What emerges clearly in the wake of this fall’s stock market turmoil and credit paralysis is that we are in the throes of an historic financial meltdown because Wall Street, and the politicians in their service, gambled with our future. Families are struggling with a long-running economic squeeze, the totality of which is still unknown. Last week, we woke up to the news that in August, we lost another 159,000 jobs – 760,000 since the beginning of the year. That same day, it became clear that the taxpayers who took on the burden of bailing out Wall Street would not get extended unemployment benefits or a job-creating stimulus package – measures George Bush said he would veto. Nearly 50 million are without health care. In August alone, more than 300,000 Americans lost their homes to foreclosure. Families are worried about putting food on the table, putting gas in the tank and being able to retire with the security that few feel these days.
The burst of the housing bubble has left the financial markets sitting on trillions of dollars of essentially fictitious value. There is no rational purpose served by pretending that either those homes or the mortgages on them held by the banks, let alone the “derivatives” based on packing and re-selling them, are worth what their paper value says. A proper rescue program would begin with an immediate ban on foreclosures, followed by the government taking over and rewriting those mortgages to reflect the actual value of those properties – i.e. a 30-40% writeoff of their fictional paper values at the height of the housing bubble – and then putting a ceiling on families’ monthly payments at something like 10-12% of household income.
Among other virtues, such a program would not only keep people in their homes but also, by reducing their payments, serve as a more effective economic stimulus than those one-time Treasury checks.
At first my opponent in this election, Congressman Peter Welch, joined a majority of Congress in voting down the $700 billion corporate bailout on Monday, September 29.
Welch's vote followed an outpouring of calls opposed to bailing out the corporate crooks. A national poll showed only 7% of voters thought the government should use taxpayer funds to keep a large financial institution solvent.
Welch's statement, published in the Burlington Free Press on September 30, correctly explained that under the bailout bill, "total responsibility for this crisis is transferred to the middle class." He condemned the bailout as "rewarding speculation, market manipulation, and corporate self-dealing." He properly called for making Wall Street pay for its own excesses with "a small transaction fee on security trades."
But then Peter Welch caved.
On October 3, Welch voted for an even more expensive corporate bailout that rewards speculators by having the government buy now worthless mortgages. But the bailout does nothing to protect homeowners in danger of losing their homes.