Seizing Control of America's Financial Freefall

There are many ways the ggovernment can help Americans in the Recession. A $700 billion bailout isn't one of them. Un this provocative article, Rosemary and Wal;ter Brasch give one possibility that will work.


by Rosemary and Walter Brasch

    It was Monday evening and the phone rang--again. It was probably the fifth time in two hours. A pleasant voice said she was from the--oh that really doesn't make any difference. Both presidential candidates have volunteer minions on the phones and Internet day after day, month after month, for what seems like years.
    A half-dozen or more e-mails a day from candidates, surrogates, and candidate support groups flood our in-boxes; letters and oversized postcards clog our mail boxes. They all give us information, or ask us to fill out a poll that has no value, and then beg for donations, every plea making it seem as if the fate of western civilization will be determined by our bank withdrawal slips. In August alone, the campaigns of John McCain and Barack Obama spent about $3 million a day, according to the Federal Elections Commission (FEC). By the end of this presidential campaign, each presidential candidate will have spent more than $500 million; by the end of August alone, more than $380 million has been spent on House races, more than $200 million on Senate races, according to the FEC.
    But, here's some other numbers. About 9.4 million Americans are unemployed, up 2.2 million from last year, according to the Bureau of Labor Statistics. The 6.1 percent unemployment rate is one of the highest in the nation's history. For those with jobs, effective buying power has decreased, as inflation has taken any pay increases. The cost of consumer goods is up almost 6 percent from a year ago, the sharpest increase since 1991, according to the Department of Labor. The value of worker paychecks, adjusted for inflation, is down about 3.1 percent over the past year, also one of the sharpest declines since the early 1990s. About 2 percent of all mortgaged homes are now in foreclosure; owners of about 3.6 million homes are now significantly past due with their payments, according to the Mortgage Bankers Association. To try to keep their houses and to pay routine bills, millions of Americans have withdrawn funds from their retirement accounts, reluctantly paying taxes and penalties in order just to keep from falling further in debt. The value of home prices has declined by about 7 percent nationally and there has been almost an 8 percent decline in the number of building permits, according to the U.S. Conference of Mayors. Forty million Americans, one-third of them children, are living in poverty. About 46 million Americans don't have health insurance. About 800,000 Americans, at least 150,000 of them veterans, are homeless, according to the Department of Housing and Urban Development.
    For more than a year, with the Bush-Cheney Administration in denial, the nation has been in a Recession.
    During the past month, the bottom has fallen out of our nation's financial system. At least another $700 billion is now needed, according to President Bush, to shore up the financial moguls. Once again, taxpayers are being asked to save multi-million corporations and their million dollar executives from the foreclosure and unemployment the rest of us face. Any help to individuals is just an after-thought by politicians in an election year. There aren't any contribution drives, any government programs that target those who have lost their homes, their jobs, and their self-worth and self-respect. Humanity is not a campaign issue for either party.
    It is callous and shallow for both the Obama and McCain campaigns to be begging for money while Freddie Mac, Fannie Mae, and dozens of mega-financial institutions, by their own incompetence and greed, assisted by the government's "asleep-at-the-switch" deregulation, brought the nation into the greatest financial freefall it ever experienced since the Great Depression of 1929.
    John McCain's actions this week speak volumes about the problem. In an attempt to convince Americans he cares about the economy, he tried unsuccessfully to pre-empt the Obama campaign. He "suspended" his own campaign, said he would not accept campaign contributions, and would not be available for the nationally-televised debate until an agreement was reached. But, it was McCain who led Senate Republicans to deregulate numerous industries. Even if McCain takes no money for a few days, he willingly accepted $84 million in public funds; Obama is taking no public funds. Obama says he intends to be in Oxford, Miss., for the debate because "this is exactly the time when the American people need to hear from the person who . . . will be responsible for dealing with this mess." Besides, says Obama, "it's going to be part of the president's job to deal with more than one thing at once." There may be another reason why McCain wanted to delay the debates. Bob Schieffer, CBS-TV's most experienced political reporter and analyst, says he has strong information that delaying the first presidential debate would also delay the first vice-presidential debate the following week, and that the McCain camp may not believe Sarah Palin is ready for a debate on foreign policy issues.
    We have almost no voice in the bailout, but we do have one option. Jesse Unruh (1922-1987), speaker of the California Assembly for eight years, said that "money is the mother's milk of politics." We can stop producing milk. We're going to tell whoever calls or e-mails us, begging for money for their grand and glorious campaign for the presidency, that calling for even more money for election costs is truly un-American when the average person is going to be expected to pay for this debacle caused by a lax Administration and ineffective Congress.
    We know who the candidates are, and what their positions are. The cost-per-vote in October for each candidate will be mega times the cost of just three months ago. If Sens. McCain and Obama are in touch with the average American as their campaign ads claim, they would realize that many of us don't have an extra $25 to throw into a pool of money that will be used to send even more campaign ads at us. Those of us who vigorously support our candidate and do have a few extra campaign dollars also know that the government bailout, no matter how many "protections" are built into it, will probably take care of whatever extra we have. If someone wearing a flag pin and campaign buttons comes around with her hand out, give her your heating bill.
    If ever we need to be united, it's now. Make the phone banks and e-mail serve the average American. Protest the candidates' unending calls for more and more money from a public which has less and less. Refuse to support companies or organizations whose political action committees have already spent more than $2.5 billion this election cycle in lobbying expenses. And let all candidates know that the next time to contribute to any campaign will be when government, no matter who is in charge, makes the lower- and middle-class individual its priority before corporations and the wealthy.   

    [Walter Brasch's latest book is Sinking the Ship of State: The Presidency of George W. Bush, available through amazon.com, bn.com, and other stores. You may contact Rosemary or Walter Brasch at brasch@bloomu.edu, or through www.walterbrasch.com]

Tags: bailout, banks, Barack Obama, Fannie Mae, Freedie Mac, George W. Bush, investment banks, John McCain, stock market, Wall Street (all tags)

Comments

2 Comments

Let's Clear a few things up.

The plan (now dead) as presented out of committee, yes lacking in a lot of detail, but none the less an outline.

1) Does not hand over $700B the number is $250B (still a lot of money) With balance coming in increments, if needed, to come later and only if this plan is showing signs of working.

2) It is not a hand over nor a blank check it comes with oversight and an outside auditor.

3) It is an an equity deal. The problem lies here in the details- the largest detail setting the mark to market price i.e. what are we the tax payers going to pay for these mortgages? Right now based on current account rules (FAS 157) the mark to market price is zero. ( FYI Some are blaming a lot of the current crisis on this rule) So what will probably happen is through financial modeling a future price will be set and that is what we will pay. What needs to happen is that the model must be a conservative one and not any of the historic Wall Street ones which tend to be overly optimistic.

4) The one thing at this point it doesn't have, because the Republicans nor the banks don't want it, is the Democrats plan to allow Bankruptcy judges to reset the terms of mortgages in default so folks can stay in their homes. This is a good idea, but a difficult one because there needs to be care to only reset the ones that we due to predatory lending practices and not  the ones because both borrower and lender were idiots.  In other words if you got into trouble because you either bought to much house when you knew you couldn't afford it or kept refinancing to buy that more expensive car that you my friend are hosed.

by jsfox 2008-09-26 05:54AM | 0 recs
The big Ponzi scheme you speak glowingly about..

would be the biggest mistake the Democrats could make.

By the way, the amount is $250B now, another $100B "at the President's discretion"  -

We should not support this exit strategy for the mortgage speculators.

NPR did a good show in 2007 about the mortgage crisis, and it explains what this toxic debt is and how the mortgages were sold.. (they were deliberately marketed to people who were unlikely to be able to pay, and the amounts of money that the houses were valued at was set unrealistically high.)

When you read that, you will realize what a HUGE mistake it would be to fall for this crock of crap.

It was called "The Great Pool of Money"
http://www.thisamericanlife.org/Radio_Ep isode.aspx?sched=1242

by architek 2008-09-26 08:08AM | 0 recs

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