Web Letters: Bailout's Political Turmoil

There are several major differences between what FDR and the nation faced in order to restore confidence in the banking system in 1932: 1. There was as yet no FDIC. 2. Credit was still being strangleheld by wealthy conservative monetarists of the time like Henry Morgenthau, and W.'s grandfather Prescott-- who wanted to keep the nation on the gold standard. 3. FDR still hadn't come over to the demand-side theory.

There were two New Deals. The first was not very successful because it was supply-sided. Most of the help was going to banks and the suppliers (as this current bailout is formulated). Along came John Maynard Keynes, who explained to FDR: What good is opening factories, if no one has a job to pay for the goods?

That's where the trillion dollars should be going now--for the government to create jobs, using New Deal style PWA and CCC Programs. That's demand-side economics. I can't believe we're still arguing about this.

John Giarratana

Jersey City, NJ

While I understand the exuberance and fervor of those who find the vote against the bailout a win for democracy, I also think the anti-bailout sentiment is misguided.

As long as we live and participate in a capitalist system, on which we all depend for our livelihoods, we will need bailouts--or fail ourselves. Capitalism lurches from one crisis to the next, which is its intrinsic structure, based as it is on ever-increasing profits and thus, overexpansion, overproduction, etc. Maybe we know this in our hearts, but we don't seem to take it seriously for our lives, as we head into crisis after crisis, now on a global scale.

It's true that bailouts only stave off the inevitable. It's time for more than a Roosevelt; it's time for our entire economic structure to change. Viva Marx!

Therese Grisham

Chicago, IL

I submitted e-mails to both Ms Pelosi and Mr Barney Frank, probably to deaf ears. The following is a synopsis of my feeling on this mess.

I have been a progressive Democrat ever since I was a student at UC Berkeley, as a grad student at UC Davis and a professor at Yale and Harvard, and I am an Obama supporter and currently working to get him elected. However, I oppose the Wall Street bailout as formulated to date, and I don't believe this approach is a "buy-in" for Main Street Americans. I'm no economist, but I understand the simple financial math that got us into this mess--it's simply due to banks loaning money to otherwise honest subprime families who wanted to improve their status with extra loans based on the equity of their homes--the good old American way; it was loans given by predatory mortgage companies that got USA in this current mess. When changes occurred (loss of jobs, huge credit debt, etc.), these individuals were forced to foreclose. Of course, the various banks are now griping about their demise, having to recoup loss of principal, loss of huge predatory interest payments and the fact that original home equity decreased significantly so that such homes throughout USA became "toxic" to the Wall Street folks who now want simple taxpayers to help them. Now the Fed and Congress are poised to help the Wall Street predators but have initiated little planning to assist the mom-and-pop people who were initially victimized by these same usury practices assuming that "trickle-down economics" will eventually save America. In my opinion, there are three simple fixes to Main Street that the Fed and Congress could help out with:

1. Don't allow loans to individuals that don't have other than basic "good" credit, and make these loans fixed;

2. Allow interest from credit cards to be deducted from income tax for a two tax years' grace period and do not permit predator companies to charge more than 10 percent by de facto regulatory measures that are now nonexistent or that Congress seems to never want to regulate;

3. Allow the Fed to help small & large businesses and industry with infusions of funds backed up by cheap rate loans (4-5 percent), so that the laid-off workers who couldn't keep up payments on their loans would continue working, paying taxes and buying stuff, and thereby stimulating the economy.

This may be simplistic, but I believe it would stimulate the economy and work much more efficiently than the current proposal, which is nothing more than a handout to corrupt institutions. I agree with Representative Denis Kucinich: Why give the Wall St predators more ammunition to continue the same inflationary practices?

I'm also sending this message to Senator Obama's folks, who haven't offered better solutions to this mess.

Richard R. Gonzalez

San Lorenzo, NM

I was really concerned about driving home yesterday after hearing the bailout did not go through. I imagined that I would have to drive around pieces of sky all over the highway with torrents of dangerous cumulus cloud pieces raining down. But low and behold, nothing. Still concerned, I raced into the house turned on my computer to read the e-mails. After deleting ten offers for new credit cards, seven offers to refinance my mortgage, six second mortgage offers and five banks soliciting my business by touting there two-tenths of a percent interest rate on savings, I found nothing else. I pondered: Am I safe? Can I can still charge on my preferred credit card, which guarantees that my interest will not exceed 30 percent? Fear continued to build up, so I decided to go to my bank and withdraw all my savings. As I drove into the bank parking lot, I panicked as there were no other cars in the lot. I was too late, the bank had already closed its doors. Collapsed before I could get there. I pounded on the door demanding my savings. Finally, the security guard open the door and told me to come back tomorrow or use the ATM machine.

R.J. Scheerer

Ocomomowoc, WI

You can be against something and vote "no," but you also have to be for something which is a "real" solution to this problem. I understand the anger of the citizens and the good feeling from finally slamming a Bush proposal, but this problem could get beyond control. Most likely the Congressional vote was too soon after posting the plan and needed some commentary and digestion.

As mentioned, Congress should seize full control of the system or at least pick and name the oversight people now. Why would the people trust Paulson as the arbiter of this plan? Until recently he was a major Wall Street player and an advocate for deregulation. He has enjoyed a lot of financial success as a shark. He is a Bush appointee and he appears to be like the fox that has left the henhouse and now has been put in charge of it. It smacks of a Bush-Rove move or an October surprise to get McCain some votes.

The rescue plan as published has basically all that is needed but it is loosey-goosey with regard to specifics and leaves all of the implementation to the discretion of Paulson. For the last eight years the Bush administration has lived on the path around rules, regulations, policies and laws. Why take a chance on hastily written legislation that offers them another chance to stray?

Willim J. Hague

Hoboken, NJ

Good for the House of Representatives. And good for the Republican majority for standing firm--finally. After giving Bush everything he wanted for almost the entire two catastrophic terms, they finally said no.

Over the last almost eight years, Bush (with the help of House and Senate Republicans) has handed huge profits to oil companies, defense contractors, pharmaceutical firms (through the Medicare drug plan) and credit card companies (by passing the bankruptcy bill). He wanted to give Wall Street a handout, too, by privatizing at least a portion of US citizens' Social Security accounts, but legislators rejected his continued pleas.

Washington anti-regulation hucksters encouraged greed to run rampant during the last eight years. And now, as a Hail Mary pass, Bush is throwing our economy to the wolves in his effort to reward Wall Street greed and irresponsibility with a $700 billion bailout at taxpayers’ expense.

Do we need any more reasons than these not to trust this man? Of course, there’s blame enough to spread around. Our legislators and a complacent media (certainly not The Nation) can pull a chair up to that table.

Barbara Scott

Taos, NM

Bailout proponents claim that the bailout is necessary to restore confidence in the finance markets. This is a plausible story. Panic played a major role in the downward spiral that brought on the Great Depression.

So, then, why are bailout proponents, our supposed leaders, trying to make us panic? Bush, Paulsen and proponents in Congress, have claimed that the bleakest of situations will result if their bill is not passed. They are inducing the panic they are claiming to want to avoid. They are scaring the piss out of us, on purpose, just as they did with the phnatasmagorical WMDs in Iraq.

So, it doesn't appear that they want to save the economy. I can't help but believe that the administration's interest is in avoiding responsibility for the crisis. If they wanted the bill to pass, they would have made the original bill (the "clean" one) more palatable. Now, if the economy bites the dust, they will have someone else to blame.

Russell Beckley

Ely, NV

The dissenters are beholden to Nancy Pelosi for the speech/high colonic she administered to them.

Cameron Jones

Indiana, PA

I think the two parties, and Main Street, would have had no problems in agreeing on the bailout, if not for the Bush wars we are forced to pay for, then Bush expects us to pay out more to help his friends on Wall Street. We in the end will lose, regardless, but let's put the blame where it started, the illegal Iraq war.

Marta Kaye

Wilmington, DE

I have mixed feelings about the bailout plan that was just rejected, but I saw Rep. Price of Georgia tonight voicing his alternative plan. That sounds even more insane than the one he just rejected. Their plan sounds exactly like the situation that got us here in the first place. Paulson may not have been totally correct, but he sure sounded more intelligent than that guy.

JAMES PINETTE

Caribou, ME

It amazes me how liberals are blaming the Republicans for the bailout bill not passing. A hundred and thirty-three Republicans did vote against the bill but 95 Democrats voted against the bill as well. Why are the Republicans blamed while 95 members of Pelosi's own party are conveniently not blamed?

Mark Jeffery Koch

Cherry Hill, NJ

Bailout or no bailout, we are headed into another Depression. Americans have been down this road before, and we can fix our economy on a national basis. We can only fix the American economy if Americans owns it. We cannot control or fix the world's economy, because no one controls it. What we see with this economic crisis is the collapse of globalization and "free trade." There is, however, an opportunity for national governments to gain and control their own economies, and shape them for the needs of their own people. We have to get back to American economics in this country. We need to pull out of the WTO and any "free trade" agreements. We need to establish tariff barriers, behind which we can rebuild our industrial infrastructure and the jobs that go with them. We also need to rebuild our public infrastructure, which will act as a long-term stimulus to the economy. We also need protection for the health and welfare of Americans through the progressive legislation as we did during the Roosevelt Administration that got us out of the previous mess in 1929. Progressives have always been about the health and safety of the American people. We might possibly set an example to other countries on how to build and develop a nation. In our case, it would be rebuilding a nation.

Pervis James Casey

Riverside, CA

The real problems are:
The institutions are unable to evaluate the actual worth of the securitized credit instruments, so the weight on the financials' balance sheets is huge yet opaque.
The unknown number of mortgages that will go south contributes to this, since the instruments are based on the repayment of said mortgages.

The solution, which I think is pretty obvious: Set a floor on mortgage values--by:

First, making this program universal and mandatory. No exceptions for any mortgage or financial institution.

Going guarantor for every mortgage at the rate of 50 cents on the dollar. Meaning if foreclosure happens, then the federal government will pay the holder of the mortgage 50 cents of the principal. This would apply only to homes that are actual homesteads. Sorry, speculators.

Making the 50 cents on the dollar an inescapable obligation for those who borrowed. Since this is a debt to the government, it doesn't matter how long it takes to collect, the government will collect it through wage garnishment, ineligibility for entitlement programs, tax return garnishment, etc. Much like student loans.

Issuing government bonds based on the obligations incurred by paying out the guaranteed 50 percent, and paying a decent interest rate on the bonds, as well as issuing them in small enough denominations that everyday citizens can buy them, instead of making the Wall Street thieves the sole beneficiaries. Since the houses are now owned by the federal government and the monies paid out to the mortgage holders are from the bonds issued, the houses should be sold at the flat 50 percent mortgage value to any citizen within the US who hasn't been foreclosed on and is a first-time home buyer. (Payments are thirty-year fixed and have the interest rate paid out on the bonds. But this bond-backed mortgage is not tax-deductible in any way.) Any financial institution that is so insolvent that it can't handle this should be allowed to fail, its limited liability shield pierced and all the assets of its management and shareholders assessed at their percentage of ownership. After all, they made the profits--time to regurgitate the profits.

RICO prosecutions and asset seizures for financial and mortgage industry employees who participated in the fraud.

This is pretty draconian but would be very effective. There is now a floor value on the CDOs since we've set a 50 percent minimum recoup on the mortgages and, sequentially, a 50 percent value on the CDOs that are based on the mortgages. It doesn't reward a single person who benefited fraudulently from the debacle (including the homeowners who obviously lied about their income). It puts houses in the hands of those who can afford them and stabilizes the housing market, since excess inventory is being soaked up very rapidly at these prices and with guaranteed financing available. And the bonds issued provide a return for those of us who weren't complete lying idiots. Not pain-free, but at least a depression averted.

Vivien Dracon

West Hollywood, CA