BOSTON, Sep 26 - U.S. lawmakers and the George W. Bush administration are continuing their closed-door meetings through the weekend to try and fashion a softer 700-billion-dollar deal for Wall Street that will appeal to citizens angry at the prospect of the mega-corporate bailout.
Treasury Secretary Henry Paulson brought the plan to Congress on Sep. 19 in a three-page outline, and said it was necessary to prevent the collapse of the finance market due to complex trades involving subprime mortgages.
The plan would have allowed Paulson, a former CEO of Goldman Sachs, complete control of the massive payout with no oversight, no auditing and no plan of a payback to the taxpayer.
ACORN president Maude Hurd captured the nation’s sentiment when she hinted at the potential electoral fallout in a speech this week: “There is a palpable populist revolt rolling through towns and cities across the country, and if Main Street doesn’t get any real help with the mortgage out of this deal, the American people only have to wait a few weeks for a constructive outlet for their anger.”
ACORN is the nation’s largest grassroots community organisation of low- and moderate-income people, with over 400,000 member families in 110 cities across the country.
At the Capitol, members of Congress attempted to convince taxpayers — and voters — that they had their best interests in mind, and that meant a big bailout for Wall Street.
“Hundreds of billions of dollars that Americans invested in retirement accounts and mutual funds have evaporated,” and more surely would, warned Democrat Chris Dodd, Senate Banking Committee chairman, while giving the impression that the income security of average people is at stake.
This couldn’t be further from the truth, say those who study stock ownership. The average U.S. citizen owns very little or no stock, and wouldn’t be helped directly by an up-market.
“I think the middle class are not going to be very affected at all by a bailout. It’s something that is going to affect the very wealthy. Changes in the stock market won’t make much difference to the middle class,” Edward Wolff, a New York University economist, told IPS.
“It’s just a political gambit to help the rich recover from the stock market collapse. If you claim that everyone is suffering, it’s easier to get a bailout from Washington,” Wolff said.
In 2001, the richest 10 percent of families owned 85 percent of all outstanding stocks, about 85 percent of all financial securities and 90 percent of all business assets, according to Wolff.
As for the rest of the country, only 32 percent of households owned more than 10,000 dollars of stock, and only 25 percent of households owned more than 25,000 dollars worth of stock, Wolff said.
A 2007 report by the Government Accountability Office found that in 2004, just 36 percent of workers had any savings at all in a retirement account. Most U.S. citizens will depend on Social Security in retirement, the government programme that provides 30-40 percent of what was earned in their lifetimes.
The bad practices of the mortgage lending industry targeted people of colour and the elderly, in particular, according to a report by United for a Fair Economy.
Only 11 percent of subprime loans went to first-time buyers last year. The vast majorities were refinancing that caused borrowers to owe more on their homes under the guise that they were saving money. Many borrowers were talked into refinancing their homes to gain additional cash for things like medical bills, the report says.
African American borrowers will lose between 71 billion and 92 billion dollars, and Latino borrowers will lose between 75 billion and 98 billion dollars as a result of bad subprime loans, according to the report.
“A couple decades of deregulation have allowed people at the top of the financial food chain to benefit from millions of people, through unscrupulous mortgage lending practices,” Michael Lapham of United for a Fair Economy told IPS.
“Who are we most concerned about helping? Homeowners facing foreclosure or people who’ve made millions and billions on subprime lending?” Lapham asked.
The U.S. public seems especially peeved at the idea of helping companies that pay exorbitant salaries to their bosses, at a time when many people have seen a decline in their standard of living.
According to the Institute for Policy Studies, CEOs of large U.S. companies last year made an average of 10.5 million dollars, while the top 50 private equity and hedge fund managers pocketed an average of 588 million dollars each.
The institute notes that draft proposals floated by the chairs of both the House and Senate banking committees would allow Paulson to determine what qualifies as “inappropriate or excessive” executive compensation under the bailout plan.
“Secretary Paulson amassed a personal stock stash worth over three-quarters of a billion dollars as the CEO at Goldman Sachs,” said analyst Sarah Anderson. “He hardly strikes us as the appropriate arbiter of what’s excessive and what’s not.”
In a statement, Anderson said the nation needs clear and strict limits on CEO pay “so that taxpayers won’t have to worry about their money flooding into the pockets of top executives and encouraging another round of reckless behaviour.”
On Thursday, unions, and anti-poverty and peace groups took to the streets, staging large demonstrations on Wall Street and in many cities chanting, “No bailouts for billionaires.”
At the end of the day Thursday, it was hard-line Republicans, including Sen. Richard Shelby and Rep. Spencer Bachus, who stood firm against the bailout. Bachus told reporters that the Republicans do not want the U.S. to buy the bad debts of the companies, but instead to loan the companies money.
Their argument that the market could do more to fix itself was bolstered later Thursday evening, when troubled Washington Mutual bank, riddled with bad mortgages, was bought by J.P. Morgan Chase.
The Democrats want the bailout, one that would meter out the billions in installments and somewhat restrict the pay of CEOs, Dodd said.
“I don’t understand why the Democrats in particular didn’t feel they have the leverage to get more out of this deal. Congress has squandered an opportunity to actually help homeowners facing foreclosure,” Brenda Muniz, legislative director for ACORN, told IPS.
According to an analysis of U.S. Census data by the Centre for Budget and Policy Priorities, 18 percent of U.S. children lived in poverty in 2007.
The willingness of Congress to consider a 700-billion-dollar payout makes clear that Congress could budget other large sums to help end homelessness and hunger, and improve public education.
“When people go to Congress to ask for more affordable housing funds and are told there isn’t money, then along comes Wall Street and they say, ‘Oh sure we have 700 billion dollars for your bailout.’ It definitely makes you question our nation’s priorities,” Lapham said.