Why We Need the Bailout

We, as a nation, are facing a critical choice: Should we give Wall Street something in the neighborhood of a trillion dollars so that it can continue doing the outstanding job it’s doing? Or should we let Wall Street collapse and see if the rest of America can get by without all those "financial services" that Wall Street provides?

To help you, and all Americans, understand why we need this bailout package – and we urgently do – I’ve decided to answer all your questions. Right here, right now.

Why should we give this money to Wall Street? I mean, if the economy needs to be spurred by an injection of billions of dollars, why not give it to us?

That’s a funny question. You already have it! Ha ha! What sense would it make to take money from taxpayers and give it straight back to taxpayers? That’s just silly. The whole point is to take the money from taxpayers and give it to someone else – preferably some hedge-fund manager who doesn’t pay taxes at all thanks to his tax-sheltered yacht parked off Antigua. I know it’s hard for you to understand, but the fact is that, after all is said and done, the money actually will come back to you, the taxpayer. How? As a result of rescuing Wall Street, banks and yacht captains will be able to extend loans to people on Main Street. That way, Main Street businesses will be able to make the investments that are needed to keep the economy going.

If the problem is that people on Main Street need loans, then why don't we just loan the money directly to them, instead of giving away it to the people on Wall Street?

You need to look at the broader picture. Farmers need to buy seed for their field, ranchers need to buy feed for their cattle, and bankers need to buy drinks for their congressmen. Everybody plays their part. That’s how the economy works.

I completely fail to understand why it helps anything to buy bad loans from banks. If banks made bad loans, shouldn’t the banks suffer the losses?

The problem, with all due respect, is that you simply don’t understand enough about economics and finance to form your own judgment about these sorts of things. Don’t forget that officials in the Bush administration have carefully thought this through. Do you think you could have done a better job evaluating pre-war intelligence from Iraq? Or deciding exactly how many days to wait before sending help to New Orleans after Hurricane Katrina? I’m sure you don’t.

More importantly, you need to realize that this situation is not the fault of the bankers. Everybody thinks they can Monday-morning quarterback the whole situation, but that’s unfair. It’s easy now to say, “Well, you shouldn’t have accepted loan applications filled out in crayon.” Or, “It was a mistake to give five mortgages to a single 19-year-old who listed his employment as ‘watching Flip That House! on cable tv.’” The fact is, it’s not productive to look backward. We need to reject the impulse to lay blame, and we need, instead, to figure out how we are going to solve this crisis.

Hmmm. Let me see. Um. Oh! I’ve got it! How about we keep our money and just see how things go?

That may seem like a tempting course. But we simply cannot wait. As the Bush administration has explained, without the bailout, Wall Street will collapse, and the misery will quickly spread to Main Street.

How? How exactly will the misery spread from Wall Street to Main Street?

Think about it this way: If Wall Street collapses, tens of thousands of investment bankers, stock brokers, and other financial-industry professionals will be out of a job. While they will retain their education, skills, and knowledge, the companies they work for will no longer be able to pay their salaries. At that point they will be forced to leave Wall Street and come to your town looking for work.

Do you really want them to set up a hedge fund inside your local Wal-Mart between the optical center and the portrait studio? I didn’t think so. You wouldn’t be able to get from the self-checkout to the greeter table without some pinstriped MBA trying to sell you a collateralized derivative-backed forward-swap debenture. And believe me, you don’t want that. It’s worth however many hundreds of billions we have to pay to keep these people in lower Manhattan, where they just sell these things to each other.

Okay, you’ve convinced me. How can I help?

Please, support the bailout by writing or calling your congressional representatives as soon as you read this. Do it first thing in the morning. If you wait until 3 p.m. in the afternoon, they’ll probably have already left to go drinking with the bankers.

Comments

[PerGynt]

Although it is despicable to accept a mortgage application written in crayon, there is still some blame to lay on the author of the application. It is fashionable to dislike rich people, although they pay the most taxes and make the greatest charitable contributions, and that's fine. But, the flush feeling of repressed panic and recognition of wrong-doing are not unique to winners. The gamblers, who knew the risk in the bottom of their hearts, who cut down on lottery tickets and children's shoes to make the payments on a new house, are at least partially to blame for the problem as well. I am convinced that this is not all a product of Wall Street making a heap of money on an outrageous mortgage selling scheme that fell apart. Greed and...uh...stuff happens on both ends of the rope. (Tug-O-War analogy)
As for me, I am neither wealthy nor have I defaulted on a home loan. So why does my retirement have to evaporate like that? I worked hard for that money. If our government isn't supposed to keep that stuff from happening then why do we have it?

[misspolite]

Ha, very funny... and quite on par with my own assessment. To play devils advocate though (we should all try to see other side after all), here is an article that attempts to explain what Bush cannot -- http://anotherdamnblog.com/index.php/why-we-need-the-bailout/

I am still not convinced this is the best solution for our nation. But I can understand why some people think we need it.