September 22, 2008 -
Dean Baker on the Proposed $700 Billion Bailout of Wall Street, the Largest Government Bailout of Private Industry in US History
Its being described as the largest government intervention in private markets since the Great Depression. The Bush administration has asked Congress to swiftly approve a massive $700 billion package to rescue the crippled financial institutions on Wall Street. Some analysts say the final cost to taxpayers could top one trillion dollars. Over the weekend, the size of the proposed bailout grew as the Bush administration said foreign banks, including Barclays and UBS, should be eligible for the bailout.
Dean Baker, Economist and co-director of the Washington, D.C.-based Center for Economic and Policy Research. He is a frequent commentator and columnist, and his blog is called Beat the Press. He is the author of several books including The United States Since 1980 and The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer.
Well, essentially, what the President has asked for is a $700 billion blank check. He wants Congress to hand over $700 billion to Henry Paulson to use to buy, you know, bad originally mortgage-backed securities. Theres apparently an effort by the financial community to broaden that, but basically he would have a blank check to bail out Wall Street.
And let me just make one point that everyone should be very, very clear on. This was not an accident, in the sense that this is like a hurricane. This was a totally predictable event. So when President Bush or Henry Paulson say, you know, we have to come to the rescue, it is because of their incompetence, because people who understood the economy—and putting myself among those, but there are others—we were warning about this a long, long time ago. This was a totally predictable event that brought us here.
The bailout should not be fun, if its constructed right. The way this should be constructed is, if youre on the edge of bankruptcy, you come to the Treasury, and you get the money. But guess what? Youre selling your company, and you also have serious limits on CEO pay. You know, you only get $2 million a year; hows that? Or maybe less. You know, some people have proposed less than that. But the bailout has to be punitive, if its serious. It shouldnt be a field day. We shouldnt have people lining up to get in. Thats telling us that this is not a serious bailout. So the idea that the administration is proposing is that the people who were engaged in incredibly reckless behavior, who made out like bandits, getting tens of millions of dollars in salary and compensation over the last few years are now going to get this $700 billion blank check from the American taxpayer. Its just unbelievable.
Well, weve been knowing since six years. The basic story was, we had a housing bubble, which, again, these people are supposed to be smart. Theyre paid tens of millions of dollars. They should have recognized the housing bubble. They should have recognized that house prices would fall, as they have been. And what that meant was, you made a loan on a house for $250,000, $300,000, $400,000, that house price was likely to fall. So if you did that with zero down, as many of them did, plus having mortgages, you know, the predatory mortgages, the subprime mortgages that have got them in particular trouble, these were guaranteed to go bad in many cases.
They acted as though house prices would just keep going up forever, and they could just keep, you know, going along these lines. They leveraged themselves to the hilt. The investment banks, like Lehman and Bear Stearns, leveraged themselves to a ratio of thirty-to-one. In other words, if they had $10 billion in capital, they had loans on the order of $300 billion. I mean, this was just asking for disaster.
And, you know, again, it did collapse. It was totally predictable it would collapse. You know, I didnt know when, didnt know exactly who, but it was totally predictable. And now theyre running to us and asking us for handouts. Think of what we do to welfare people, when they—you know, everything they have to go through to get, you know, a $500-a-month check, and these people want billions, no questions asked. Unbelievable.
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Constantly, Constantly Robbing you !!! He lies about wars, about 9/11, about being worried about "main st".
He is a dog, lier, cheating, robbing bstard and you people need to get him arrested AFTER the elections.
And MC Cain needs to be kept away from anything sharp, including politics.
mikeybrumbrum 3 years ago 2
Your senate is SO "under the thumb" of th e CIA, that they had to STOP arguing, and go along wiht this THEFT. They have a chice: co-operate = get millions of dollars in bribes
Dont co-operate = get killed !
Just like ancient Rome, and the ORIGINAL senate, on capitol hill !!!
mikeybrumbrum 3 years ago
When I spoke of "putting them in office and taking them out",I meant the Senators and Representatives.If they want to sell us out to the rich,then we need to exterminate them thru the vote!A majority of the laws made in Congress are geared to KEEP the poor down.Many appear initially to be for ordinary citizens but implicitally the "elite" are better served.
Evrastus 3 years ago
Fushsia,I have thought about this a lot.I have to agree with you.We poor may suffer for a while either way but I think we will suffer less damage if the bill does not pass.If it passes I think that the damage will be IMMEDIATE and extremely erosive to our future economic intrastructure.We need to let the greedy part of our society know that we don't scare so easy!Look at what they are doing to us now and they haven't even been given a"blank check" yet!We put them in,we can put them out of office
Evrastus 3 years ago
You guys need to keep calling them and let them know to keep voting against the bailout or else you will vote them out of office! The Senate passed the bill last night and now you need to keep Congress from doing the same!
Fuchsia 3 years ago
All non-rich Americans will suffer, whether or not this ridiculous bill is passed! Paulson and Bernanke will still be ok with their millions and billions
Fuchsia 3 years ago 2
Let them lose everything and have to move into homeless shelters!
Ba101 3 years ago
"money masters" video. 3 plus hours of the history of centralized banks in this country and said this was on the way.
Our hard work isn't going to stop the transfer of wealth from us to the wealthiest.
Ba101 3 years ago
I just feel like either way, the average person is going to suffer. If they approve the package, they'll use it to cover themselves. Unemployment is high, prices are high, gas is high, but my wages remain the same. I'm at the point where I really don't care if we have a depression anymore. Inflation will skyrocket when this money is printed. So I'm going to be screwed anyway. I say let the fat cats on wall street burn too.
Stargirl70 3 years ago
rpm297,that makes sense,also why not make it mandatory for realtors,at the purchase of property,make it quite clear,upfront,the difference in a FIXED INTEREST MORTGAGE LOAN and an ADJUSTABLE RATE MORTGAGE! I have found that the major reason that many people are losing their property because they were not made aware of the consequences of timing and "going in low and going into disaster later"! This seems to be the cause of so much loss of property.What do you think? Love 2 you.
Evrastus 3 years ago