Wednesday, October 1, 2008

Presidential candidates favor the trickle-down bailout

Our current financial system sucks capital out of small communities, pads pockets on Wall Street and condemns ordinary people to lives of debt. But it's the devil we know and the presidential candidates think we should keep it on life support by passing the "rescue plan" currently pending in Congress.

Obama has warned of financial catastrophe if the "rescue" doesn't pass.

In a brazen effort to win popular support linking the woes of Wall Street to the woes on Main Street, McCain said on CNN:

"By the way, the first thing I'd do is say, 'Let's not call it a bailout. Let's call it a rescue.' Because it is a rescue. It's a rescue of Main Street America."

This supposes that our bloated, top-heavy, corrupt, unproductive financial system is worth propping up in its current form. This supposes that business as usual is good for Main Street. This supposes that the current system based on greed, fraud, unregulated worthless derivatives, swindling and a lifestyle of deceit has ever helped Main Street.

The words "crisis" and "catastrophe" are meant to scare Congress away from their responsibility to deliberate. After 9-11, Congress traded away liberty for false security with the U.S.A. Patriot Act. Now, "crisis" and "catastrophe" are employed to sway Congress away from their golden opportunity to remake our horribly broken "financial system" by re-establishing appropriate regulation and oversight. There is tremendous popular support for letting Wall Street take its licks and letting the so-called "free market" function for a change. The People would like to dole out some tough love through their elected representatives.

But some argue, since our retirement savings and college savings are tied up in the financial sector's worthless products, we will all suffer if more institutions fail. Worse yet, as global credit remains sluggish, companies will not make payroll and people will lose their jobs. Credit is the life blood of the global financial system. Traders need to float puffy clouds of highly leveraged risk around the globe around the clock to grow our retirement savings. We are all in this together, they intone. And drug dealers need users to stay in business.

But remember, prior to the hideous meltdown, millions of people were already suffering and losing jobs through downsizing and outsourcing -- the result of efforts to increase share value quarter to quarter.

Instead of propping up the system that brought us this mess, why not start by helping small businesses and individuals directly harmed by the situation. Why should Congress save huge banks from their own bad investment decisions and let local communities continue to crumble as foreclosures drive down property values and devastate once healthy neighborhoods?

How about giving Main Street a bailout, a chance to start over and let the benefits trickle up to the bloated big boys for a change?

--Take the $700 billion and start making very small loans ($20,000-$50,000) to homeowners in trouble. Think of it as the grandest ever micro-loan program. Consumers will spend at the local level, resume making their mortgage payments and keep their mortgages from simply lapsing into "bad paper." The big boys will get their money and people won't lose their shelter.

--And if you really want to get radical, just make grants. Don't expect repayment. It would be no worse than the billions flushed down the drain in Iraq. In fact it would be better -- directly benefiting U.S. citizens and killing no one.

--Have local banks that meet strict criteria for sound lending administer the program, service and hold the loans, or disburse the grants. This would establish local financial institutions and people as authorities in their communities. This would cultivate working financial relationships at the local level.

--Create a service corps of financial counselors who can work with consumers lacking financial literacy to help them get on the right track. This would create jobs for dislocated financial industry workers.

--Assist small businesses having difficulty getting loans for operating expenses. Rather than prop up unproductive financial gamblers, get the money to small companies that make things people need and provide vital services in small communities. This would keep people employed and maintain consumer spending, which accounts for nearly two thirds of all economic activity.

Granted, things are in such a state, that the fat cats will need a little hand out to keep going. But it would be obscene if Congress provided that corporate wefare with no commensurate support for small businesses, workers, families and children and communities.

Senators Barack Obama, John McCain, and Joe Biden will all be in Washington, D.C. after sundown to vote on the Wall Street "rescue plan". Main Street will be watching closely.