The Dems should be saying “No way!” to the UberBailout.
There are four very good reasons behind that.
- The real problem is the housing depression. This does nothing to solve the problem of housing prices that will fall another 10-25% nationally. More homeowners will go underwater. More banks will go insolvent as the good mortgage loans on their books go bad. Most likely we’re going to see a flood of Alt-A mortgages go bad — the ones that are only a step up from subprime — mostly issued in 2006 and 2007. Many of those had 2 or 3 year “introductory rate” offers. Those are going to reset big time in the next year. And they will blow up just as badly or worse than subprimes did.
- Banks are still leveraged way out of proportion. They don’t have the cash on hand to handle another wave of defaults. And another wave of defaults is most certainly coming when Alt-A’s detonate. They are still leveraged to the hilt in huge amounts of funny paper…far, far more than $700 billion.
- The problem is not liquidity then, it’s insolvency. These banks aren’t going to survive. This plan doesn’t even begin to address how much bad derivative debt these banks are carrying…they are basically insolvent and have been for months. All this plan will do is buy them enough time to dig a deeper hole for the next President to fill with our money.
- This plan does nothing to stop moral hazard. Banks now have every reason to take crazy risks because they believe even the lousiest derivative traps they have set for themselves will get wiped off the books. We’re socializing the debt of these bad investments and letting the banks keep the profits privately. All this turn out to be is a delaying tactic. No additional regulatory oversight, no punishment, no safeguards, just Bush demands $700 billion. Why should we do that?
So it’s painfully clear that the UberBailout is destined for failure. The only people who can stop it are the Democrats…but given their track record on standing up to Bush, there’s zero hope.
Let’s face it. The Democrats have failed us at nearly every opportunity in the last two years. They’ve failed us on Iraq, Afghanistan, Pakistan, FISA, equal pay provisions, protections for civil liberties, oversight actions, curbing executive privilege, torture as standard operating procedure and now they are about to sign away our souls to the GOP and end our economy.
When UberBailout fails…and it WILL fail…we will be in a world of hurt. A third world, that is.
What we need is for the Dems to demand complete accountability and for them to come up with a real plan to deal with this issue…and yes, that means letting Wall Street deal with the consequences of its actions.
That will never happen. If anything, the Dems will want hundreds of billions more to bribe us with. Maybe some of it really will go to homeowners, but what of renters? What of the millions of us that don’t own a home?
The GOP clearly doesn’t understand how much danger the economy is in right now. Or maybe they do, maybe this is the plan all along. But they couldn’t have done it without the Dems.
No. The Dems will fail us again…maybe for the last time. And when they do finally fail us, when this plan fails to save the economy from collapse…
Who will be left to save us then?
There’s a glimmer of hope. A small one.
House of Representatives Speaker Nancy Pelosi said on Saturday that Democrats want to deal swiftly with the Bush administration’s $700 billion financial market rescue plan, but also want more oversight, taxpayer protections and regulatory reform.
“In working with the administration, we will strengthen the proposal by ensuring that the government is accountable to the taxpayers in any future actions under this broad grant of authority, implementing strong oversight mechanisms, and establishing fast-track authority for the Congress to act on responsible regulatory reform,” she said in a statement.
“We will also seek to protect lower- and middle-income Americans … from the fallout of the ongoing Wall Street crisis, by enacting an economic recovery package that creates jobs and returns growth to our economy,” the California lawmaker added just hours after the rescue proposal was unveiled.
But is it going to be enough?