Give Main Street a Fair Shake

Give Main Street a Fair Shake


The Administration has put a corporate-led bailout on the table with the threat that Congress pass it as is or face aworldwide economic catastrophe. We’ve seen this kind of shock and awe, do it our way or else, fear mongering before. Yes, action is needed, but that action must be smart, just and effective. Action must ensure that this taxpayer-funded rescue doesn’t reward the very people on Wall Street who created this mess whileshafting the needs of Main Street. The President, the Federal Reserve, SEC and Congressional committees responsible for regulation and oversight failed to act in the public or national interest and allowed this economic meltdown to reach crisis proportions. It’s ironic that the same people and firms that preachedfree-market capitalism are the ones now demanding a speedy taxpayerbailout.

This bailout should be seized as an opportunity to start addressing thereal economic crisis–the one on Main Street–where the struggle tomake ends meet is increasingly more dire in an economy marked by joblosses, crumbling infrastructure, the lowest levels of personal savingssince the 1920s, Gilded Age inequality and the highest level of foreclosed homes since the Great Depression.

Attention must be paid to restoring people’s opportunities and hope andaddressing America’s investment deficit, as Harold Meyerson laid out ina recent Washington Post op-ed:

Someone needs to invest in the United States of America. For the past decade and, in a broader sense, for the entire duration of the Reaganera, both government and Wall Street have opted not to.

So where is the commitment to reinvesting in America and its people? While billions or even trillions of taxpayer dollars are being proposedfor the benefit of banks and big corporations, we also need to ensureaccountability and oversight and protect taxpayers from being ripped offin a rushed, blank-check, no-strings-attached Wall Street bailout.

Economist Robert Kuttner offers some strong, common sense demands in apost today, and also describes Treasury Secretary Paulson as “playing this more as the investment banker that he used to be, than as a steward ofthe public interest.” He notes that House Financial Services ChairmanRep. Barney Frank articulated a good start to reworking Paulson’s bailout:

An economic stimulus to go with the Wall Street bailout; morerefinancing help for borrowers; and some limits on windfall gains tocorporate executives.

Regarding Frank’s last point, the Institute forPolicy Studies is recommending to Congressional allies that in order to qualify for bailout assistance, firms should be required to adopt a policy that no executive will be compensated at a rate greater than twenty-five times thelowest-paid employee. Also, there should be no multi-million dollargolden parachuteseverance packages for fired executives who “led” their companies down afailed road.

Congressman Frank and his fellow progressive Democrats would be wiseto take an extra step over to the people’s side of the aisle and listento those, like Kuttner, who argue that this bailout–if there is anyjustice–must include provisions to re-regulate financial institutions;government equity in any company that is proportional to the amount ofmoney the company receives from the Fed bailout; authorization to take acontrolling interest in some companies as happens when an FDIC-insuredbank goes broke; a portion of the $700 billion to be used for mortgagerefinancing and putting people back in homes; and at least $200 billionof new economic stimulus “for infrastructure rebuilding, more generousunemployment and retraining benefits, and green investment.”

Don’t think for a second that Wall Street has been humbled by itscolossal collapse. Secretary Paulson is warning that he needs a “cleandeal.” Industry lobbyists are threatening that changes are “dealbreakers.” Against all odds, these people still believe they are thesmartest guys in the room and masters of the universe. And they haveplenty of apologists and enablers on the Hill to keep them in business,such as House Minority Whip Roy Blunt, who was still peddling the conservative and a historical gospel that “providing $25 billion worth of infrastructure spending [is] not stimulative and everyone knows that.”

Sure, Mel. Rebuilding crumbling bridges, modernizing our energy grid,improving our schools and roads – and paying people to do these jobs sothat they, in turn, can house their families, feed their kids and putclothes on their backs–that doesn’t do diddly for the economy, right? But redistributing wealth upward, that does? Actually, savvy economists estimate that an additional $40billion in infrastructure investment could create as many as one millionnew jobs. Smart and targeted public investment such as the kind called for in the Apollo Alliance plan for energy independence is what we truly need. Supported by scoresof business leaders, labor unions and environmental groups, the ApolloAlliance has provided a blueprint to promote the renewable energyindustry with a $300 billion investment over the next ten years, creating3.3 million jobs, leading to economic growth, more tax revenues, andenergy independence.

In contrast to Congressman Blunt, Sen. Bernie Sanders is someone whounderstands the need to view this bailout in the context of the realeconomy and its impact on people’s lives. He writes in an op-edthat “any proposal must protect middle income and working families frombearing the burden of this bailout.” Sanders’ planincludes “a five-year, 10 percent surtax on the income of individuals above$500,000 a year, and $1 million a year for couples; a requirement thatthe price the government pays for any mortgage assets are discountedappropriately so that government can recover the amount it paid forthem; and, finally, the government should receive equity in thecompanies it bails out so that when the stock of these companies risesafter the bailout, taxpayers also have the opportunity to share in theresulting windfall.”

How is it that this Administration and too many in Congress–whichhaven’t tried to find the resources to, say, invest in the nation’shealthcare system or to repair bridges and tunnels–can now be ready tocome up with $700 billion plus to rescue banks by taking on their toxicassets? Remember when we couldn’t give kids healthcare because $35billion for S-CHIP was too expensive?

As Secretary Paulson and a herd of lobbyists try to rush through aone-sided deal that once again shafts the Americanpeople after they were already shafted by deregulation–insisting thatthe abyss is the only alternative to this deal–consider this levelheaded observation from Nobel Prize-winning economistJoseph Stiglitz:

Wall Street has always been quick to overstatesystemic risk–take, for example, the 1994 Mexican financial crisis–but loath to allow examination of their own dealings.

Not this time. Not this crisis.

This time, let’s insist on a fair shake that protects and revitalizesthe people of Main Street, rather than the bankers of Wall Street. Thistime, there needs to be proper accountability and oversight, and areview and renewal of the deal every three months to see if it is indeedserving the people’s long-term interests.

Contact your Senators and Representatives today. Express your outrage that the current proposal lacks accountability for Wall Street. Tell them it needs to put the interests of Main Street first. Corporations led us into this mess with their greed and shortsightedness. Let’s not allow them to dig us into a deeper hole with more of the same.

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Katrina vanden Heuvel
Editorial Director and Publisher, The Nation

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