Like many of us, I've taken up a new hobby these days: writing to my US senators and congressmen. And like most folks with a brand new interest, I find myself addicted. There's a real urgency for all of us to get involved with the energetic national discussion of plans to bail out Wall Street, so here's my contribution for the day to the debate on Capitol Hill. I hope it inspires you to write your legislators, too.
Oh heck, who am I kidding? Emails are like Lays' potato chips; I can't send just one, so watch out, Obama and McCain!
Dear Honorable Senator Reid:
IF American taxpayers are going to buy Wall Street's "toxic assets"--the mortgage securities and other derivatives that bankers and investors can no longer trade among themselves BECAUSE THEY KNOW THEY'RE JUNK--then taxpayers must have the following provisions written into the bail-out deal.
- Bankruptcy and foreclosure protection: Once the US government owns the securities, then the terms of contracts can be rewritten to reduce and fix interest rates for borrowers so that they can afford to stay in their homes. Bankruptcy judges must be empowered to play a role in helping beleaguered homeowners WITH ONLY ONE HOME keep that house. It is ludicrous that real estate investors with more than one home--like your colleague Senator McCain--could benefit from having a bankrupcty judge rewrite the terms of mortgages on their investment properties but that middle- and working-class homeowners whose only real estate investment is the home they live in cannot receive similar leniency in bankruptcy proceedings.
- Equity shares in the financial institutions that receive government money: If taxpayer money buys a mortgage-backed security or other derivative from a banking or investment firm, then that money has become an asset to that firm. Taxpayers now have a share in that firm's profitability, and like other shareholders we have a right to dividends. Such dividends should be paid when private shareholders receive their dividends, back to the federal government for the collective benefit of taxpayers.
Finally, DO NOT RUSH this process. Even though I argue for taxpayers' rights in any bail-out plan, I am not yet convinced that a bail-out is necessary. Wall Street and its friends in the Bush Administration (Bush, Paulson, Bernanke) are practicing EXTORTION: they threaten the shut down of credit if the bail-out doesn't happen. The President says, "The market isn't functioning the way it should," but that is a lie. By not trading its junk derivatives, the market is operating exactly as it should. Anything that isn't traded has $0 value, so why is $700 BILLION the magic number? IF taxpayers have to buy this junk, the most we should offer is 10 cents on the dollar. But let's check with some leading economists first to make sure the bail-out is necessary and will work as its advocates advertise.
Robert Reich, whose economic theories are far more sound than the "trickle down" fantasies of "voodoo economics," observes that the market is not paying attention to real indicators--housing starts and job growth/loss, for instance--of the economy's generally poor health. He's right: the Dow Jones average has been climbing today on optimism about a bail-out because Wall Street is self-centered and is ignoring the reports of decreased housing starts and increased unemployment.
IF the federal government wants to spend $700 BILLION to assist the economy, laundering Wall Street's junk portfolio is not the most effective plan. We could loan more money to small business through the Small Business Administration. Fannie Mae and Freddie Mac could loan more money to home-buyers. Federal bankruptcy rules could be rewritten to be more fair once again to debtors. The engines of economic growth are not derivatives trades, but those trades and the quick money investors thought they represented are where Wall Street saw fit to focus its efforts. The federal government, the taxpayers' representative, should support the real engines of economic growth: the products we manufacture and the services we provide.
I would far more strongly prefer that Congress let those who gamble in derivatives drown in their own stupidity and greed. But if the majority goes for the bail-out, then I beg you, please, do all you can and more to protect taxpayers' financial interests.
Respectfully,
Your Nevada constituent