I am not an economist nor do I claim to be an expert on finance and economic matters. I am, however, an ordinary citizen, a voter, and a taxpayer who is being asked to bear the brunt of paying for the mess created by the greed, irresponsibility, and recklessness of those who made out like bandits in the deregulated atmosphere of the financial system for decades.
When I make mistakes with my money and finances, or if me and my family get into financial trouble we don't get a bailout. But now we, the taxpayers are being asked to do that very thing -- supposedly, for the sake of the country's financial well-being and survival -- at the behest of those who created the conditions for the financial crisis and who mismanaged the economy in the first place.
Voting on the Bailout
I opposed the bailout as it was originally drafted and which was defeated in the House of Representatives vote. There were many good reasons to oppose the original bill as this list from David Sirota points out.
After the bill was defeated in the House revisions were made to the legislation and a vote was taken in the Senate where it passed.
Regarding the second version of the bill, economist Paul Krugman agrees with James Galbraith’s assessment:
In short, as I said at the beginning, the bill is a vast improvement over the original Treasury proposal. Given the choice between approving or defeating the bill as it stands, I would urge supporting the bill. I do so without illusions. There need be no pretense that it will solve our underlying financial and economic problems. It will not. The purpose, in my view, is to get the financial system and the economy through the year, and into the hands of the next administration. That is a limited purpose, but a legitimate purpose. And it may be the most that can be accomplished for the time being.
Alternatives to the Bailout Are Out There
Contrary to leaders like Bush, Paulson, and leaders within the Congressional Republicans and Democrats that say pass the bailout as it stood or face certain catastrophe, there are alternatives to the bailout and I supported taking a good, long look at these alternatives and make them part of the criteria by which any bailout should be structured.
Here are a few examples from the Progressive sphere:
• The Service Employees International Union
• The Congressional Progressive Caucus
• Campaign for America’s Future
• Robert Reich guidelines
• Bernard Sanders guidelines
• James Galbraith guidelines
The Main Point
Paul Krugman and James Galbraith, among many other economists, agree that this latest revision of the bailout is, at best, a stopgap, band-aid gesture so that the economy does not collapse completely—for the short term. They estimate that short term being establishing the next administration after the November elections. For such an important bill and vote, that doesn’t inspire much confidence in me as a citizen.
Senator Bernard Sanders argues:
This bill does not effectively address the issue of what the taxpayers of our country will actually own after they invest hundreds of billions of dollars in toxic assets. This bill does not effectively address the issue of oversight because the oversight board members have all been hand picked by the Bush administration. This bill does not effectively deal with the issue of foreclosures and addressing that very serious issue, which is impacting millions of low- and moderate-income Americans in the aggressive, effective way that we should be. This bill does not effectively deal with the issue of executive compensation and golden parachutes. Under this bill, the CEOs and the Wall Street insiders will still, with a little bit of imagination, continue to make out like bandits.
This bill does not deal at all with how we got into this crisis in the first place and the need to undo the deregulatory fervor which created trillions of dollars in complicated and unregulated financial instruments such as credit default swaps and hedge funds. This bill does not address the issue that has taken us to where we are today, the concept of too big to fail.
And THAT’s the point. Any bailout or any solution to the financial mess we are in must address these underlying causes that led to the crisis in the first place. And nobody who is in a position of power or leadership seems to be listening to the glaringly obvious common sense of people like Sen. Sanders.
The bailout may very well pass the House on its second go round, but the underlying causes for the crisis will remain and will be unaddressed. As one of my friends put it to me in an e-mail:
There will be NO addressing of stronger regulatory action on Wall Street down the road. There will be no punitive measures against the speculators who caused this mess in the first place. You will not see any Congressional checks on executive power from the Treasury Department. There is NO later. It doesn't matter if it is McCain or Obama who sits in the White House either.
Once the bailout money jump starts the credit flows between the banks, all of the talk about changing the culture of Wall Street and reigning in the excesses of market capitalism will die away. Finance industry lobbyists will shower members of Congress with un-reported gifts and reported campaign contributions. It's business as usual once again.
The Final Word
So if you are in favor of the bailout there is good news for you in that momentum seems to be on the side of the Senate version passing the House. But you better not have any illusions that what you are supporting is THE solution to the crisis. I agree with the Krugman-Galbraith camp that says what the bill represents is, at best, a stopgap measure designed to have the economy limp its way along until the next administration is established.
I’m in the camp of Sanders and others who offered alternatives to the bailout and who argued that the underlying causes of the finance crisis must be addressed. The only reason the Progressive vision cannot be articulated into a viable alternative to the bailout as it was presented by Bush, Paulson, and Republican and Democratic Congressional leaders is that the Progressive movement does not have the political juice to set the agenda. That doesn’t mean they are wrong. That just means politically, they largely function in the margins and are not players.
Don’t let the debate begin and end along the terms of whether the bailout bill should be passed or not. The problem goes much deeper than that and doesn’t deserve to die down whether or not the bill passes.
Cross-posted in An Ordinary Person