The chief business of the American people is business.
-Calvin Coolidge
The ongoing saga of our nation’s economic tribulations is truly one for the ages.
First, there was the government conservatorship of Fannie Mae and Freddie Mac on Sept. 7. Then, on Sept. 15, Lehman Brothers, one of our investment titans, filed for bankruptcy. But it was Oct. 6 that told us we were in real trouble. On that day, the Dow Jones Industrial registered below 10,000 points for the first time in almost four years. The aftershocks of this massive drop sent international stock markets into ones of their own. Luckily, by this time, talks had already been held about stepping in to ease the hurt Wall Street was taking, and soon Treasury Secretary Henry Paulson proposed a “bailout package” to lessen the blow to our economy and get Wall Street back up on its feet.
The price tag of that bailout caused no small amount of consternation among taxpayers. Listed at $700 billion, which rivals the amount of money we have already spent on the Iraq war, Paulson’s plan essentially implemented the old adage “throw money at it until it goes away.” Perhaps, considering the amount, the phrase “bury it in money” would be more appropriate. Needless to say, a plan so vague didn’t go very far in Congress.
So when the new, revised bailout plan came around in October, there was a little more direction involved. Now, the plan was split into three parts: The first was the $700 billion plan to fix Wall Street. The second involved tax relief on hybrid vehicles and subsidies for renewable energy programs and companies. The final piece was a tax relief package for small businesses and middle class families, in order to loosen up liquid assets and kick-start the economy by getting Joe the consumer out there spending money again.
But then a wrinkle appeared. The Big Three Automakers (Ford, GM and Chrysler) went to Washington, hands cupped and faces downturned, asking for $25 billion of the $700 billion to keep the auto industry running. At first Congress was ready to let them squirm, but because the auto industry is one of the biggest moneymakers in the American economy, they soon realized help was needed.
OK, history lesson’s over. Here’s what it comes down to: Being a fellow taxpayer, I am less than thrilled about this latest situation and the fact that we are going to have to spend our paychecks to save these people when they got themselves into it. However, there are two important things to remember:
One, the United States is its economy. We may have the strongest military in the world, but that is because it is funded by the strongest economy in the world. The other side of the coin is that this is something that has the potential to pay for itself. What lots of media reports fail to mention is that this is not the populace of the U.S. giving a $700 billion check to Wall Street and telling them to go wild. This is us giving the government $700 billion to buy the troubled assets from our investment franchises. Once the books have been balanced, the government will sell these assets back into the market, ideally for more than what they bought them for. This kind of money would find its way back to the taxpayer in public works, such as funding health care, or public maintenance, or be given back in stimulus packages.
People who are saying we need to let Wall Street and the Big Three twist in the wind are not looking far enough ahead. Yes, it would feel great to see all the CEOs who got us into this mess have to sell their private jets, but it would be overshadowed by the dissolving of our very financial system around us. We need a functioning economy; like it or not, money makes the world go ’round.
However, this is not to say there should not be oversight. Now is the time for some serious cracking down on transparency and oversight laws. Not so much as our new market is strangled, but enough that this kind of thing never happens again. In a New York Times article, David Leonhardt mentions a popular idea that has seen support on the Democrat side: Because the Treasury can’t handle all of the risk, it buys the troubled assets at half price, and in exchange for the premium, gains a stake in the company, allowing for better oversight and control of bad business practices. If any of the firms complain, well, they no longer have the right to; they had their chance, and they blew it in a way we haven’t seen since 1920. Perhaps once trust is gained back, restriction could be softened. But you don’t buy a new car for a teen who crashed the first one while texting.
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