“By coming together on this legislation, we have acted boldly to prevent the crisis on Wall Street from becoming a crisis in communities across our country,” said President George W. Bush, less than an hour after the House of Representatives voted 263 to 171 today to pass the $700 billion Wall Street bailout – er, financial rescue plan. Excuse me.
And, yesterday, Thus Spake Obama! “You have this extraordinary moment in your hands because you’re not going to be able to afford to be disengaged… We will rise or fall as one nation, as one people.”
You want to know something? I’d have to agree. He’s not lying. This collective takeover of banks – that is, the illiquid assets on the books of our nation’s banks – is the largest, and somehow the most elusive, expansion of the federal government in the history of our nation. Under this plan, none of us will be able to afford not to be affected, and we will rise, or fall, together now, brought down by the irresponsible decisions made by home buyers, predatory lenders, and politicians who lifted regulations on mortgage-backed securities.
Do you know exactly where your taxpayer money will be going in this bailout? Does anybody?
Today, we all collectively bought $700 billion worth of troubled assets to ease the crisis on Wall Street, an action that will cost working families somewhere between $6,000 and $10,000.
The problem is, most Americans don’t have that kind of cash on hand. We’re not even considering the other bailouts that occurred this summer. In May 2008, Bear Stearns investment bank was bailed out for $30 billion. Fannie Mae and Freddie Mac were bailed out for $200 billion and AIG for $85 billion in September. Also in September, the federal government gave $25 billion to the Big Three Detroit automakers. The Outstanding Public Debt as of 3 Oct 2008 is $10.1 trillion. Without today’s added bailout, each American already owes the federal government more than 33,000 dollars in tax money.
Let’s face the facts: This housing issue will not be fixed until those who could not afford their over-inflated houses, artificial interest-only loans, or variable mortgages are out of those houses and their foreclosed assets are properly liquidated. Plain and simple. Boosting the Dow Jones Industrial with $700 billion dollars – to be withheld – is furthering an illusion of wealth and prosperity among our financial institutions. Furthermore, don’t you find it strange that the last three Treasury Secretaries have been former Goldman Sachs CEO’s? Hank Paulson made $600 million at Goldman Sachs. Why did he try to push the bailout through post haste? Where were the limits on golden parachutes in the original bill? How will Goldman Sachs fair in this bailout? OK, so I’m a conspiracy theorist, and I digress.
Are we headed towards a depression? According to Austrian economists Friedrich Hayek and Ludwig von Mises, the key cause of the Great Depression was the expansion of the money supply in the 1920s that led to an unsustainable credit-driven boom. In February 1929, Hayek predicted the economic downturn, stating that “the boom will collapse within the next few months.” Ludwig von Mises also expected this financial catastrophe, and is quoted as stating, “A great crash is coming, and I don’t want my name in any way connected with it,” when he turned down an important job at a bank in early 1929.
As President, Herbert Hoover also raised taxes during the Great Depression, by all accounts making problems worse. Today, how do we lower the deficit without raising taxes? Well, there is only one way: cut spending. That means the government must take on less, not more, as in the case of this bailout deal. If your Congressman doesn’t understand that, vote him or her out of office. I applaud any Congressman who voted either way based on conscience, regardless of their vote, but they better be ready to defend their vote during this final month of campaigning. Congress should have reformed this bill first to carefully regulate the market before sending the invoice to those responsible Americans, the makers, who will have to pay for the irresponsible actions of the takers.
But, according to Congress, the Treasury, the Fed, and the White House, this bill HAD TO BE PASSED to save our economy! And after the President signed it into law, the Dow Jones Industrial Average rallied, right? No, actually, it dropped 157 points.
“The budget should be balanced; the treasury should be refilled; public debt should be reduced; and the arrogance of public officials should be controlled.” – Cicero, 106-43 B.C.
“We are ready to accept almost any explanation of the present crisis of our civilization except one: that the present state of the world may be the result of genuine error on our own part, and that the pursuit of some of our most cherished ideals have apparently produced results utterly different from those which we expected.” – Friedrich Hayek, 1948
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