Their revolt was anything but an act of courage to protect American families.
http://www.alternet.org/story/100857/?page=entire
On Monday, the Bush administration's massive Wall Street bailout
went down to a narrow defeat in the House. After the 228-205 vote, markets
crashed, and the usual partisan finger-pointing followed. According to the
Washington Post,
Speaker Nancy Pelosi "maintained that Democrats 'delivered on our side
of the bargain' by getting 60 percent of House Democrats to support a
bill that was built around the Bush administration's proposal, whereas
67 percent of House Republicans voted against it."At first
glance, it may appear that the 133 House Republicans who broke with
their party's leadership did so out of principle -- that they bravely
stood up against a massive cash transfer to those most responsible for
precipitating the financial crisis in the first place. They appeared to
be gambling a lot in taking that principled position, despite the fact
that the bailout had drawn fire from across the political spectrum. The
conventional wisdom, after all, has gelled around the idea that only an
unprecedented cash infusion into the ailing banking system will stave
off a potential Next Great Depression. The message many rebellious
conservatives sent was that it takes courage to roll the dice with the
world's economy six weeks before an election, even if the public was
deeply skeptical of the measure (the reality is that almost none of the
lawmakers who face tight races this fall voted for the bailout, fearing
a backlash from voters; Congress is not known for courage or principle
on the eve of an election).And there's no question that the bill
they and 95 of their Democratic colleagues killed was an extremely bad
one, even if some token nods to "Main Street" had been added to help it
go down lawmakers' throats more smoothly. Democrats abandoned a key
provision -- one vehemently opposed by lenders -- to allow bankruptcy
judges to modify mortgages that are in the process of foreclosure, and
they accepted only token limits on executive compensation for companies
that would be rescued under the plan (PDF). Worst of all was a vaguely worded
provision
that might have allowed the Treasury to buy up bad paper at the price
at which it was originally booked, rather than at those securities'
largely unknowable but deeply diminished current value. That would have
essentially given a small investor class an opportunity to recover its
losses at the expense of the American taxpayer (and future taxpayers,
as the bailout would be financed through debt).But a deeper look
reveals another picture of the legislative fight that has occupied
Washington since George W. Bush first proposed the bailout. Unlike most
House Democrats, who voted against the bill in an attempt to send the
plan back to the drawing board to get a deal that might better protect
taxpayers and homeowners, House conservatives torpedoed the measure in
order to advance their own alternative "bailout," one that's an
ideologically motivated back door to bailing out Wall Street without
doing anything for Main Street.The plan is notably light
on detail, even for campaign season, when politicians are loath to
discuss the fine points of any proposal. But based on what can be
gleaned from media reports,
the heart of the "alternative" scheme is for the government to sell
insurance for securities based on bad loans, rather than buy up the
paper directly. Supposedly, the premiums would be high enough to assure
that Joe and Jane taxpayer don't get fleeced.On its face, that idea seems both
fiscally sound and decidedly conservative, in the traditional sense of the
word.But
remember what the immediate problem we face is all about. The financial
industry is weighed down by an enormous "shit pile" of bad paper --
mortgage-backed securities, complex derivatives and insurance-like
instruments that were supposed to make all these "creative" investment
vehicles somewhat sound. That shit pile, impossible to value
accurately, is threatening the whole economy, as lenders hunker down
and hold onto their cash reserves in an attempt to ride out the storm
of foreclosures, and that's making it tough for businesses and
consumers to get credit they need to expand their operations or buy new
gizmos.That's not a situation that lends itself to a
government-backed insurance policy. If the premiums aren't deeply
subsidized by the American public, they'll be out of reach of troubled
banks by definition -- after all, if they had enough cash to cover
their bad debts, which will ultimately be the job of the insurer
(that's you, me and the people we know), then they wouldn't find
themselves on the brink of collapse to begin with. That means the
government would still end up effectively buying up the banks'
worthless paper piece by piece as the underlying assets on which that
paper is written go belly-up. Think of it as the government selling
fire insurance for houses that are already ablaze.So the point
was not to spare the taxpayer the expense of Wall Street's shit pile.
By offering an alternative plan, House conservatives abandoned a
negotiating process that was, at heart, about trying to modify the
disastrous Bush-Paulson plan so that it didn't just bail out the
financial sector's movers and shakers without getting some concessions
for working America.The other two tenets of the alternative plan are worse
still.In
keeping with the tradition of a party that has one policy solution to
all economic ills -- cutting taxes on the wealthy -- the conservatives
who bucked their leaders also suggested cutting capital gains taxes,
even if only on a temporary basis. It's a triumph of ideology over
common sense. We've seen stock markets tanking, as investors flee like
rats from a sinking ship, seeking safer ground in commodities, which
have gone through the roof (oil prices have been moderated somewhat by
expectations of a long slowdown that would cut demand). A tax holiday
on capital gains would only encourage those investors with steely
nerves (and gains) who are staying in the market to join the herd,
getting out while it's tax-free to do so. That can only send the
already sky-high prices for food, energy and everything else even
higher into the stratosphere. Ordinary working people would end up
paying on both sides of the deal -- getting soaked for Wall Street's
Reckless Lending Insurance and then paying through the nose to put food
on the table.Adding insult to injury is the third leg of the "alternative"
bailout plan: more deregulation of the financial sector.That's nothing short of
breathtaking in its audacity. It was a lax regulatory environment
that brought us to the verge of collapse in the first place. Exotic
security-backed loans -- loans that didn't conform to the standards in
place for banks that held deposits, including subprime loans, mortgages
given to people who misstated their income and loans with heavy
prepayment penalties and huge balloon payments -- are, as one would
expect, faring far worse than the kinds of traditional loans that are
regulated by the Federal Housing Authority or backed by Fannie Mae.
Regulations passed by Congress only three months ago, as the depth of
the meltdown had become clear, made "coercing a real estate appraiser
to misstate a home's value" and "making a loan without regard to
borrowers' ability to repay the loan from income and assets other than
the home's value" a no-no; if similar commonsense regulations had been
in place over the past decade, the run-up of the real estate market
wouldn't have been as frenzied, and we wouldn't see the skyrocketing
number of foreclosures we're witnessing today.Again, none of
this is to suggest that Americans should shed a tear for the demise of
the compromise deal struck between Treasury Secretary Paulson and the
Bush administration -- it was a bad deal that deserved to go down in
flames. But it's also becoming increasingly evident that some sort of
intervention is necessary to prevent the crisis from spreading through
the entire global economy. Rather than pugnaciously cling to a failed
ideology by heaping lucre on the wealthiest in the hope that it
trickles down to the rest of us, Congress should be going back to the
drawing board and coming up with a bailout plan rooted in a modicum of economic
justice.The
House conservatives who have proven to be such a fly in the ointment
are trying to go the other way -- cooking up a plan that will only
deepen Main Street's pain in the name of saving it from Wall Street's
predations.
Dr King was a Community Organizer!! George Wallace was a Governor!!
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