The Blog Formerly Known As Vote '08

Hey, free-market, leave-us-alone conservatives! Why are you not standing up & protesting the government-assisted buyout of Bear Stearns? Shouldn’t the government just get out of the way & let the market work unabated?

All kidding aside, the Bear Stearns bailout is important to you & to the presidential race. For one thing, if it had not happened, the collapse of the 5th-largest banking institution would have rippled across the economy & caused a domino effect that would likely in some way affect your bottom line more than the current high gas prices.

Is the government doing enough? Is it doing too much? Do any of the presidential candidates have a plan for what Alan Greenspan has predicted will be the worst national economic crisis since World War II?

has more thoughts after you click “read the rest of this entry.”

Before we see if any of the current candidates have any idea how to steer us out of this sinkhole, let’s take a look at ways the current president is mishandling this mess.

On the one hand, he’s approved Fed chairman Ben Bernanke’s emergency weekend decision to lend $30 billion dollars to help JP Morgan Chase buy Bear Stearns for $2 a share (Stearns’ stock price closed Friday at about $30 a share, so anyone who had invested money with the firm lost very much money, very quick).

The move calmed -for now- the fears of Wall Street.

But on the other hand, this president has consistently refused to give average homeowners who are now threatened with bankruptcy & foreclosure any help at all.

Here’s how White House spokeswoman Dana Perino defended that seeming discrepancy yesterday:

QUESTION: But people who are facing, say, foreclosures, individuals, the little guys who are facing their foreclosure, looking at the big guys getting government, if not brokered, certainly, they’re overseeing deals that are engineered to, sort of, keep the big-picture financial community afloat. And they’re saying, Well, where’s my boost of liquidity?

PERINO: They’re going to get that boost of liquidity in the form of a stimulus package and a tax rebate that’s coming to them the second week of May.

QUESTION: But that’s not going to save their houses.

Heck, no, it’s not. Consider these numbers:

-The average tax rebate check will be about $600 for individuals & $1670 for middle-income families.
-As of September, the median mortgage payment for American homeowners was $1566 a month.
-The average increase in subprime mortgage payments (as of early 2007) was $320 a month.
-Foreclosure rates are skyrocketing, up 60% in February.
-Americans have less equity in their homes than at any other time since 1945.
-Don’t forget gas prices. If you don’t cut back on your use, you should expect to pay an extra $231 in 2008 for gas.

Now compare that to the $30 billion of your taxpayer money that the government has put up as a guaranteed loan to JP Morgan Chase. Does it look at all like the administration is favoring one group over the other? Who deserves more help? Or should there at least be an attempt to be fair?

This is not to criticize the Fed’s action. Again, it was needed to prevent a domino effect on an already shaky market. Despite Ronald Reagan’s 1981 inaugural quip that “government is not the solution to our problems, government is the problem, sometimes government’s presence is necessary.

You can find further reading on that last thought here & here, from two sides of the political spectrum. Are you able to find an opinion that says the government shouldn’t have done what it done last weekend, that it should have stayed out of the way & let the market’s “invisible hand ” do its job? Let me know, because I’m having trouble finding that viewpoint this week. I did find a piece from Newsweek’s Robert Samuelson, who wonders if the Fed’s action to solve one problem may bring about many others. & the Wall Street Journal editorial page say the high-end managers of Bear Stearns have no one but themselves to blame.

Now, to the presidential race. First, Eugene Robinson says in today’s Washington Post that none of the three candidates are giving this issue the attention it deserves.
John McCain has freely admitted he is not the world’s leading expert on economics. He recently said “I’m going to be honest: I know a lot less about economics than I do about military and foreign policy issues. I still need to be educated,” and thus is digesting the latest book from former Fed Chairman Alan Greenspan, “the Age of Turbulence: Adventures in a New World.”

On YouTube’s “You Choose 08” channel, the most recent clip from McCain on the economy is from last April. (Either that channel or the McCain campaign might want to update things PDQ.):

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Read more on McCain’s economic platform here, at his website.

Meanwhile, Barack Obama talked about the bailout with PBS’s Gwen Ifill in an interview yesterday**:

GWEN IFILL:When you watched what the Fed had to do over the weekend, what do you think as president you would do in reaction to this kind of crisis?

SEN. BARACK OBAMA: Well, obviously, there are some short-term steps that we have to take. And what we have is a crisis of confidence in the credit markets, partly because people don’t know where the bottom is, in terms of bad debt that’s out there, not only from the subprime lending market, but also the credit card markets and the title loan markets. And all those potential bad debts are making people afraid to do ordinary business with companies that are very credible.

The Fed has taken some good steps. I think they have been innovative in trying to pump liquidity into the market. I think assisting JPMorgan Chase to purchase Bear Stearns was a sound decision, given that the alternative was probably Bear Stearns going under, which could have triggered a domino effect in the market.

But what I think we have to do is to get a floor under our housing market. And so I’m working with Chris Dodd, the chairman of the Banking Committee, to make sure that we’ve got a system to shore up the mortgage-lending process and make sure that people aren’t losing their homes.

That will provide some assurance that there’s not going to be just a bottomless pit of bad debt out there. And hopefully, banks, then, and other financial institutions will start having a little more confidence and start doing the normal business that needs to be done.

GWEN IFILL: When does it become a Fed bailout and when is a line when it becomes a taxpayer bailout?

SEN. BARACK OBAMA: Well, I’m not sure there’s a bright line. You know, I think that if Congress is starting to appropriate money, then it’s a taxpayer bailout.

And there are some innovative things that we can do to make sure that we are helping people who need help and deserve help, but recognizing that there are some people in the financial system that took enormous risks and probably need to be punished for having taken some bad decisions.

They were getting a lot of upside. They were getting huge $100 million, $200 million bonuses. And they should take some hits. And we don’t want to bail them out.

On the other hand, the ordinary person who’s in their home, partly because of a deceptive loan or because their wages and incomes haven’t gone up over the last seven years that George Bush was in office, those folks need some relief.

And that’s why I would focus on the short-term problems that we’re having, but also on the long-term structural problems that we’ve had with our economy. We have to start providing more income, more help, more support to middle-class and working-class families. That will actually make the entire economy strong.

**(had McCain talked about it yesterday, we would have provided the full transcript here, too)

Here’s an Obama economic speech clip from YouChoose08 - we’re starting to see a pattern here - from last June. (way to stay current, there, YouTube):

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Details on Obama’s economic platform can be found here at his website.

Hillary Clinton issued this statement yesterday on the Bear Stearns story:

“This is a moment of great unique uncertainty in our financial markets. The crisis that began in the subprime mortgage market has spilled over and now poses a broader threat. I am following the developments in our markets closely. This morning I spoke with Secretary Paulson and New York Federal Reserve President Tim Geithner. They both outlined the actions that were taken yesterday to ensure liquidity and restore confidence in the market. I relayed to them my thoughts and concerns. I will continue to monitor the situation closely throughout the day and will seek advice and counsel from a broad range of economic advisors.

“As a senator from New York, I am keenly focused on the impact of these market developments on the lives and livelihoods of thousands of New Yorkers and on the New York economy as a whole. I am also reminded everyday as I meet with families and listen to their stories that the effective function of our market isn’t just about Wall Street, it is about Main Street. It’s about the families I meet that are struggling to fend off foreclosures and stay in their homes. It’s about construction workers who used to build houses and are now out of work. It’s about the college student who has good credit but is struggling to get a loan. What is happening on Wall Street may well affect the lives and fortunes of tens of millions of Americans who work hard everyday. They’ve done nothing wrong, but they will be impacted.

“In these times of stress and uncertainty, we need to be vigilant, to do everything in our power to maintain confidence in our financial system. I feel very strongly that in every way we’ve got to have more urgency to continue the action that was started yesterday. In my conversations earlier this morning, I raised my concern about the continuing numbers of foreclosures and my very strong belief that in the absence of addressing that aspect of this subprime mortgage credit crisis, we will not be able to make the progress that we have to make. I will follow this closely and as I said, I am particularly concerned about the many employees of Bear Stearns and their families and the ripple through the economy that this is going to cause.”

Here’s a clip on the YouChoose08 site featuring Hillary talking about the economy — surprise! It’s from last May (composing an e-mail plea for more current clips to YouChoose08 as we speak):

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You can see how Hillary Clinton outlines her economic platform here, on her website.

Now that you’ve digested all this (we hope it went down well) now’s your chance to weigh in. What do you think?

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