I'm not opposed to the government stepping in and bailing out some of the financial giants that have gone down the past week. When your patient has gone into cardiac arrest, you need to keep the heart functioning. The financial sector is the heart of our economy.
What I object to is that there has been little effort made to provide support for Joe and Jane America who have lost their homes in this bubble burst. The benefit they will receive from this will amount to the "trickle down," which is to say that it does not exist. Those who do stand to benefit are the power brokers and uberwealthy whose decisions and actions put the economy into this mess. This is the government once more taking the side of the wealthy.
The economic effect of the bailout would have the same effect by bailing out homeowners, with the additional benefit of allowing working class homeowners to remain in their homes. This has been rejected for reasons that elude me. Discussions instead center on allowing homeowners to be thrown out of their homes, and protecting the brokers whose irresponsibility created the market crash.
From what I understand of the bailout that was rejected Monday -- and I can't imagine the one being considered now differs much in this regard -- is that it would have allowed no golden parachutes for CEO's hired after the bailout. Those who presided over the worse financial collapse in 70 years, however, still get theirs.
In other words, it still protects the wealthy malefactors while managing to screw over the little guy. What a country.
This may be how the world works, and how it always has worked, but I see no reason why we should tolerate or accept it, nor that we should facilitate it. Our government was founded to protect the people from tyranny, and that includes economic and financial tyranny as well as political. It is within the purview of the government, in granting the emergency aid, to lay down stipulations for receiving that aid. That includes "No bonus for failing."
The people who have presided over the crash of WaMu, Lehman Bros., AIG and the others are not entitled to turn a hefty profit over their greed and incompetence. The U.S. Government was, the last I knew, planning a rescue operation that would reward them personally for their failure, and then close the barn door after all the horses had left, so there would be no more golden parachutes for later failures.
I call that wrong. Anyone with me?
Copyright © 2008 by David Learn. Used with permission.
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3 comments:
As far as the bad actors not being punished goes.... Blame the Founding Fathers.
The third paragraph of Article I, Section 9 of the U.S. Constitution reads:
No Bill of Attainder or ex post facto Law shall be passed.
Simply put, if you do something and it's legal at the time you do it, Congress can't make it retroactively illegal.
This is a very important protection. It unfortunately means that as long as the people who created the current financial mess acted within the law, their ill-gotten gains are theirs to keep. No matter how unethical their actions seem in hindsight.
Been a while since I wrote this piece, but I don't believe I was referring to filing criminal charges against the miscreants who crashed Wall Street and wrecked the economy. The issue is that the government was giving -- has given -- a large amount of public money to bail out private companies.
I find it hard to believe that the government had no choice but to see that level incompetence be rewarded with millions (billions!) of taxpayer dollars. That's even more money than our elected representatives get for their own incompetence. It should have been quite simple to make the lack of a golden parachute a stipulation to the bailout. It's pretty standard that when one company buys another, there's some discussion about contracts and positions, and who gets retained, and at what salary. I don't recall reports that this discussion was had.
The tremendous rewards for bad behavior had already been paid by the time the crisis was recognized.
As far as the golden parachutes go... Yeah. There was a huge rush to pass something, anything, as quickly as possible to prevent the perception that congress and the president had their heads in the sand.
This was followed by much lamenting (by the same people) about "Why didn't anyone add these provisions?"
"Unintended consequences" was a very popular phrase in the political news coverage last fall and this spring. I expect we'll hear another round of wailing sooner or later about "Bailout II: More of the Same."
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