Those in power under former president George W. Bush contributed to the economic pillaging of the country by declining to regulate Wall Street, allowing the economic debacle that has devastated the country, bringing middle-class Americans to their knees economically with their jobs, and savings vanishing with each passing day.
During the last days of the Bush tenure, his economic team tried to stem the economic tidal wave overwhelming the country with a team led by Treasury Secretary Henry Paulson, who failed miserably. Bush’s team told us that the major problem was liquidity and that a bailout of the banks was absolutely necessary; otherwise the country would collapse into a Great Depression similar to the one that ushered in the FDR administration.
When Congress, which had rejected the first Paulson plan, reversed itself out of sheer terror and voted for the $750 billion bailout, we heard Paulson telling us six weeks later that buying the “toxic assets” of banks was no longer the way to go and instead we should give these banks more dollars to shore up their capital. He did so, using half of the $750 billion that had Congress had approved for the bailout to secure liquidity.
The man we thought knew what to do gave those billions away without conditions, and the banks have chosen so far not to lend, and instead buy other banks, pay dividends to shareholders, and provide bonuses to their top executives and others who led them to failure.
The new team under President Obama has asked Congress for an additional so-called stimulus bill, now at about $800 billion and still growing – with about $350 billion remaining and available to the Obama administration for use from the previous stimulus package. The administration has the power now or through laws that Congress could pass to make the banks lend and provide the needed liquidity.
When I wrote to Federal Reserve Chairman Ben Bernanke on Oct. 9 and asked why he didn’t impose a requirement that the banks do their job to lend for which they were licensed — and only to those applicants who were creditworthy and at the same rate as the previous year, his response was, “Requiring directly that banks extend specified amounts of credit to creditworthy borrowers would entail many complications. For example, bank regulators would need to create an objective definition for determining which borrowers were creditworthy. Moreover, because the volume of banks’ credit activities can fluctuate over time for a variety of reasons, including those over which they have no control (such as the rate of economic growth in their geographical regions), determining appropriate targets for individual banks’ lending activities would be complex and potentially arbitrary. In addition, because of the very large number of banking institutions in the country — more than 8,000 — administering such a program would be extremely resource intensive.”
Do Bernanke’s objections make sense? Aren’t those 8,000 banks monitored now? Let me suggest to the Obama administration how it should react to the economic crisis: Impose by executive order a requirement that all banks fulfill their obligations and lend money to creditworthy applicants. If the administration does not believe it has the power to impose that requirement, then ask Congress for that power and in the interim, make it a condition of any loan program banks enter under future bailouts. Create a new court or use existing bankruptcy courts with the power to change the terms of mortgages. I suggest new courts as well as using the existing bankruptcy structure in order to avoid the need for bankruptcy on the part of the mortgagor because of the predatory lending practices used in the original mortgage. The New York Times editorial of Feb. 2 states that the Obama administration has rejected the “bankruptcy fix” now “out of fear it would cause Republicans to delay or reject the package.” If true, this is unbelievably foolish on the part of the administration.
Finally, I am fearful that radicals in the Democratic Party who support programs such as healthcare and education reform that I have supported over the years will seek to impose those programs by fiat without congressional hearings and laws, by inserting them in the stimulus legislation. On what do I base that fear? Here are two news reports.
A Jan. 28 New York Times article by Robert Pear stated, “The stimulus bill working its way through Congress is not just a package of spending increases and tax cuts intended to jolt the nation out of recession. For Democrats, it is also a tool for rewriting the social contract with the poor, the uninsured and the unemployed, in ways they have long yearned to do. With little notice and no public hearings, House Democrats would create a temporary new entitlement allowing workers getting unemployment checks to qualify for Medicaid, the heath program for low-income people. Spouses and children could also receive benefits, no matter how much money the family had. In addition, the stimulus package would offer a hefty subsidy to help laid-off workers retain the same health plans they had from their former employers. Altogether, the economic recovery bill would speed $127 billion over the next two and a half years to individuals and states for healthcare alone, a fact that has Republicans fuming that the stimulus package is a back door to universal health coverage . . . As Congress rushes to inject cash into a listless economy, it is setting aside many of the restraints that have checked new domestic spending for more than a decade. The White House said the changes contemplated by Congress would provide coverage for nearly 8.5 million newly uninsured people who had lost their jobs and would protect Medicaid for many more whose eligibility would otherwise be at risk.”
On the same day, Jan. 28, also in The New York Times, Sam Dillon reported, “The economic stimulus plan that Congress has scheduled for a vote on Wednesday would shower the nation’s school districts, child care centers and university campuses with $150 billion in new federal spending, a vast two-year investment that would more than double the Department of Education’s current budget. The proposed emergency expenditures on nearly every realm of education, including school renovation, special education, Head Start and grants to needy college students, would amount to the largest increase in federal aid since Washington began to spend significantly on education after World War II. Critics and supporters alike said that by its sheer scope, the measure could profoundly change the federal government’s role in education, which has traditionally been the responsibility of state and local government.”
Although I support the ultimate goals of the new Democratic congressional majority for significant changes in our society, I do not want those changes imposed through stealth. I want them debated and voted on by a Congress able to sort out the good from the bad in shaping legislation. That is not what is happening now. According to Pear’s New York Times article, “Democrats said the current economic crisis did not allow time for public hearings on the legislation.”
For me, this is a form of tyranny and is not acceptable. The ends here do not justify the means. There is no need or excuse for stealth.
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