Thursday, February 12, 2009

Make speculators pay for the bailout

As Americans celebrated the 200th anniversary of Abraham Lincoln on February 12, 2009, we need to be reminded that Lincoln's name is sometimes used in vain. One of these was Charles Keating. As head of the Lincoln Savings and Loan Association of Irvine, California, Keating took advantage of loosened restrictions on banking investments, just as the current group of Wall Street bankers have done. Every 50 years in US history, the conservatives cook up schemes to rob the national treasury. Sometime this takes decades as legislation and policy are fixed. With the inauguration of Ronald Reagan in 1981, this last debacle began.

In between, conservatives rob the nation's Commons, without building anything. Always, they are bailed out by taxpayers. In 1989, Congress created the Resolution Trust Corp. to take over $125 billion in assets owned by 296 failed savings and loan associations. Over the next six years it added $394 billion in assets belonging to an additional 747 insolvent thrifts. The RTC’s main job was to sell those assets, mostly real estate, at the best price it could get.

In the end, the S&L cleanup cost American taxpayers an estimated $124 billion. The RTC ceased operation in 1996. Despite the price tag of the thrift bailout, many believe the RTC successfully averted even worse consequences and higher costs. Heading the RTC was Vice President George H.W. Bush despite the fact that his son, Neil, was one of the key perpetrators in robbing the S&L's. It's not coincidence that the majority of the perps were Republicans, only one of whom, Charles Humphrey Keating Jr., to my knowledge was convicted of any crime. And, once again, the US taxpayer is called upon to pay the bill, despite enormous wealth the CEO's have piled up during their tenure simply by moving pension fund wealth around that had already been made. From this wealth, they extracted gross bonuses that should have gone to the owners of this money, workers and retirees who should have gotten the majority of the interest on these funds, but were given only a pittance.

As a result of Wall Street's ponzi schemes, the Institute for Policy Studies has identified the staggering income inequality in the US population as the root of a deeply flawed political economy in a recent report entitled: Second Chance A Sensible Plan for Getting the Recovery Right. The authors -- Sarah Anderson, John Cavanagh, Chuck Collins, Dedrick Muhammad, and Sam Pizzigati have outlined a plan that begins with government rebuilding accountability and trust severly undermined by the Bush administration's lack of oversite with the Wall Street financial services industry. Briefly stated, the report warns that
"Congress assumes that the funding for the Wall Street bailout and stimulus investments will come from additional federal borrowing. But this rush to borrow merely shifts the recovery burden onto the backs of future taxpayers. Congress needs to change course — and develop a 'pay as we go' plan that makes Wall Street pay. The lion’s share of bailout funding should come from the high-finance gamblers and CEOs who have so profited from our casino economy."
The IPS report suggest several tax reforms that it believes could generate over $500 billion in revenue to pay for economic recovery. Program basics are:
  • Fund a green stimulus for the real economy;
  • Restructure mortgages for families put at risk by predatory lenders;
  • Make Wall Street speculators pay for the bailout;
  • Shut down the global casino: Assert real oversight of financial markets; and
  • Limit CEO pay and prohibit profiteering from the bailout.
Download the complete report here...

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