We are getting hit with opinions from pundits and talking heads who have been wrong time and time again and only add to the absolute confusion of the current economic situation. Peter Bronson wrote a piece in the Cincinnati Enquirer today stating that using the term "bailout" is wrong in this situation because "A bailout is the kind of thing that happens when your brother-in-law calls at 3 a.m. from the county slammer, where's he locked up for mowing down mailboxes with his drinking buddy Jack Daniel's." He says that we should be using the term "rescue" because "A rescue is what the Red Cross does for victims of earthquakes, hurricanes and other calamities. A rescue is heroic - a selfless act of lifesaving courage. A rescue is for someone like me who deserves it. A bailout is for someone else who deserves a night in jail." He continues, "Nearly every headline and every glitzy graphic on the news calls it a "bailout." And it's wrong. We are way past welfare for Wall Street. Now we're talking about a loan to rescue Pension Street, IRA Boulevard and 401(k) Avenue." How could anyone be confused with that crystal clear analogy?
Lucky for us, Ken Blackwell has put his finger on the root problem of this whole economic mess. From his latest piece Blackwell says:
But we must look to the root cause. It is not the loosening of regulations from the Clinton years, or the push for home ownership by the administration and certain congressional leaders, or the corrupt practices at Fannie and Freddie, or the greed of financiers. All of those played a role. But those factors could not cause a collapse by themselves.
We have become a culture addicted to instant gratification and a fixation on the material. Increasingly, concepts such as duty, self-denial, hard work, delayed gratification, and patience have been swept away.
Wait a second, all of those factors (de-regulation, a push for a home ownership society, corruption, and greed) couldn't cause a collapse by themselves? Tell me more Mr. Blackwell!
The instant-gratification culture that has run rampant at the consumer end of the equation has now seeped into the lending end. Suddenly, when people apply for a loan for twice as much house as they could afford, the bank says yes...
...It may not be exciting to talk about teaching and following sound principles regarding debt management and prudent planning. It is even less exciting to talk about finding contentment and happiness in ways other than always needing to lunge after something newer, better - and more expensive.
Blackwell's solution, that of talking with people about "finding happiness" in other ways which run counter to the way our very society functions, is not helpful. Not only is his solution not helpful, but it implies that the population's actions have run independent from the very system that encourages the behavior of rampant consumerism. After all, I thought it was patriotic to go shopping? Let's interject some clarity into this discussion and turn to some voices that have been absent from the corporate media during this debate.
Economist Dean Baker, one of the people who accurately predicted this meltdown, recently wrote a piece in which he said:
There is no way that the failure to do a bailout will lead to more than a very brief failure of the financial system. The worst case scenario is that we have an extremely scary day in which the markets freeze for a few hours. Then the Fed steps in and takes over the major banks. The system of payments continues to operate exactly as before, but the bank executives are out of their jobs and the bank shareholders have likely lost most of their money. In other words, the banks have a gun pointed to their heads and are threatening to pull the trigger unless we hand them $700 billion."...
...There has been a mountain of scare stories and misinformation circulated to push the bailout. Yes, banks have tightened credit. Yes, we are in a recession. But the problem is not a freeze up of the banking system. The problem is the collapse of an $8 trillion housing bubble. (It was remarkable how many so-called experts somehow could not see the housing bubble as it grew to ever more dangerous levels. It is even more remarkable that many of these experts still don't recognize the bubble even as its collapse sinks the economy and the financial system.) The decline in housing prices to date has already cost the economy $4 trillion to $5 trillion in housing equity. This would be expected to lead to a decline in annual consumption on the order of $160 billion to $300 billion.
Or how about the words of New York University economist Nouriel Roubini:
...the claim by the Fed and Treasury that spending $700 billion of public money is the best way to recapitalize banks has absolutely no factual basis or justification. This way of recapitalizing financial institutions is a total rip-off that will mostly benefit – at a huge expense for the US taxpayer - the common and preferred shareholders and even unsecured creditors of the banks. Even the late addition of some warrants that the government will get in exchange of this massive injection of public money is only a cosmetic fig leaf of dubious value as the form and size of such warrants is totally vague and fuzzy...
...Instead, the restoration of the financial health of distressed financial firms could have been achieved with a cheaper and better use of public money. It is pathetic that Congress did not consult any of the many professional economists that have presented alternative plans that were more fair and efficient and less costly ways to resolve this crisis. ... and it is a scandal that even Congressional Democrats have fallen for this Treasury scam that does little to resolve the debt burden of millions of distressed home owners.
It is quite interesting that throughout all of this bailout discussion, much of the reporting being done by the corporate media has been within the framework of the Paulson Plan. There has been little to no talk of any alternative plans outside of amendments to the existing framework. Too often is it presented that a bailout is 100% needed and if decisive action is not taken soon, it could lead to a greater disaster. I have seen hardly any talk of alternative ideas and I have yet to see a roundtable discussion of different solutions between leading economists on a major network. Wouldn't this be an appropriate time to have this conversation to make absolute sure that we are taking the best road out of this mess? I tend to agree with Josh Silver of FreePress when he states:
The result is an American public that is fundamentally uninformed about the issues that matter most - like economics, health care, and war - and over-informed about those that matter least: sports, celebrity, the latest campaign ad, and horserace analysis of elections. We have no reason to believe that the press -- and along with it, most politicians -- will ask the tough questions, expand the range of debate, and bring the facts to the American people. But until they do, our economy - and our democracy -- will continue its race to the bottom.
We are a confused public and we are viewing the "solution" through a single framework that is being presented by the media as only one that we can consider. We need to expand the debate on this issue, but with the House set to vote (and potentially pass) the bailout plan on Friday, it looks like some of these voices will go unheard.
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