Through the events of this past week, we are once again solemnly reminded of that truth we hold self evident; that in as much as money talks, corporate America would always have the words and voice to trounce the will and uproar of average hardworking American citizens. This is without doubt an unfortunate egregious fact of life. Rechristening the bailout bill a rescue bill and thereafter passing it into law was a bold affront. I find it hard trying to decipher whether this was another episode of ignorance that led to gullibility and as a consequence incompetence on the part of this Congress or just another full frontal assault on the wish and will of the American people.
In the year 2002, amidst widespread orchestrated fears of impending onslaught of weapons of mass destruction by Saddam Hussein, the United States Congress passed Joint Resolution 114 that authorized this president, George W. Bush, to bomb the state of Iraq into submission. The resolution back then, passed the Senate by a vote of 77-23—an almost identical tally by which this bailout bill, H.R.1424, riding a 74-25 vote, passed the Senate last week. One would think that such politics of fear that brought this hasty and unnecessary war would have served as a beaming caution for both Democratic and Republican leaders, but once again, common sense was too pricey a commodity to buy. “Inaction is not an option,” said Senate Majority Leader Harry Reid after the passage of the bailout bill in the Senate last week, “which is why we’ve worked expeditiously and in a bipartisan manner to stop a bad situation from getting even worse.”
The bailout bill as passed by Congress uses $700 billion of everyday hardworking men and women’s money to buy bad mortgage-backed securities and other woeful investments made by the ruthless CEOs on Wall Street. The idea is premised on a theory that if we simply remove these bad judgments from the books of these firms, then normalcy resumes. Money begins to flow from lender to lender, you and I can easily and readily buy whatever and anything we want, small companies don’t have to worry about making payroll and laying off people, in essence … it all becomes as if none of these ever happened. But there’s a problem inherent in this; this theory is not only fundamentally flawed and an insensitive use of taxpayers’ money, it is outrageously myopic as well—unmistakably emblematic of the legislators responsible for its passage into law.
Most experts agree that the bust of the mortgage boom is at the heart of this turmoil. During the high-flying years of this boom, restrain and discipline were caution words punishable by the harshest of deaths to the mind who dared fathom them. It was the season of greed that saw the lender trying to make a quick buck, the borrower trying to get over on the lender, and the investor trying to make his share in all of these—to the extent yours truly was almost an eager victim. There was no abandon to the American greed, wolves on Wall Street seeing an opportunity to prey on borrowers sliced, diced, and packaged mortgage loans until it was indecipherable as to which was worth what. Home prices reached the heavens, and as one in every nine jobs in the U.S. is attached to housing, the crest beckoned on any that cared to ride. Then came the foreclosures, home buyers couldn’t keep up with mortgage payments and a backlash of defaults from hell unleashed itself on the nation. Like a toxic waste, anyone exposed became infected.
And since Wall Street was the ballroom for this dirty dancing, a consequential shake-up in the financial markets was irrevocable. Stocks that make up these markets are by definition high-risk bets, which explain why rewards are high when times are dandy. The bonds segments of the markets on the other hand, are by definition low-risk bets, which explain why even during wonderful times, returns are in no way as substantial or exorbitant as those of stocks. So it’s really disheartening to see life savings of retirees, employees’ 401k plans, and others heavily invested in these firms take a drastic tumble or disappear altogether. While I submit this is unquestionably depressing, it was a risk knowingly undersigned by all participants. Whether as acts of incompetence or willful criminal fraud by those who run Wall Street, retirees and citizens who took the less traveled road of bonds and other low-risk investments shouldn’t have to through their tax money pay for the luxury of those who took the high road. Harsh … but true.
By passing this bailout bill, Congress has thrown what was saved from the fire back into the fire, and doing so in a fashionable manner: A bill worth at least $810 billion according to Congressional data, with money for NASCAR race tracks, wooden arrows for kids, and even rum import in a time of unprecedented national deficit. So far as home prices continue to plunge (experts are predicting well over a year for this), throwing money at the fat cats on Wall Street empowers only the rich and powerful. The credit crunch was a necessary evil, and the firms that made good decisions would have eventually resumed business. After all, taxpayers have already doled out billions of dollars to save AIG and the like. We know neighborhood banks will continue to operate normally in all of this, which is where any money should have gone. Raising the FDIC limit was a good decision. And what happens if these firms decide to sit on the money they receive and play a wait-and-see game? Does the financial freeze suddenly melt away? This idea of spreading around the loss in bad times and privatizing the profits in good times is ludicrous, and this Congress should cover its face in shame.