Do you oppose the $700 billion Wall Street bailout? Click here
| Bailout type | Cost to taxpayers (Source: Reuters) |
|---|---|
| Proposed Treasury Department legislation | $700 billion+ |
| Bear Stearns financing | $29 billion |
| Fannie Mae and Freddie Mac nationalization | $200 billion |
| AIG loan and nationalization | $85 billion |
| Federal Housing Administration housing rescue bill | $300 billion |
| Mortgage community grants | $4 billion |
| JPMorgan Chase repayments | $87 billion |
| Loans to banks via Fed's Term Auction Facility | $200 billion+ |
| Loans from Depression-era Exchange Stabilization Fund | $50 billion |
| Purchases of mortgage securities by Fannie Mae and Freddie Mac | $144 billion |
| TOTAL | $1.8 trillion+ |
| COST PER HOUSEHOLD | $17,064+ |
A flurry of Web activism is channelling misgivings about the proposed $700 billion Wall Street bailout into political action.
There is NoWallStreetBailout.com, which asks visitors to sign a petition to Congress. It features a quote from Allan Meltzer, a professor at Carnegie Mellon University's business school, saying: "This is scare tactics to try to do something that's in the private but not the public interest. It's terrible."
The cross-town competition comes from VoteNoBailout.org, which says: "We are witnessing a bankers' coup d'etat. In the name of saving the economy from a crisis created by their own greed and immense profits, the biggest bankers have taken a country and a people hostage."
There's also FinancialPetition.org, plus a humorous, off-color Web site that encourages people to "list" items they want the government to buy.
Public pressure in opposition to the bailout, from these sites and from unexpected sources like the AFL-CIO and Republican Newt Gingrich, may have helped to slam the brakes on what had been an unusually fast-moving process in Washington.
By midday Thursday, news articles began appearing saying a "tentative bailout agreement" had been struck between congressional leaders and the White House. But the day ended with the talks in tatters, an intra-party rebellion by House Republicans, and a promise to continue the meetings on Friday.
Republicans including House Minority Leader John Boehner objected to the proposal as putting taxpayers on the hook for what could be potentially huge losses, according to the summary by The Washington Post. Boehner and his colleagues are backing an alternative that would involve a rescue plan financed by the banks themselves, not taxpayers. (Because their party controls the Congress, Democratic leaders don't actually need Republican support. They want it anyway for political cover.)
Ask an economist whether the $700 billion bailout will harm or help the economy, and the answer will depend on his or her political (or at least philosophical) predilections.
New York Times columnist Paul Krugman said "doing nothing isn't a serious option." Treasury Secretary Henry Paulson told a House committee on Wednesday that doing nothing would "threaten American families' financial well-being, the viability of businesses both small and large, and the very health of our economy." An editorial in the Salt Lake Tribune took a similar approach.
Other economists draw unnerving parallels to the Great Depression, warning that it was caused precisely by this kind of government intervention in the economy. The Competitive Enterprise Institute's OpenMarket.org says the proposed $700 billion intervention will prove to be either "excessively costly or unnecessary." Peter Schiff, a well-known stock market bear and president of Euro Pacific Capital, warned: "We're going to have a tremendous recession if the government does nothing but we're going to have a worse one" if it does. Also see the Huffington Post's reasons to oppose the bailout, and Republican Rep. Ron Paul's warning that "it's the same destructive strategy that government tried during the Great Depression: prop up prices at all costs."
The 1920s boom that led to the Great Depression was aided, and may have been largely caused, by the Federal Reserve's expansion of the money supply by 8 percent a year, or 62 percent over an eight-year period. Such a boom was due for a bust, which started in September 1929.
Instead of taking a hands-off approach, the Federal Reserve intervened on a dramatic scale, in part to allow loans to be taken over; one union leader called it a "barrier against financial demoralization." President Herbert Hoover overruled his Treasury secretary, who counseled a laissez-faire approach, and embarked on programs to artificially keep wages constant (or higher), expand public works, and boost farm subsidies. By 1931, as the Depression was well under way, Hoover was busy calling for an investigation of short sellers. He later summarized his policies as: "We met the situation with proposals... of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic."
It's true that the proposal the Bush administration is advancing today does not come close to the extreme measures that Hoover adopted. But what critics--especially those online--seem to fear is that another step down that path could prove to be an unusually risky one.
Editors' note: For the latest coverage of the bailout plan, see CBSNews.com.
Declan McCullagh, CNET News' chief political correspondent, chronicles the intersection of politics and technology. He has covered politics, technology, and Washington, D.C., for more than a decade, which has turned him into an iconoclast and a skeptic of anyone who says, "We oughta have a new federal law against this." E-mail Declan. 
September 25, 2008
Economists Send Open Letter to the United States Congress on the Wall Street Bailout
44 economists from around the country oppose the bailout
By: Wayne Brough
[If you are an economist who opposes the bailout and would like to be added to this list, please send an email to Wayne Brough at wbrough@freedomworks.org]
We, the undersigned economists, write to strongly advise against the proposed $700 billion bailout of the financial services sector as a response to current trends in the market. Granting the Treasury broad authority to purchase troubled assets from private entities poses a significant threat to taxpayers while failing to address fundamental problems that have created a bloated, over-leveraged financial services sector.
Such a large government intervention would create changes whose effects will linger long into the future. The Treasury plan would fundamentally alter the workings of the market, transferring the burden of risk to the taxpayer. At the same time, the $700 billion proposal does not offer fundamental reforms required to avoid a repeat of the current problem. Many of the troubles in today?s market are the result of past government policies (especially in the housing sector) exacerbated by loose monetary policy. Congress has been reluctant to reform the government sponsored enterprises that lie at the heart of today?s troubled markets, and there is little to suggest the necessary reforms will be implemented in the wake of a bailout. Taxpayers should be wary of such an approach.
In addition to the moral hazard inherent in the proposal, the plan makes it difficult to move resources to more highly valued uses. Successful firms that may have been in a position to acquire troubled firms would no longer have a market advantage allowing them to do so; instead, entities that were struggling would now be shored up and competing on equal footing with their more efficient competitors.
Although it is clear that the financial sector has entered turbulent times, it is by no means evident that providing the U.S. Treasury with $700 billion to purchase troubled assets will resolve the crisis. It is clear, however, that the federal government will be facing substantially higher deficits and taxpayers will be exposed to a significant new burden just as the looming crisis in entitlement spending appears on the horizon.
For these reasons, we find the proposed $700 billion bailout an improper response to the current financial crisis.
Sincerely,
Dick Armey, FreedomWorks Foundation
Wayne Brough, FreedomWorks Foundation
Alan C. Stockman, University of Rochester
Ambassador Alberto Piedra, Institute of World Politics
Arthur A. Fleisher III, Denver Metropolitan State College of Denver
Bryan Caplan, George Mason University
Burt Abrams, University of Delaware
Cecil E. Bohanan, Ball State University
Charles N. Steele, Hillsdale College
Charles W. Baird, California State University East Bay
D. Eric Shansberg, Indiana University Southeast
Donald L. Alexander, Western Michigan University
E.S. Savas, Baruch College/CUNY
Ed Stringham, Trinity College
Erik Gartzke, University of California, San Diego
Frank Falero, California State University, Bakersfield
George Selgin, West Virginia University
Howard Baetjer, Jr., Towson University
Ivan Pongracic, Jr., Hillsdale College
James L. Huffman, Clark University
James McClure, Ball State University
Joe Pomykala, Towson University
John P. Cochran, Metropolitan State College of Denver
Kishore G. Kulkarni, Metropolitan State College of Denver
Lawrence H. White, University of Missouri-St. Louis
M. Northrup Buechner, St. John?s University
Melvin Hinich, University of Texas, Austin
Nikolai G. Wenzel, Hillsdale College
Norman Bailey, Institute of World Politics
Paul Evans, Ohio State University
Randall Holcombe, Florida State University
Richard W. Rahn, Institute for Global Economic Growth
Robert Heidt, Indiana University School of Law, Bloomington
Rodolfo Gonzalez, San Jose State University
Roy Cordato, John Locke Foundation
Samuel Bostaph, University of Dallas
Scott Bradford, Brigham Young University
Soheila Fardanesh, Towson University
Stephen Shmanske, California State University, East Bay,
T. Norman Van Cott, Ball State University
Walter Block, Loyola University New Orleans
William Barnett, II, Loyola University New Orleans
William F. Shughart, II, University of Mississippi
William Niskanen, Cato Institute
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Additionally, what we are witnessing is far more than just a deepening economic trough; we are seeing the end of The Debt Standard of Money. Our entire economy depends the creation and expansion of debt, every "dollar" or I should say every Federal Reserve Note, must be "borrowed" into existence and each "dollar" is nothing more than a legal notification of a debt obligation or a "glorified" IOU. As with all Debt Monetary Systems (fiat), ours will face the same fate as those which came before it, it will collapse under the weight of the massive and irreversible debt upon which it rests.
There are 300 million US citizens that pay taxes. These are the people that are losing their house, job, car, and have poor health.
Congress and the President should just pass a bill that gives one million dollars to each registered tax payer so they can pay off all debts and own their own houses and not only will it fix the economy but stop banks from failing as well.
Instead we have $700 billion in government waste and corporate bailouts of really stupid banks and those 300 million US tax payers are going to pay for it all with higher taxes in the next few decades and the US government will owe more trillions to the Chinese.
But I guess they won't do it, because it is logical, uses common sense, and seems to be the less expensive way to fix things.
If we use realistic taxpayer numbers we find the IRS recording 138 million taxpayers in 2007. Of those 138 million approximately 1/3 paid zero in taxes. This means that 92 million taxpayers actually are contributing and would feel the direct burden of the bailout - because they would be paying for it.
Still, if we paid each of these 92 million a rebate of $1 million it would cost $92 trillion - a sum that the US would have to collect by borrowing through issuing more T-Bills (if we could even get investor nations to purchase that much debt) and in so doing would increase the national debt by a factor of 10 from $9.7 trillion to $101 trillion.
Additionally, this approach would be fiscally irresponsible since it would (A) put the nation in debt loads too severe to repay, and (B) lead to hyper inflation the likes of which even the Weimar Republic in Germany never saw.
Come on! You can't be that naive! You obviously understand nothing about economics.
What are you going to do when every business in the country closes... yes closes!
Who's going to work there for $10.00 an hour when your a millionaire?
Where are you going to spend your money?
They'll have to pay people $300.00 an hour to work at Wal-Mart... and a gallon of milk would probably be $120.00... not to mention the price of a car or a house! Think beyond they pipe dream that you?re going to get something for nothing and pawn it off on the children.... THAT?S what got us into this mess in the first place!
Let the market crash and then correct itslef... don't prolong it by involving the government. Nothing the government has ever gotten involved in has ever gotten better... it's not the nature of the beast!
http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print
-I
But you do make a statement that's peculiar, that economists and people in the financial industry that have no more stake than the rest of us support this bailout. Well, everyone in the financial industry has a stake in this more than those outside it. Even the mail-room clerk's job is dependent on this. But it misses the bigger point that nobody outside the financial industry, treasury (run by the recent ex-CEO of Goldman Sachs), and part of congress support it.
Academic economists have widely balked at the proposal and hundreds of professors (including some with Nobel Prizes in economics, and laureates), and they have petitioned the Congress to reconsider, and, at all costs not be hasty. None seem to feel that costly, immediate action, at the sole discretion of a single individual (who's largely responsible to bankrupting Goldman Sachs), is wise. They seem to think that stepping back and taking time to make a plan and get it right is more important that responding immediately.
http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print
Stop your tired blame Bush idiocy. Congress is to blame because they are the regulators. Congress is controlled by Democrats and when the Republicans controlled it the democrats BLOCKED reform. See through their excuses - though I doubt you will because you don't want to.
America, stop playing politics and look at the bigger picture, stop concentrating on your own self interest, and fix this situation of your own making, so that others in the world may get on with their lives with a little more security. Remember the USA accounts for less than10% of the worlds population, how unfortunate that it should have such a major influence.
The solution to this mess is simple.
There are 300 million US citizens that pay taxes. These are the people that are losing their house, job, car, and have poor health.
Congress and the President should just pass a bill that gives $2000 dollars to each registered tax payer so they can pay off all debts and own their own houses and not only will it fix the economy but stop banks from failing as well. That is $600 Billion in fixing the economy.
Instead we have $700 billion in government waste and corporate bailouts of really stupid banks and those 300 million US tax payers are going to pay for it all with higher taxes in the next few decades and the US government will owe more trillions to the Chinese.
But I guess they won't do it, because it is logical, uses common sense, and seems to be the less expensive way to fix things.
Meanwhile, they'd help out further by abolishing interest-only mortgages (unless the mortgagee can prove he/she makes over $x per year), and cap mortgage interest rates to x.x% over federal prime.
/P
Bailout? not necessarily, but knowing the consequences for us (the American citizens & the U.S. as a country) must be done with full understanding for the long term. A task that can't be done overnight.
A decision on the US economic roadmap must happen right away. To do nothing will put our system so far into crisis, it will take generations to recover, if that can even happen.
Debate? OMG! How self serving, when we are truly in peril of never seeing the US the same way (in a good way) again.
Senators, get to work and quit the politicing. For once, put yourselves and your campaigns aside for a greater good.
This simple graph matches the total US debt problem. We have made a system of increasing the US money supply, entirely by issuing debt, now approaching 100 years. Each year, the dollar that our forfathers borrowed and didn't repay, has about $380 of interest! Sorry kids, throwing $700 billion of new debt in, won't solve the real systemic problem.
A US Treasury Dollar, declared by law equal to a Federal Reserve Note, spent into existence (with restraint), not debt, appears to be a realistic answer. Increase of the Dollar money supply cannot carry interest and expect the US citizens to carry the rapidly increasing burden of high usury. Retirement of currency through payment of taxes, keeps unrestrained growth in check, creating stability. This method could make new capital for worthy ventures to be undertaken here in the US.
I'm sure the WaMu CEO and CFO live incredibly luxurious lives, so instead of we the people paying for the banks failures, how about we take seize the property of the executives and board of directors for these failed companies and auction it off. I think they can live without their personal jets and helicopters and their $100k sports cars. Kick them out of their mansions and make them live like the people they screwed over.
Any CEO and CFO of these failed banks should be banned from holding another executive position. If you don't send them to jail, at least take everything they own and force them to flip burgers and serve fries at a local fast food place.
What's that definition of insanity again? Doing the same things and expecting a different result, right?
Good grief folks, its time for some sanity.
Will the firms who sell the assets to the government take a hit? The answer is yes. The sale price will be less than their face value.
Should government do this? Generally no but in this case it was government that played a large role in creating the problem. How, by encouraging and "persuading" lending institutions to relax and sometimes abandon sound lending practices. This brought in a large influx of non credit worthy people who would not have been approved given normal lending criteria. Add to this the speculators who entered to home market by buying homes with the goal of flipping them in a few months at a significant profit.
Does the government need to take action? Yes, Is the bill that finally emerged fromt he committee the answer? Likely no. What finally emerged was something that unlikely would ever work.
The 3 top auto manufacturers were given $25,000 billions dollars yesterday and is asking for additional $25,000 billion dollars. Where will this money come from? Why do we have to update their factories to get better milage? Remember the hybrid money, who promised 80 MPG and only came up with 30 MPG? What did we get for our money?
Now we are going to give more for more promises>
- by Yirmin September 26, 2008 7:13 AM PDT
- We have two options..
- Reply to this comment
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Showing 1 of 4 pages (105 Comments)Do nothing and the economy will be hit hard and average joe will suffer some hardship, and the rich will suffer even more hardhsip.
Or
Do a bailout and the economy will be hit a little now and even harder 10 years from now, and average joe will be hit hard now and harder later, and the rich will go on about their business suffering nothing at all.
Well frankly I feel like the suicide bomber on this one. I'm willing to do nothing and make damn sure that others suffer along with me instead of allowing the government to heard the average joes to slaughter while the rich go on business as usual.