Thank goodness for elections?! According to Democracy Now, it seems that virtually all the Republican votes and some(?) of the Democrat votes against the bailout monstrosity were in closely contested districts. (Isn’t it a shame that all the NYC contingent felt sufficiently secure to support Bush (with the notable exception of Congressman Serrano) because they are all in safe districts?
Another disillusionment is the erstwhile NYT columnist and economics professor, Paul Krugman, to whom we have turned for a semblance of sanity in these years of horror (but not on “free trade”).
Yet, on this most vital issue, he puts on the hat of a Democratic Party functionary – as if he were gunning for a top position in an Obama administration. In recent columns he writes that this bill is ok and that doing nothing is not an option: meaning we must follow the Pelosi-Reid line of getting behind the Cheney-Bush policy of bum rushing us and confusing us into further sinking the economy.
So why did Pelosi and Reid decide to support Bush in the face of the overwhelming opposition of the voters? One can see that they’re not leaders, they’re timid and ineffectual. They’re afraid of the press just as much as they are of Cheney and Bush. (Or are the two the same?)
Second, we can guess that they were assured by the likes of Robert Rubin that there are plenty of large donors to the Democratic party who would also be feeding from the same trough – never mind the consequences. Else, why would they vote against the clear wishes, not to mention the needs, of the vast majority of their constituents?
I offer a few paragraphs from some of the leading voices of sanity, including two who show that if the purpose was really to help the economy, there are sane, wise and practical ways to do it.
Luigi Zingales, NY Sun 9.29.08
Debating Paulson's Bailout: It's a Big Price
If banks and financial institutions find it difficult to recapitalize, it is because investors are uncertain about the value of the assets in their portfolios and do not want to overpay. Will government do better at valuing those assets? In a negotiation between government officials and a banker with a bonus at risk, who will have more clout in determining the price? Mr. Paulson's plan would create a charitable institution that provides welfare to the rich — at taxpayers' expense.
If the government subsidy is large enough, it will succeed in stopping the crisis. But, again, at what price? Aside from costing billions of taxpayer dollars, Mr. Paulson's plan violates the fundamental capitalist principle that whoever reaps the gains also bears the losses. Remember that in America's Savings and Loan crisis of the late 1980s, the government had to bail out those institutions, because their deposits were federally insured. But in this case, the government does not have to bail out the debt-holders of Bear Sterns, AIG, or any of the other financial institutions that will benefit from Mr. Paulson's plan.
Since we do not have time for Chapter 11 proceedings and we do not want to bail out all the creditors, the lesser evil is to do what judges do in contentious and overextended bankruptcy processes: impose a restructuring plan on creditors, with part of the debt forgiven in exchange for equity or warrants.
[Zingales spends several paragraphs explaining his solution: forcing debt forgiveness, which he writes was done successfully during FDR’s term; which allowed and stock and bond prices to soar after the Supreme Court upheld the decision. –-This shows that there are rational solutions out there if the evil doers would allow them.]
Forcing a debt-for-equity swap or debt forgiveness would be no greater a violation of private property rights than a massive bailout. But, for the major players in the financial sector, it is much more appealing to be bailed out by the taxpayers.
Indeed, for the financial industry, the appeal of Mr. Paulson's proposal is precisely that it taxes the many and benefits the few. Since the many — taxpayers — are dispersed, we cannot put up a good fight in Congress, whereas the financial industry is well represented politically. For six of the last 13 years, the Treasury Secretary was a Goldman Sachs alumnus.
The decisions that Congress must make now will affect not only the American economy's short-term prospects, but will shape the type of capitalism that we will have for the next 50 years. Do we want to live in a system where profits are private, but losses are socialized, where taxpayer money is used to prop up failed firms? Or do we want to live in a system where people are held accountable for their decisions, where imprudent behavior is penalized and prudent behavior rewarded?
For anyone who believes in free markets, the most serious risk of the current situation is that the interest of a few financiers will undermine the capitalist system's fundamental workings. The time has come to save capitalism from the capitalists.
How Wall Street Can Bail Itself Out Without Destroying The Dollar
September 26, 2008 by CommonDreams.org
For Grover "Drown Government In The Bathtub" Norquist, this bailout deal will work out very well. At a proposed cost of $4,780 per taxpayer, it'll further the David Stockman strategy of so indebting us that the next president won't have the luxury of even thinking of new social spending (expanding health care, social security, education, infrastructure, etc.); taxes will even have to be raised just to pay for the bailout. It'll debase our currency, driving up commodity prices and interest rates, which will benefit the Investor Class while further impoverishing the pesky Middle Class, rendering them less prone to protest (because they're so busy working trying to pay off their debt). It'll create stagflation for at least the next half decade, which can be blamed on Democrats who currently control Congress and, should Obama be elected, be blamed on him.
But there's another way: Create an agency to fund the bailout, loan that agency the money from the treasury, and then have that agency tax Wall Street to pay us (the treasury) back.
It's been done before, and has several benefits.
In the United Kingdom, for example, whenever you buy or sell a share of stock (or a credit swap or a derivative, or any other activity of that sort) you pay a small tax on the transaction. We did the same thing here in the US from 1914 to 1966 (and, before that, we did it to finance the Spanish American War and the Civil War).
For us, this Securities Turnover Excise Tax (STET) was a revenue source. For example, if we were to instate a .25 percent STET (tax) on every stock, swap, derivitive, or other trade today, it would produce - in its first year - around $150 billion in revenue. Wall Street would be generating the money to fund its own bailout. (For comparison, as best I can determine, the UK's STET is .25 percent, and Taiwan just dropped theirs from .60 to .30 percent.)
But there are other benefits.
As John Maynard Keynes pointed out in his seminal economics tome, The General Theory of Employment, Interest, and Money in 1936, such a securities transaction tax would have the effect of "mitigating the predominance of speculation over enterprise."
In other words, it would tamp down toxic speculation, while encouraging healthy investment
The Rich Are Staging a Coup This Morning
September 29, 2008
No matter what they say, no matter how many scare words they use, they are up to their old tricks of creating fear and confusion in order to make and keep themselves and the upper one percent filthy rich. Just read the first four paragraphs of the lead story in last Monday's New York Times and you can see what the real deal is:
"Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.
"Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.
"At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees.
"Nobody wants to be left out of Treasury's proposal to buy up bad assets of financial institutions."
Unbelievable. Wall Street and its backers created this mess and now they are going to clean up like bandits. Even Rudy Giuliani is lobbying for his firm to be hired (and paid) to "consult" in the bailout.