After searching for answers on the bailout all weekend with the fervor of a quest for the Holy Grail, I came up a little short. Amid hundreds of opinions, newscasts, and political propaganda, what were we actually signing up for, and was it all worthwhile? I found an incredible lack of answers, seemingly because Congress completed avoided any persuasive ideas or explanations toward the public.
Like nearly all of my fellow Americans, my confidence in the President and Congress are at an all time low - how was I, or anyone, supposed to support something I didn't understand, from people I didn't necessarily trust? Joel Achenbach of the Washington Post said it best - "a political establishment held in higher regard may have been able to hold together some kind of coalition of the willing, but distrust of the nation's leaders, from the leaders of Congress to the President, foreclosed that possibility."
So when Henry Paulson came up with a plan that was supposed to save our nation from financial Armageddon and said "just trust me with your $700 billion" and didn't offer further explanation, we didn't.
How did something that was suspected to be a landslide victory fall short on Monday? There are many speculations, but in a nutshell, it probably comes down to politics. Thousands of concerned voters called and emailed their Congressmen, and although they were told to vote with their conscience, I have to applaud Congress for exactly what they were criticized for: voting on behalf of the people they support. Yes, they may have done it to protect their jobs (the vote occurred just weeks before all 435 members of the house are up for re-election), but the lesson learned is that you, Joe Average voter on Main Street, do have a voice, and it does matter.
Unfortunately, many of us (me included) were woefully uneducated to make this decision. Many very, very smart people (I'm talking to you, Nobel Prize Winning Economists, authors, professors, scholars, doctors, lawyers, Mr. Cents, etc.) stood on opposite sides of the debate. Although you will probably be reading this after the bill has been passed through the House, I want to present to you, dear readers, the information I was sorely lacking before spending hours researching it - a summary of each position to the questions that are foremost on my mind.
What happened?
CNN has a great timeline of events leading up to the crisis. Basically, many investment houses on Wall Street were borrowing a lot of money to make risky bets on subprime mortgages. Bear Stearns failed and the government stepped in, Lehman Brothers failed and the government walked away, saying they were only picking industries to save that were "too big to fail". What was the criteria for too big to fail? AIG met the standard, and then suddenly we were looking at bailing out the entire system to the tune of $700 billion dollars or face financial Armageddon.
I wish someone would just tell me what the heck this bailout plan was for.
The New York Times printed an article that was the single best original source of information on the subject, and I don't say that lightly. If you read anything - read this article. If you don't want to read it (well, you really shouldn't be reading this either, but regardless…) here's a brief synopsis:
- The plan is asking for up to 700 billion to buy distressed mortgages. The government cannot go beyond the $700 billion without further approval from Congress, but estimates run from $500 billion to $1 trillion. However, the $700 billion is in addition to the 85 billion for AIG, 25 billion for Freddie and Fannie, and $29 billion to help JP Morgan Chase merge with Bear Stearns.
- Taxpayers will ultimately bear the burden of the bail out. Congress hopes that the bailout will help the overall marketplace more than it hurts the taxpayer.
- Main Street is being asked to cleanup Wall Street because the markets are so pervasive that they, ultimately, affect nearly everyone. The bailout plan will also likely include limits on payouts for executives and relief for homeowners facing foreclosure.
700 Billion is a lot of money - how did they come up with that number?
When pressed for an answer to this question, the Treasury said they just wanted to come up with a really big number. No, I only wish I was kidding.
What are the experts saying?
Here are some arguments for the bailout:
This isn't just a Wall-Street bailout!
And here are some against:
Newt Gingrich, former Speaker of the House
Rep. Robert "Bobby" Scott (D-VA)
If you are reading this post I'm assuming you are interested enough in our political system to have a vested interest in its outcome. So, now that you are informed (at least slightly more than before you read this post), do what's right for government, get out and vote. Because we've proved a lot of things that are much more valuable than money - that the democratic system we love and stand behind still works, Joe Average voter still has a voice, and, most importantly - every vote matters.
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