TheMillerCircle.org

A few days before Lehman Brothers filed for bankruptcy, some $8 billion was transferred from their European accounts to the American side, $2.5 billion of which has been set aside for corporate bonus payouts. This has incensed the European workers of Lehman Brothers who number about 5000, that have to worry about their basic paychecks, without any promise of bonus money. Lehman Brothers is being bought by the British bank Barclays, who want to preserve some of its best executives to run their expanded US operations.

Naomi Klein, author of The Shock Doctrine (an excellent book) warns us that the Republican Right Wing is using the Wall Street Collapse to further consolidate their hold on our economic policies, with none other than Newt Gingrich providing an outline for broad cultural changes, including school vouchers for education reform. Her book is all about how the free market economists use cultural shock to introduce policies that would otherwise be unacceptable. But, by taking advantage of our anxieties created by periods of cultural stress or about future solvency, they strike for measures that further promote free market objectives–in this case further privatizing profits and making the public assume more of the risk. Treasury Secretary Paulson wants us to swallow his pill whole: if we give carte blanche for $700 billion, a number that is likely to grow, we will have taken a very large step towards that objective, one that further promotes the Free Market economy with a free ride.

We must insist on much more effective control of the financial industry, if this unprecedented public bailout is given to save Wall Street; included in this additional control, we should insist on the elimination of bonus payments to executives who have caused this disaster, and insist too that the US government receive stock and ownership in those companies that get bailout support, so that eventually the United States treasury has the possibility of recovering its money. Otherwise we are passing on another huge debt to our children and grandchildren. And this bailout loan should be associated with drastic revisions of the oversight structure, not only for the Wall Street firms, but also for the Treasury Department: we should not let Paulson run a huge cash flow that is left to his whim and fancy. As a person with Wall Street DNA, Paulson’s formula is to simply back up the current Wall Street culture with public money. Not long ago I heard Ken Lewis, CEO of Bank of America, relate what he was told when he first went into banking–that they should feel good about having 10% annual profit. Well, what we are supporting with our bailout is continued Wall Street behavior that looks at 10% as a failure. It is that culture that must change. Every executive on Wall Street needs some public cold water thrown on their face. And, the public finally has to get really pissed off! Our objective should be concern over the debt we leave our children to pay, just as much as the need and drive to preserve our own contemporary solvency.

Two forms of public debt need to be addressed as elements to this bailout: one is to find ways of getting people back into their homes by refinancing loans where it is feasible and the second is to find ways of reducing the huge public credit card debt, by reducing the interest rates that these banks can charge. Remember, that if we had fixed the mortgage problem from the bottom, we might have prevented most of this crisis from every taking place. Right now the huge credit card debt that the middle class owes has supported the banking and Wall Street boom, while enslaving the middle class with interest rates that violate common usury laws that were abandoned under Reagan. We could go a long way in achieving this objective by supporting the Credit Cardholders Bill of Rights, H.R. 5244 which came out of the House Financial Services Committee with vigorous opposition by the credit card industry. You can facilitate its passage by reacting to the Public Citizen write-in campaign.

A good model for bailouts is how we handled the Chrysler loan of 1979 in which the automobile executives had to appear before Congress and accept modifications of their corporate behavior. For a $25 billion loan, the US was eventually repaid in full, Chrysler improved its bottom line and the government sold their preferred stock for a $400 million profit. Those are the kinds of demands we should be insisting on for bailouts on Wall Street.
Unfortunately, in 1979 we had a far less compliant congress than that of today, so we seem to be listening to Paulson when we should be listening to Ralph Nader. For a sober analysis of Paulson and his plan to deleverage Wall Street, a must read is Paul Krugman’s article in the NYT yesterday: he concludes that we should be insisting on public ownership for public buyouts. Anything less is free money for bad over-leveraged behavior: in other words greed!

RFM