Initially, when the news broke late last week that the Treasury wanted $700 billion to shore up financial institutions to prevent a breakdown on Wall Street, I thought that this was a scary scenario for an already weak economy.
Over the past weekend a lot of discussions went on - ad nauseam I might add - on the proposition and the supposed 'end-of-the-world' scenario. The American people then began a slow, angry simmer on what was being forced on them.
Think about it: why should we - the taxpayers - foot the bill for crooked deals that Wall Street brokers have already been paid million-dollar commissions for? Personally, I think that we should persecute those who practiced predatory lending, and let those companies who brokered those creative financial transaction go bankrupt. That way other companies will think twice before trying extreme risky deals that will fail.
Who is responsible for this mess?
Whoever reduced oversight and regulation of the financial industry (and Senator John McCain has been one of the strongest proponent for this).
We NEED rules and regulations when it comes to financial and economic issues. If we didn't, and subscribed to a "full free-market" ideology, we might as well borrow our money from "Guido the Loan shark" and keep our money under our mattresses. Rules and regulations is NOT big government - they are instruments for protecting the rights and investments of hard-working Americans.
Most Americans are against the bailout and are furious are finding the country in this situation. You can argue that because the average American are not familiar with economic principles and understand verbatim what is happening on Wall Street they do not understand the impact no bailout may have, but economists from around the country and also unanimously AGAINST the plan.
(from Kevin G Hall, McClatchy Newspapers)
"It's more hype than real risk," said James K. Galbraith, a University of Texas economist and son of the late economic historian John Kenneth Galbraith. "A nasty recession is possible, but the bailout will not cure that. So it's mainly relevant to the financial industry."
The Paulson plan will get some bad assets off the balance sheets of troubled Wall Street institutions and commercial banks. That may help thaw the lending freeze.
But it wouldn't reduce the crush of homes in or near foreclosure, said Simon Johnson, a professor at the Massachusetts Institute of Technology. That's a problem that will surely grow worse if the U.S. economy enters recession, leading to greater job losses, which feed a vicious downward spiral of even more foreclosures and defaults on car loans and credit-card debt.
Coming out of the White House on Thursday, the ranking Republican on the Senate Banking Committee, Alabama's Richard Shelby, held up what he said was a five-page list of economists opposing the rescue plan.
"This is not me. This is economists at Harvard, Yale, MIT, University of Chicago, our leading universities," an exasperated Shelby told reporters. He called the administration plan "flawed from the beginning."
Johnson, a former assistant director of research for the International Monetary Fund, said: "I think the main problem is what they have on the table is not truly comprehensive, and I think it's probably not decisive for that reason."
Few economists, including Galbraith, are willing to discount completely the chance of a financial collapse, given the turmoil in credit markets and banking.
"My sense is it will delay a disaster, given that you only have three months left in this administration. But it will not cure the problem in the (financial) industry or prevent the shakeout and downsizing of the industry," Galbraith said.
Sure, some intervention is needed but not this rush for a blank check to bail out willful fat-cat misuse of public trust.
My view is that President Bush is trying to scare Washington into backing a rushed plan that will prevent the demise of the Republican Party. Think about it - if a Democrat-lead congress and senate refuse to vote on this deal and the economy goes belly up - the Republican Party will always be tarnished by the following financial market meltdown.
If Bush gets both houses to pass the bill and it delays any recession - until next year anyway - the party will come through and might even win the presidential election.
Some have even begin to call this bailout plan, and the doom-and gloom speech by President Bush on Wednesday, an "Economic Shock and Awe Campaign" by the Bush administration, and have drawn striking similarities between this appeal to congress and one made five years ago to back the Iraqi War.
My message to lawmakers: slow down and really examine what it being pushed on you. The markets will stabilize if they feel that a solid long-term plan is being put in place, NOT a hastily contrived one.
Let's not make another costly mistake.
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