I know most of us are seething at the very idea of a bailout plan and being forced to throw precious tax dollars (full amount yet unknown) “down the drain” to help save a bunch of greedy guys and gals who flagrantly put our country and individual investors at risk. And I certainly don’t want to be an apologist for an administration that let it all happen as their own financial portfolios probably grew and grew.
But here’s the thing…this isn’t about Main Street versus Wall Street the way the media has been telling it – and the way our politicians have felt compelled to tell it too.
It’s about Main Street AND Wall Street, because the two are totally, inextricably, for-better-or-worse reliant on each other.
The problem is, it’s hard for us to want anyone on Wall Street to benefit even slightly or in any way be relieved of the pain of all this when they are the very reason we’re all suffering. But there’s just no way to bail ourselves out without throwing them a lifeline.
Unfortunately, it’s no longer us versus them at this point. It’s just U.S.
***
UPDATE: Looks like we now have the final draft (as final as it can be knowing we’ll still have to flesh out components as we go along) of a solid compromise bailout plan for both houses of Congress to vote on with at least reasonable hope it will be passed. This was a largely bi-partisan effort and, from what I’ve just heard it contains, I think the revised bailout plan has a pretty good chance to work:
- Only half of the $700 billion has been approved as of now, and even that will be phased in.
- There are limits to executive compensation.
- There are several levels of oversight, including an independent Investigator General.
But BEST OF ALL:
- There’s a provision for an ownership stake for the American people in all the rescued companies so that we get something back for the dollars invested. And we are first in line for payback.
- AND…there is a provision for every single transaction under this bill to be posted online. Not only giving us transparency, but a chance to blog the crap out of any stupid moves we see.
Do I think it’s perfect? No. Will this solve all the problems? Lord NO! But the way the financial markets work, if we just stepped back now and let everything tumble domino fashion (as it looks lined up to do) the cost to us will be many many trillions – and the worldwide aftermath and clean-up would be unthinkable.
And there’s a good chance, btw, the way this revised plan is structured as of now, the final cost to us will be much less than even the approved $350 billion. Not that I can guarantee that. But every day the credit markets and investor confidence stay frozen (and prevent small and big business from returning to normal and new business from being created), means more lost revenue and lost jobs for all of us. And in that scenario, everyone loses.
I know some of you still hate it (I’m certainly not dancing in my living room), but I’ve worked in all these industries and have a background in both finance and banking…and this really is as bad as they are telling us. Even from an administration that’s cried wolf again and again, this time it’s for real.
Tags: Add new tag, bailout plan
September 28, 2008 at 1:28 pm
The bailout plan is a bad idea on so many levels. Government is intervening in the natural consolidation of the financial services industry which has had a huge run up recently – in 2006 fully 1/3 of *all* US corporate profits were from this sector.
Dave
http://www.islandersoftware.com/weblog/2008/09/27/just-say-no-to-the-bailout-plan/
September 28, 2008 at 1:52 pm
Thanks for the link providing another perspective. We respectully disagree.
Government intervening in natural consolidation? You mean…more and more power in the very hands who created this mess? Less companies with more power? Isn’t that one of the reasons we think monopolies or near-monopolies are bad?
BTW…I’m an organizational consultant who has worked in government, profit, non-profit and academia. Bigger is not always better…as our huge unwieldy government bureaucracy shows us. I’ve been in the belly of the beast of huge corporate entities, and economies of scale often are accompanied by the inability of a large company to know what all its hands are doing.
But that said…I know it’s a philiosophical difference we won’t resolve. Government “interference” brought us Glass-Steagall in 1933 after the great stock market crash and helped keep our markets stable until 1998/1999 when, led by none other than “never met a regulation I like” Phil Gramm (long time friend and advisor to McCain) REMOVED regulatory protections, helping pave the way for this wild ride we’ve been on and for these huge consolidations you speak of where profits and greed drove normal banking precautions to be pushed aside in the name of bigger and bigger profits. All that helped put us on this awful financial rollercoaster ride, ending in this descent into financial crisis.
No, dwrugh, it’s not less regulation and “natural consolidation” we need…it’s sound regulation, transparency and oversight that has real teeth in it. The other way is just myth as far as I’m concerned.
But again, I respect your different opinion and am sure many out there agree with you.
Thank you for the visit.
JABG
September 30, 2008 at 12:29 pm
Thanks for looking at my post, JABG, and for your very kind comments!
I should really cite this post of yours on my blog, because it is far superior to what I wrote, especially with your first-hand knowledge of the industry. Would it be okay if I referenced this post?
September 30, 2008 at 12:51 pm
I hope it’s okay with you that just added a short post on my blog, asking readers to look at your post. Your breakdown is excellent and right on-point (whereas I tend to veer off topic a bit…!#$%!). I actually tried to read the 100-page bill yesterday. I got half-way and my head was spinning
It’s unfortunate that the bill didn’t pass on Monday. I hoping that they try again soon. There is still quite a bit of opposition against any proposed bailout, because the people of America are merely concerned with “their” burden as taxpayers, and they really don’t see why this is absolutely necessary in dealing with the crisis we’re in, or why such a plan is actually protecting the public interest–not just Wall Street’s or Washington’s. Thank you for breaking it down so well in this post!
September 30, 2008 at 1:04 pm
Oh…of course I’m happy to have this mentioned on your excellent blog. And I have to laugh…I too often feel like I’m rambling when I try to make my point. Glad this spoke to you.
Let’s just hope something has changed on both sides of the aisle as well as Main Street and we can get consensus now…and agreement to work out the details later, since there is a LOT to still work out. The talk of FDIC expansion is interesting. I need to go look at that more. Smiling that you got further through the bill than I did…despite my background!
JABG
September 30, 2008 at 1:09 pm
I think I got crossed-eye just a few pages into it, actually!
I love reading your blog, and your more recent posts about the bailout and Pelosi were excellent as well. Keep up the great work JABG!
September 30, 2008 at 1:11 pm
Thanks, culturepress. Same right back at ya!
October 1, 2008 at 3:18 pm
I agree with you and wrote about this yesterday on my blog. “Main Street” is only hurting “Main Street” if they believe they can “get even” with Wall Street by opposing some level of bailout. I’m adding you to my blog roll. Democrat Dave
October 1, 2008 at 4:16 pm
Thanks, Dave. Just read your piece. Great stuff. And the same goes for the rest of your blog. I’m adding your link too. You have lots of really cool posts I only wish I blogged! I’m going back right now for that Al Franken bit…
Oh…and I like your call to action, so if I may, I’m reprinting some of it here:
Amen, Democrat Dave! The LIBOR rate hit 6.88 yesterday, up from 2.56 the day before – the day of the failed vote in the House. Why does that matter? That’s the rate banks use to lend to each other to keep credit markets flowing. It’s also the rate ARM mortgages are set to and when they reset…kerpow! If that doesn’t come way down, the crisis we’re dealing with now will look like a day in the park.
JABG
October 14, 2008 at 7:30 pm
[...] Why We Need a Bailout Plan Jump to Comments Just a Brooklyn Girl has an excellent breakdown of the bailout plan and why we need it. Her experience in the industry gives her a far superior understanding of the plan and the current financial crisis than I would ever have. It’s also concise and right to the point, so please take a look at “Bailout Plan: Sure It Sucks. Here’s Why We Need It Anyway.” [...]