Congress is set today to vote on a plan to commit $700 billion of U.S. taxpayer money on a Wall Street bailout plan that editorialists (such as the D&C), politicians and pundits across the country cry as one, "painful, but necessary."
But is it?
Some economist and other observers disagree.
From the McClatchy News Service:
"It's more hype than real risk," said James K. Galbraith, a University of Texas economist and son of the late economic historian John Kenneth Galbraith. "A nasty recession is possible, but the bailout will not cure that. So it's mainly relevant to the financial industry."
This Washington Post story questions not so much the necessity of the bailout, but the wisdom of the rush to get it passed.
David Sirota offers up five reasons why the bailout is insane, and concludes, "If this bill passes, it will be a profound referendum on the dominance of money over democracy in America."
Caroline Baum offers up a variety of view points, including:
Paulson has said repeatedly that the "root cause'' of the problem is "the housing correction, which has resulted in illiquid mortgage-related assets that are choking off the flow of credit."
"The root cause of the problem is that we don't have any homebuyers," Edward Leamer, an economist at the University of California, Los Angeles, told the Associated Press.
The "root cause of this crisis" is "the lack of capital in the banking system," said Paul Ashworth of London's Capital Economics. "The only way the Treasury's plan would have any meaningful impact on banks' capital ratio is if it vastly overpaid for the securities it is buying."
...
If you don't diagnose the problem correctly, the odds are you won't prescribe the right medicine. The troubled assets are the result, not the cause, of loose lending practices, a housing bubble that burst, a glut of unsold homes and home prices that are still too high relative to incomes and rental costs, according to many economists.
...
"If you need money, sell assets,'' Rosner said. "Excess inventory is liquidated at 99-Cent Stores every day, and it doesn't require the government to get involved.''
The Wall Street Journal, in an article that speculates that the bailout further erodes Bush's so-called "conservative legacy," notes:
Meanwhile, conservative legal scholars question whether the rescue plan is constitutional, and predict court battles in the years to come, similar to those set off by President Franklin Roosevelt's New Deal programs.
Grover Norquist, a leading conservative organizer and president of Americans for Tax Reform, says the financial crisis stems from Mr. Bush's abandonment of conservative principles. He cites the president's failure to undo policies of the past that led banks to make unwise loans, as well as expanding the roles of mortgage giants Fannie Mae and Freddie Mac.
Dean Baker say there is no way a no-bailout leads to another Great Depression.
While their argument is wrong, these are powerful voices in national debates. If the bailout proves to be an obstacle to effective stimulus in future months and years, then the bailout could lead to exactly the sort of prolonged economic downturn that its proponents claim it is intended to prevent.
Pulitzer Prize winner and Rochester-area resident David Cay Johnston points to an IMF study that suggests bank bailouts rarely work as intended and transfer wealth from taxpayers to bankers.
Bailout:
Bailout: <a href="<a href="http://www.guardian.co.uk/commentisfree/2008/sep/29/wallstreet.useconom… economists call this an outrage!</a>
<a href="http://www.guardian.co.uk/commentisfree/2008/sep/29/wallstreet.useconom… Guardian's Nouriel Roubini</a> writes:
"Thus the claim by the Fed and Treasury that spending $700bn of public money is the best way to recapitalise banks has absolutely no factual basis or justification. It is a total rip-off that will mostly benefit – at a huge expense for the US taxpayer – the common and preferred shareholders and even the unsecured creditors of the banks."
How can our government representatives so consistently fall into line with this administration's hasty policies time after time? Is it wrong to assume that the voice of dissent among constituents has been mounting ever more steadily in the past four years?
A Web site called www.stopthehousingbailout.com leads me to believe that yes, in fact, there is dissent. Only had a chance to browse the site, so I'm not pasting it here as an endorsement. Just thought folks would be interested to find out on their own what it's all about.
Philip, it's not an
Philip, it's not an administration thing. It's a republicrat thing. They're all in it together. Obama has taken more money from these guys than all but one other Senator. Most of the opposition at this point is coming from, as far as elected officials go, a few lonely voice libertarian Republicans, and even a few of them are falling inline. The bill that will be voted on today, while a compromise bill, is mostly a bill being brought forth by the Democrats in the House, who control the House and who could thwart the administration's bailout plans quite easily.
But didn't this originate
But didn't this originate within the administration? Didn't the initial plan come from Treasury Secretary Henry Paulson?
Everywhere, such things are said as: "the blank cheque the Bush administration had sought" or "the Bush administration's $700 billion bailout" or "the Bush administration's initial proposal" or "the Treasury's proposal". This may be a bill now pushed by many Demcorats (and Republicans), but this thing was given birth by the same old crew. That doesn't mean the "Republicrats" are free from blame — as you say, the Democrats should be able to thwart this thing, if they wanted — but it does go to reinforce the follow-the-leader mentality of our government representatives. Our very own Democrat, Sen. Chuck Schumer, has been as despicable as usual in this, pushing with all his might for a bailout.
A story on <a href="http://money.cnn.com/2008/09/28/news/economy/Sunday_talks_bailout/index…; says flat out: "The core of the bill is based on Treasury Secretary Henry Paulson's request for authority to purchase troubled assets from financial institutions so banks can resume lending and so the credit markets, now virtually frozen, can begin to operate more normally."
Also, no single politically-like-minded faction seems to have a monopoly on opposition to this bailout, be they libertarians or whatever. This Democrat, for example, seems pretty vehement in her opposition:
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In the end, though, Howard,
In the end, though, Howard, you've made the most important point: Our reps are ultimately responsible for this.
This really begins with the
This really begins with the founding of the Federal Reserve in 1913. And a good deal of blame can go to Alan Greenspan for creating bubble economies through artificial manipulation of markets. And then there is Bill Clinton for putting pressure on banks to create new loan facilities so that people who couldn't really afford to buy houses could, and then you get to the greed of Wall Street taking advantage of the situation. There is also the Democrats who did in fact block every attempt to reform Fannie and Freddie. Bush is an enabler, but he really didn't do much, which probably the bigger problem with Bush than anything else -- he fiddled while Rome burned.
"And a good deal of blame can
"And a good deal of blame can go to Alan Greenspan for creating bubble economies through artificial manipulation of markets. And then there is Bill Clinton for putting pressure on banks to create new loan facilities so that people who couldn't really afford to buy houses could, and then you get to the greed of Wall Street taking advantage of the situation" (owens wrote).
Mr. Alan Greenspan helped fix what the clinton administration took over and mucked up.
Mr. Greenspan predicted what would happen during the clinton administration and the duration or delay that the recession would take place.
The economy was in crisis after Bush second term, actually as soon as war in Afgainistan.
I know Economics, world and at home.
If you look ahead to the future with any investsments in mind you will have the best chance of recovery with MCCAIN/PALIN at least to sway the congress and senate to bail out AMERICAN interests modestly.
It will take four years to fix what has happened in the last four years OK ?