• Bernie Sanders
• William Greider in The Nation:
Washington must assert its full emergency powers and tackle two things at once: manage the gradual downsizing of the financial system in an orderly fashion that sustains lending, and revive production and employment by force-feeding activities of many kinds. This cannot be a voluntary program that simply invites bankers to participate on their terms. The government must impose emergency regulatory controls to keep finance in step with the nation's overall goals. If bankers resist these terms, they should be cut off, isolated from the public's lifesaving assistance.
These are not idle suggestions. The nation is now in the grip of dynamic political change, and this will not stop with the decision on Paulson's grandiose bailout. Presuming the bailout prevails in Congress, Paulson will be handing out public billions to Wall Street players in the next few months. The political counterforce for genuine public-spirited solutions should be pushing back right away. Activists and intellectuals, public citizens and heavyweight financial players, even some members of Congress, are already at work on the details. If Congress reconvenes for a lame-duck session, you will see some of these measures surface for public debate and popular agitation.
The essence of this action will borrow ideas and models from the New Deal and update them to fit our present circumstances. This not simple nostalgia. It is a clearheaded recognition that the public interest has not been served and the crisis will not recede until it is. Here are five concepts for recovery and reconstruction that are in circulation. If we are lucky, these proposals will redefine the next presidency, whoever wins.
1. Stop the easy-money bailout. Instead of buying rotten assets from Wall Street firms with no strings attached, the government should examine their books and decide which banks can be saved with direct infusions of capital in exchange for public ownership--roughly on the terms Warren Buffett got when he aided Goldman Sachs (preferred shares and guaranteed dividends). The failing institutions should get regulatory euthanasia. This approach gives the government direct control over the survivors and ensures that the public is protected from egregious loss. The model is the Reconstruction Finance Corporation of the 1930s, which recapitalized banks and corporations under stern supervision.
2. Help the folks who are hurting--directly. A homeownership corporation patterned after the New Deal original would have the money and the flexible authority to supervise "workouts" for millions of failing families. This is what bankers do for corporations when they get in over their head. Government can do the same for indebted households: stop the liquidation, stretch out default dates and arrange manageable terms. This is not a bleeding-heart gesture--keeping families in their homes is economic stimulus, and it halts the decay of neighborhoods.
3. Get serious about economic stimulus. We need a recovery program five or six times larger than the pitiful $60 billion proposed by Democratic leaders. These billions should go for the familiar list of neglected priorities--fixing bridges and schools--but should also jump-start the green agenda for alternative fuels and restoration of ruined ecosystems. The government should subsidize the new industries of our age, just as New Deal spending financed the modern development of aircraft, petrochemicals, steelmaking and other key industries in the 1930s.
4. Re-regulate the bad actors and indict the criminals. Start by restoring the law against usury--the predatory lending practices that ruin weak and defenseless borrowers. Government cannot wait for a relaxed debate about restoring regulations. We need newly designed controls over the financiers and well-defined public obligations imposed not only on banking but also on hedge funds and private equity firms. These cannot be discretionary rules. If the money guys don't like them, they should get out of the business. Paulson's Wall Street colleagues are already mobilizing lobbyists for this fight, but they may discover that Washington has been changed by events. The easygoing deference to Big Money seems suddenly out of fashion.
5. Create a new brain for government management of the economy. The crisis and the halting decision-making by the Treasury and the Federal Reserve--not to mention the secrecy and special deal-making on behalf of financial interests--make it clear that deep reform is required. I would start with a special reconstruction and recovery agency, empowered to lead policy and oversee banking regulators and the economic stimulus. The Federal Reserve's so-called independence is an antique concession to the big banks and doesn't make any sense. Monetary policy and fiscal policy must be balanced and decided in the same process. That rational approach might have stopped the Fed from the biases and dereliction that led to this crisis.
These ideas and many others are in gestation. They will reach fruition when politicians and other leaders swallow their bruised egos and rethink their supine posture, arm in arm with Wall Street. That looks improbable at the moment. But voters can help them change their minds. (read the whole thing)