I’ve been reluctant to comment on the “financial crisis” that everyone is talking about but since this is a money blog, I thought it was time to weigh in. I do not support the current plan in Congress. Here’s why:
$700 billion dollars is an arbitrary figure. An assistant to the Treasury Secretary stated last week that $1 trillion was too much for the taxpayers to swallow and $500 billion was not enough to make Wall Street happy. Ergo, $700 million is about in the middle, so good enough. We really have no idea how much this is going to cost because it’s very difficult to value the financial instruments (mortgages, etc) that the government will be buying. I’ve read estimates that the buyouts will be as little as $250 billion and as much as $1 trillion. No one really knows how much we are asking the taxpayers to take on.
When small businesses make bad decisions, they go out of business. There are bad companies in this country that have made bad decisions. Why should we help these companies and not small businesses? Small business is being crushed by high oil prices and are worried how they are going to pay their heating bills this winter. Congress did not run to pass a comprehensive energy policy. Why must we run now?
I’m listening to Kay Bailey Hutchison (R-Texas) talk about the tax cuts in the bill, that just must be passed. These tax cuts are actually items that expire each year, for which Congress passes an extension each year. This is not new policy. If this bill fails, these extensions would be passed in a seperate bill. Nothing new here.
The bill makes companies give the government stock as part of the bailout, so the American people will have an ownership stake. The government owning stock in corporations. I don’t know what they call that where you come from, but it sounds a bit like Communism to me.
Congress tells us that we must save the financial sector. Since this discussion has started, more industries are holding out their hands; the airlines and the auto industry are both looking for funds. The credit card industry wants in on the deal. Where will it end?
This bill does not just purchase bad mortgages, it purchases all sorts of assets: pension plans, debt from small banks that serve low- and middle-income people. I thought this was about the housing sector? I guess not. If companies and municipalities start dumping their pensions on the government, you can be sure we are going to need that entire $1 trillion.
Our Congress tells us that the credit markets are drying up and that it is unacceptable. Maybe we need to tighten credit in this country. Bankruptcies rates are high, people can’t afford the debt they have, savings rates are negative. There is too much credit in this country. That’s how we got into this mess in the first place. We need to stop borrowing and live within our means.
I’ve been really frustrated watching this debate. People all around me are frustrated as well. I’ve spoken to people of all ages and all political leanings. I have met very few who support this bill. $700 billion is a huge amount of money. It’s almost 30% of the annual federal budget. We see the amount of national debt the country already has us on the hook for. I am not willing to borrow even more money from countries that do not like us (among them China and Saudi Arabia) to bail out companies that made stupid decisions. I am currently watching the Senate debate this on C-Span. I think I should turn it off before my brain starts leaking out of my ears.
Pay attention to this legislation. I urge you, whether you are for or against this bill, to contact your representatives. Tell your legislators how you feel about this bill. If your legislators vote against your wishes, it’s time for them to go. Use your voice and your vote.