Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C., and author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer. Here's part of his assessment of the financial crisis and bailout from today's Democracy Now!
Well, we’ve been knowing since six years. The basic story was, we had a housing bubble, which, again, these people are supposed to be smart. They’re paid tens of millions of dollars. They should have recognized the housing bubble. They should have recognized that house prices would fall, as they have been. And what that meant was, you made a loan on a house for $250,000, $300,000, $400,000, that house price was likely to fall. So if you did that with zero down, as many of them did, plus having mortgages, you know, the predatory mortgages, the subprime mortgages that have got them in particular trouble, these were guaranteed to go bad in many cases.
They acted as though house prices would just keep going up forever, and they could just keep, you know, going along these lines. They leveraged themselves to the hilt. The investment banks, like Lehman and Bear Stearns, leveraged themselves to a ratio of thirty-to-one. In other words, if they had $10 billion in capital, they had loans on the order of $300 billion. I mean, this was just asking for disaster.
And, you know, again, it did collapse. It was totally predictable it would collapse. You know, I didn’t know when, didn’t know exactly who, but it was totally predictable. And now they’re running to us and asking us for handouts. Think of what we do to welfare people, when they — you know, everything they have to go through to get, you know, a $500-a-month check, and these people want billions, no questions asked. Unbelievable.
Baker is certainly right about this, and right to repeat - as he did several times on Democracy Now! - that any bail-out should be punitive against the giant corporations queuing up for a hand-out. Otherwise, it's a message to those being rescued that there will be no penalty for continuing their reckless behavior and that the taxpayers will again be gouged to save them. But "unbelievable"? Hardly. Because the bailout being proposed is itself a totally predictable scheme. As devilstower wrote in his essay here on Sunday:
When taxpayers are left holding the bag for $1 trillion this time around, it's hard to believe it's any sort of accident. This is enemy action. This is a bullet deliberately fired into the economy by men willing to exercise their ideology regardless of the cost to taxpayers. Men who have every expectation that they can plunder the system again and again, while the public picks up the tab.
In other words, not unbelievable. Not unexpected. Not the least bit surprising. Totally predictable.
Democrats, in general, and Senator Barack Obama, in particular - as the new head of the Democratic Party - should trash this outrageous dictatorial bailout and stop listening to the advice of those who led us into this mess - including some fellow Democrats of prominence. They shouldn't tinker on the edges of the administration's proposal. Their substitute plan should put the pain on the pin-striped grifters where it belongs instead of on those Americans who have been repeatedly victimized by them.