[Peace-discuss] Reasons to Vote Against Wall Street's $700 Billion Bailout

[C. G. Estabrook]

	Reasons to Vote Against Wall Street's $700 Billion Bailout
	By David Sirota
	Created 09/28/2008 - 4:01pm

There's news this Sunday afternoon of a congressional deal to bailout Wall
Street fat cats with $700 billion of taxpayer cash (you can read the draft
legislation here [1]). Though the deal negotiated between congressional leaders
and the White House is better than what Treasury Secretary Henry Paulson
originally proposed early last week, it remains an insulting atrocity, having
omitted even basic aid to homeowners, bankruptcy reforms and any modicum of
future financial industry regulation. Now, the New York Times [2] reports that
the Democratic leadership may not have the votes to pass this bailout. So
without further ado, here are the top 5 reasons (in no order) why every single
member of Congress - Democrat and Republican - should vote this sucker down.
Please feel free to copy and paste this post into an email to your
congressperson. They are deciding right now - let them hear your voice.

1. BAILOUT'S INHERENT FISCAL INSANITY COULD MAKE PROBLEM WORSE

When an individual consumer uses a new credit card to pay off astounding debt
from an old credit card, it's akin to check kiting, which is is illegal.
Apparently, though, when the government does it, it's billed as Serious Public
Policy. Because that's what this supposedly prudent bailout bill would do: Force
taxpayers to borrow $700 billion from foreign banks to pay off the bad debt of
Wall Street banks. During a crisis that is aimed at preventing interest rates
from skyrocketing, nobody has been able to explain how adding almost a trillion
dollars to the interest rate-exacerbating national debt would do anything other
than undermine the plan's underlying objective. Worse, the U.S. Treasury
Department itself [3] admits that the $700 billion number is "not based on any
particular data point" - that is, they created it out of thin air because "We
just wanted to choose a really large number." Slapping that amount of money onto
the national credit card when our government can't even justify the amount is
beyond absurd - it is insane.

It didn't have to be this way, of course. As I noted in my newspaper column this
week [4], Senator Bernie Sanders proposed a temporary tax on millionaires to
finance part of this bailout. Similarly, Blue Dog Democrats proposed [5] a
future tax on financial firms if and when taxpayers lose cash on the deal. These
proposals were discarded in favor of language asking the government to "submit a
plan to Congress on how to recoup any losses," according to the Associated
Press. Not only is that language toothless, but it opens up the possibility of a
plan being submitted that says we should raise middle-class taxes or slash
middle-class social programs to pay for Wall Street's misbehavior.

2. EXPERTS ON BOTH THE LEFT AND RIGHT SAY THIS BAILOUT COULD MAKE THINGS WORSE

Primum non nocere is the Latin phrase for "first do no harm" - the priority
principle for any EMT working on a sick patient. It should be the same priority
for Congress at this moment - and a growing group of esteemed experts on both
the Right and Left are insisting that this bailout bill could make things worse.
Here's a review:

     * The Washington Post [6] reported on Friday, almost 200 academic economists
"have signed a petition organized by a University of Chicago professor objecting
to the plan on the grounds that it could create perverse incentives, that it is
too vague and that its long-run effects are unclear."
     * NYU's Nouriel Roubini [7], the visionary who had been predicting this
meltdown, says "The Treasury plan (even in its current version agreed with
Congress) is very poorly conceived and does not contain many of the key elements
of a sound and efficient and fair rescue plan."
     * Harvard's Ken Rogoff [8], a Former Federal Rerserve and IMF official,
insists that the prospect of this bailout is, unto itself, taking a manageable
problem and making it into a more intense crisis. He says that credit is frozen
primarily because banks want to avoid dealing with other banks that might drive
a hard bargain, and instead would rather wait for free money from the
government. Without the prospect of that free money, Rogoff suggests that credit
would probably begin moving again, if slowly.
     * Dean Baker of the Center on Economic and Policy Research [9] says that
spending so much cash so quickly on such a poorly conceived plan could have the
effect of making it impossible to fund economic stimulus that is the real way
out of this mess. "Suppose the Paulson plan goes through," he writes. "It is
virtually certain that the economy will weaken further and the number of
foreclosures and people without jobs will continue to rise. This is the fallout
from a collapsing housing bubble...When families respond to their loss of home
equity by cutting back their consumption it will deepen the recession. In this
context it might prove very important to have the resources needed to provide a
substantial stimulus - [and] there is no doubt that this bailout will make
further stimulus much more difficult to sell politically."

Meanwhile, it's not even close to clear that this is a problem that requires
such an enormous response. As mentioned above, the Treasury Department admits it
has absolutely no factual basis for requesting $700 billion - an amount
equivalent to about 5 percent of our entire economy. Additionally, the
Washington Post [10] reports that "Banks throughout the United States carried on
with the business of making loans yesterday even as federal officials warned
again that their industry is on the verge of collapse, suggesting that the
overheated language on Capitol Hill may not reflect the reality on many Main
Streets." Indeed, "many smaller banks said they were actually benefiting from
the problems on Wall Street" and "even some of the nation's largest banks, which
have pushed hard for a federal bailout, deny that the current situation is
forcing them to reduce lending."

The questions, then, are simple: In the face of this bipartisan opposition from
objective experts, why should a lawmaker instead believe the same Bush officials
who helped create this crisis with their deregulation, the same Bush officials
who just months ago said everything was AOK? Shouldn't there be almost complete
unanimity among both objective and partisan observers before spending 5 percent
of our entire economy after just one harried week of White House demands? Fool
me once shame on you, fool me twice, shame on me. It's time, as The Who said,
that we "don't get fooled again."

3. THERE ARE CLEARLY BETTER AND SAFER ALTERNATIVES

The mantra throughout the week has been that America has "no choice" but to pass
Treasury Secretary Henry Paulson's $700 billion giveaway - that, in effect,
there are no alternatives. But that's an out-and-out lie - one with a motive:
Making it seem as if the only thing we can do is hand the keys to the federal
treasury over to both parties' corporate campaign contributors.

The truth is, there are a number of alternatives. Here are just a few:

     * In the Washington Post last week, Galbraith outlined a multi-pronged plan
[11] shoring up and expanding the FDIC, creating a Home Owners Loan Corporation,
resurrecting Nixon's federal revenue sharing, and taxing stock transactions (a
tax that would fall mostly on speculators) to finance the whole deal.
     * The Service Employees International Union [12] has drafted a plan based
around a massive investment in public services and national health care, and
regulatory reforms preventing foreclosures and forcing banks to renegotiate the
predatory terms of their bad mortgages.
     * For those in the mindless, zombie-ish "someone has to do something, so we
have to do what the White House says!" camp, consider the possibility that you
are under the spell of the same kind of White House fear that led us to invade
Iraq because of Saddam's supposed WMD. Consider, perhaps, that there may not
even be a compelling basis for doing anything just yet (or at least not anything
nearly so huge), and that the whole reason there is this urgent push right now
has nothing to do with the financial situation, and everything to do with
creating the political dynamic to pass a wasteful giveaway - one that couldn't
be passed otherwise without a sense of emergency. And ask yourself why you would
listen to this White House instead of listening to those experts who have been
predicting this crisis and are now advising against this bailout - experts like
CEPR's Baker. In two separate posts (here [13] and here [14]), he says that
letting the problem play out could be the best path, because Treasury and the
Fed may already have the tools they need. Following this path, the worst thing
that happens is "The Fed and Treasury will have to step in and take over the
banks [which] is exactly what many economists argue should happen anyhow," Baker
writes. "So the outcome of the worst case scenario is a really frightening day
in which the whole world financial system is shaken to its core, followed by a
government takeover of the banks. Eventually the government straightens out the
books and sells them off again. But the real threat here is not to the economy,
it is to the banks."
     * Then there is the idea of simply taking the $700 billion and simply give
it to struggling homeowners to help them pay off part of their mortgages. This
hasn't even been discussed but the thought experiment it involves is important
to understanding why there is, indeed, an alternative to the Paulson plan. If
the root of this problem is people not being able to pay off their mortgages,
and those defaults then devaluing banks' mortgage-backed assets, then simply
helping people pay their mortgages would preserve the value of the
mortgage-backed assets and recharge the market with liquidity. That would be a
bottom-up solution helping the mass public, rather than a top-down move helping
only financial industry executives.

On this latter proposal, some may argue that giving any relief to homeowners is
"unfair" in that those homeowners created their problems, so why should
taxpayers have to help them? But then, is helping homeowners any less fair than
simply giving all the money away to Wall Street, no strings attached? I'd say no
- and helping homeowners also serves a second purpose: namely, keeping people in
their homes, which not only helps them, but helps an entire neighborhood (as any
homeowner knows, nearby properties can be devalued when foreclosures hit).

4. ANY INCUMBENT VOTING FOR THIS PUTS THEMSELVES AT RISK OF BEING THROWN OUT OF
OFFICE

As a preface, let me state that I think we live in a country where politicians
too often listen to their donors and to the Establishment rather than their
constituents, not the other way around. America is a country where our leaders
dishonestly invoke the concepts of "Statesmanship" and "Seriousness" and their
supposed hatred of "pandering" to justify ignoring what the public wants (as if
giving the public what it wants is somehow not the objective of a democratic
republic). So, in short, I don't think there's anything wrong with this bill
being "politicized" by coming down the pike right before an election - in fact,
I think it's a good thing because the election - and the fear of being thrown
out of office forces our politicians to at least consider what the public wants.
I mean, really - would we rather have this decision made after the election,
when the public can be completely ignored?

Polls overwhelmingly show a public that sees voting for this bill as an act of
economic treason whereby the bipartisan Washington elite robs taxpayer cash to
give their campaign contributors a trillion-dollar gift. As just two of many
examples, Bloomberg News' poll [15] shows "decisive" opposition to the bailout
proposal, and Rasmussen [16] reports that their surveys show "the more voters
learn about the proposed $700 billion federal bailout plan for the U.S. economy,
the more they don’t like it." Put another way, this bailout proposal has unified
both the Right and Left sides of the populist uprising that I described in my
new book [17] and that is now even more angry than ever.

Any sitting officeholder that votes for this - whether a Democrat or a
Republican - should expect to get crushed under a wave of populist-themed
attacks from their opponents. We've already seen it start. In Oregon, Democratic
challenger Jeff Merkley (D) is airing scathing television ads [18] hammering
Republican incumbent Gordon Smith for potentially supporting the deal.
Similarly, this morning on Meet the Press, we saw Republican Senate challenger
Bob Schaffer (CO) dishonestly papering over his own votes for deregulation and
ripping into his opponent Rep. Mark Udall (D) for potentially supporting the
deal. Incumbents, get ready for that kind of election-changing heat in your face
if you vote "yes."

This, by the way, could play out in the presidential contest. Barack Obama has
been taking the advice of the Wall Street insiders in his campaign in endorsing
this bailout. McCain has endorsed the vague outline, but he may ultimately back
off once he sees the details, allowing him to then run the last month of the
campaign as the economic populist in the race. I'm not saying it would work,
considering McCain's 26-year record of supporting the deregulatory agenda that
created this crisis. But such a move could end up help him flank Obama on the
defining economic issues of the race.

5. CORRUPTION AND SLEAZE ARE SWIRLING AROUND THESE BAILOUTS - AND AMERICA KNOWS IT

The amount of brazen corruption and conflicts of interest swirling around this
deal is odious, even by Washington's standards - and polls suggest the public
inherently understands that. Consider these choice nuggets:

     * Warren Buffett [19] is simultaneously advising Obama to support the deal,
while he himself is investing in the company that stands to make the most off
the deal.
     * McCain's campaign [20] is run by lobbyists from the companies that stand
to make a killing off a no-strings government bailout.
     * The New York Times [21] reports that the person advising Paulson and
Bernanke on the AIG bailout was the CEO of Goldman Sachs - a company with a $20
billion stake in AIG.
     * The Obama campaign's top spokesman pushing this deal is none other than
Roger Altman, who Bloomberg News [22] reports is simultaneously "advising a
group of investors who are trying to prevent their shares from being diluted in
the U.S. takeover of American International Group Inc." - that is, who have a
direct financial interest in the current iteration of the bailout.

Add to this the fact that the negotiations over this bill have been largely
conducted in secret, and you have one of the most sleazy heists in American history.

**********

If this bill passes, it will be a profound referendum on the dominance of money
over democracy in America. That - and that alone - would be the only thing an
objective observer could take away from the whole thing.

Money will have compelled politicians to not only vote for substantively
dangerous policy, but vote for that policy even at their own clear electoral
peril. Such a vote will confirm that the only people these politicians believe
they are responsible for representing are are the fat-cat recipients of the $700
billion - the same fat cats who underwrite their political campaigns, the same
fat-cats who engineered this crisis, and want to keep profiteering off it. Any
lawmaker who takes that position is selling out the country, as is any
issue-based political non-profit group - liberal or conservative - that uses its
resources to defend a "yes" vote rather than demand a "no" vote. This is a bill
that forces taxpayers to absorb all of the pain, and Wall Street executives to
reap all of the gain. It doesn't even force the corporate executives (much less
the government leaders) culpable in this free fall to step down - it lets them
stay fat and happy in their corner office suites in Manhattan.

Even if they believe that something must be done right now, lawmakers should
still vote no on this specific bill, and force one of the very prudent
alternatives to the forefront. They shouldn't just vote no on Paulson's proposal
- they should vote hell no. Our economy's future depends on it.

**********

Links:
[1] http://www.cspan.org/pdf/marketsbill_draft.pdf
[2]
http://timesfreepress.com/news/2008/sep/28/bailout-breakthrough-deal-cut-bailout-plan/
[3]
http://www.forbes.com/home/2008/09/23/bailout-paulson-congress-biz-beltway-cx_jz_bw_0923bailout.html
[4] http://www.creators.com/opinion/david-sirota/back-in-the-u-s-s-r.html
[5]
http://www.politico.com/blogs/thecrypt/0908/Blue_Dogs_seek_recoupment_provision_in_Wall_Street_bailout_package.html
[6]
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/25/AR2008092504531.html
[7]
http://www.rgemonitor.com/roubini-monitor/253762/rge_conference_call_on_the_economic_and_financial_outlookand_why_the_treasury_tarp_bailout_is_flawed
[8] http://tpmcafe.talkingpointsmemo.com/2008/09/26/is_the_crisis_real/
[9] http://tpmcafe.talkingpointsmemo.com/2008/09/26/bailing_on_the_bailout_or_is_i/
[10]
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/25/AR2008092504155.html
[11]
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/24/AR2008092403033.html
[12]
http://blogs.seiu.org/blogs/2008/09/26/take-a-deep-breath-our-economic-recovery-plan/
[13] http://tpmcafe.talkingpointsmemo.com/2008/09/28/financial_meltdown_the_day_aft/
[14] http://tpmcafe.talkingpointsmemo.com/2008/09/26/bailing_on_the_bailout_or_is_i/
[15] http://www.bloomberg.com/apps/news?pid=20601087&sid=aYK_5_fV5D4M&refer=home
[16]
http://www.rasmussenreports.com/public_content/business/general_business/opposition_to_bailout_plan_grows_but_still_expected_to_pass
[17]
http://www.amazon.com/dp/0307395634?tag=sirotablog-20&camp=0&creative=0&linkCode=as1&creativeASIN=0307395634&adid=1BYG4T2ZJJAZXD5JM0YF&
[18] http://www.youtube.com/watch?v=nBy-5MuwP0Y
[19]
http://www.huffingtonpost.com/david-sirota/questioning-warren-buffet_b_129112.html
[20]
http://www.motherjones.com/mojoblog/archives/2008/09/9753_mccain_campaign_lobbyists_wall_street_aig.html
[21] http://www.nytimes.com/2008/09/28/business/28melt.html
[22]
http://www.ourfuture.org/blog-entry/2008093927/bloomberg-news-aides-both-presidential-candidates-demand-passage-paulsons-bail

<http://www.ourfuture.org/blog-entry/2008093928/top-5-reasons-vote-against-paulsons-700-billion-bailout>

	###