Thanks for that. Now we are talking. I know where you stand. We are on the same team.
Of course the crisis needs to be faced and managed. No one is laughing about that. No one is saying let it fall. I am furious, not happy or laughing. No one is naively hoping for some romanticized revolution. I know working people are going to get hurt. But damn, let's not talk about how wonderful the capitalist system is. Let's not create these artificial divisions between us. I poosted about "it's a Wonderful Life" for two reasons - to make the point that by outting the little people first and pulling together we will sooner get through this, and also because that de-mystofoes the economy for people and gives them a way to think and talk about it that isn't fear-driven or so dense and esoteric and academic that only the few can comprehend it.
There are all sorts of alternatives being put forward. I just heard Bernie Sanders on NPR talking about that.
Alternatives
Robert Reich -
If you think the Bailout of All Bailouts (whose details will be worked out over the coming week) won't saddle American taxpayers with billions, if not trillions, of risky obligations, you don't know politics -- especially in an election year when members of Congress are eager to get home to campaign; when the incumbent lame-duck president (who was he?) has all but vanished, leaving his hapless Treasury Secretary, a former investment banker, to take the lead and the heat; when voters are in high anxiety over the economy and Wall Street is melting down; when the executives of every financial powerhouse in America have staked lots of money on campaigns in both parties and have indundated Washington with lobbyists.
In other words, watch your wallets. The tab here could be very high. If everything goes extremely well, markets move upward, and the risky loans become far less risky, it's possible that taxpayers (that is, the Treasury) might actually make money. But if the bottom falls out, American taxpayers could be on the hook for trillions of dollars. What then? The federal debt soars. What then? Interest rates go out of sight. What then? Foreigners lend us less money. What then? We're cooked.
But there's no reason taxpayers need to be involved in this.
Whether you call it a reorganization under bankruptcy or just a hellova fire sale, the process should resemble chapter 11 under bankruptcy. Any big financial institution that wants to clear its books can opt in. But the price for opting in is this: Investors in these institutions lose the value of their equity. Executives lose the value of their options, and their pay (and the pay of their directors) is sharply limited. All the money from the fire sale goes to making creditors as whole as possible.
Meanwhile, policymakers work on a new set of regulations to ensure transparency on Wall Street -- governing disclosures, minimum capital requirements, avoidance of conflicts of interest, and better ensurance against stock manipulation -- so that, once the bad debts are off the books, the new numbers can be trusted.
The bailout is a massive swindle, and the public is being black mailed. "Give us trillions to play with so we can keep our game going and keep robbing you all blind, or we will destroy the economy."
Problems are: (1) It's not likely to do all that much good because no one knows how much bad debt there is out there. Even if the government bought a lot of it, investors and lenders still couldn't be sure how much remained. After all, big banks have already written down hundreds of billions of bad debts, and that hasn't restored confidence in the Street. As the economy slows, bad debts will grow. Again, the problem isn't a liquidity or solvency crisis; it's a crisis of trust.
(2) However much bad debt there may be, that amount is surely far greater than the $394 billion of real estate, mortgages, and other assets that the old RTC bought from hundreds of failed savings-and-loans -- thereafter selling them off form whatever it could get for them. The Bailout of All Bailouts would therefore put taxpayers at far greater risk than they are even today, and require an unprecedented role for government in reselling assets. Another major step toward socialized capitalism.
A better idea would be for the Fed and Treasury to organize a giant workout of Wall Street -- essentially, a reorganization under bankruptcy, for whatever firms wanted to join in. Equity would be eliminated, along with most preferred stock, creditors would be paid off to the extent possible. And then the participants would start over with clean balance sheets that reflected new, agreed-upon rules for full disclosure, along with minimum capitalization. Everyone would know where they stood. Bad debts would be eliminated. Taxpayers wouldn't get left holding the bag. And there would be no "moral hazard" incentive for future financial wizards to take giant risks with other taxpayers' money.
Congress, the Fed, and the Administration shouldn't be giving more help to Wall Street. Policymakers should focus instead on people who really need a safety net right now -- workers who have lost or are about to lose their jobs, who need extended unemployment insurance and health insurance for themselves and their families; homeowners who have lost or are likely to lose their homes, who need additional help meeting mortgage payments and reorganizing their debts; and people who have lost or are in danger of losing their savings or pensions, who need better insurance against possible loss.
The only way Wall Street's meltdown doesn't spill over to Main Street is if policymakers begin to pay adequate attention to the people whose wallets really keep the economy going, and who merit more help than the Wall Street tycoons whose carelessness and negligence have put it in such jeopardy.
Will Democrats step up for us, or cave in and sell us all down the river?
Step up now, starting with Obama, and the Democrats sweep into office with massive support and the Republicans are finished politically for a generation or more. Play it safe and cave in, and we are all in for a world of hurt.
Kucinich -
Protecting the public interest in any economic "bailout"
Dear Friend,
The U.S. government has been turned into an engine that accelerates the wealth upwards into the hands of a few. The Wall Street bailout, the Iraq War, military spending, tax cuts to the rich, and a for-profit health care system are all about the acceleration of wealth upwards. And now, the American people are about to pay the price of the collapse of the $513 trillion Ponzi scheme of derivatives. Yes, that’s half a quadrillion dollars. Our first trillion dollar compression bandage will hardly stem the hemorrhaging of an unsustainable Ponzi scheme built on debt "de-leverages."
Does anyone seriously think that our public and private debts of some $45 trillion will be paid? That the administration's growth of the federal debt from $5.6 trillion to $9.8 trillion while borrowing another trillion dollars from Social Security has nothing to do with this? Does anyone not see that when we spend nearly $16,000 for every family of four in our society for the military each year that we are heading over the cliff?
This is a debt crisis, not a credit crisis. Just as FDR had to save capitalism after Wall Street excesses, we have to re-invigorate our economy with real - not imaginary - growth. It does not address the never-ending war on the middle class.
The same corporate interests that profited from the closing of U.S. factories, the movement of millions of jobs out of America, the off-shoring of profits, the out-sourcing of workers, the crushing of pension funds, the knocking down of wages, the cancellation of health care benefits, the sub-prime lending are now rushing to Washington to get money to protect themselves.
The double standard is stunning: their profits are their profits, but their losses are our losses.
This bailout will not bring real jobs back to America. It will not bring back jobs that make things. It does not rebuild our schools, streets, neighborhoods, parks or bridges. The major product of this financial economy is now debt. Industrial capitalism has been destroyed.
In the next few days I will push for a plan that includes equity for every American in any taxpayer investment in this so-called bail-out plan. Since the bailout will cost each and every American about $2,300, I have proposed the creation of a United States Mutual Trust Fund, which will take control of $700 billion in stock assets, convert those assets to shares, and distribute $2,300 worth of shares to new individual savings accounts in the name of each and every American. I will also insist that all of the following issues be considered in whatever Congress passes:
1. Reinstatement of the provisions of Glass-Steagall, which forbade speculation
2. Re-regulation of the finance, insurance, and real estate industries
3. Accountability on the part of those who took the companies down:
a) resignations of management
b) givebacks of executive compensation packages
c) limitations on executive compensation
d) admission by CEO's of what went wrong and how, prior to any government bailout
4. Demands for transparencey
a) with respect to analyzing the transactions which took the companies down
b) with respect to Treasury's dealings with the companies pre and post-bailout
5. An equity position for the taxpayers
a) some form of ownership of assets
6. Some credible formula for evaluating the price of the assets that the government is buying.
7. A sunset clause on the legislation
8. Full public disclosure by members of Congress of assets held, with possible conflicts put in blind trust.
9. A ban on political campaign contributions from officers of corporations receiving bailouts
10. A requirement that 2008 cycle candidates return political contributions to officers and representatives of corporations receiving bailouts
And, most importantly, some mechanism for direct assistance to homeowners saddled with unreasonable or unmanageable mortgages, as well as protection for renters who have lived up to their obligation but fall victim to financial tragedy when the property they live in undergoes foreclosure.
These are just some thoughts on the run. You will hear more from me tomorrow.
Dennis J Kucinich
www.Kucinich.us
216-252-9000 877-933-6647
Norman Markowitz -
A Radical Alternative to Bush's Radical BailoutBoth confusion and anger reign for most people across the political spectrum about the $700 billion "bailout" of Wall Street banking and brokerage houses, which the Bush administration is trying to force through Congress right now. The administration portrays the choice as being between bailout or disaster, trying to marginalize debate to create a fait accompli.
First, there really is a far-reaching fiscal crisis and something has to be done quickly to contain it. But Paulson and the Bush administration trying to "socialize" the losses of major institutions of finance capital on the assumption that the benefits will then trickle down to the masses of people, who will then stop losing their jobs, homes, and pensions.
...
When people are bankrupt or simply cannot pay the debts they have incurred, they are put on a repayment plan. So why not Wall Street? People everywhere are understandably outraged by the vast personal wealth that the top executives of these Wall Street firms have accumulated. But the Bush administration hasn't even mentioned repayment.
Just as Franklin Roosevelt proposed a salary limitation for corporate executives during World War II in order to show sacrifice for the war effort, both compensation caps and payback plans for CEO's and CFO's whose wealth ranges from the tens of millions to the hundreds of millions can and should be enacted. Also, since the capitalist class loves regressive payroll taxes for Social Security and Medicare, a serious program of reregulation could establish an excess profits fund and attach it to FICA, in effect to make the capitalist capitalist class begin to pay directly a much bigger partof social security and allied programs while reducing the payroll taxes on working people.
Such suggestions might be antidotes to radical right-wing economic policies, which that the nation has long endured and have produced the disaster that we face today.
What is, as all labor negotiators always ask, the benefit for working people and the country in this unprecedented bailout? At present there is no benefit except the usual trickle-down promises. A reasonable position for all non big business sectors of the society to take should be to say: no benefit for working families, no bailout. As all labor negotiators know, the more desperate big capital's position becomes, the more concessions they are willing to make.
http://www.politicalaffairs.net/article/articleview/7448/ Bernie Sanders -
More Say No to Wall Street Bailout by Middle ClassSenator Bernie Sanders has been joined by more than 23,000 citizens in a letter to Treasury Secretary Henry Paulson calling for a surtax on the very wealthy to bankroll any bailout of Wall Street. “Any plan to clean up the mess on Wall Street must ensure that middle income and working families are not the ones who are paying for this bailout,” the letter says. The phenomenal outpouring of support came in the two days since the letter was posted on Sanders’ Senate Web page.
Meanwhile, House Banking Committee Chairman Barney Frank (D-Mass.) reiterated his support for Sanders’ proposal for a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers.
Frank and Sanders were interviewed today on the National Public Radio program “On Point.” The banking committee chairman said he first voiced support for Sanders on Sunday on the CBS News program “Face the Nation.”
“I think this strengthens the argument for a surtax on the wealthiest people in this country who are among those who made these mistakes. We are unfortunately in a situation -- it’s almost as if we let them take the economy hostage but not having appropriate financial regulation,” Frank said. “I do think at this point the people who make over $1 million a year, a surtax on their incomes, that’s one way to get the people who made these mistakes to contribute to the cost of undoing it.”
Sanders proposal is for a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers. That would yield more than $300 billion in revenue to cover losses the government will incur when it resells troubled mortgages it acquires from banks.
He also called for a major economic recovery package to put Americans to work at decent wages, a return to stronger regulation of businesses, and the breakup of giant corporations like those that got the country and Wall Street into the crisis. “If a company is too big to fail, it is too big to exist,” Sanders said.
http://www.sanders.senate.gov/news/record.cfm?id=303545 Bernie Sanders: Bailout Transfers Wealth - Upward
by John Nichols
Here's what Sanders says -- and what Obama and the Democrats should be saying:
For years, as a member of the House Banking Committee and now as a member of the Senate Budget Committee, I have heard the Bush Administration tell us how "robust" our economy was and how strong the "fundamentals" were. That was until a few days ago. Now, we are being told that if Congress does not act immediately and approve the $700 billion Wall Street bailout proposal these "free marketers" have just written up, there will be an unprecedented economic meltdown in the United States and an unraveling of the global economy.
This proposal as presented is an unacceptable attempt to force middle income families (and our children) to pick up the cost of fixing the horrendous economic mess that is the product of the Bush Administration's deregulatory fever and Wall Street's insatiable greed. If the potential danger to our economy was not so dire, this blatant effort to essentially transfer $700 billion up the income ladder to those at the top would be laughable.
Let us be clear. If the economy is on the edge of collapse we need to act. But rescuing the economy does not mean we have to just give away $700 billion of taxpayer money to the banks. (In truth, it could be much more than $700 billion. The bill only says the government is limited to having $700 billion outstanding at any time. By selling the mortgage backed assets it acquires -- even at staggering losses -- the government will be able to buy even more resulting is a virtually limitless financial exposure on the part of taxpayers.) Any proposal must protect middle income and working families from bearing the burden of this bailout.
I have proposed a three part plan to accomplish that goal which includes a five-year, 10% surtax on the income of individuals above $500,000 a year, and $1 million a year for couples; a requirement that the price the government pays for any mortgage assets are discounted appropriately so that government can recover the amount it paid for them; and, finally, the government should receive equity in the companies it bails out so that when the stock of these companies rises after the bailout, taxpayers also have the opportunity to share in the resulting windfall. Taken together, these measures would provide the best guarantee that at the end of five years, the government will have gotten back the money it put out.
Second, in addition to protecting the average American from being saddled with the cost, any serious proposal has to include reforms so that we end the type of behavior that led to this crisis in the first place. Much of this activity can be traced to specific legislation that broke down regulatory safety walls in the financial sector and allowed banks and others to engage in new types of risky transactions that are at the heart of this crisis. That deregulation needs to be repealed. Wall Street has shown it cannot be trusted to police itself. We need to reinstate a strong regulatory system that protects our economy.
Third, we need to address the needs of working families in this country who are today facing very difficult times. If we can bail out Wall Street, we need to respond with equal vigor to their plight. That means, for example, creating millions of jobs through major investments in rebuilding our crumbling infrastructure and creating a new renewable energy system. We must also make certain that the most vulnerable Americans don't freeze in the winter or die because they lack access to primary health care.
Finally, we need to protect ourselves from being at the mercy of giant companies that are "too big to fail," that is, companies who are so large that their failure would cause systemic harm to the economy. We need to assess which companies fall into this category and insist they are broken up. Otherwise, the American taxpayer will continue to be on the financial hook for the risky behavior, the mismanagement, and even the illegal conduct of these companies' executives.
These are the last days of the Bush Administration, the most dishonest and incompetent in modern American history. It is imperative that, at this important moment, Congress stand up for the middle class and for fiscal integrity. The future of our country is at stake.
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