The Bush administration is pushing a plan for a $700 billion bailout of the nation’s financial lending system, a system so broken that some were predicting a wholesale collapse of our financial system. Time is of the essence, according to President George
The Bush administration is pushing a plan for a $700 billion bailout of the nation’s financial lending system, a system so broken that some were predicting a wholesale collapse of our financial system.
Time is of the essence, according to President George Bush and Treasury Secretary Henry Paulson Jr., because the situation is so severe. This is the same Bush who earlier in the week called Wall Street’s free-fall in response to the Fannie Mae and Freddie Mac takeovers and the Lehman Brothers bankruptcy an “adjustment.”
Certainly, something must be done to forestall a financial collapse, which would plunge the entire world into chaos. The domino effect of having our banking system crash would drag systems around the world with it.
But before we apply this $700 billion tourniquet to the hemorrhaging lending and financial systems (along with $200 billion for Fannie Mae and Freddie Mac, $85 billion for AIG insurance and another $29 billion for Bear Stearns), let’s be careful what we are spending the money on, and be even more careful because of whose money we are spending.
What the Bush proposal buys us is time but not much. It props up some of those lending institutions by putting taxpayer dollars on the line to guarantee really bad loans, either business or mortgage. In the meantime, Bush, who has fewer than four months left in office, will have his crack group of financial advisors come up with a more comprehensive plan to undo what 20 years of banking and financial services deregulation has done.
What will happen instead is that the next president will inherit a $1 trillion bill. That is $1 trillion less to spend on many other worthy pursuits, including more funding for education, more funding for paying for infrastructure repair – roads, bridges, sewers – and funding to make sure all Americans have quality, affordable health care.
While Congress considers the cost of the Bush bailout, our lawmakers must also weigh the cost to the nation of shifting that money from investing in worthwhile projects, to guaranteeing risky mortgage loans and paying off multi-million dollar golden parachutes to overpaid CEOs of failing companies.
This, at a time when we are spending $10 billion a month on a war that was foisted on the country with lies and faulty information, and at a time when the Bush administration has built the largest budget deficit in history. There is only so much money – taxpayer money, and these kinds of expenditures make the likelihood of any tax cuts remote. This Bush bailout is a direct result of the failed policies of relying on a free market system to govern itself, ignoring the penchant for profligate greed on Wall Street that prompted those securities and exchange regulations in the first place.
But, rather than place blame, we must make sure that this $700 billion fix will not cripple the nation and keep us wallowing in debt.
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