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A (Slight) Win for the Good Guys?

By       Message Tim Buchholz       (Page 1 of 1 pages)     Permalink    (# of views)   No comments

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American Paul Krugman just won the Nobel Prize for Economics, and in a recent interview on NPR, the host said that, due to the timing of the award, everyone is going to be looking to him for an answer to this economic crisis. Krugman, who also writes for The New York Times (often negatively about George W. Bush's policies), said he was impressed with Britain and the European Union's plan to buy stock in the banks they were helping, not just trade "cash for trash" as the US Bailout Bill has been referred to. Then, low and behold, The US has decided that this plan might be ok.

When the Bailout Bill was first presented, it was to be $700 Billion with no oversight handed over to people who used to work for some of these companies to selectively fix whomever they felt needed it. When people started saying that we should get some ownership or stock options in these institutions, Bernanke and Paulson scoffed, saying too many restrictions would limit the plans effectiveness. The market is very fragile. Well, that plan failed in the House. Maybe it failed entirely for political reasons; we are coming up on elections, and one Congressman was quoted as saying, "We all want this bill, we just want someone else to vote for it." Or maybe a few of our Congressman were able to see that this was just a blank check to the bankers and did little to help the American people, sort of trickle-down economics at its best.

Then a revised bill came to the Senate, with more pork than a sausage factory, and somehow, amidst this time for change and the straight-talk express, one of the most pork laden bills I've ever seen to hit the floor passed with flying colors. There's tax breaks for NASCAR and wooden arrows in what was supposed to be the most important bill to cross the Assistants to the Senators' desks in years (I assume most of the Senators didn't read it, you know they are busy trying to get re-elected. It was over 400 pages!). And yes, they did get some legislation to stop Golden Parachutes (sure) and we were told there would be a good chance that we could get a lot of or maybe even some of our investment back! Good for us!

Then the European Union, with the help of Britain's PM Flash Gordon as he's now called, came up with their plan. This plan called for the money to buy stock in these struggling banks, some up to 60% ownership, and the taxpayer would suddenly have a real stake in this business. It was heralded as a big breakthrough in Europe, and the world, and even Nobel winner Krugman thinks it might actually work. Suddenly, the US changed its plan and said they would do the same thing, though before they said any restrictions could ruin the plan. Maybe they didn't want the rest of the world to get it right.

The US Government then announced that they would be using $250 Billion to buy stock in the struggling banks, therefore creating some much needed capital. So our government would finally be a part of its money system again. I was so excited. The stock market hit record highs. England was about to own 60% of one of its biggest banks. Isn't that the way it should be? Why are we paying interest on money we loaned ourselves? Where is it going? Where is it coming from?

I, of course, would like to see the government, or in theory - the people, own all the shares, but even with the little economics I like to think I understand, that would mean we would have to start living within our means paying off our debt. I read recently that every American owes about $37,000 as part of our national debt. The clock that keeps track in New York City recently ran out of numbers. This $700 Billion breaks out to roughly $2,300 per person, including all children. I am only slightly over $1,000 in debt, over $6,000 when you add my student loan, and that makes me uncomfortable. The US government just added $2,300 more. I'd like to get something back on that investment. But now I was about to own stock in the banks. I'm saved!

But then I kept reading and it said the banks in the US would be allowed to buy back those stocks in time. WHAT? Well, then I thought that the much heralded savior of the Euro would at least be keeping its 60% of ownership, but no, the same deal goes in Europe. The shares would be sold back in time? Just when they become profitable again, I am sure. Let's hope they at least wait till we got our money back, with interest.

 

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Tim is a some-time activist living in Ohio who thinks things should be a little bit more fair. He has also worked as a musician and an actor, performing throughout the US, Europe, and Japan.

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