Insights · September 29th, 2008
Well, well, the U.S. House of Represtatives voted down the rescue package.
Now what?
I am attempting to synthesize what I read and see, as I am sure many of you are. This approach, currently posted on Firedoglake, seems appealing and sensible. Give Secretary Paulson $150 billion now, till January. Tween now and the new Congress develop a long-term solution along these lines:
1) Buy up mortgages at a discount and give people new fixed rate mortgages. The government shares in further house appreciation (only fair since it bailed the homeowner out). This stabilizes mortgage prices and helps people and banks both. It is essentially identical to what FDR did with the Home Owners Loan Corporation (HOLC), and we know how to do it. Initial price tag? Probably around 20 billion.
2) Use the FDIC (the folks who take over failed banks) to take over failed mutual and money market funds, make sure the investors get as much money back as possible, liquidate the funds in an orderly fashion (or keep them operating if necessary) and if they are kept alive, kick the people who screwed them up to the curb and change how they do business.
3) Declare a national emergency, with judicial review (unlike Paulson’s seizure of ultimate power) and use the authority to review all purchases of banks, to institute oil rationing if necessary (or simpler procedures like “every street now has a 55 mile an hour speed limit, if it is normally higher). Also allows release of oil from the reserve, if necessary.
4) Expand the safety net such as food stamps, employment insurance, welfare and so on. We know this is going to get worse no matter what we do, so why aren’t we taking care of ordinary people?
I am curious why approaches like these are not getting more play.
Regarding the vote itself, the party that voted overwhelmingly to defeat the bill said the reason they voted this way is that the Speaker of the House offended them with this speech. I urge you to watch it in full and judge for yourself. It does not seem offensive to me, though I am not a member of the minority party. You can read the text of the speech here. It seems like something else was driving opposition to the bail out plan rather than this particular speech.
We have to hope that they will all come back to the table and seek a reasonable approach that bridges us to a better long term solution.
Update: Dean Baker also takes a reasonable look at the crux of the long-term problem, which is declining home valuations, and possible options for moving forward.
Update 2: On the need to pass what is actually on the table, Friedman appears to be right.
Glen Hiemstra is a futurist speaker, consultant, blogger, internet TV show host and founder of Futurist.com. To arrange for a speech contact Futurist.com.
