Tuesday, September 23, 2008

What Does It All Mean -- Really?

I'm not sure there's a way for me to fully comprehend the finanacial crisis this country faces today. I was born at the beginning of the Great Depression, have rallied through the smaller ones over the years. But today it seems we are being threatened with a situation, that if not handled well, could indeed doom us to another "great depression" that just may make the original look like a kiddie version.

Bob Herbert, Op-Ed writer for the New York Times, had an insightful article this morning, so instead of trying to explain what I feel I'm not really capable of explaining, or at least, anywhere close to the reality of the situation, I thought I would share his thoughts with you today.

September 23, 2008
Op-Ed Columnist
A Second Opinion?

Does anyone think it’s just a little weird to be stampeded into a $700 billion solution to the worst financial crisis since the Great Depression by the very people who brought us the worst financial crisis since the Great Depression?

How about a second opinion?

Everything needs much closer scrutiny in these troubled times because no one even knows who is in charge, much less what is going on. Have you ever seen a president who was more irrelevant than George W. Bush is right now?

The treasury secretary, Henry Paulson — heralded as King Henry on the cover of Newsweek — has been handed the reins of government, and he’s galloping through the taxpayers’ money like a hard-charging driver in a runaway chariot race.

“We need this legislation in a week,” he said on Sunday, referring to the authorization from Congress to implement his hastily assembled plan to bail out the wildly profligate U.S. financial industry. The plan stands at $700 billion as proposed, but could go to a trillion dollars or more.
Mr. Paulson spoke on the Sunday morning talk shows about “bad lending practices” and “irresponsible borrowing” and “irresponsible lending” and “illiquid assets.”

The sky was falling, he seemed to be saying, and if the taxpayers didn’t pony up $700 billion in the next few days, all would be lost. No time to look at the fine print. Hurry, hurry, said the treasury secretary.

His eyes, as he hopped from one network camera to another, said, as salesmen have been saying since the dawn of time: “Trust me.”

With all due respect to Mr. Paulson, who is widely regarded as a smart and fine man, we need to slow this process down. We got into this mess by handing out mortgages like lollipops to people who paid too little attention to the fine print, who in many cases didn’t understand it or didn’t care about it.

And the people who always pretended to know better, who should have known better, the mortgage hucksters and the gilt-edged, high-rolling, helicopter-flying Wall Street financiers, kept pushing this bad paper higher and higher up the pyramid without looking at the fine print themselves, not bothering to understand it, until all the crap came raining down on the rest of us.
Yes, the system came perilously close to collapse last week and needs to be stabilized as quickly as possible. But we don’t know yet that King Henry’s fiat, his $700 billion solution, is the best solution. Like the complex mortgage-based instruments at the heart of this debacle, nobody has a real grasp yet of the vast implications of Mr. Paulson’s remedy.

Experts need some reasonable amount of time — I’m talking about days, not weeks — to home in on the weak points, the loopholes, the potential unintended consequences of a bailout of this magnitude.

The patchwork modifications being offered by Democrats in Congress are insufficient. Reasonable estimates need to be made of the toll to be taken on taxpayers. Reasonable alternatives need to be heard.

I agree with the economist Dean Baker, co-director of the Center for Economic and Policy Research in Washington, that while the government needs to move with dispatch, there is also a need to make sure that taxpayers’ money is used only where “absolutely necessary.”
Lobbyists, bankers and Wall Street types are already hopping up and down like over-excited children, ready to burst into the government’s $700 billion piñata. This widespread eagerness is itself an indication that there is something too sweet about the Paulson plan.

This is not supposed to be a good deal for business. “The idea is that you’re coming here because you would be going bankrupt otherwise,” said Mr. Baker. “You’re coming here because you have no alternative. You’re getting a bad deal, but it’s better than going out of business. That’s how it should be structured.”

The markets tanked again on Monday as oil prices skyrocketed. Time is indeed short, but alternative voices desperately need to be heard because the people who have been running the economy for so long — who have ruined it — cannot be expected to make things right again in 48 or 96 hours.

Mr. Paulson himself was telling us during the summer that the economy was sound, that its long-term fundamentals were “strong,” that growth would rebound by the end of the year, when most of the slump in housing prices would be over.

He has been wrong every step of the way, right up until early last week, about the severity of the economic crisis. As for President Bush, the less said the better.

The free-market madmen who treated the American economy like a giant casino have had their day. It’s time to drag them away from the tables and into the sunlight of reality.


Judy said...

I am sure no matter what happens the burden for all this will fall on the taxpayers. I knew when we started with the bailing out it would multiply and skyrocket. What's next when this does not work?

Dianne said...

I saw President Clinton on Letterman last night. First it was so comforting to mke believe for a moment that he was in charge again. He spoke calmly and intelligently - imagine that! I haven't heard that for 8 years out of a Prez.

He was pretty much saying what this article was saying. He was also saying that while Wall Street needs to be stabilized it is as/more important to freeze foreclosures and help people keep their homes.

Once again Bush is rushing in for his corporate friend using his so called experts/lackeys as the soldiers.

And we'll be the ones on the front line.

People don't realize how much more damage this clown can do in 4 months.

Margie's Musings said...

It's just a matter of time until the rest of the banks and power brokers get in line for the handout, we, the taxpayers, are going to foot.

Everyone is moving way too fast on this. The first thing that should happen is the firing of all those speculators before they get their hands on all that money and make off with a lot of it.

Linda said...

What can we do to postpone this decision until after the election? See my post today on the Federal Reserve Board of Governors. The Bush administration has permeated everything.

bobbie said...

I got an email today saying that no less than 56,000 letters have gone to Congress already, telling them the White House has no right to use our money to bail out the richest people in the country.

And also, 5 men from Veterans for Peace have climbed the National Archives Building with a banner they have put up saying "Defend Our Constitution Arrest Bush/Cheney as War Criminals". Have you heard that on the news yet? Neither have I. Hope it gets a mention.

Deborah Godin said...

Great post Sylvia! The powers that be won't be satisfied until they have created a feudal system, with the monied, decently educated elite few overseeing a massive base of barely literate economic serfs. We need to pay attention to this financial mess at the top, as well as stop the dumbing down in the schools.

Alida Thorpe said...

It is scary!
The middle-income taxpayers always get the "short" stick. We will have to pay and the wealthy companies will make even more money.

People have been losing their homes, many people are jobless or in jobs that they don't want but can't leave, many have no medical benefits so don't go to the doctor.....the list goes on and on.

We need an intelligent President to make the right decisions. It is not about "experience" but intelligence. Let's think this through and make a decision we can live with for the next 4 years.

TropiGal said...

Yes, and yes, and yes, and yes. How do we get the decision-makers to listen?