I asked yesterday where the leadership was to lead the country out of the economic troubles it’s experiencing. Details of the Senate Bailout came out overnight and it’s clear that leadership cannot be found in the Senate. Their Bailout is worse than the House version. Instead of only giving irresponsible corporations $700 billion of future taxpayers’ money, the Senate Bailout includes some tax cuts (not all bad) and a change in accounting of mortgages. Those accounting practices, known as “mark to market” require banks to adjust the value of their assets to reflect current market prices. So what’s wrong with that? House Republicans whined that the rules forced banks to report huge paper losses on mortgage-backed securities, which might have been avoided. What’s wrong with that?
Housing prices ballooned in the past 10 years, unsustainably so. Then folks started having their houses foreclosed on because banks weren’t ensuring borrowers had the income to pay their bills. They gave away overpriced houses to anyone who said they wanted them. Once houses started being foreclosed, demand for housing fell. House prices started going down, at a slower rate than they were run up. As the foreclosures mounted at a record pace, the packages of mortgages that banks sold started losing value. Unfortunately, the prices for those packages had escaped from reality, reaching levels that exceeded world Gross Product. Read that again: the gamblers playing with these packages sold them so many times for so much profit that their net price far and away blew past what the world can produce in one year. That doesn’t make much sense, but that’s what happens when a market is unregulated. It gets to make up its own rules and it did so based solely on greed.
As losses stacked up, banks were forced to adjust the package prices to what their current market value was. Which meant they started to fall. Unfortunately, the difference between what the packages were sold for and what their reasonable market value was very big. That’s where news of banks writing off billions of debt arose. The banks couldn’t sell the packages at prices they paid because the actual property had lost its value. What House Republicans want to do is make it so that banks could reset the price of those packages to whatever they want. That’s correct: Republicans want banks to play make believe with what a mortgage is worth. Just ignore the fact that it’s not just that people don’t want to buy the houses, people can’t buy the houses. Republicans want to put a small band-aid on a gaping wound and tell Americans a solution has been found. Republicans don’t want to address the causes of the economic slowdown, they want to address its symptoms. What Republicans want to do is what they’ve done to inflation and unemployment numbers: rig the calculations so that the numbers report what you want them to report, instead of what is real. Which, by the way, is how they run government: it does what we say it does, not what it really does.
By including a number of tax cuts, the Senate Bailout is trying to sweeten the pot for Republicans. Despite the fact that Democrats supposedly control Congress. Despite the fact that Americans of all stripes have clearly indicated their disapproval over forking over 700 billion of their dollars to out-of-control Wall Street gambling fat-cats. That’s money that will not go toward education, health care or global warming. The Senate is hoping that by dressing their Bailout up with some tax items that haven’t made it on to any other legislation, the American people will swallow their awful pill with a tiny bit of sugar. The important part is: the Bailout remains. The immoral Bailout of too-large corporations with taxpayer dollars remains. As I pointed out yesterday, no Congressional members have clearly defined how giving away $700 billion will unlock the credit markets, which is the real problem today. Senators pushing this Bailout are instead demonstrating their disdain for Americans and their loyalty to corporations who donate to their reelection efforts.
Moreover, Democrats are still jumping at Republican fear-mongering. Everything we’ve heard from Bush and Paulson is how afraid we should be about this “crisis”. They have done so without defining what the crisis is or how their Bailout would address such a crisis. Give the banks $700 billion or else…. Or else what is the pertinent information. Most Americans clearly don’t believe Bush or his cronies (with good reason), but Senators are rolling over like the good puppies they’ve been trained to be. Senators that vote for this bill don’t deserve their positions.
One last thing: this situation would have played out completely differently if we still had the Clinton surpluses and not the Bush deficits. Surpluses were going to run into the hundreds of billions or trillions of dollars by this point in time. Instead, Bush has doubled our deficit while running up record debts. So much for fiscal conservatism.
I ask that my Senators reject this bill. If they do not, I ask that the House of Representatives does. If both chambers pass it and Bush signs it, our economy will not be better for it.
A couple more thoughts about this. The first is this: I have zero trust that the Bush administration is going to appropriately implement this bill. It is disturbing to me that after 8 years of nothing but the most insidious of lies, anybody is expecting Bush to follow either the letter or the spirit of the contents within the Senate Bailout. The list of lies would take more time than I care to think about to assemble, let alone diagnose and discuss. And so it is still somehow incredible to me that the Senate is preparing to hand Bush everything he wanted in the first place and stuff some fluff around it to soften the blow of passing it.
CONservative economic policies have failed. That fact seems to have escaped said Senators because they are contemplating giving away $700 billion to see if voodoo economics will work. Maybe this time, eh Senators?
The continued capitulation to Bush disgusts me. I have no doubt that overall, Barack Obama is a better choice for President than is John McCain. But if Obama votes for this, I fervently hope other activists realize that he will not be the savior that many have ascribed him to be.
Think about the morality of these two headlines:
WaMu CEO could get $13.65 million for 18 days work
WaMu employees’ pensions fate unclear; many to lose jobs
Executives are waging class warfare against Americans. The Senate just voted to continue that war. If anybody seriuosly thinks Paulson will responsibly dole out $700 billion to his corporate buddies, I have a bridge in Alaska I can sell you.