Trouble in River City: The $700b Bailout Doesn’t Address the Real Problem by Joseph C. Phillips

October 17, 2008 at 3:05 am Leave a comment

joseph-c-phillips.jpgUsing a bit of legislative slight of hand in order to get around constitutional rules granting the House of Representatives sole authority to originate revenue legislation, which includes appropriations bills, the senate last week approved a $700 billion bailout of the financial industry, otherwise known as the 2008 Emergency Economic Stabilization Act.

Titles, of course make all the difference in the world. The week previous a similar bill presented in the house went down to defeat. Polls showed Americans decidedly opposed to bailing out the financial sector by a two to one margin. No doubt now that we are not bailing out Wall Street but stabilizing the economy Americans can get firmly behind this measure. The bill was quickly passed by the house with no changes and signed into law by our president. The stock market responded to the decisive action by our political leaders by promptly falling like a rock. The Dow Jones Industrial average plummeted to below 9,000 for the first time in five years and was followed closely by markets in Asia, Australia and Europe.

In an effort to restore confidence in the financial system the White House announced that it is considering taking ownership positions in many of our nations banks.

I don’t know about you but if the idea of an economic Czar with unprecedented power over our economy made me hesitant, the thought of nationalizing our banking industry has me brimming with confidence. My new bank is called Sealy Posturpedic.

Folks we have trouble right here in River City; trouble with a capital “T”. That rhymes with “P” and that stands for politicians getting together to “fix” a crisis they are largely responsible for creating.

Make no mistake there is plenty of blame to go around. The promise of easy money led investors to speculate and borrowers to over extend, taking on more debt than they could afford. There were some lenders that took advantage of the emotional decision to purchase a home and offered deals that were in the end too good to be true. Brokerage houses pawned the junk off on investors and made a killing. And let us not forget the politician’s, fat from campaign donations that looked the other way. All are complicit! But none more than those granted the privilege of speaking for the people, the very same politicians we now look to to solve the mess they created.

Under pressure from “predatory politicians” Fannie Mae and Freddie Mac lowered their lending standards. The result was “that by 2008 about 33 percent of Fannie and Freddie’s business involved risky loans. And as of May 2008, Freddie and Fannie had guaranteed $2.2 trillion in mortgages, about 75% of all mortgages in the U.S., and owned a quarter of the all the mortgage back securities issued on the market.” Then these same predators ignored the warnings of a pending implosion and resisted efforts to tighten regulation of the GSE’s. In fact many of these same protectors of the people encouraged Fannie and Freddie to increase their portfolios. These representatives of the people were “pissed off” at the “political lynching” claiming concerns about The GSE’s were “overblown.” “We do not have a crisis.”

What is truly remarkable is that for these men and women there is no political price to pay. None of them will ever admit, “I was wrong” or be held accountable for their ignorance, blindness or some combination of the two. Each and every one of them will be reelected – sent back to Washington to “solve” problems.

Just some of the highlights from the recently passed “fix” for our broken economy:

-Section 503 provides a tax exemption for certain types of wooden arrows made for children.

-Section 308 extends a tax rebate on imported rum from Puerto Rico and the Virgin Islands.

-Section 325 provides tariff relief for fabric and clothing manufacturers that use imported yarns and worsted wool products.

-Section 211 allows employers to provide a benefit for workers that commute to work by bicycle.

No wonder investors were less than confident. But why aren’t taxpayers downright angry? The rescue bill is chalk full of pork for projects that have absolutely nothing to do with toxic mortgages.

Yes sir we have trouble here in River City. Trouble with a capital “T”, which rhymes with “P” and that stands for politicians breaking things they never should have touched, riding in to fix the crisis and sending the American people the bill.

Joseph C. Phillips is the author of “He Talk Like a White Boy” available wherever books are sold.



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