By Dave Lindorff
Hold everything!
Talk about déjà vu. Remember when Bush and his cabinet officers were
running all over in late 2002 crying wolf about Iraq’s supposed nukes,
and threatening that inaction on a war resolution by the Congress would
leave them to blame when the “mushroom cloud” appeared over some
American city?
Well, now they’re doing it again, this time claiming that economic
Armageddon faces the US and even the global economy if Congress doesn’t
hand over all power over the economy to the Secretary of the Treasury
in absolute contravention of the most fundamental principle of the
Constitution, which establishes that the budget be in the control of
Congress. These guys are saying if Congress doesn’t vote to hand over
$700 billion or more of taxpayer money to the Treasury to dole out to
fat cat bankers, the resulting economic collapse will be on their heads.
But here’s the thing. Just as nobody else in the world was freaking
out about Saddam Hussein’s alleged nuclear threat, nobody is
particularly panicked about the US or the global economy. If investors,
who are supposed to be all wise about things economic, were worried
that the roof was about to cave in, they’d be selling stocks as fast as
they could dial their brokers. And the institutional investors—those
with the real inside information—not to mention the managements of
companies, who really know the true state of affairs of their own
firms—would be unloading shares at fire sale prices. The stock market
would be falling like it fell in 1987, or, if what these administration
con artists are claiming were really the case, even farther. That is to
say, we’d be seeing a 3000-4000 point drop in the Dow.
But we’re not seeing that. The Dow Jones average this week fell a
modest 8 percent and then recovered by 4 percent, and yesterday, the
broader S&P index actually rose. Some panic!
We’re told that there is a credit crisis, but people are still
getting mortgages. I know a retired woman of modest means who just went
in and refinanced her mortgage at a lower rate. Businesses are still
receiving loans, too, and while they might want a lower rate, they’re
still meeting payroll. Banks haven’t jacked up interest rates to absurd
levels.
Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke told
a select group of Congressional leaders earlier this week that if they
didn’t rush through their three-page proposal giving them draconian
power to shovel public money into banker’s coffers, the country would
be instantly plunged into a major recession.
But when Congress balked at this power-grabbing rip-off, it caused
barely a ripple in the stock markets, which are down less than 10
percent from their level when the crisis first struck with the bailout
of Fannie Mae and Freddie Mac.
Let’s be honest: this is an artificial panic, or worse, an effort
to create one. It’s not a real panic. When you have the president and
the treasury secretary and the Fed chairman going around warning of a
steep recession or a depression, you have to ask yourself why these
guys are yelling “Fire!” in the theater. In a real crisis, President
Franklin Roosevelt preached calm (“We have nothing to fear but fear
itself.”). This president says, “Be afraid. Real afraid!”
The truth is, this is a very normal economic downturn, with the
exception that a lot of banks are holding an unusual amount of really
rotten debt—the result of their own greed and fraud.
The answer is not to bail these rotten institutions out. It’s to let them fail.
I realized what was happening when the Bush Administration spent
$85 billion assuming all the bad debt of AIG in return for warrants
giving it the right to up to 80 percent ownership of the insurance
giant, when, at that day’s share value, the Treasury could have bought
the whole company outright for just $7 billion.
If we’re concerned about the homeowners who hold subprime
mortgages, the government can step in and order the banks to
renegotiate the terms of those loans to make them fixed 30-year
mortgages that people can actually afford to pay, and it can step in
and guarantee them. In return for covering the bankers’ asses on those
loans, the government can take over the worst banks, and take ownership
positions in others as it sees fit.
If the economy slows down because of all of this, the answer is for
the government to start spending on programs that will create new
jobs—R&D funding for new non-carbon energy sources, public funded
power generation projects using wind, waves and solar energy,
infrastructure repair, public transit expansion, more teachers for our
schools. Every dollar spent on these kinds of things will circulate
back into the economy immediately, helping to bring the economy back.
Funneling money to banks won’t help, because the odds are, much of it
will flow overseas where there’s a better return.
In short, Congress needs to call the president’s bluff.
The public knows it’s being had here. We’ve seen the deceitful
nature of this administration, and we know now that everything it says
is a lie.
Bush and his treasury secretary, however, are right about one
thing: Congress is going to be blamed if they do the wrong thing. But
the wrong thing isn’t failing to approve a $700-billion Wall Street
bailout. The wrong thing would be approving it.
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DAVE LINDORFF is a Philadelphia-based journalist and columnist. His
latest book is “The Case for Impeachment” (St. Martin’s Press, 2006 and
now available in paperback edition). His work is available at www.thiscantbehappening.net
