Mad and broke
By Doug Thompson
Why should people who are poor, or at least poorer, bail out the rich?
People ask that question a lot lately. They ask everybody. They ask themselves. They ask because they’re mad. They’re as mad as I’ve ever seen. They’d really, really like an answer.
My smart-aleck answer is, “We’re poor already. Take our money and we’ll still be poor. The goal is clearly to help stop rich people from becoming poor.”
I stopped giving that answer because people didn’t realize I was joking.
The real answer’s simple: We’re the only ones with that kind of money.
The richest one-tenth of one percent of the people control 11.6 percent of the wealth in this country. We haven’t had a proportion like that since 1929 — which is rather ominous.
However, that means that the rest of us still have 88.4 percent.
To belabor the point, the government’s after us for the same reason John Dillinger robbed banks. That’s where the money is.
Keep in mind also that we’re borrowing the money. The only reason we’re paying it back instead of the rich is because the money for repaying the debt will come from our loopy, break-ridden tax structure. We don’t need to stop the bailout. We need tax reform.
But why go through the bailout at all? If we must, why not give the people who can’t pay their mortgages the money to pay their mortgages?
We should risk money on a bailout because the cost of a bailout is less than the cost of a Depression, even by the coldest analysis.
Why have a “trickle down” bailout, then? I’m not completely convinced myself. The core answers are for speed and simplicity.
Bailing out millions of homeowners is not something our government is set up to do. Millions of claims would require processing.
The alternative is to just let the treasury secretary write a few large checks to some banks.
For instance, which homeowners do we bail out? I have no problem bailing out a family with a modest home where somebody’s lost a job. I have a lot of problem bailing out somebody who bought a whole lot more home than he could possibly afford because he thought he could turn around and sell it for a nice profit. Then there are contractors who built houses nobody’s lived in yet. They are in a tough spot, but that was a risk of doing business.
If I want the government to bail out the workers and not bail out the gamblers, somebody’s going to have to do some sorting out. That takes time. We don’t have time.
Why don’t we have time? Look at the recent example of the University of Central Arkansas.
UCA is a state-owned college in Conway. UCA had a line of credit. State colleges are not supposed to have lines of credit without telling the state Department of Higher Education and the state Department of Finance and Administration. UCA’s board of trustees either didn’t know that or didn’t care.
The financial crisis hits. One of the banks that got into trouble was in one North Carolina. UCA had a relationship with that bank. Next thing we know, Arkansas taxpayers could be liable for about $5.4 million of UCA debt. That probably won’t happen, making UCA a mild example of the danger a lot of institutions are in.
So here’s the point: A lot of institutions tried to get in on a piece of Wall Street action. Those institutions are linked to other institutions. Multiply the UCA situation by several tens of thousands of times, and you see what can happen: a chain reaction.
The chain reaction has to be stopped at the reactor core — Wall Street.
I don’t like it either.
At least now we’re going to get something for our money.
The first plan to buy failed banks’ bad loans — their garbage — has been replaced by the “Group of Seven” industrialized nations’ plan to buy shares in troubled banks. We’re going to buy the good and the bad, and benefit when and if that stock recovers.
We’ve replaced private profits and shared losses with shared losses and shared profits, which is an enormous turn for the better. It was a plan put together in Great Britain before being adopted by the G-7.
Wall Street’s reputation is shattered, but it performed an important service on Monday that should be praised. When the administration passed a bad plan, even one with $700 billion behind it, Wall Street plunged. When a good plan replaced the first buyout scheme, stocks reacted by racing up. It may be dangerous — or foolish — to read that much into the gyrations of the stock market, but I’m going to give them credit this once anyway.
Mad and broke