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Friday, September 26, 2008

Bailout Schmailout

I spoke to a friend of mine who is an economics professor at Stanford. He said that he crunched some numbers and that the $700 billion dollar bailout would come to a $9,000 bill to every household in the US. He said that the Savings and Loan "bailout" was structured as a loan to the banks and that the loans got repaid eventually with interest so we taxpayers did not end up losing money. He said his expertise is in employer/labor economics but in talking with his colleagues at Stanford, there was consensus that the "bailout" currently on the table was the wrong approach. He said that we have a good system for bankruptcy and we ought to let the banks declare bankruptcy and then work their way through the process. If that doesn't work, then there's time down the line for some kind of bailout.

Can't say I understand it very well. But I was very happy to sign a petition put out by Credo, my phone service, and write emails to Congress with their points - more a reflection of my outrage at the high-rollers than my knowledge of how to orchestrate the financial steps.

"1. If the taxpayers are shouldering the risk, the taxpayers should reap any eventual benefits. We accomplish this by giving the government an equity stake in every company we bail out proportionate to the amount we give them.
2. If we're paying (more than) our fair share, the CEOs and executives should have to, too. All of the fat cats who got us into this mess should relinquish their stock options and salaries until they start showing us, their investors, that they can once again be profitable. Future salaries should be linked to profitability.
3. No more campaign contributions from Wall Street executives and PACs. Taxpayer dollars should be used to get our nation out of a crisis. They cannot be used to fund giant, powerful lobby operations that will be used to strong arm Congress into making bad policy.
4. Better regulations start right now. Wall Street can't expect to take thousands of dollars out of your paycheck without agreeing to increased transparency and more stringent oversight - the kind that might have helped avoid this mess to begin with.
5. Bankruptcy judges get broader leeway to help homeowners. Why should we lose our homes so the CEOs can keep theirs?"

1 comment:

  1. I absolutley agree! Arno & I were just talking about the bailout and just can't believe it's necessary. If we took 700,000,000,000 (wow, look at those 000) could we give extentions on morgages, increase funding for renewable energy = jobs? And how is it that when a regular person makes mistakes and ends up in bankruptcy court there is no recourse? Yet we can bail out corporations that have siphoned billions of dollars. I know it would be a huge culture shock to live within our means, but if we were actually producing a tangible product, that allowed the stock market to sell shares of, wouldn't that create jobs, stimulate the economy and allow everyone (little people too) get back on their feet? Sounds like a much better use of all those dollars to me.