After another rough week, the government has announced its wildest bailout proposal plan yet. The new effort would buy up to $700 billion of bad American mortgage debt.
Aside from going against the principles of free-market capitalism, this plan just doesn’t make sense. Our economy has run into trouble because home prices got out of whack with reality. Unless the government mandates the prices homes will sell at (and this, by the way is also a disastrously bad idea), the government cannot solve the housing problem.
The solution is time, we must wait patiently while the supply of used homes is diminished, and the supply of new buyers rises. This will take time, however, and with an election coming up, the government wants a quick fix.
However, a lot of politicians, spanning the aisle from liberal Democrats such as Harry Reid to very conservative Republicans, oppose this bill. Most people know this legislation will be a disaster; however, politicians by and large will not speak out for fear of offending their big donors from Wall Street. Take Democratic presidential nominee Barack Obama for instance. He has supported every bailout that has come along this year. I doubt it is because he honestly likes these proposals; it is illogical for someone who claims to care deeply about the middle class to load up the American taxpayer with over a trillion dollars of new debt this year. These bailouts have harmed the vast majority of Americans to help a few fat cat Wall Street owners.
Take Obama’s support of the bailout of Fannie Mae and Freddie Mac, the $122,500 he received in campaign contributions from Fannie and Freddie employees probably had a bigger sway in his thinking than the morality of such a ridiculous plan. I could argue about why this bailout is as doomed to fail as the others we’ve had so far, but I’ll let the markets do the talking.
The Dow fell 370 points on Monday over worries about the bailout. An index that measures the value of the dollar fell more than two percent today, meaning that yesterday’s $100 is only worth a little less than $90 today.
Worst of all, the price of oil spiked almost $25 per barrel, as the global oil sellers rejected our devalued dollars. If the government continues to spend over a trillion dollars a year on bailouts — and yet still not fix the economy — the dollar will collapse. I hope you enjoyed $4 per gallon gas, cause it will be back soon if the plunge in the value of our currency is not repaired.
One aspect of the bailout particularly scares investors, including the foreigners who lend us the money needed to keep the government functioning. One provision allows the Secretary of the Treasury, Henry Paulson, to buy up any bank assets he wants at any price he sets and the bill specifically forbids any other court or government agency from reversing his decisions.
This allows one man, and sadly, an incompetent one, to have complete control over the nation’s banks.
Normally Democrats support economic bailouts, but this one is so ridiculous that even Democrats are incredulous. Congresswoman Marcy Kaptur of Ohio said the following, “Wall Street’s big banking boys, those self-proclaimed geniuses of high finance, are bankrupting America.”
She continued, “I can’t think when I have been as upset as I am tonight about what is happening by the big shots, and the people who are paying the bill are getting shoved off the edge. Wake up, America!”
I urge you to contact Obama and let him know you don’t want him bailing out more yacht-owning Wall Street elites. You can reach his office at (202) 224-2854.
Ian Bezek is a junior economics major. His column appears Tuesdays in the Collegian. Letters and feedback can be sent to firstname.lastname@example.org.