http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/04/04/INR316Q4F5.DTLPresident Obama must stop the bailouts and start the prosecutions. It's time to focus on anti-poverty programs to protect the growing unemployed from hunger and homelessness. Stealth payments to billionaire bondholders must cease immediately.
Since the mid-1970s, average Americans' wages have stayed flat when adjusted for inflation. Productivity rose, profits rose, but not wages. To compensate for stagnant wages and the desire to consume more each year, Americans worked more, retired later, spouses went to work, and many burned savings. Then they started borrowing. Debt became America's growth industry.
The scheme collapsed because Americans' wages weren't sufficient to pay the interest on existing debts. The only way out of this is to tighten our belts and pay down debt, the opposite of what our bank-owned government is advising.
The administration and the banks keep talking about a credit crisis, but there isn't one. Banks are lending. If you want a mortgage and can afford to pay it back, you can borrow at low rates today. You can finance a car at low rates for seven years. But most Americans don't want more debt because it is a debilitating path to poverty. The average American family already pays 14 percent of annual income in interest to banks.
To fix this fake crisis, there are fake discussions about what the government must do. The endlessly recycled plan to buy "troubled" assets isn't to get banks lending again, because they haven't stopped lending. The plan seeks for taxpayers to buy worthless assets at high prices to absorb rich investors' losses. That's it. It keeps coming back as a different plan, but with that same goal. There is no goal beyond that one goal: keep rich people from taking losses.
Obama and his economic gurus all chant, "Credit is the lifeblood of the economy," but they don't mean credit. They mean debt. Imagine the president saying, "Debt is the lifeblood of our economy. We desperately need to get more American families deeper in debt." That's what he means, and that's what these bailouts hope to do.
In a Sept. 14 article in this newspaper, I noted that banks push senators, with the blessing of the administration, to introduce bills that are bailouts, but disguised to appear not to be bailouts. The goal is to accomplish the desired result without risking your bought-and-paid-for representative.
Imagine you bet $500,000 on a stock and it dropped to $20,000. If you owned Treasury Secretary Tim Geithner, he'd get on TV and explain that if the government didn't buy your shares for $500,000, the economy would suffer because you couldn't invest anymore. He'd say the "free market" isn't pricing the stock "right," and we have to "help" the market with taxpayer money to make sure you get the "right" price.
Bailout psychology is destroying the economy. Banks hold off on foreclosures in the hope of refinancing borrowers into government-backed loans that will almost certainly default - at taxpayer expense. I've talked to ordinary people delinquent on credit cards who put off bankruptcy because they "heard" the president was unhappy with unfair bank practices and "help was coming soon." Millions of homeowners desperate to sell are keeping empty houses off the market waiting for a "rebound," flushing a stream of income down the toilet.
Worsening economic figures are being used to confirm that more bailouts are needed rather than that previous ones might be failing. The logic is much like medieval blood letting: The patient died because we didn't drain enough of his blood.
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