Economic Crisis and the Wall Street Bailout

by Keith Cooper

From Broader View Weekly, October 10, 2008

I consider myself a patriot. I cherish the ideals upon which I believe our nation was founded. However, the recent handling of the economic crisis facing the country has greatly shaken my faith in the integrity of our democratic republic.

Few, at any level of government, have not sought to politicize or manipulate the situation for their own gain. And it hasn’t just been Congress or the Bush Administration who have played politics with this dire circumstance. The media has been complicit in hiding the truth and using fear tactics to sway public opinion.

I may not know as much about markets and how the financial sector operates as someone who has a large investment portfolio might, but I do know that there has been much speculation over the past few years about the downturn that was expected once the recent housing bubble deflated. So it seems unlikely that so many administration officials and financial experts were surprised by this collapse in the market. Yet it was presented to the American people and to Congress as an emergency that needed urgent attention to stabilize the economy.

It may seem absurd to claim that a crisis that threatened our entire economy was allowed to take form when action could have been taken to lessen the impact. However, it is conceivable that crises are allowed to develop within this administration when one views the situation in the context its history. Crisis has been a useful impetus that has driven policy throughout the past seven years. The attacks of September 11, 2001 have been used as the motivation and driving force to hammer through sweeping and unprecedented policy changes. Those attacks were the springboard into the wars in Iraq and Afghanistan. As situations worsened in those wars, crisis was used as a justification for allowing torture and interrogation practices that we would have denounced in the past. On the economic front, as oil and gasoline prices began to rise above the tolerance of public opinion, the crisis was used to pressure congress to allow domestic drilling and oil exploration against the will of many.

Now, the “surprise” catastrophe in the financial sector has been used to push through a $700 billion package that will bail out Wall Street firms that have been allowed through reckless deregulation to gamble unethically with their investments and give the Secretary of Treasury Henry Paulson considerable power over distributing taxpayer dollars. This is a remarkably socialist move for a Republican administration that tries to appear fiscally conservative despite its spending practices. Of course, its easier to justify spending billions of taxpayer dollars on the wealthy than it is to justify spending on healthcare for the uninsured or bringing relief to disaster victims like folks displaced by hurricane Katrina.

Congress was a spectacle of political spin throughout the process leading up to the bill’s passing. Senators and Representatives were swallowing bitter pills and supporting legislation that was growing more and more unpopular. American citizens began to express their distaste for rewarding unethical banking and lending practices. Democrats were trapped between the “do nothing” label the media has hung on them and their constituents who might threaten their seats. Division within the ranks was encouraging as Republicans sided against the Bush Administration and both Democrats and Republicans bucked their own parties. Things came to a head on Monday, September 29, when the House of Representatives had the will to reject the bill despite warnings by the White House and punishment by the markets.

The Senate resurrected the bill on Wednesday by passing it and forcing the House to vote on it again. Supporters in Congress and the President beat the streets to drum up the votes needed to ram it down the throats of the American people. My hope is that the “yea” voters will be greeted with a backlash when they return to their constituencies.

The storm of protest from the public has waned a bit in the last week with the market’s plunging, and fears of credit and savings issues affecting Main Street. The media’s coverage is largely responsible for any softening of outrage in public opinion. The mainstream outlets largely ignored any disapproval until voices of dissent grew to a level that couldn’t be discounted. Even then, the fact that groups were gathering to protest or that phones in congressional offices were ringing with constituents pressuring their representatives to reject the bill was marginalized. Local newspapers in our region hardly mentioned dissent. A reactive strategy to fend off disapproval was crafted and media outlets stopped calling it a bailout and started using the term “rescue.” The result was a portrayal of a do-nothing Congress that refused to act in a time of crisis and a deal that was painted as the only alternative to economic disaster.

The White House, Congress and the media did the nation a disservice by spinning the crisis and the details of the bill into a political soup that was confusing to the average citizen and then spoon feeding the public only the information that played into a narrow agenda.

Now that the deal has been struck, we have little say over how our tax dollars are being spent. Congress has a limited oversight over how and to whom Secretary Paulson doles out his government handouts. We can hope that as the process goes forward Congress will be vigilant in their constitutional responsibility to look out for our interests. We can pester the offices of our Congressmen and Senators expressing our discontent. We can send a message to those who supported the bailout and are up for reelection by voting “nay” for them. Whatever we do, we must become a better-informed public and not rely upon limited sources to keep us abreast of issues of importance.