Robert Reich on "Paulson's and Bernanke's logic": The Bailout To End All Bailouts

[ProSense]

The Bailout To End All Bailouts

By Robert Reich - September 23, 2008, 7:24PM

But will it work? Here's Paulson's and Bernanke's logic, made explicit at the Senate hearing today: There's only a certain amount of bad debt on Wall Street's books, left over from the wild and woolly days of lax mortgage lending. Once removed from the Streets' books, credit will flow again. And once credit flows again, even Main Street can breath a sigh of relief.

P&B failed to mention that bad debts are growing even among people recently considered good credit risks. At end of August, 6.6 percent of mortgages were at least 30 days past due. That's up from 5.8 percent at end of June. We're also seeing a growing amount of credit card and auto payments past due.

The culprit isn't just those sub-prime loans. With jobs and wages are dropping across America, many people who had been able to pay their bills no longer can.

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Congress should drive the hardest deal it can with Wall Street. But Congress also needs to pay direct attention to Main Street. It should extend unemployment insurance, freeze mortgage rates, and pass a stimulus package that generates more jobs.

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[jazzjunkysue]

1. I doubt, seriously, that many mortgage companies will tighten their qualifications.

If anything, this only forces them to take on more desperate loans, simply living month to month, knowing their jobs are terminal.

I have no reason to think any CEO will send out a memo with new regulations or oversight.

They have to be shut down. There is no other way. Those who did play it straight will survive.

Yup. Jobs will be lost.

Maybe we'll finally realize we need to return to production and innovation, instead of quick financial gimmicks. Production and innovation require time and investment and patience. The rich business owners will all have to start hiring people who can make them money the old fashioned way.