FacebookTwitterGoogle+RedditEmail

Requiem for the Bailout

It’s mid-October, and the Wall Street bailout that was supposed to save the economy from collapse is a flop.

Only two weeks ago, the media hype behind the $700 billion bailout was so intense that it sometimes verged on hysteria. More recent events should not be allowed to obscure the reality that the news media played a pivotal role in stampeding the country into a bailout that was unwise and unjust.

Exceptions in the news coverage underscore the fact that other perspectives were readily available when the Bush administration began pushing its bailout proposal in late September. “Many of the nation’s brightest economic minds are warning that if the Wall Street bailout passes, it would be a dangerous rush job,” McClatchy Newspapers reported on Sept. 26. For instance, economist James K. Galbraith called the warnings of economic disaster in the absence of a swift bailout “more hype than real risk.” He added: “A nasty recession is possible, but the bailout will not cure that.”

When the House of Representatives rejected the bailout on Sept. 29, all media hell broke loose. During the next few days, journalists and selected sources took turns decrying the failure of House naysayers to recognize the urgency of the moment. The nation’s economy was at stake, and craven ideologues on Capitol Hill were dithering around!

Countless editorials and pundits castigated the House members who had voted no. The condemners spanned the mainline media spectrum; liberals, moderates and conservatives excoriated the House and called for a swift reversal.

Senate passage came on Thursday, Oct. 2, and the next day a chastened House approved a revised version. That Friday afternoon, President Bush signed the $700 billion Wall Street bailout into law.

Despite all the media hype about how the bailout measure would quickly steady the stock market, it fell and kept falling. Over the next week, ending Oct. 10, the Dow made history as stocks plunged by 18 percent in five trading days.

And what about the ostensible main reason for the humongous bailout in the first place — unfreezing the credit markets? Well, in spite of the enormous media outcry for the bailout to get credit flowing, it didn’t. And the key economic factor in the recession — housing — remained just as stuck as before.

At the Center for Economic and Policy Research, on Oct. 1 — two days before the House caved — economist Dean Baker addressed a pivotal flaw in the spin. “It would be foolish to issue a mortgage loan without a very substantial down payment, since the expected decline in house prices will quickly destroy much or all of the equity held by the homeowner,” he wrote. “In other words, it is the drop in house prices that is causing banks to demand 20 percent down payments in many markets, not their lack of capital. This situation will only be changed by a government house-price support program. Improving the financial conditions of banks will make little difference.”

But the media storyline required — in fact, demanded — that committing many billions of dollars to the “rescue” was the essential step to be taken from Capitol Hill.

After the House initially balked at approving the Wall Street bailout on Sept. 29, the range of New York Times op-ed columnists took turns with the denunciation chores. None was more bitterly caustic than David Brooks. On Sept. 30, under the headline “Revolt of the Nihilists,” he denounced the noncompliant House members for failing to heed “the collected expertise of the Treasury and Fed.”

A week later, on Oct. 7, when Brooks wrote a follow-up column, the bailout had been law for several days. But the stock market was plunging faster than ever, and the credit crunch was unabated. “At these moments, central bankers and Treasury officials leap in to try to make the traders feel better,” Brooks wrote. “Officials pretend they’re coming up with policy responses, but much of what they do is political theater.”

Now he tells us.

Before the bailout gained approval on Capitol Hill, the media narrative was dangling the prospects of immediate results. But afterwards, there were none.

“Global markets have so far given thumbs down to the giant $700 billion bailout plan,” former Labor Secretary Robert Reich said in an Oct. 8 public-radio commentary, five days after the bailout had become law. “The easy answer to why the bailout hasn’t worked is it hasn’t been implemented yet. But its purpose was largely psychological — to boost confidence that the government is doing something big to clear out bad debts that have been clogging the system. That psychological boost should have happened as soon as the bailout was enacted. Yet no one seems to believe that $700 billion will make much difference.”

On Oct. 12, the lead story on the New York Times front page wondered aloud “whether the administration squandered valuable time in trying to sell Congress on a plan that officials had failed to think through in advance.”

The Times now tells us that the much-hyped bailout plans to “buy distressed assets” will be diminished in favor of a “capital infusion program for banks.” But what hasn’t changed with the $700 billion planning is a basic approach for trickle-down instead of trickle-up.

As the Institute for Policy Studies pointed out on Oct. 1, “A real ‘bailout’ would target the troubled households of working American families. A $200 billion ‘Main Street Stimulus Package’ could bolster the real economy and those left vulnerable by the subprime mortgage meltdown.”

Components of such a stimulus package could include “a $130 billion annual investment in renewable energy to stimulate good jobs anchored in local economies and reduce our dependency on oil” — and “a $50 billion outlay to help keep people in foreclosed homes through refinancing and creating new homeownership and housing opportunities” — and “a $20 billion aid package to states to address the squeeze on state and local government services that declining tax revenues are now forcing.” But that kind of discourse for grassroots economic stimulus hasn’t gotten into the media storyline this fall.

It’s now being revised with quite a bit of backspin. But the media storyline for justifying the Wall Street bailout was great while it lasted. And it lasted long enough to stampede Congress into approving a massive jolt of taxpayer money to redistribute wealth upwards in the United States.

NORMAN SOLOMON is the author of “War Made Easy.”

 

Your Ad Here
 

 

 

 

More articles by:

Norman Solomon is executive director of the Institute for Public Accuracy, where he coordinates ExposeFacts. Solomon is a co-founder of RootsAction.org.

Weekend Edition
January 18, 2019
Friday - Sunday
Melvin Goodman
Star Wars Revisited: One More Nightmare From Trump
John Davis
“Weather Terrorism:” a National Emergency
Jeffrey St. Clair
Roaming Charges: Sometimes an Establishment Hack is Just What You Need
Joshua Frank
Montana Public Schools Block Pro-LGBTQ Websites
Louisa Willcox
Sky Bears, Earth Bears: Finding and Losing True North
Robert Fisk
Bernie Sanders, Israel and the Middle East
Robert Fantina
Pompeo, the U.S. and Iran
David Rosen
The Biden Band-Aid: Will Democrats Contain the Insurgency?
Nick Pemberton
Human Trafficking Should Be Illegal
Steve Early - Suzanne Gordon
Did Donald Get The Memo? Trump’s VA Secretary Denounces ‘Veteran as Victim’ Stereotyping
Andrew Levine
The Tulsi Gabbard Factor
John W. Whitehead
The Danger Within: Border Patrol is Turning America into a Constitution-Free Zone
Dana E. Abizaid
Kafka’s Grave: a Pilgrimage in Prague
Rebecca Lee
Punishment Through Humiliation: Justice For Sexual Assault Survivors
Dahr Jamail
A Planet in Crisis: The Heat’s On Us
John Feffer
Trump Punts on Syria: The Forever War is Far From Over
Dave Lindorff
Shut Down the War Machine!
Glenn Sacks
LA Teachers’ Strike: Student Voices of the Los Angeles Education Revolt  
Mark Ashwill
The Metamorphosis of International Students Into Honorary US Nationalists: a View from Viet Nam
Ramzy Baroud
The Moral Travesty of Israel Seeking Arab, Iranian Money for its Alleged Nakba
Ron Jacobs
Allen Ginsberg Takes a Trip
Jake Johnston
Haiti by the Numbers
Binoy Kampmark
No-Confidence Survivor: Theresa May and Brexit
Victor Grossman
Red Flowers for Rosa and Karl
Cesar Chelala
President Donald Trump’s “Magical Realism”
Christopher Brauchli
An Education in Fraud
Paul Bentley
The Death Penalty for Canada’s Foreign Policy?
David Swanson
Top 10 Reasons Not to Love NATO
Louis Proyect
Breaking the Left’s Gay Taboo
Kani Xulam
A Saudi Teen and Freedom’s Shining Moment
Ralph Nader
Bar Barr or Regret this Dictatorial Attorney General
Jessicah Pierre
A Dream Deferred: MLK’s Dream of Economic Justice is Far From Reality
Edward J. Martin
Glossip v. Gross, the Eighth Amendment and the Torture Court of the United States
Chuck Collins
Shutdown Expands the Ranks of the “Underwater Nation”
Paul Edwards
War Whores
Peter Crowley
Outsourcing Still Affects Us: This and AI Worker Displacement Need Not be Inevitable
Alycee Lane
Trump’s Federal Government Shutdown and Unpaid Dishwashers
Martha Rosenberg
New Questions About Ritual Slaughter as Belgium Bans the Practice
Nicky Reid
Panarchy as Full Spectrum Intersectionality
Jill Richardson
Hollywood’s Fat Shaming is Getting Old
Nyla Ali Khan
A Woman’s Wide Sphere of Influence Within Folklore and Social Practices
Richard Klin
Dial Israel: Amos Oz, 1939-2018
David Rovics
Of Triggers and Bullets
David Yearsley
Bass on Top: the Genius of Paul Chambers
Elliot Sperber
Eddie Spaghetti’s Alphabet
FacebookTwitterGoogle+RedditEmail