If you’ve watched a news show, listened to the radio, picked up a newspaper or even just watched The Daily Show this week, you know that Wall Street is in trouble. Years of irresponsible speculation and reckless lending policies–including the targeting of subprime mortgages in America’s most vulnerable communities–have contributed to the threat of bankruptcy of some of the biggest names in banking and insurance. Bear Sterns. Fannie Mae. Freddie Mac. Lehman Brothers. Merrill Lynch. AIG. You may not have heard of all of them before, but chances are that you’ve heard of one of them, and the chances are even bigger that they have, somewhere along the road, been involved in your own financial situation, whether it is as an investor in the bank that lent you your mortgage or as the manager of your 401(k) or pension. Long story short, this is really big news with potentially huge impacts on every sector of American life and the economy. And as big news, the reporters are covering it, just as they’re also covering the fact that the Federal Reserve, an independent government agency entrusted with managing America’s monetary policy (mainly through deciding interest rates), has bailed out a few of these large investment banks to the tune of over $300 billion.
I’m no economist, but the economists who are talking about these bailouts right now generally appear to believe that they are necessary. The fabric of the American economy is so interwoven that we cannot simply allow major segments of our community to fail without repercussions for the rest of us. Undoubtedly, there should be reprecussions for bad behavior, and the current critiques of the lack of accountability for these banks and their managers are very persuasive. Just as America cannot succeed without broad support of the common good, it cannot succeed without accountability, transparency, or justice. Responsibility in America cannot just be to ourselves (or our stockholders), it must be to each other as well.
Of course, this interconnectedness isn’t only true for large investment banks; this is true for all of us, from the largest to the smallest. That’s why it’s disappointing to see that as the Federal Reserve takes action to keep our financial sector in one piece, our elected official in Congress and the Administration are not providing parallel support to American families and children. Apparently frozen until next year is consideration of expanding the State Children’s Health Insurance Program, which provides access to health care for about 7 million children. One of the most successful government programs, the Children’s Health Insurance Program has reduced the number of uninsured children by around 3 million, and, as I wrote a couple of weeks ago, is credited for helping with the reduction of the number and percentage of uninsured from 2006 to 2007. Similarly, we’ve yet to see a federal response to the
So my question is, what’s AIG got that your child doesn’t? True, this isn’t exactly comparing apples to apples; the Federal Reserve’s independence allows it to act in ways that are more difficult for Congress and the Administration. Nonetheless, the social contract of America which has made this country strong is one of mutual security, the guarantee that our elected officials will work to insure our ability to provide for the health, food, education and other basic needs of our families, neighborhoods, and communities. Almost a century ago, when financial crisis also created hardship for Americans across the country, the government responded not with bailouts, but with a program of hope and support, a set of policies that did not seek to provide for American’s basic needs, but rather to assist us all, as families and as a national community, to get back on our feet. Legacies of those policies live on today, responding to high fuel prices with the Low Income Home Energy Assistance program and to skyrocketing food prices with the Women, Infants and Children nutrition program for mothers and their children, the Commodity Supplemental Food Program for senior citizens, and the Emergency Food Assistance Program that supports food banks. At only a fraction of the cost of the recent investment bank bailouts, there is an opportunity for our elected representatives to not only guarantee and uphold the core American value of economic and community security, but to help stimulate the economy as well.