The Bush administration and congressional Democrats are agreed on a bank-robbery-in-reverse to bail out the titans of Wall Street--but the Republican free-market madmen are getting in the way.
Socialist Worker USA editorial- September 26, 2008
BY DAY, it looked like an honorable agreement among thieves--Democratic and Republican lawmakers joining together over a White House conference table to hammer out the basic points of a $700 billion bailout of the Wall Street financial system at the expense of the vast majority of Americans.
But by nightfall, the deal was falling apart--with consequences so dire from the point of view of the corporate and political elite that even George Bush could grasp it. "If money isn't loosened up, this sucker could go down," Bush said during the White House summit meeting, according the New York Times' account.
Just to be clear: When he said "this sucker could go down," Bush wasn't talking about the bailout plan.
He was talking about the American financial system.
Even the mainstream media were stunned by the details emerging Thursday night of what went on behind closed doors in the White House Cabinet Room at a meeting that brought together leading members of Congress from both parties; the two presidential candidates, Barack Obama and John McCain; and George Bush and assorted administration officials.
Beforehand, Congressional leaders said they were basically united on the bailout plan. It seemed like Bush and the two presidential candidates would give their stamp of approval, and the deed would be done.
But then, according to reports, House Minority Leader John Boehner announced that he and fellow Republicans just couldn't go along with a proposal that violated their free-market principles by putting the private sector's financial assets--worthless though they may be--into the hands of the federal government. The meeting then devolved into shouting matches and recriminations, according to reports.
The irony is that the wider public opposes a bailout on the terms that the Bush administration--that neoliberal scourge of "big government" when it comes to other countries--wants to impose: take immense sums that could be used to help ordinary people suffering through foreclosures and growing joblessness, and hand it to the bunch of rich, corrupt parasites who caused the problem in the first place.
But in Washington, opposition to the bailout is coming from the right--from the "free-market fundamentalists" of the Republican Party, whose proposal to resolve the financial meltdown on Wall Street isn't more regulation, but less. Oh yes, and--of course--cut the capital gains tax and other taxes on the tiny minority at the top of society that has grown unimaginably rich during the 2000s, not to mention the preceding two decades.
In other words, the Republicans are opposing a plan put forward by the incumbent president of their own party--and the Democrats are fronting for their supposed sworn enemies in the Bush administration, having given up on any real measures to help working people suffering through the current crisis.
No one knows what will happen next--even by the time this article appears on Friday morning. But it certainly won't be a return to stability and certainty that the politicians promised when they gathered at the White House.
Oh, and by the way? While all that stuff about what happened at the White House was emerging Thursday night?
This one other thing happened: The U.S. government seized Washington Mutual, the largest savings and loan in the country, and promptly sold off the bulk of its assets to super-bank JPMorgan Chase at bargain-basement prices.
The financial press has been warning ominously about the imminent collapse of WaMu, as it's known, for weeks. But the actual event looks destined to be the second story on a Friday morning where uncertainty about whether the financial system stands on the brink of outright collapse is that much more grave.
- - - - - - - - - - - - - - - -
NO ONE should be fooled by the demagoguery of the right-wing Republicans, who claim to be standing up for ordinary Americans. The Bush administration plan, supported by Congressional Democrats, to funnel $700 billion of taxpayers' money into bank vaults is about saving the corporations and super-rich investors that the Republican Party serves above all else.
Under the scheme proposed by Treasury Secretary Henry Paulson, the government would buy up bad debts--in the form of bonds and securities that are tied to mortgages--from banks and other financial institutions. According to Paulson and Federal Reserve Bank Chair Ben Bernanke, once relieved of these bad debts, banks would resume lending in the normal amounts that will keep the economy moving.
Under the original draft of the plan, Paulson and future treasury secretaries would get dictatorial powers over the use of this money, making a mockery of the U.S. Constitution. The only people influencing Paulson's decisions would be the Wall Street bankers he hires to advise him.
What's more, Paulson says, the deal has to be passed immediately to prevent the crisis from triggering a meltdown of the world financial system. George W. Bush did his best to stir up such panic in a nationally televised speech on September 24. "Without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold," Bush declared.
With a job approval rating of just over 30 percent, Bush hardly has the credibility to rally people to support such a drastic measure. This is the man who said that the Patriot Act had to be rushed into law to defeat terrorists, that Saddam Hussein was threatening the U.S. with weapons of mass destruction, that Iraqis would welcome U.S. invaders, and that the U.S. had accomplished its mission in Iraq by May 2003.
Who, then, would leap into action over anything this lame duck--make that dead duck--administration says at this point?
No one. Except Congressional Democrats, of course. As popular discontent brewed over Paulson's outrageous proposal, Wall Street's favored Democrats--Sens. Chuck Schumer and Chris Dodd and Rep. Barney Frank--looked for ways to sell the bailout proposal.
They came up with a few fig leafs. These reportedly include a toothless oversight board for Paulson's program, limits on executive pay for the already super-rich CEOs of companies that participate in the program, and a means by which the government could acquire stock in companies in order to recoup taxpayers' money if the bailout succeeds.
But none of these add-ons change the thrust of the plan, which empowers Treasury Secretary Paulson--himself a former Wall Street executive--to single-handedly control $700 billion, and send that money straight to his banker colleagues.
And unlike the savings-and-loan crisis of the early 1990s, when the U.S. government acquired the real estate assets of bankrupt S&Ls, the U.S. is planning to buy bonds tied to mortgages, and even more obscure financial instruments indirectly tied to those bonds. Much of this paper is worth little or nothing, given the decline in house prices and the rise in foreclosures.
Nevertheless, Fed Chair Bernanke had the nerve to argue that the government should overpay for these securities on the ground that their value will increase over time.
In effect, Paulson and Bernanke--and the Democrats who are fronting for their plan--are acting like highway bandits with a gun to the head of a hostage, and saying: Hand over the $700 billion right now, or the economy gets it!
- - - - - - - - - - - - - - - -
THE CRISIS and its phony bailout solution beg a question so obvious that even some politicians are asking it: Why should the banks and financial institutions that caused this catastrophe get rescued, but ordinary people at risk of losing their homes or their jobs have nowhere to turn.
If the government is willing to spend at least $700 billion on banks, why can't it find a fraction of that for the other victims of this crisis--the vast majority of them completely blameless, unlike the banks?
Such questions can't be answered except with the obscene truth--in this twisted system, the lives of a small minority of rich and powerful matter more than everyone else's.
Voices of outrage against this deal are being heard everywhere--thus, hundreds turned out on Wall Street Thursday for a protest against the bailout. This points to the potential for similar organizing in the future.
Whatever the fate of the Paulson bailout, though, this crisis is an indictment of capitalism. Even with regulations and government oversight, at the heart of the free market is blind, irrational competition, with the primary priority being the enrichment of a few at the expense of society as a whole.
The scale of this crisis has led to what many are calling "Wall Street socialism"--the gains left in private hands, while the public gets stuck with the losses. It's time to revive a discussion of genuine socialism: a planned economy, democratically controlled, so all the vast resources and potentials in this world are used for meeting everyone's needs.