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Story Archives: This is not the time for partisanship
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|This is not the time for partisanship|
Most of the armchair quarterbacking that usually follows the first presidential debate was nowhere to be found prior to and immediately following the U.S. House of Representative's decision not to sign off on President Bush's proposal to spend some $700 billion to prop up the economy.
Held on the campus at the University of Mississippi in Oxford last week, the first debate featuring the party nominees for president in the 2008 election cycle was supposed to focus on foreign affairs. Though foreign affairs consumed much of the discussion, it was the economy, or the status of it, that served as of the focal point of the exchange between Sens. John McCain and Barack Obama.
That's understandable in light of the dire situation that exists today on Wall Street where some of the country's most successful financial firms -- historically -- have either gone bankrupt or are operating on the brink of bankruptcy. Worse, Wall Street's woes eventually will trickle down to main street America unless Congress intervenes. At least that's what the experts tell us.
Accordingly, that's the lay of the land on Wall Street where the firms in question took huge risks when they invested heavily in "bundles" of sub-prime home mortgages, thinking one day they could make money on the backs of many people who secured home loans at more than 100 percent of the appraised value of the properties they bought, or financed. Many buyers and many lenders thought home values would continue to rise, which they had for years, solidifying the gamble lenders took in granting home loans for borrowers who, more often than not, did not possess the collateral to justify the loans or the income to pay them back.
At the heart of the problem sits Fannie Mae and Freddie Mac, quasi-government mortgage companies that gobbled up sub-prime loans, utilizing the good faith -- and credit -- of America's taxpayers. Fannie Mae and Freddie Mac sold those "bundles" of sub-prime mortgages on Wall Street where historically strong financial firms awaited the opportunity to make big money by buying the securities and reaping the benefits for years. Or so they thought.
Something happened along the way, though.
Real estate values leveled off. In some cases, real estate values slumped, creating an "upside down" scenario in home values versus the money owed on mortgages. In other words, much of the real estate in question was not worth as much money as borrowers owed.
Meanwhile, the economy cooled off, too. It cooled off, to some degree, because inflation heated up thanks to sky-high oil and gas prices, which also hit consumers hard at the gas pump. Thus, expendable income took a hit. Furthermore, many of those consumers lost their jobs for a host reasons, including a downturn in the economy, which prompted companies nationwide to tighten their belts.
Add it all up, and we have a mess on our hands.
It remains a mess because Congress cannot reach an agreement on what to do, if anything, to give Wall Street some breathing room on the credit front. Simply put, the experts, including Treasury Secretary Henry Paulson, tell us Congress must buy about $700 billion worth of those bad mortgages so Wall Street and the banking industry in general will have about $700 billion worth of credit to extend to corporate America, including the mom and pop businesses that litter the fruited plain.
Already, we're hearing of situations in which large corporations sought credit but were denied it. That tells us the credit crunch has arrived. In time, consumers who possess A-plus credit ratings will be affected as well, encountering situations where even their hometown banks will deny them loans simply because the banks do not have the money, or credit, to lend.
The notion of Congress spending $700 billion of the people's money to clean up what would appear to be financial misdeeds by a greedy few is unconscionable. Yet, it is within reason to say the American economy cannot afford for Congress to do nothing.
Though it seems Congress understands it must do something, members deadlocked earlier this week over the particulars of the president's bailout plan, which congressional leaders hashed out in a series of marathon meetings with the Bush administration, including Treasury Secretary Paulson. Sticking points, or issues that prompted Congress to say no to the $700 billion plan, included disagreements over capping compensation packages for CEOs of Wall Street firms. More important, many Republican members of the House, and some Democrats, too, vehemently objected to the government assuming ownership in the Wall Street firms that agree to participate in the bailout plan.
Believers in a free-market economy, myself included, cannot stomach the thought of the government assuming, or seizing, ownership of private enterprise. After all, when was the last time the government operated anything properly?
That raises the question, though.
If Wall Street is so good at what it does, why are we having this discussion?
We're having it for the obvious reasons, including because of a greedy few who gambled. They rolled snake eyes, too, creating a multi-billion dollar problem for the American people.
And my friends, the American people will have to pay to clean it up.
One way or another.
At some point this week, the House of Representatives will revisit the president's proposal to thwart what we are told is the onset of a financial meltdown in the old U.S.A.
Hopefully, the partisan bickering we've witnessed in the past few days will subside, clearing the way for Congress to approve a plan that works for the people in lieu of efforts to punish a greedy few.
|Frank Morris Murder Series|