Every time Treasury Secretary Henry Paulson opens up his mouth, I stagger. First he said he was willing to bail out Fannie Mae and Freddie Mac to the tune of about $100 billion apiece. Then he said that AIG needed an $85 billion bailout. The latest? The Bush administration is asking for $700 billion to bail out investment bankers.
If you add it up, it's $985 billion, or nearly a trillion dollars. We are increasing our national debt at a time when it is already bloated from the war in Iraq and from the bloated spending policies of the Bush Administration. We are increasing debt and skirting trouble at a time there are political operatives describing the economy as healthy and robust.
It is amazing how quickly leaders have turned on a dime. One wonders if the timing of this is connected with a need for Treasury Secretary Paulson to make sure that his colleagues are adequately compensated as we move ahead. To be sure, the new president, McCain or Obama, will have his hands full because of this chicanery that represents little more than "chickens coming home to roost."
Is there a choice? I am hoping that Democratic legislators will view the Bush proposals most critically. There ought to always be a choice. The financial guru Suze Orman was on Larry King saying this is the best thing that happened to America.
She asked why the intervention had taken so long. Someone who needs a job might ask the same question. Why does intervention take so long? Someone whose mortgage in foreclosure, who is still not clearly helped by the proposed Bush bailout, might also ask why it has taken so long. Some folk have already lost homes and been displaced, and there is no relief for them.
A man called Suze Orman while she was on Larry King to say he'd been fiscally responsible, so why should his tax dollars bail out banks. She chided him, telling him that we have to bail out these banks to avoid a depression. She was among those who talked about the horrible things that might happen to our economy if the insured Treasury does not step in. She is right, but she is also wrong. Right. If no one steps in, it is likely that we will have catastrophic consequences. But she is among those not thinking this matter fully through. Shouldn't those who gained from the go-go of crazy finances now pay for it? Or will they walk away with their profits, leaving taxpayers holding the bag! Why should highly-paid banking execs get the money they are "entitled" to, while millions of taxpayers shoulder the burden and pay up.
The past decade has been a financial go-go for profit takers. They have enjoyed the benefit of relaxed regulation, and now, all of us are paying for it. They have developed new financial instruments, derivatives, adjustable mortgages, and anything that allowed them to strip excess profits from the process, and their exploitation of systems has pushed stock prices upwards.
They have targeted lower income markets, including minority markets, and sparked a financial literacy movement with their flagrant disregard for differences in financial acumen. And they've chuckled all the way to the bank. Now, with markets on the verge of collapse, they are putting their hands out and asking all of us to finance the go-go. And we are willing to do it.
Everyone says they want to look forward, and that's because looking backwards is more than painful. If we look back, we will find that there are a few who will lose some dollars this year and next, but they were paid enough to float through this crisis. Meanwhile, there are millions of Americans – with as many as 3.5 million slated for foreclosure – who don't have that go-go cushion. We may need to bail out economic bad actors, but must we also finance the go-go? At the very minimum, those who led bankrupt institutions should forfeit pay in the name of the millions who will never be made whole.
Dr. Julianne Malveaux, an economist, is president of Bennett College for Women.
