The Democrats are just going along with a Bush/Paulson bailout plan instead of putting their own stamp on it. Nancy Pelosi, in her rant yesterday (which I approve of BTW) said that the age of Reaganomics, trickle down economics, laissez-faire unregulated economics was over. That's all well and good but why, then, go along with a bailout plan based on trickle down economics? Why not make sure the plan bails out Main Street and not Wall Street. Paulson, who cashed out on $500 million of Goldman Sachs stock (without paying capital gains or any other tax) when he left Wall Street for the Treasury Department, has probably lost a couple hundred million in his portfolio in the current crisis. Don't you think that that fact would set his priorities about whom to bail out? Would it be the wealthy investor or the person trying to get a car loan?
They've tried to sell this crisis as a liquidity crisis. They've tried to suggest that small business will not be able to make its payrolls. The Republicans always trot out small business when somebody is going to get hurt, but that's a lot of baloney. They don't care about small business. They care about big business, you know, those big enough to hire lobbyists. Paulson would bail out hedge fund investors, large corporations and the wealthy. That's who he deals with. He could care less about small business making payrolls, somebody trying to get a car loan or a mortgage. And there is plenty of liquidity in the system, just not enough to bail out hedge funds with all their toxic derivatives. Do we want a taxpayer bailout to bail out credit default swaps investors and people who have invested in other exotic financial instruments? Those are the ones that are toxic. Those assets should be frozen until such time as they can work their way throught the banking system. The government should target their provision of liquidity toward Main Street, toward mortgages, car loans and small business loans and not toward bailing out hedge funds and holders of toxic assets like credit default swaps. These after all are mainly the wealthy investors. If your pension fund is holding these instruments, you should fire your pension fund director.
And as far as 401ks, these are mainly invested in mutual funds. The stock market is volatile. So what? You can't set policies according to the whims of the stock market. It went down 778 points when the bailout plan was voted down, but it came back up 485 the next day with no bailout plan in place. Setting policy to placate the stock market is like chasing a will o' the wisp, like the flailing around in Dante's limbo. The stock market fluctuates according to day traders who sell if the news is bad, then buy when the market bottoms or buy when the news is good and sell when the market tops. It's all dependent on the news of the day and not on any underlying value of the companies the stocks represent.
The Fed has added all kinds of liquidity to the system. $630 billion on September 29. Congress voted down $700 billion, but the Fed added almost the same amount at almost the same time. Does this mean that the taxpayers' $700 billion is not needed now? Why should there be such a rush now? On September 17 the Fed bailed out AIG to the tune of $85 billion. The Fed pumped $200 billion into the system on March 11. On March 14 the Fed bailed out Bear Stearns to the tune of $30 billion. That's $945 billion by my tally. And that's still not enough? Let the Fed bail out banks. Congress should bail out the little guy, and the Democrats should start acting like they're in charge. The government has already taken over Fannie Mae and Freddie Mac. They can't provide money for mortgages? It's not believable. I've noticed that my credit cards still work. Somebody must be providing liquidity.
The bailout plan provided for recovering monies for the taxpayer ... but after 5 years. This is ridiculous. How about providing the mechanism now. In 5 years this provision may well be forgotten or superseded by events or reality. The clause in the bailout plan limiting executive compensation was riddled with loopholes and potential work-arounds. And there's nothing about repealing Gramm-Leach-Bliley and reinstating Glass-Steagall. Nothing about making derivatives illegal. Nothing about changing the system structurally. They seem to want to add more regulation of the exotic financial instruments instead of eliminating them altogether. This is no solution.
The final version of the bill included sort of a plan for eventually recouping losses; if the Treasury program to purchase and resell troubled mortgage-backed securities has lost money after five years, the president must submit a plan to Congress to recover those losses from the financial industry. Presumably that plan would involve new fees or taxes, perhaps on securities transactions. Sure, and a Republican President would submit a plan to recover losses from the financial industry? That's like having the fox submit a plan for restocking the hen house.
Here's a bailout plan that would have a Democratic flavor.
1) Add targeted liquidity for small business short term loans, car loans and student loans.
2) The bailout plan should provide relief for those facing foreclosure. ARMs should be converted to conventional 30 year fixed rate loans.
3) Bernie Sanders' plan should be implemented. Impose a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers. That would raise more than $300 billion in revenue.
4) Thom Hartmann's plan should be adopted: If we instate a .25 percent Securities Turnover Excise Tax (STET) on every stock, swap, derivitive, or other trade today, it would produce - in its first year - around $150 billion in revenue.
5) There should be airtight legal language regarding limitations on executive salary, stock options, perks, bonuses and any other form of compensation.
So if Reaganomics is dead, why aren't the Democrats proposing a bottom up bailout for the middle class instead of a trickle down solution which is more of the same failed policies we've had for the last 38 years? Why are they siding with the Bush administration when the Republicans are not even buying the Bush bailout? Why don't they act on Nancy Pelosi's words and have the courage of their convictions? We've already had massive bailouts of the banking system. Let the frozen liquidity of hedge fund derivatives stay where it is until banks can work through it. At the same time liquidity can be targeted for Main Street and relief can be given to homeowners facing foreclosure.
Paulson wants bailout now; reform later. Just the opposite should be the policy of the Democrats. Reform now; bailout for the middle class as needed.
California Free Press