President Bush says the $700 billion bailout of Wall St. necessary because he’s worried about “Main St.”
Democrats say this plan has nothing in it for Main St. and needs changes. Ron Blackwell, Chief Economist at AFL-CIO says the neo-liberal policies of the last 35 years have failed. Economis Prof. Ellen Frank of the University of Massachusets adds: “This is clearly socializing risk with returns still privatized”
Story Transcript
Free Market Bailed Out
Producer: Carlo Basilone
CARLO BASILONE (VOICEOVER): President George W. Bush on Saturday defended the $700 billion cost of his financial bailout proposal, the largest since the Great Depression, saying it needed to be so massive so that the turmoil on Wall Street did not spread.
GEORGE W. BUSH, US PRESIDENT: —in my judgment, based upon the advice of a lot of people who know how markets work. This is why it is going to be contained to just the financial community. This problem would spread to the average citizen. You know, you hear them talk about Wall Street and Main Street. Well, this is Wall Street plus Main Street, and I’m worried about Main Street.
BASILONE: However, key Democrats say there is nothing in the proposal for Main Street, and that the legislation will need changes to provide better protections for taxpayers and homeowners in danger of losing their homes. US Treasury Secretary Henry Paulson on Sunday made the rounds of the television talk shows to stress the need for speed and getting approval for his bailout plan for financial firms.
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Courtesy: ABC This Week
HENRY PAULSON, US TREASURY SECRETARY: We need this to be clean and quick, and we need to get it in place. But I believe that this plan should be able to allow us to do more to help prevent preventable foreclosures, and I will work to that.
GEORGE STEPHANOPOULOS, HOST: But what guarantees do the taxpayers, at least, and these other people seeking help have that after this passes they’re going to get the help they need?
PAULSON: Well, there are many people in this country that need help, but the biggest help we can give the American people is to stabilize our financial system right now.
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BASILONE: Paulson has been resistant to suggestions made by Democrats that the program be changed to include further relief for homeowners facing mortgage foreclosures and to include an additional $50 billion stimulus effort.
RON BLACKWELL, CHIEF ECONOMIST, AFL-CIO: These guys are trying to put a floor underneath the most serious financial crisis since the Great Depression, and we’re certainly, the labor movement, are calling them to do something for the people who live and are bleeding in the real economy. People are losing their jobs, they’re losing their homes, and they’re losing their savings in this financial crisis. And I think you’ll find that when this gets to Congress, because Congress has to provide some authority for the Federal Reserve and the Treasury to take the steps they want to take, they’ll be hearing from the congressmen that we’ve got to do something to stimulate this economy, to deal with the employment problems, and also to deal with this mortgage crisis that really is at the root of this whole problem.
PROF. ELLEN FRANK, ECONOMICS, UNIVERSITY OF MASSACHUSETTS: I think it’s very, very difficult to predict what’s going to happen. I mean, we’re right in the middle of one of the worst financial crises that we’ve seen since 1929. And this package is just being floated. The details are not hammered out. You know, Congress is going to have its say. It is going to be very difficult to build a consensus between Republicans and Democrats. It’s even going to be difficult, I think, to build a consensus within the Republican Party. There are those who are not happy with this kind of large-scale government intervention.
BASILONE: Many were surprised at the speed with which the Bush administration changed its policies from unbridled laissez-faire, free-market economics, to the largest US government financial intervention in almost 80 years.
BUSH: My first instinct was to let the market work, until I realized, upon being briefed by the experts, of how significant this problem became. And so I decided to act and act boldly.
BLACKWELL: I think they’re really trying to preserve the system. I mean, the prevailing ideology that is behind the failed policies that we’ve been suffering under for the last 35 years—neoliberalism, to put a term on it—these policies are now very much at stake. The crisis that we have is the result of a series of structural imbalances economically in the United States and in the world that have their basis in failed neoliberal policies. And this caliber of failure throws into question many things that were until this point taken for granted. But their failure means there’s an openness, I believe, in our political life to raise some questions that would have been difficult to raise before. And so as serious as this crisis is and as dangerous as it is, there is an enormous opportunity here. And the fact this is coming in the midst of a presidential election in the United States is fortuitous. I think it will force the discussion of issues that we wouldn’t have had the opportunity to discuss otherwise. Markets are great things, but they can’t do the things that policy has assumed they were uniquely capable of doing. And I think that myth of the omnipotence of markets is an enormous casualty here, and it is going to force government to step up and take its responsibility for doing what only governments can do.
FRANK: This is clearly a case of socializing risk with returns still privatized. I think that’s, you know, definitely a serious problem. And, of course, the details of this have not yet been worked out, and it’s not clear what is going to be done in return. Are bank CEOs and hedge fund managers going to continue to walk away with multi-million dollar salary packages? Are the shareholders going to continue to be protected against any losses? And then the even bigger question is: are any similar rescue packages going to be put in place for homeowners who are facing foreclosures, who are unable to restructure their loans as the banks as are being able to restructure their own risky ventures?
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