News & Views from 465 California Street

$1,014,000,000,000 (and counting)

Clint Reilly
Sep
30
2008

The big numbers keep piling up. First there was Bear Stearns’ controlled implosion, which cost $29 billion. Then Fannie Mae and Freddie Mac flatlined, eliciting another emergency injection of $200 billion and a government takeover. AIG teetered and fell into an $85 billion safety net. Then came the request for another $700 billion from the Treasury Department and Federal Reserve to save Wall Street from itself.

Wow! That’s a ton of scratch – even for Uncle Sam’s deep pockets.

To justify the unprecedented zeros, Wall Street bankers argue that our financial system will collapse without the intervention, taking with it the machine that keeps the American economy generating taxes and jobs. A new depression would ultimately cost Americans far more. President Bush reasserted this message when he addressed the nation last Wednesday night.

By contrast to this trillion dollar grift, many social programs long castigated as “too expensive” by conservative critics seem positively cheap.

Start with health care, at $100 billion to cover all of America’s 47 million uninsured.

Immunizing every child on the planet against measles, whooping cough, tetanus, tuberculosis, polio and diphtheria would go a long way toward restoring America’s image abroad, and it would cost only $600 million!

Or we could try properly funding some of our important existing programs: The federal budget for Temporary Assistance for Needy Families is $16.9 billion. We allot only $5 billion for cancer research. Never mind that 1,500 Americans die from cancer every day.

The formerly staggering costs of sending our kids to college, fully funding public education, repairing our nation’s roads and bridges and building badly needed new schools seem cheap next to the $1,014,000,000,000 price tag of the credit crisis.

I have always winced at the self-righteous attitude many business leaders have toward politics and politicians. This disdain is manifest in the lobbying agendas of many private industry groups and the public testimony of many corporate executives.

They routinely attack fiscal imprudence in the public sector even as their companies squander billions. They are the first to criticize public sector salaries while they themselves earn millions without risking any of their own capital. Industry lobbyists condemn extravagant retirement packages for municipal employees, police and fire personnel, while corporate executives angle for multi-million-dollar golden parachutes for themselves behind closed doors.

These corporate mandarins were the architects of the 1990s savings and loan scandal, the 2000 dot-com meltdown, and the 2008 credit crisis. And yet they accuse the public sector of professional incompetence, financial negligence and gross mismanagement.

Sadly, the federal government’s power to oversee Wall Street has eroded dramatically over the past quarter century. New institutions like hedge funds and mega investment banks have escaped regulation by the Federal Reserve, the Treasury Department and Congress. Even as big business brings our nation to the brink of financial Armageddon, their propaganda machine tries to convince taxpayers that government was the real culprit.

In President Franklin Roosevelt’s 1932 inaugural address he laid the blame for the Great Depression squarely on the shoulders of the Wall Street establishment:

“The rulers of the exchange of mankind’s goods have failed through their own…incompetence…They have no vision, and where there is no vision, the people perish.”

Roosevelt concluded by proclaiming, “The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of that truth lies in the extent to which we apply social values more noble than mere monetary profit.”

I hope President Barack Obama delivers an equally eloquent condemnation of Wall Street’s incompetence and greed in his 2009 inaugural address. And in his first 100 days as president, he should lay out a Rooseveltian agenda to restore critical oversight and regulation to a financial system bloodied by its own unbridled avarice.

Comments (6)

  • You may have won a judgement against the Contra Costa Times/Bay Area News Group, but your columns appear to be right out of the Democrat’s playbook. While business is much of the problem in today’s society, the larger problem is the entrenched politician – from the locals all the way to Congress (in which the Democrats hold a majority). Additionally, many of their staffers have been there for years – helping to perpetuate their own ideals and retain their jobs.

    In my 60+ years, I have met only ONE politician who was completely honest and forthright – and that was in Washington (state) in the 1970′s. The rest of these politicians – like it or not – are concerned with only one thing…… and that’s to pander to the public, telling them what they want to hear, with the sole intent of being re-elected – all under the guise of “public service.” Witness the recent indecision of the Wall Street bailout – half of these politicians don’t know how to vote, because the election is only 5 weeks away – that tells me they don’t have the backbone/guts to make a real decision to benefit the country.

    BTW, let’s not forget that Barney Frank and many of the other Democrats indicated a number of times since 2004 that Fannie Mae and Freddie Mac were solvent and there were no problems – despite concerns raised by John McCain and others.

    My opinion – throw ALL of the incumbents out of office for incompetence….. from Congress on down. I am tired of paying taxes for an inefficient government run by incompetent self-serving politicians who are concerned ONLY with spending more and more, while creating unnecessary laws – and not addressing the real issues. As an example – look at the budget mess in Sacramento…. those politicians spend the year screwing around with nonsensical laws, and ignore the budget until it’s too late – then whine about the Republicans being unfair to the poor…. and then demanding a simple majority instead of a 2/3 majority to (essentiall) make it easier to raise taxes, while calling the plan to assign redistricting to an independent commission a “power grab.” No thanks – the Demos got us into this mess. They can’t/won’t/don’t know how to get us out.

    Lastly, Obama is NOT the president – in case you’re wondering. While you’re entitled to your opinion, I would suggest you stick with the facts to support your opinion. Obama is nothing more than an empty suit promising “change” (whatever the hell that is). As far as I’m concerned, your “column” is nothing more than a “paid” advertisement for the Democratic Party. Stick with the facts. We certainly DON’T need another FDR!

    Fred

    Posted by: Fred | September 30th, 2008 at 12:31 pm

  • Clint,

    True, FDR blamed Wall Street. However, “providing for the general welfare” is the government’s responsibility. FDR, Hoover, and Congress were out to lunch. They are the real “rulers of the exchange.”

    I suppose FDR will be remembered for many quotes. For me FDR’s Big Lie was “I will not send our boys to die in Europe.” What a whopper. Well, he was elected and the result was 292, 131 young Americans killed under his watch.

    I plan to vote for Obama too. He received $500,000 from Fannie and Freddie (and so did McCain), cash cows for politicians. One would be naive to believe they were set up for the home buyers. Fannie and Freddie will be around because of the avarice of politicians’ need for money.

    Article I, Sec 8 of the constitution lays the responsibility of the current credit crisis squarely on an irresponsible Congress; but I must remember that the Constitution is a living, breathing document and means whatever Congress says it means. Barney Frank and Chris Dodd led the charge for “no down” mortgages which has led to the current meltdown—-and they are now in charge of solving the problem they caused—-Imagine that!
    Respectfully………….Hank R

    Posted by: HankR | September 30th, 2008 at 12:34 pm

  • Hello Clint,

    instead of watching our 401Ks drop in value month after month, why doesn’t Congress let us withdraw our 401K funds without penalty for Real Estate purchases?

    This would help all types of home owners and help clean up some mortgages in the process.

    Just one idea to consider before Congress is pushed into a hasty decision by a president who lied to us in the past and has used this type of crisis tactic in the past.

    Bruce Garofalo

    Posted by: BGarofalo | September 30th, 2008 at 12:57 pm

  • I found your column very inciteful and I agree with
    Roosevelts analogy of Wall Street;however, don’t hold your breath for
    any condemnation from Obama.Both McCain and Obama had an opportunity
    at the debate to condemn Wall Street,thus scoring points with voters
    such as myself.Instead they dodged the issue like a hot potato.I have
    no faith in either candidate to stand up to the corruption that has
    permeated our governmental bodies and do right by the american
    people. Thank you

    Posted by: D.Leslie | September 30th, 2008 at 11:17 pm

  • I enjoyed reading your column of September 30, 2008. And, while I
    could easily take you to task on virtually every point you attempted to
    make, I’d like to focus upon your biggest, most glaring and important
    omission.

    Greedy Wall Street fat cats are, in fact, important players in the
    financial debacle we find ourselves in today. They constructed the
    complicated financial instruments that facilitated this mess, and made
    millions for not only their Wall Street peers, but for thousands of
    realtors, bankers and mortgage brokers along the way. Executives at Freddie
    Mac and Fannie Mae were complicit as well and deserve much of the blame,
    notwithstanding the praise they received few years ago from representatives
    Barney Frank and Maxine Waters. And, of course, you cannot ignore the
    political pressure to extend credit to unworthy borrowers imposed upon
    these institutions by the same Barney Frank. After all, shouldn’t every
    American be able to own his or her home?

    What’s missing from your column of September 30, is the same thing
    that missing from the columns of your liberal brethren; the responsibility
    of the individual to do the right thing. No one put a gun the heads of
    these people borrowing money they knew they couldn’t afford. But, in your
    mind, and the minds of other liberals, they’re the victims in all this. We
    are after all, “trying to keep Americans in their homes”. But where is it
    written that every American gets to own a home? And if they get to own a
    home, shouldn’t they get to own a new car, a new flat screen television,
    have all their medical bills paid and be able to send their children off to
    college for free? According to you, the answer is an obvious yes. In fact,
    you’d like to extend the generosity of the American taxpayer to immunizing
    the rest of the world against measles, whooping cough, tetanus,
    tuberculosis, polio and diphtheria and thereby help America improve its
    “image” in the world. It’s simple. If I buy a car I cannot pay for, I get a
    visit from the repo man. If I get in over my head, spend recklessly and
    can’t afford to pay my bills, I don’t deserve to own a home.

    So what’s going to happen? The American taxpayer is going to foot the
    bill to help these people stay in their homes. The loans will be
    restructured by extending the borrowing period, and/or by reducing the
    amounts of principal owed, and interest rates charged. The irony here will
    be that your neighbor, who spent recklessly, borrowed more money than he
    could afford, and maxed-out his home equity loan by buying that 80 inch
    flat screen television, will end up with a restructured mortgage with terms
    better than yours. The hopeless “victim” in all of this, the patron saint
    of the democratic party if you will, will emerge victorious, free to start
    over and do it all again.

    Posted by: C. Peterson | October 1st, 2008 at 10:38 am

  • The only one i truly believed and had mucho faith in to clean up this mess was Mrs. Hillary Clinton.

    If John Edwards had been exposed of his moral shenanigans and/or the Mainstream Media been more fair and kind to Hillary, she probably would’ve been preparing for her Inaugural Address yesterday. Sen. John McCain wouldn’t have had a snowball’s chance against her at any point.

    Fixing the Economy will be an arduous task. It seems as though it could only be “band-aided” from becoming economic disaster at this juncture and that’s IF the Republicans put aside their Party pride and act quickly for the nation as a whole. Blaming Speaker of the House Nancy Pelosi for the bailout failure when all she did was point out the corrupt and greedy policies of the Bush administration’s cronies and Wall Street robber barons was yet again, the steadfast Republican way of privileged politics for the few, as opposed to righteous politics for the general good of the many/majority which is why we have an elected Gov’t to serve “US”. “We, the People”.

    We’ll see if this bailout (which is mandatory and NECESSARY) gets passed without futher delay. Yes, we’ve been held hostage to this bailout (and future ones), but we can’t cry over spilt milk. We just gotta find a way to not spill anymore..i.e. reverse this trend. We gotta take our medicine like a champ. The more bitter the pill, the harder the lesson we learn which will scare us next time to not go down this path. Serve as a hard reminder.

    Just my opinion which is worth no more than 2 copper Lincolns. Oh, precious metals! :)

    “Barack ‘n’ Roll ’08″

    Posted by: Don Nguyen | October 1st, 2008 at 10:57 am

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