Saturday, September 20, 2008

Greed, The Gift That Keeps On Taking

Billions for Payouts?! Who Pays?
By Vermont Senator Bernie Sanders

The current financial crisis facing our country has been caused by the extreme right-wing economic policies pursued by the Bush administration. These policies, which include huge tax breaks for the rich, unfettered free trade and the wholesale deregulation of commerce, have resulted in a massive redistribution of wealth from the middle class to the very wealthy. (Not precisely true. Republicans had a lot of help from the Clinton administration.)

The middle class has really been under assault. Since President Bush has been in office, nearly 6 million Americans have slipped into poverty, median family income for working Americans has declined by more than $2,000, more than 7 million Americans have lost their health insurance, over 4 million have lost their pensions, foreclosures are at an all time high, total consumer debt has more than doubled, and we have a national debt of over $9.7 trillion dollars. (If we're going to be truthful about this mess, everyone who bought a house they couldn't afford and took on credit card debt they couldn't pay, are part and parcel of this mess. I'm not discounting the fact that in many cases people were misled into taking on debt they couldn't afford, or that unforeseen job losses put people into a default state.)

While the middle class collapses, the richest people in this country have made out like bandits and have not had it so good since the 1920s. The top 0.1 percent now earn more money than the bottom 50 percent of Americans, and the top 1 percent own more wealth than the bottom 90 percent. The wealthiest 400 people in our country saw their wealth increase by $670 billion while Bush has been president. In the midst of all of this, Bush lowered taxes on the very rich so that they are paying lower income tax rates than teachers, police officers or nurses. (This horribly skewed wealth redistribution is truly an 'intrinsic' evil.)

Now, having mismanaged the economy for eight years as well as having lied about our situation by continually insisting, "The fundamentals of our economy are strong," the Bush administration, six weeks before an election, wants the middle class of this country to spend many hundreds of billions on a bailout. The wealthiest people, who have benefited from Bush's policies and are in the best position to pay, are being asked for no sacrifice at all. This is absurd. This is the most extreme example that I can recall of socialism for the rich and free enterprise for the poor. (This is a brilliant line and aptly sums up the economic philosophy of the Freidman shock therapy school of economics.)
In my view, we need to go forward in addressing this financial crisis by insisting on four basic principles:

(1) The people who can best afford to pay and the people who have benefited most from Bush's economic policies are the people who should provide the funds for the bailout. It would be immoral to ask the middle class, the people whose standard of living has declined under Bush, to pay for this bailout while the rich, once again, avoid their responsibilities. Further, if the government is going to save companies from bankruptcy, the taxpayers of this country should be rewarded for assuming the risk by sharing in the gains that result from this government bailout.

Specifically, to pay for the bailout, which is estimated to cost up to $1 trillion, the government should:
a) Impose a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers. That would raise more than $300 billion in revenue;

b) Ensure that assets purchased from banks are realistically discounted so companies are not rewarded for their risky behavior and taxpayers can recover the amount they paid for them; (This is called exposing them to the Natural Consequences of their behavior.)

c) Require that taxpayers receive equity stakes in the bailed-out companies so that the assumption of risk is rewarded when companies' stock goes up.

(2) There must be a major economic recovery package which puts Americans to work at decent wages. Among many other areas, we can create millions of jobs rebuilding our crumbling infrastructure and moving our country from fossil fuels to energy efficiency and sustainable energy. Further, we must protect working families from the difficult times they are experiencing. We must ensure that every child has health insurance and that every American has access to quality health and dental care, that families can send their children to college, that seniors are not allowed to go without heat in the winter, and that no American goes to bed hungry.

(3) Legislation must be passed which undoes the damage caused by excessive de-regulation. That means reinstalling the regulatory firewalls that were ripped down in 1999. That means re-regulating the energy markets so that we never again see the rampant speculation in oil that helped drive up prices. That means regulating or abolishing various financial instruments that have created the enormous shadow banking system that is at the heart of the collapse of AIG and the financial services meltdown.

(4) We must end the danger posed by companies that are "too big too fail," that is, companies whose failure would cause systemic harm to the U.S. economy. If a company is too big to fail, it is too big to exist. We need to determine which companies fall in this category and then break them up. Right now, for example, the Bank of America, the nation's largest depository institution, has absorbed Countrywide, the nation's largest mortgage lender, and Merrill Lynch, the nation's largest brokerage house. We should not be trying to solve the current financial crisis by creating even larger, more powerful institutions. Their failure could cause even more harm to the entire economy. (The other problem with this, as exposed by the Bush fiascoes, is that institutions this big become de facto shadow governments.)


Bernie Sanders analysis has some very important points about just where the government needs to go if we're going to be handing out upwards of a trillion tax dollars to solve another monster problem brought on by deregulation, corporate cronyism, and unfettered greed.

Everything I've read indicates that Congress will be trying to fast track legislation before the end of next week. I hope Senator Sanders is heard by both sides of the political spectrum. He has an important message. Personally, having already had my own run in with Bank of America's penchant for takeovers, their gains of Merrill Lynch and Countrywide Loans scares me silly. The only thing which would be scarier is if I found out Walmart was a major stockholder.

All of that aside though, the people who will really pay for this bailout are the people for whom the generosity of Americans was literally the difference between life and death. Catholica Australia has an interview with Claudette Weirle who is the Secretary General of Pax Christi. Her specific concern is Haiti and how this will effect this small economically devastated island nation.

But it isn't just Haiti who will be seriously impacted. Any nation whose life blood is the money generated by immigrants in the United States is going to be devastated. Any nation who is dependent on American foreign aid and personal charity is going to be devastated. This devastation will get worse as the dollar declines. This devastation will get worse as the ripple effect of bailout loans from other banking systems begins to impact the ability of developing nations to compete with our corporate needs. This is hardly just a problem for the US middle class. This is truly a problem for all the global poor.

I wish our bishops would start to rail about the intrinsic evil this situation represents. In Benedict's travels in France he gave a sermon in which he spoke about the evil of idol worship and the root of all evil, which is greed. How prophetic he turned out to be.

America's unregulated corporate economy has been given the capacity to destroy the hopes, dreams, and lives of other global people along with the American middle class. This American corporate form of the 'redistribution of wealth' may go down in history as the worst form of social evil ever unleashed on mankind. Trust me, that's not hyperbole, that's going to be fact.

Congress needs to drop the partisanship and finally act in the best interests of the COMMON GOOD. Out of this dark period can come resurrection, but it's going to take people willing to pay the price. The question is, does congress have enough?


  1. I hope that Senator Sanders is heard also. Many are making this connection that we have a socialist form of government for corporations now. The big fish have been swallowing the little fish and getting way too big for their own britches, with no regulation of their greediness. Bailing them out is not a solution, it's a band aid to fix a huge hole in a dam that will only burst again with more losses.

    It continues to baffle me that McCain has the audacity to say he will bring the sort of change necessary to fix our economy when he has been part and parcel a contributor to the problem we are now in with supporting deregulation for years.

    #1 of Sanders proposal is a must.
    #2 of Sanders recommendation to "create millions of jobs rebuilding our crumbling infrastructure and moving our country from fossil fuels to energy efficiency and sustainable energy" would be the way to move us forward out of this economic mess and make us energy independent too.

    I agree totally with Sanders and your analysis Colleen. It's not just about our economy, but the poor in other countries that rely on our charity. If we are unable to help them because of our own economic woes, they will suffer more. The Bishops need to make these connections and be part of the solution.

  2. Has it occurred to anyone to ask, why did this happen now, not two months from now, or two months ago?

    What happened to cause both Lehman and AIG to fail at the same time?

    I do not believe in coincidences, and there are too many that are coming together now. Was there a precipitating event that is being covered up? Is this a divine intervention prior to the election?

    Any ideas anyone?

  3. I kind of wondered about that too Carl. Why all of a sudden are they all going down in the same week. It could be a domino effect in that the depression basically started on substantiated rumor, but you never know.

    All I know is that it is critically important this country take a serious look at what we expect from our economy, both in terms for us as Americans and for us as world citizens. This is not just a presidential election. It is also about 1/3 of our senators, and all our representatives. If we want to make a break from corporate tyranny, this is the time to do it.

    I guess in that sense, I don't see it as an accident.

  4. I think the IRS should investigate the books at AIG and all these failed institutions to find out what happened, and make sure no one put any money in Swiss bank accounts. Our elected representatives should demand this be done. All of these DEALS of government bailouts have been "done in secret and behind closed doors" as Ron Paul says, and the public has a right to know since it is OUR MONEY they are being bailed out with.

    Carl, I'm surprised that the economic downfall didn't happen sooner, but I'll speculate that what finally broke the camel's back at AIG Insurance was probably Hurricane Ike and having to pay in losses and losing that money at Lehmann Brothers.

    From AIG's website, they have elected a new Chairman and CEO named Liddy who is interestingly a graduate of Catholic University.

  5. I'm really pissed off about these bailouts, particularly of AIG. The LA Times ran an article about AIG and the bailout. It states that the Cato Institute was against the bailout. Not knowing much about the Cato Institute I looked it up. There was a recent paper written by Robert Krol, professor of economics at California State University, Northridge entitled Trade, Protectionism, and the U.S. Economy – Examining the Evidence. Although it is not related directly to the bailing out of AIG it is about Free Trade and the promotion of McCain for President. The link to that paper is here:

  6. Carl, I have been mulling over precisely your question. At a cynical level, I sometimes think that there's a deep assumption in American culture these days that the Republicans are the ones most capable of handling economic crisis.

    Money is what they do, after all.

    So I've thought about the fact that if there was control over the timing of these revelations, they could be timed to try to throw the election to McCain-Palin.

    I also think that, sad to say, many people assume Obama is not as capable of dealing with profound economic issues simply because of his skin color! Personally, I hope voters will prove the bigots wrong, but I'm frightened at the possibility that people will vote on the basis of fear of change and fear of the new.