Strip the Gold from the Money Temple Walls
BUSH RESCUE PLAN FOR WALL STREET AIMS TO PRESERVE
INVESTOR PROFITS AT AMERICAN TAXPAYERS' GREAT COST
US Bears "Collective Guilt" for Economic Ruin –
But Rescue Does Not Mean Any Should Profit
By J. Lange Winckler
At the core of the George W. Bush Administration's emergency economic rescue program is the stabilization of Wall Street investments – and the profits created during more than six years of state-stimulated borrowing to pump profits into Wall Street. Now the Bush Administration proposes that since its economic campaign resulted in an economic collapse caused by the crushing debt of a federally-encouraged spending spree, the taxpayers of America should put up $750 billion or more to make sure Wall Street speculators keep all those profits.
What the Bush Administration proposes, in other words, is a "tails I win – heads, you lose" plan to make certain that a few Wall Street investors and overpaid corporate executives make buckets of money no matter how badly they mis-managed their businesses, no matter how brutally they abused consumers, and no matter how horribly the American nation is crippled for decades to come with the tax burden of guaranteeing the profits of that tiny economic aristocracy in pinstriped suits.
In a sentence, the Bush Wall Street bailout plan is mainly aimed at keeping the rich extremely rich, the poor even more impoverished, and the temple of Wall Street plated with gold.
Unfortunately, the Bush Administration has the world by the short and curly hairs – how, after all, can the worthy investor's accounts be separated from bloated wallets of the greedy pigs that the Bush Administration has always fed with public policy bon-bons? Lawyers have a concept for this – the drop of ink, which once spilled into water, cannot be separated afterward.
There are many millions of worthy investors as caught up in the collapse of the American financial marketplace as those whose immense fortunes are at risk. Individual retirement programs, public institutions of governments around the world, and other interests which benefited from the cowboy economics of the Bush Administration are as much at risk as those whose multi-million-dollar quarterly bonus checks helped motivated the most insane and dangerous economic policies since Marie Antoinette urged the starving of Paris to eat cake.
So the real challenge facing Americans staring at this terrible situation is that of whether to just take the brutal blow of accepting responsibility for the wreckage of the world economy – and in the process, handing billions of dollars to the very people who caused the problem – as a matter of honor and global necessity, or somehow repudiating this debt and hoping the consequent crash won't hurt too long or cost too many lives.
However, that is only the stark set of alternatives the Bush Administration and its minions, including Republican Presidential candidate John McCain, offers American taxpayers.
In fact, under the Bush proposals, the nation would step up and guarantee that the profits of the boardroom boodlers will be guaranteed by the sweat and wages of generations of Americans yet to be born. There is no reason that a rescue plan of sorts cannot be constructedthat does not return profits to those who engaged in an orgy of financial philandering.
It is necessary that the United States accept some cumulative
responsibility for the damage the nation's financial and governmental
irresponsibility has cased at home and abroad. The American people as a whole do own a "collective guilt" for permitting this turn of events to occur. And even under the most stringent of rescue programs, America is going to be stuck with a massive bill.
A just rescue program will first observe that there is no investor of any kind that deserves to profit from the manipulations of the stock market during George W. Bush's Administration. Principally, today's crisis results from ill-advised and unthinking investment in the stock market more than the bad loans taken out by people who could not afford them. But even worse, stock market investors intentionally blinded themselves to the glaring truth of the Republican economy – that the spending was going to stop, that the debt would pile too high, and that eventually the American marketplace would have to face the truth that now confronts it.
One of the great lies now circulating is that poor, unqualified, and incompetent borrowers bought houses they could not afford. That is an absolute lie and slander.
The crisis is not the product of millions of poor people all going broke at once – but of millions of wealthy people who have suddenly run out of borrowed money to spend, to finance banks, to buy expensive cars, to waste on excessive vacations, to spend in any way, productive or not.
This current economic crisis is not really due to greedy and stupid people taking out loans they could not pay – it was caused by wealthy people, and financial institutions, taking out loans on the serene belief that the spending would go on forever and they could eventually get even richer and pay off their highly-leveraged loans without a care in the world.
And the financing for all of that excessive spending came from false stock market riches created by debt-based spending. The money went in circles, from Wall Street to bank accounts, to yacht brokers or champagne salesmen, and back to Wall Street.
Once the money quit going to Wall Street, then the money for banks to lend began to dry up and they could not afford to carry their questionable loans. When the banks began to call in their debts, the money began to grow even more scarce. This is precisely the same situation that brought Wall Street to ruin in 1929, at the beginning of the Great Depression.
Only now the Bush Administration has made a discovery. Taxpayers are much more willing to support actions that they believe will stave off the danger of another Great Depression. And the White House thinks it can guarantee those almost-lost profits on Wall Street using the labor of generations to come.
It is immoral and obscene to think that the United States should guarantee the profits of the privateers of Wall Street. The rescue plan that eventually gets approved should take every penny of profit out of the proposition. Investors who blithely took a flyer on the mad manipulations financed by artificially-low interest rates and debt do not deserve to make one nickel from their speculations, large or small.
Unfortunately, those whose large-scale manipulations of the market, major traders and investment banks, cannot be punished by losing all they put in while everyone else at least escapes whole. Rather, any firm that seeks to slough off its losing assets and stay in business must agree to very stern terms for Federal money, and that will ultimately affect every shareholder in those firms.
And those terms must require that no profit of any kind be realized in the Federal assumption of some debts, nor that any corporate official of any company accepting Federal aid receive more than five times the average annual wage of the company's non-managerial, non-supervisory personnel.
Virtually no one investing in any company accepting Federal bailout money must be allowed to obtain one penny's profit from their investments in what was essentially a thoughtless bet on an endless ride into a rich sunset. Government bailouts do not mean government guarantees of the expectations of profits.
This means devaluing assets, rewriting company balance sheets and statements, and otherwise selling to Federal rescue programs bad debt or other assets at a sharply-devalued rate. It means allowing bankruptcy judges to mediate renegotiation of debt of all whose notes are taken over by the government – and then setting the real value of those notes at the rates set by the courts so taxpayers are not shafted. It means not only sharply limiting current executive pay in all participating companies, but reaching back to 2003 to demand executive re-payment of excessive compensation to the corporate entities.
It will be chaotic, challenging, argumentative and messy, as anything in a democracy always is, but if the profit is taken completely out of the rescue of Wall Street, then maybe America can show it is both responsible and honest. And that will be in sharp contrast to the Republican economy that has led to today's disasters.
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J. Lange Winckler is an historian and writer in Tampa, Florida.