Two Big Reasons the Financial Crisis … Isn’t

Well, well, well.  The more the financial “crisis” and the Bush administration-led “solution” play out, the more the whole thing stinks.  How much does it stink?  Enough so that there should be no way any member of Congress, Democrat or Republian, votes to give the Bushies the power they’re so desperately seeking.

First, it’s not so much of a crisis as Bush would have us believe.  Bush’s cronies have been sitting on this legislation for months.  Which would indicate prudence except they’ve been talking about how good the economy is doing and how stable it is this whole time.  This plan could have been sold faster if they said at any time that the economy was starting to look weak because of the housing and financial institution crises.  More to the point though, the Bush administration waited for months while the financial markets got slaughtered.  Why?  Because they didn’t want another one of their failures to go public prior to this year’s election.  Remember, many Republican Representatives and Senators came out over the weekend saying Democrats shouldn’t try to score political points with this crisis.  Their faux concern rings even more hollow now that the leader of their party did just that while allowing major corporations to fail and allowing our economy to sink further than it otherwise would have.  They should work on cleaning up their own house before looking into their neighbors’.

Second, not only does the Bush administration expect taxpayers to foot the bill of foreign banks with bad debts, they want tax dollars to go to banks who aren’t even in trouble!

You have to remember, these are not all weak or troubled firms that own mortgage-backed securities. A lot of them are very successful banks and investment houses that have done very well, have been responsible, are holding performing assets that have value. They were not necessarily irresponsible players, and so you have to be careful about how you deal with them.

Why does the Bush administration want American taxpayers to help banks who don’t even need it?  Because their solution doesn’t address the real crisis.  There isn’t a quick fix to the mess we’re in.  Banks don’t know how many of their assets are bad or what they’re actually worth.  The legislation Bush wants passed can’t fix a problem that remains undefined.  Democrats need to stand firm and wait for more solid information to become available.

What Do You Want?

As the Bush administration continues to expect taxpayers to shoulder the burden of the out of control gamblers on Wall St., maybe a small dose reality of the options being considered should be presented.  So here is my take.

You can believe the Bushies when they say Congress should do something about the crisis that Bush’s allies created without due consideration of the ramifications.  You can believe that this crisis is so big and so bad that nobody should have any oversight of the Treasury Secretary’s decisions on which bad assets taxpayers get to assume.  You can believe that Bush and his cronies have your best interest in mind as he saddles the country with up to $700 billion (for now) of additional debt and leaves irresponsible, untrustworthy executives in control of their firms.  You can believe these things while the Bush administration makes absolutely no attempt to protect the taxpayer or as it makes no attempt to improve the environment for homeowners or small business owners.  You can believe they’re protecting America by assuming foreign banks debt.

By doing so, of course, you then support the following.  You don’t want to shift our energy from fossil fuels to renewables.  You don’t want to address global warming.  You don’t want any investment in our country’s infrastructure.  You want the next generation to live under a system that pays billions of dollars per year on interest on the debts that you incurred.  You want Social Security to fail.  You want Medicare to fail.  You don’t want any meaningful change to our broken health care system.  You don’t want any improvements to our education system.  You don’t want America to move any further into the 21st century because we’ll still be paying off our 20th century debts.  You want to cover foreign bank mistakes as well as domestic bank mistakes.

Here is the thing nobody is talking about: if regular Americans are on the hook for multiple Trillion dollar games (i.e. Iraq, Wall St. rip-off, hurricane recoveries, etc.), there’s no money for anything else.  Republicans want government to fail.  They’ve purposefully created a culture where higher taxes are forbidden.  At the same time, Republicans have created the largest government spending programs in our history and now have overextended America’s financial obligations to such a degree that something has to give.  Do you think Republicans are going to allow the War (“defense”) budget to be cut?  It represents, by far, the largest expenditures of your tax dollars.  If the government doesn’t collect any more money, programs will have to be cut.  If “defense” is off the table, Republicans have been honest about their goal for years: no social programs.  A small group of extremists are working very hard to force those programs to be cut out of the budget.

So we can pay for Wall Street’s immoral gambling problem.  Or we can hold a small group of executives and government officials responsible for their long history of mistakes and get back to work ensuring America can continue towards a prosperous 21st century future.  What do you want?

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[Update]: Barack Obama recognizes what I’ve described above.  Health care, energy, education and everything else will have to take a back seat if Bush’s immoral bailout goes through.

Front Seat: Economic Concerns

The big news continues to be the Bush administration’s response to the collapse of the U.S. financial sector and Americans’ response to that.  Yesterday, I outlined the “rescue plan” and offered some thoughts of my own and others’ as well.  Today, I’m reading disturbing things in the corporate media about the “rescue plan”.  In a nutshell, a number of overpaid economists who were dead wrong about the state of the economy leading up to the stelllar failures are presenting this as an either-or situation.  That approach is incredibly narrow-sighted, especially given some of the alternative solutions I wrote about.

Don’t get me wrong: we are all facing a crisis that could get a whole lot worse.  I duly recognize that fact.  What counts moving forward is how we deal with that crisis.  Adding $700 billion to the national debt and taking one point of economic growth per year away from the next five years is the wrong solution.  CNN’s Paul LeMonica’s view is we can choose between that solution and doing nothing.  Seriously, that’s all Paul (and others!) can offer?  How about enforcing some penalty on the gamblers responsible for this crisis?  Once again, the richest among us are perilously close to getting off scott-free after making the worst possible decisions and sticking the rest of us with their gambling debt.  The fact that folks like Paul offer up only two extreme solutions to this crisis is indicative of how scared they are of the monied interests of Wall St.  They should be afraid of the interests of Main St.

What’s most insulting about this offering of extremes is the warnings accompanying them.  Jobs might be lost, people might lose their homes, incomes could fall, blah, blah, blah.  Hey!  Wake up, pundits!  All that has been happening.  Bush’s Republican government has created the fewest jobs in 8 years’ time since WWII.  Foreclosures are occurring at record rates.  Real incomes haven’t increased in 8 years’ time.  Not doing anything about the Wall St. crisis won’t create some new economic reality for Main St.  It’s Main St. that has had to deal with their own economic crisis and now that Wall St. is feeling the pinch, suddenly it’s time to roll out the rescue plans.  On Main St.’s back, I might add.

Meanwhile, the markets contine to roil.  The dollar fell today, oil spiked by $20 per barrel (the highest one-day gain ever) to $130!!, and the Dow is down 370 points again, just to name a few.

Random Pieces 3/17/08 – Updated

Happy St. Patrick’s Day!

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I’m sure more than a few of us read that the Federal Reserve and JP Morgan Chase bailed out the large investment firm Bear Stearns last week. Actually, we’re the ones that bailed the bank out. Jeff Blum at OpenLeft has some darn good questions. For instance, why can’t we provide a few billion dollars to help out the borrowers? What benefit will bailing out this firm provide the rest of us?

My feelings on this are: we shouldn’t be bailing out large investment firms that knowingly took on incredibly risky investments. It’s interesting to listen to the economic elite put all the blame on the sub-prime mortgage mess on the people who signed the papers. According to the lenders, if people didn’t know what they were signing for, they shouldn’t have signed. Therefore, they deserve what happens to them. Well guess what, turnabout is fair play. If the borrowers should have known what they were getting themselves into, what responsibility should the lenders have? Apparently none.

Additionally, I find it very interesting that this move is reminiscent of activities last undertaken … in the Great Depression. But according to Bush, the economy is doing just fine! Why do Democrats constantly have to clean up Republican’t messages?

I also think it’s disgusting that these same elitists want government to stay out of their business with regard to application of regulations, but as soon as things look bleak they think it’s the government’s responsibility to bail them out. Seriously, WTF?! Does the ‘free market’ work or does it not? Really, who are the real welfare queens? Bear Stearns and the other large firms got themselves and the rest of us into this mess, more knowingly than those who borrowed from them. I have absolutely no pity for these entities who operated for years as though they were above the law. They should reap what they sowed – maybe a couple large firms’ failures would serve as a wake-up call to the remainder of them to work with regulators in the future. Bailing this firm out sends a message to all of the firms that taking on too much risk is okay since the taxpayers allow themselves to be fleeced time and time again.

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I love conservative economic policies. The U.S. is no longer the world’s largest economy.

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Update – Well isn’t this interesting: Bonuses handed out in 2006 at Bear Stearns totaled $2.6 BILLLION. As of today, the company is only worth 1/10 of that, down from $40B back in January. Tell me again why taxpayers got saddled with a multi-billion dollar bailout please. Oh yeah, because regulation is bad and greed is good.

Remember this when you pay your next insurance premium: we can’t afford universal health care because it’s more important to bail out Bear Stearns.

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Update 2 – Granny Doc nails it.