Views expressed in guest columns do not necessarily reflect the views of Accuracy in Media.
Visit the complete Guest Column archives.
To Bailout or Not to Bailout, That Is the Question
Guest Column | By Paul M. Weyrich | October 1, 2008
Economists,
House Republicans led by Minority Leader John Boehner (R-OH) and millions of
Americans across the country are questioning the prudence of the Federal
Government’s bailout of Fannie Mae, Freddie Mac and AIG. The bailout package
has taken so much criticism that neither of the two Presidential candidates is
willing to endorse it outright. You also can add my name to the list of those
concerned.
The cost to the
American taxpayer, we’re told, is to be $700 billion, though it probably will be
closer to a full $1 trillion, and all must be done without delay. Why the
rush? Where are the compelling economic arguments that if we don’t act
immediately to save these companies this nation will suffer financial Armageddon
in short order? Senator Joseph R. (Joe) Biden, Jr. (D-DE) has suggested that we
Americans should be patriotic in paying our taxes. Are we to be patriotic in
order to come to the financial aid of a multi-trillion dollar corporate world,
one which consistently espouses a free-market economy? Neither President George
W. Bush nor his Treasury Secretary, Henry Paulson nor the Congressional
Leadership has come through with any clear-cut reasoning regarding what the
effects would be if we did not act quickly or what the American people would
gain if we do. And as various economists are claiming, this incredibly enormous
bailout never would address the actual problems that got us into this mess, nor
would it give any protection to the taxpayer who must foot the entire
bill.
What’s more, we
now understand that several of the key players behind this government bailout
have extensive ties to many of the corporate giants they want to rescue.
Senator Christopher J. (Chris) Dodd (D-CT), Chairman of the Senate Banking
Committee, has received more than $7.8 million since 2003 from financial,
insurance and real estate corporations, according to the Center for Responsive
Politics. Representative Barney Frank (D-MA), Chairman of the Financial
Services Committee, has received approximately $600,000 in the last five years.
The two are part of a four-man negotiating committee (the other two are
Republicans) whose job it is to iron out a bailout compromise settlement. These
two men consistently have voted in favor of their corporate constituencies.
Whose best interests do you think are represented at the negotiating table – the
public’s or those of the corporate world?
Corruption and
bad judgment persist in both the corporate and political worlds. When in June
Senate leaders agreed to a bipartisan bill to establish a $300 billion rescue
fund for troubled mortgages and a new regulator for Fannie Mae and Freddie Mac,
nothing changed in banking practices. Banks continued to extend mortgages to
those who could not afford them, which is what caused the problem in the first
place, as did Washington Mutual (WaMu), which finally was seized last week by
the Federal Government and sold to JP Morgan-Chase. And WaMu’s latest CEO, Alan
Fishman, who was on the job for about a month, is walking away with a severance
package worth an estimated $18 million – the stockholders and general public be
damned! But at least WaMu was not bailed out by the taxpayer. Yet, unless bad
banking practices are addressed through a return to strong regulation, nothing
will change. Banks will continue to close, home foreclosures will persist, and
we will see a further erosion of property
values.
I have pondered
certain questions regarding the stock market: What constitutes the real value of
a Wall Street company which is doing fairly well? Is it part assets and
profits, and part psychology brought on by Wall Street marketing? What is it
that really drives the market and thus the value of a corporation? Should the
price of a stock be $68 per share, $48 or only $2 per share? So regarding this
bailout, one question centers upon the real value of these corporate giants;
another concerns an alternative approach to a bailout, such as a merger or a
government loan with interest. As some economists argue, contrary to Wall
Street types, when all is said and done, if there is no bailout of these
companies, the overall solid assets still will be there and the buildings and
equipment will as well. Of course, positive cash flow has dried up, but that
does not mean that corporations like these cannot return to sound business and
banking practices (neglected for so long while in several cases the books were
cooked), and get their companies back onto solid financial
footing.
I am not
rejecting a bailout or rescue plan of some nature but let’s first think good and
hard about the repercussions. Are we in the process of nationalizing the
economy and moving toward a socialistic state; will this $1 trillion save the
nation or will it actually drive America ever closer to financial insolvency
through massive accumulations of outstanding debt; and is the American taxpayer
expected through “patriotism” to foot the cost of huge corporate failures?
Sorry, but I’m not buying this rush to bail out Wall Street until I see some
clear answers.
Paul Weyrich is Chairman and CEO of the Free Congress Foundation.
© This column is the property of the Free Congress Foundation and may not be reproduced without their permission. For comments and inquiries, contact Phyllis E. Hughes at . Visit our website at http://www.FreeCongress.org.
Guest columns do not necessarily reflect the views of Accuracy in Media or its staff.
6 Comments | Post a Comment
While the time to act is immediate, the action should be to secure the Fed and ensure that they don’t stop printing money (liquidity) and hike the discount rate (also a liquidity issue) as they did in 1929. There are very mixed ideas as to the actual impact of this (I think) manufactured crisis.
However, vesting total control of the system with an unaccountable person or body is not the answer. How fast does the US want to be absorbed into the UN’s idea of a “perfect world” or “new world order”?
Obviously, the nation’s businesses need a financial system that is liquid enough to meet their normal needs (ie payroll and for adding inventory), and that has broken down, and quick action must be taken. BUT having said that the more I hear about the route the congress is taking, the more I see evil hands of the left in this and a power grab to take control of the nation’s economy.
As I am not as savvy on the ins and outs of the financial system as SOME economists, but I believe prudence tells me to sign on with the Conservative Republicans and Blue Dog Democrats that are opposing the present way, and go with their idea that costs the taxpayers no money but takes care of the problem with loans, rule changes, credits, and incentives.
This Senate version seems to just add 124 Billion to the cost, with many earmarks and sweet deals for selected groups, but much of the rest is just the bill the House voted down on Monday.
I’m hoping the House votes “nay” again! Why the taxpayers should “buy” already defaulted or foreclosed mortgages, charged-off credit card accounts and defaulted loans on already repossessed vehicles is beyond me. AND - - why we should also do this for foreign banks or foreign soverign funds is even more inexplicable.
The “American Market” is the wealthiest and largest market there is - - and it seems to me it will take almost no time at all before brand new companies, including financial services, are formed and capitalized to take advantage of that market opportunity and to profit from it.
It seems there’s way more going on here than meets the eye - - and plenty of GOPs and DEMs seem to be on the bandwagon.
The bailout bill is passed and still US markets are down… Still uncertainty. Although foreign markets done well on Friday. Is there any plan B ....?
This whole thing has gone to craps guys. the economy is going to just get worse. The greed of people in government will never end.
October 2 at 10:56 am | #1 | Link
I agree with Paul on this. Since the bureaucrats are intending to spend our taxpayer money, they had better present it to us to review and approve or disapprove by popular vote. What they want to do is take it from our wallets without our approval. Let’s just say NO, until they come up with a better idea.
Government doesn’t solve problems, it only creates them.