Dear America,
Everyone has heard by now about the crisis that occurred with Wall Street. A lot of people probably thought that they would never really need to be concerned with what’s going on in Wall Street outside of the stock report shown on the local news that we barely paid attention to. At least I did. Now, I’m finding myself wondering more about Wall Street than I have ever cared to. I have (and I’m sure many of you have too) wondered what happened to get our economy into this mess to begin with. Well, that question has an answer that is multi-faceted and many factors go into play that are beyond me. But some basic things that occurred can be explained. So, let’s begin shall we.
Now, I’m a very simplistic person and so my explanation will reflect that. Back in March of this year, the feds rescued Bear Stearns, the US’s 5th largest investment bank, from collapsing by shelling out $30 billion of taxpayers’ dollars. The feds’ rationale for doing so was because this huge company held a lot of contracts that they thought would no longer be honored if it failed, which would as a result been catastrophic to our economy. Now in our current month of September, stating that this has not been a good month for Wall Street or our economy would be a terrible understatement. The first sign of trouble again was when the feds had to take over two of the nation’s largest mortgage companies, Fannie Mae and Freddie Mac. Then a week later two financial giants that had been around for over a century, Merrill Lynch and Lehman Brothers literally went broke. Merrill Lynch saved themselves by allowing Bank of America to buy them out and Lehman Brothers went bankrupt. And let’s not forget American International Group (AIG). It has been said that the main reason, in simple terms, why these companies were in hot water is because they took too many excessive risks and made too many bad business decisions.
So, now the American people must pay for their mismanagement.
The feds have proposed a massive bailout plan for these companies that will include a high price tag of an estimated $700 billion (of taxpayers’ dollars might I add). All of the details of the plan have not been finalized at this time. But CNN does confirm some of the details proposed by the current administration. Bush’s plan calls for the feds to purchase risky assets from financial companies for the next two years, hold on to them, and then sell them for a profit. It is hoped that by bailing these companies out, they will be given the opportunity to clean up their balance sheets which would allow them to lend again and supposedly benefit us all. Democrats specifically propose as additions to Bush’s plan that that the feds should not be allowed to buy up troubled assets for the next two years, that the feds should have more of an equity stake in the companies it rescues, more help for Americans facing foreclosure, stricter government regulation, and a decrease in the bonus pay for the major executives of those companies being rescued. And inevitably, this would increase the nation’s deficit from 10.6 trillion to 11.3 trillion starting the next fiscal year on the 1st of next month. One member of Congress has advocated that the bailout should be paid for by increasing taxes on the incomes of those making over $1 million a year. Sounds good to me, but I highly doubt if that happens. It has been said that this bailout will be a risky venture with no clear guarantee of success, but it has also been said that inaction is not an option if we want our economy not to go under which would have effects similiar to the Great Depression of 1929. And that would truly be catostropic.
What about my clients? With a great deal of our national budget already going toward the military and less towards social welfare programs, it seems like the American people will be the ones left suffering… especially the poor. Tennessee’s home foreclosures rose 66% over a two year period from 2005-2007. Contrary to popular belief, there are those who live in poverty that do live in their own home. About 25% or 3,868 families in the Nashville area own their own home and would be particularly affected by the bailout (we all will be affected). If the Democratic proposal additions are passed along with the bailout plan, it may help alleviate the suffering of this bad situation by also helping out homeowners and putting measures into place so that the likelihood of this event reoccurring is lessened. Many people have also wondered who will “bailout” the American family when this mess takes it toll on them. Who will bail us out when the effects of this start to be felt at its hardest? Some of us have also wondered how the government can come up with a way to squeeze out billions now but would not have probably ever have done that for social welfare programs. And anyone who works in the area of social welfare and non-profit know that having to face annually decreasing budgets are usually a major concern repeatedly as the need for these programs keep increasing. The phrase “In God we trust” on the back of our currency couldn’t be more true because, in my opinion, anyone that puts their complete trust in our nation’s supposed leaders and government is delusional.
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4 comments:
I agree, to put trust in anything but God is delusional at this point. Remember this country is geared of off profit, and I am sure someone will be making profit even in this chaos. Even the same execs in Wall Street made there profit while it lasted off of securities that they couldn't back up. I think in the end wall street execs are responsible for creating a false sense of security for the American people and the real estate market. We are yet to see the real damages of this affair and it could take years to recover. Who will give me bail out money to replace what I lost when selling my home in an unstable housing market. I had to sell my home for a couple of thousand less than I paid for it in 2006. The values of homes have been depreciating in many neighborhoods because of the mess.
I'm sorry to hear that you have been directly effected by our terrible housing market, like so many American families have. But I am hopeful that things will get better. What else can do but hope for the best? Things are already bad now and we can only pray that they don't get any worse. As far as profits go, I agree with you. There has been talk about people making a profit off of Bush's bailout plan, and from polls on CNN many are worried that in the end only the already "well-off" will end up benefitting from the Bailout plan once it's all said & done. And I believe that the Bailout plan as Bush is proposing it, would allow many of the Execs who got us into this mess to keep getting their millions in bonuses and salaries. Democrats are proposing additions to the plan that would limit that. Bush says that the Bailout plan will renew the American people's trust in the economy again. I think the ordeals that we have been encountering this year have all altered our trust of our economy and our government in ways that we never really thought it could be shaken.
Okay, so how about the last time the feds "helped" out the common american worker? The Great Depression. You know what came out of that? The welfare system. befor the great depression it was the business of local government to help their less fortunate. however times changed and thing went downhill as a nation. AFDC was inintally created to help those who suffered due to world war I and a failing economy. The economy only picked up when we entered wwII. Will we have to enter another war for things to get better. Also just as things picked up with the election of a democrate FDR it will end again with the election of OHB :-) http://www.english.uiuc.edu/maps/depression/about.htm
also check out http://usa.usembassy.de/society-socialsecurity.htm
I agree with you Twinkie. In the past, the government did assume more responsibility in helping the disadvantaged. As times have changed, so has the government's position on how they help the poor. More & more they are moving towards privatization of social welfare programs, which to me, is just a way they can wash their hands of the poor population & pass the buck onto local communities, agencies, & churches. I do hope that we do not have to enter another war for things to get better. I remember reading about the Great Depression & feeling a lot of empathy for the folks who lived through that & had to endure those circumstances. But I never thought in my wildest dreams that in my generation our economy would be in the state it is currently in. I guess as an American, we do all have a certain degree of arrogance that other countries may cite as their reason for disliking us. We think that because we are the US, we have been and always will be one of the richest countries in the world...the land of opportunity. But since becoming an adult & experiencing the trials & tribulations our country is currently facing, it served as a blatant reminder that our country needs to be careful. Just because we are America, doesn't mean that we can't fall from grace. I personally hope that never ever happens, but over the years I can now see how that could very well take place if things don't get better. Before, I couldn't even imagine it. But now unfortunately, I can't really say that with too much confidence.
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