The People's Story About the Great Bail Out of October 2008

Reporters, pundits, columnists and Commentators all spoke their piece on the Great Bail Out of October 2008, but there is a side to the story that to my knowledge has been overlooked: The people's story/ I am afraid this tale will be lost if someone doesn't record it now. It is the story of the tens of thousands of Americans who called, e-mailed and faxed their Congressmen and President Bush stating their anger and demanding the bail out of financial institutions who had played fast and loose with good business practices not be bailed out at tax payer expense. Several times during the critical two weeks of negotiations the switch boards at both the White House and the Capitol Building actually broke down under the onslaught. It was stated by several Congressmen that their e-mails and phone calls from constituents were running 90% against the bail out plans.

Of course Congress did sign off on a huge $700 billion Bail Out plan ( Emergency Economic Stabilization Act of 2008 **) that President Bush and the Democrats in Congress were demanding just had to be, but only after adding about $2 billion more in pork spending to lure the Republican hold-outs to their way of thinking. The funds were to be given over to some unknown person to administer and decide what companies would received the largess and what companies would be allowed to fail. But most of all it was suppose to immediately put some starch in Wall Street with just the promise of money coming. Well, here it is six weeks later and Wall Street is still on a roller coaster ride as the Dow fluctuates almost hourly. In fact, the Markets all over the world have been affected with one country, Greenland, going totally bankrupt and others very nearly bankrupt.

So here is the story that will, I am sure, be lost. It is the story of the tens of thousands of American tax payers who were ignored by their government; what they said and why, the questions they asked that were not answered and their anger.

The cry all over the country was, "Bail Out? Hell No!". Americans were angry and vocal about it. This issue received more phone calls, e-mails, faxes and letters than had any other issue during his tenure in Congress stated one 25 year veterans Congressman.

I can't even imagine how much could be done to improve our country with $700 billion! I do know though that it is a whole hell of a lot more and lot better than spending that money to bail out the fat cats just so we can continue on the same destructive path our economy has been on for decades now.

I am totally opposed to this bailout of the financial institutions. Let the bad ones fall! If anything is done and money is put anywhere it should be given to the home buyers who are in trouble. I propose forcing the mortgage companies to accept the low interest loans that the buyers were first given. If they don't then allow them to go out of business and at that point the government can step in and take over the mortgages of the individual buyers who are actually living in the homes they have mortgages on. No bails out for the financial institutions or the speculators. But this action is to be taken only after the lending company is completely down the drain with it's poor management out of a job and it's stock holders out of money.

I have been stewing over this and am so angry! I am tired of supporting companies who did not adhere to good, or even mediocre, business principles. When I over spend or make a bad decision no government bails me out. When small companies who employ the most Americans and are actually the backbone of the free market system make bad judgments they are not bailed out, but the fat cats who pay lobbyist to wine and dine Congressmen get a fat welfare check for paying their CEO's exorbitant salaries and benefits.

I have e-mailed everyone I could and will continue to e-mail more people. If we don't let them know how we feel then Congress is going to give our hard earned dollars to the rich guys who make large "pay offs" to them.

Many are saying, "Why should tax payers help out home buyers who should have known better than to get a loan for more house than they could afford?" But they didn't "know better" when the financial lenders were telling them otherwise. The loan officers working for the banks were telling them they could afford with these handy dandy Adjustable Rate Mortgages with low interest rates and monthly payments they could afford, and not to worry because the value of the house will increase so when the rate changes you can just get another loan.

President Carter and then President Clinton wanted the poor and minorities to own homes so they passed the word that the regulations and standards be loosened so these people could get loans to buy homes. It was as if they were making home ownership another entitlement. Big government and big financial business were making the American Dream come true for everyone. No need to work and save to get that home. Just sign on the line with our buy now, pay later mentality that was and is being sold to those who can not afford to buy now because they can not afford to pay later. The finance companies loved the directives coming from the federal government and the games began. They eased up on the standards and sold houses and mortgages and the poor and minorities were in homes of their own. The games were not merely straight mortgages as had been and should have been the standard. No wise guys on Wall Street became inventive with what they called "derivatives". They bundled and trundled these mort gages and sold bonds on them that were not backed up by the property but were backed up on the buyers ability to pay off the mortgages. Then bundled the bonds and sold them again! And I say, "Hell no! No bail out for these people with my money."

People don't know about mortgages; they just plain don't and they rely on the people who are in the business to advise them. Everyone keeps saying how "complicated" financing is and 99 out of 100 buyers feel this and are intimidated and rely on the loan officers. That's just as "responsible " as they get, or probably can get after trying to read thru and understand a mortgage contract. So we should let these people lose their homes because they should have known better, because they didn't and probably couldn't. But by all means bail out the very people who not only should have, but did, know exactly what they were selling to home buyers. And what they were selling to the mortgage companies and the bundling of all kinds of loan to sell again and on and on until all the fat cats got their cut. Just two months ago Senator Dodd was telling all how financially sound Freddie and Fannie were because Freddie and Fanny were his friends who contributed heavily to his campaign. Now he is the top dog of the Senate Banking Committee who is crying about the "crisis" and the financials institutions need for the government to step in and "save the country". The he went a step further and voted to have the federal government actually buy out Freddy and Fannie (the largest holders of mortgages in the country) with all their bad mortgages. This was done outside of the $700 billion crisis bail out though because Senator Dodd and other Congress men had more "friends who contribute" to bail out.

The "must do" bail outs begin and are sure to run wild. The government owns Fannie and Freddie and a good part of AIG (American International Group, Inc.) The largest insurance company in the world who have insured a huge amount of these toxic mortgages and derivatives and we are being told simply can not be allowed to fail. Now the Congressmen are agreeing that the government should own a good part if not all of the financial institutions in this country. What's next? Why shouldn't power and utility companies and even whole cities fail so they too can get bailed out? Well at least we have a model to follow in our march towards communism/socialism: the Soviet Union. (Addendum: no sooner was the Bail Out Act passed than Washington was inundated with lobbist and representatives from power and utility companies and debt ridden cities and even states for their share of the spoils. Failure was indeed to be rewarded!)

Did you know the only real difference between communism and socialism is that in socialism the government fosters the lie that the people own everything while with communism there is no pretense? Now we are going to have democracy and free-markets moph into socialism, but continue to be called Democracy and free markets. Or maybe a new name will be invented just for an America gone mad.

I still maintain it is folly to keep using the tax payer (our great grandchildren!!) to prop up and bail out this wobbling, over inflated, irresponsible, debt ridden and unrealistic economy. The United States has sold it's soul to Japan and China to keep this going and someday they are going to call the note. Then the economy will topple and Americans will be held hostage. American the newest banana republic.

The Asian economies have wisely been divorcing themselves from the Europeans and American markets so when we bust they may not. They have been building a sound Asian based economy not tied to any of the rest of the world. China, Japan and Indian can take us down any time they want with the assets they now own. (Don't look now but many of those assets these countries own are financial institutions! So the laugh is on the tax payer again as we buy China's communist government out of some bad investments!)

We have a chance now to take it on the chin and build back up; perhaps even with some sanity. Or maybe just for another three generations or so before we go off the deep end again.

The big worry about failing financial institutions is not being able to get credit, and as we all know our economy is based on the availability of credit. So no one can get credit? Perhaps we will learn to live on what we already have. Americans are in credit card debt way over their heads for such junk as cell phones and iPods for God's sake. The voluntary savings rate in this country is down around .02% of the population. Add in those who are almost forced to save with their 401k's at work and the percentage goes up some. So we bail out the financial institution and that means credit card companies too with tax payer money. Joe Public can continue to dig himself deeper and deeper and continue to keep paying the credit card companies with the money the government lets him keep after the higher taxes necessitated to pay for the "bail out". Same source just a different pocket.

In the mean time because Joe is so far in debt buying his "wants" rather than "needs" he can't afford medical insurance so he is demanding the government bail him out too and offer Universal Medical Care. With Medicare/Medicaid/Senior Drug entitlement currently taking approx. 27% of the budget perhaps you can just imagine what Universal Care will cost us. Remember that slippery slope people? Socialism right around the corner.

Let it all far apart now! Both the financial institutions, businesses and people. No credit, no jobs. Then let the government put money into Food Stamp programs and medical clinics for the "poor". Let the government create jobs by repairing the crumbling infrastructure (highways, bridges, etc.). I can't even imagine how much could be done to improve our country with $700 billion! I do know though that it is a whole hell of a lot more and lot better than spending that money to bail out the fat cats just so we can continue on the same destructive path. Or, did I just hear someone whisper "We simply must maintain the Status Quo"?

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Addendum: So Dear Mr. Congressman please tell me after the American tax payer bails out the failures in the country who is going top bail out the American tax payer? Why didn't more Congressmen feel as Senator Allard felt? Here is his letter to me:

"October 10, 2008

Dear =======,
Thank you for writing to me about the recent troubling activity on Wall Street. I understand your concern and appreciate your taking the time to contact me.

The U.S. economy began facing challenges last year due in large part to problems in the subprime mortgage market. The severity of the problems became quite apparent in March 2008, when Bear Stearns collapsed. At the beginning of September 2008, the federal government took control of the two housing government sponsored enterprises, Fannie Mae and Freddie Mac. Unfortunately, the difficulties that began in the subprime mortgage market had spread to other market sectors, causing Lehman Brothers to file for bankruptcy and Merrill Lynch to be bought out by Bank of America. The Federal Reserve and Treasury intervened to prevent a bankruptcy filing by AIG and took over the company. Additional firms showed weakening under market pressures.

These events touched off a significant crisis of confidence in our financial markets. Without capital flowing freely, illiquidity left them virtually frozen. The frozen capital markets represent a threat not only to the financial sector, but the business sector and entire economy as well.

To prevent a financial crisis, Treasury Secretary Paulson and Federal Reserve Chairman Bernanke released a proposal to allow the federal government to purchase up to $700 billion of the troubled, illiquid assets. These assets would be held by the government for some period of time, after which they would be sold, potentially for a profit. The Treasury Department believes this will promote market stability and help protect American families and the U.S. economy by fundamentally and comprehensively addressing the root cause of our financial system's current distress.

After receipt of the initial Treasury plan Congress made several key changes. While the legislation provides the Secretary of the Treasury with the authority to use up to $700 billion to purchase troubled assets, the money is not available all at once. An initial amount of $250 billion is available followed by installments of $100 billion and $350 billion, upon approval of the President. The legislation establishes a Department of the Treasury insurance program for distressed assets that guarantees those assets, including mortgage backed securities, that were issued before March 18, 2008. Treasury would collect premiums from financial institutions that chose to participate. Additionally, the bill increases the Federal Deposit Insurance Corporation (FDIC) limit from $100,000 to $250,000 through 2009. Another adjustment made was a limit placed on executive compensation or "golden parachutes" for firms in which the government acquires a significant stake. To address concerns over long term accountability, an oversight board comprised of federal banking regulators is established and a provision in the package states that if, after five years, the government has incurred losses from the program, the President must put forth a proposal for recovering government assets from firms that profited from federal assistance.

After long and careful deliberation I voted against the bailout package. Taxpayers are and have always been my number one priority. I have serious concerns that Congress held no hearings in creating this $700 billion package, nor did it use a deliberative process to provide a reasonable assurance that this proposal would even work. I am unwilling to leave a huge legacy of debt for generations to come without confidence that it would be worth the price. I have always believed that the government should live within its means and thus have opposed increasing the federal debt limit. The bill before Congress would significantly increase the national debt.

I have seen no evidence that the Emergency Economic Stabilization Act is in the best long term interests of taxpayers and the economy, and I also strongly oppose the additional spending provisions rolled into the bill. We shouldn't spend this kind of taxpayer money on assumptions and guesswork. I believe that Congress can find a way to unfreeze the credit markets without unfairly penalizing American families for the greed and mismanagement on Wall Street.

Congress should act to preserve our free-market tradition. We have never propped up failed businesses on Main Street; we should not prop up failure and malfeasance on Wall Street. During my remaining time in the Senate I will continue to advocate for this belief.

Sincerely,

Wayne Allard

United States Senator"

** I emailed Senator Dodd with my protest and this is what I received from him if you care to read it: http://triadblogs.com/BrendaFayBowers/8743/From+Sen.+Dodd%3A+++Summary+of+the+%26quot%3BEmergency+Economic+Stabilization+Act+of+2008%26quot%3B++and+%26quot%3BPork%26quot%3B..html