financial regulatory system, and the host of other problems that got us into this mess. There will be time to sort all of this out later, and we must. But now is the time to put our anger aside, look at the big picture, and avert an economic apocalypse that could devastate all of us.
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The fact is that warning signs of this housing bubble were known for years by these financial firms and government officials yet they chose to ignore them hoping it would all go away. Yet anyone who warned about it was ridiculed. But now that this day of reckoning has arrived, you and others would have us give authority to those who chose to ignore these signs and lead us out of this mess?
Why should I believe anything that they say when in the original bill, “Decisions by the Secretary (Paulson) 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.”
Is this some kind of joke? Did I go to bed one night in America and wake up in Soviet Russia?
If these financial firms cannot survive, they should use the laws already in place and declare bankruptcy. Bankruptcy punishes these firms. But a bailout transfers the obligation from these firms that authorized risky loans to the taxpayers. And while more bankruptcies may occur and loans hard to get for a period for some people, there is no need for despair. The market hates a vacuum and someone will see an opportunity to provide capital to worthy individuals.
Would the bail out Paulson is demanding actually save us from disaster? I don't know. What I do know is that Bush/Paulson absolutely cannot be trusted. Everything they do is intended to take money away from workers and hand it billionaires. Why would this be any different?
Obama and Establishment Democrats
The problem with Obama's and the Congressional Democratic establishment's tacit support of the Paulson-Plus Plan is it is inherently a top-down approach which ever way you slice it. The Democrats can attempt to place measures capping CEO pay, attempt to demand taxpayers see an equity stake in future gains, and establish oversight committees to see this through, however the dirty little secret is that most of these measures are fraught with legal ambiguity and would be nearly impossible to enforce provided the government does buy these Banks' toxic paper. Perhaps more disconcerting is the fact that no one really knows for sure what this paper is worth anymore due to the complete halt in trading of these mortgage-backed securities, thus the government is almost sure get overcharged. What the Democratic establishment is not telling us is that everything they have proposed amounts to nothing more than lip service. Even worse, in an attempt to pander to House republicans, the Paulson-Plus Plan now has the capital gains tax suspension. This certainly won't help our deficit and undermines future Progressive programs.
McCain and Establishment Republicans
I heard McCain's economic advisor Martin Feldstein last night on Charlie Rose propose an asset swap measure that would essentially allow the government to assume creditor authorities over these overvalued mortgages. The Treasury Department would buy up every bad mortgage from these Wall Street banks without any market-to-market measures to bring these assets back to reality, ergo the banks would have no problem charging the government up the "fanny" (no pun intended) for this essentially worthless paper. This coupled with continued market instability assuming the Wall Street giveaway doesn't trickle down, could usher in the largest transfer of private property to the government in American history. Most off this would target the country's most vulnerable citizens as they were the chief victims of the predatory lending practices of the past two years and account for the majority of the toxic assets in the marketplace. Clearly McCain's economic people have a different concept of who the victims are in this crisis. Not to mention the prospect of this asset swap has the Libertarians pulling their hair out.
The only commonality between all parties involved at this point seems to be in bolstering FDIC coverage to $250K per account. This is seen as a purely psychological measure aimed at calming the markets.
So please, Progressives stand up, call your Representitive and lets stop this Wall Street giveaway tomorrow!
I couldn't care less for those greedy wall streeters. They can jump from the windows and I wouldn't give a d***.
Obama and Establishment Democrats
The problem with Obama's and the Congressional Democratic establishment's tacit support of the Paulson-Plus Plan is it is inherently a top-down approach which ever way you slice it. The Democrats can attempt to place measures capping CEO pay, attempt to demand taxpayers see an equity stake in future gains, and establish oversight committees to see this through, however the dirty little secret is that most of these measures are fraught with legal ambiguity and would be nearly impossible to enforce provided the government does buy these Banks' toxic paper. Perhaps more disconcerting is the fact that no one really knows for sure what this paper is worth anymore due to the complete halt in trading of mortgage-backed securities, thus the government is almost sure get overcharged. What the Democratic establishment is not telling us is that everything they have proposed amounts to little more than lip service. Even worse, in an attempt to pander to House Republicans, the Paulson-Plus Plan now has the capital gains tax suspension. This certainly won't help our deficit and is sure to undermine future Progressive programs.
http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20080930/REG/809309958 "No Bailout Act" the DeFazio-Kaptur Plan
It is my view that this would be the most principled Progressive undertaking, a true bottom-up approach, one that gets at the heart of what is causing the credit crunch, that being the imminent threat of rolling home foreclosures due to these overvalued mortgages. Also, this is the only plan offered thus far that would not add trillions more to the skyrocketing deficit.
Ok -- it's certainly fun to rage against "Wall Street", but it is also pointless. There were no great secrets here. There was extensive media attention given to (i) a possible housing bubble, (ii) the dangers subprime mortgages for YEARS. (If you don't believe me then go back and look at some newspapers from 2005 and 2006.) No one did anything about it because homeowners liked having rising home values (including the constantly refilling piggy bank) and finance companies liked all of the business. Lots of people at many levels of society did stupid things as a result. We now are at risk for a recession (at least).
Who is hurt most by a recession? Poor people. Not the guys who made lots of money off of making all of those mortgages, or the borrowers who were able to quickly flip houses for more and more money. You can get mad at those people if you like, but lots and lots of people made financial bets and some of them worked and some of them didn't.
It is now time to put the national financial house back in order and yelling "NO" and stomping feet won't do that. Something that takes heat off of the mortgage securities market will do that -- and the current financial rescue package is as good a proposal for doing that as any. Let's move forward with it and make sure that Main Street doesn't suffer just because we were mad at Wall Street.
I agree. this bill is definitely flawed, but I didn't see anyone floating out a better one. and no, "throw the bums out!" is not an alternative at the moment, and neither is apportioning out the $700B to individual citizens. this bill does give us some breathing room to be able to actually look at not just regulation but restructuring. the problem should have been addressed last year - and ideally should never have been allowed to arise - but it wasn't. better to put a tourniquet on it, then get to the hospital in time to prevent gangrene. that's better than bleeding to death in the desert.
Our primary human capacity is the ability to make distinctions. E.g., the fact that we are all in this together doesn't mean that we have the same influence over what happens. There are investors and then there are Investors.
Those Investors who spend every working minute, if not every minute of their day, gaming the economic system for profit are not like investors who leave assets for an extended time to be used by others for productive purposes, allowing *rent* to be paid back for the money.
We are not all willing to lie, cheat, and steal. Our problem is that too many capital "I" Investors are so willing. In the absence of law enforcement, the payoff is too tempting for them to resist. They laugh, as the saying goes, all the way to the bank. It's us, investors,.they are laughing at. Stop making excuses for them.
See Neil Grossman's Profile
There is no doubt that Wall Street and Main Street are inextricably linked. The problem is that this package is not the solution. It may stabilize bank balance sheets. But banks are still over-leveraged. For the economy to grow, banks need to be able to expand their balance sheet. Not going to happen. Further it will take a while for the program to get up and running. On the other side, the American consumer is in trouble.. Jobs are at risk, savings are depleted, home equity has disappeared across a large swathe of the population. investment portfolios are lower (but equities are still over-valued based on fundamentals an risk.
unfortunately, alternatives were not discussed that might have addressed these problems. Rather, it has been a PR blitz of intervention by fear. Leadership by fear is usually the purview of dictators and demagogues. The bottom line is we are confronted by a real crisis. However, the solution warranted more consideration and debate; and a better outcome. And I think if this had been done, the bill would be far superior.
It would be great if every working-class American would participate in an organized one-day worker strike. THAT would send a message to the corporate pirates that we really mean business.
If only.....
"A handful of people?"
The reason these bubbles have been needed is that the United States over the last generation gave away millions of its good manufacturing jobs to foreign nations in order to further the greed of global finance capitalism. So the only way people have been able to live has been through credit bubbles that have the disadvantage of inflation the prices of assets, including their homes.
The only reason that there has been "economic growth" in the past few years is that Greenspan and this administration want to get us out of the dot.com bubble which also burst. Go shopping with money that you borrow using your home as collateral so that the illusion of prosperity can continue while wars for oil and pipelines are pursued with loans from foreign nations.
The FED should be seized by the Congress under Article, Section 8 of the US Constitution. The FED banks could survive as clearinghouse banks, but the FED that has robbed the American people for almost one-hundred years through charging us interest could be taken off our backs. The debts could be discharged in bankruptcy. Why do we pay interest on our debt to the FED for issuing money. If you read the Constitution, Congress was given the right to issue money to the people, not the FED which is a private group of bankers who seized control in 1913 in a financial coup.
Allow bankruptcy judges to "cram down" mortgages.
Amen
Amen !
As Richard Cheney would say, So? People are tired and angry of the rich. Too much disparity.
The only time the corporates claim that we're in this together is when it's time to share the losses. When there are profits to be collected, it's every man for himself. What extraordinary hypocrisy. Sorry, but the interests of real Americans are diametrically opposed to those on Wall Street. What's good for them is bad for us, what's bad for them is good for us. The people running Wall Street have proven conclusively that they don't understand business or finance, and that they are not capable of managing the economy. Anyone who listens to their advice is insane and almost certainly corrupt. This is pretty much a civil war at this point. We must confront and defeat these people once and for all.
Sorry, but Main Street and Wall Street are not in this together. If Wall Street drops by 90 percent, they walk out rich, just not insanely rich. If Main Street drops by 10 percent, a lot of people walk out broke for life.
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