Like many Americans, I have a job and a retirement account. My job depends on a healthy economy because nobody will buy our products if their cash flow is interrupted, and my retirement account is based on stocks and could easily be wiped out if the market tanks.
A lot of my dreams for the future are tied up in these things, so I have a pretty deep vested interest in keeping the economy afloat and avoiding a depression. There are a lot of things I'd like to do with my money, like educating my kids and helping fund programs to feed hungry Americans, develop alternative energy technologies, and support American manufacturing.
If I lose all my assets, a lot of these dreams will at least suffer serious setback and at worst go down the tubes forever. I have to admit it : I'm afraid of what will happen if our economy slips into a depression.
At the same time, I strongly adhere to the idea that one must take responsibility for one's own risks and decisions, and that the basic values of America reject the notion of public liability for private risk. Likewise and even more strongly, I believe that unchecked power like that suggested in 'section 8' of the bailout plan, power that cannot even be challenged in a court, is dangerous and has no place whatsoever in a free society. I feel that a country where taxpayers are expected to pay for the bad bets of reckless investors, and one man can make sweeping decisions with no oversight or review, is not one that I'd like future generations to inherit -- not one that I would even call America.
I want to believe that the people selected to steer our economy, Ben Bernanke and Henry Paulson, know better than I do about what's going on with the country and what should be done to alleviate the crisis. I want to believe that the government acts in the interest of the citizenry at large. I want to take them at their word, to believe that they have credibility.
They do not have credibility. Paulson was CEO of Goldman Sachs, and has an obvious vested interest in preserving the financial system as it is. Neither he nor Bernanke foresaw, much less did anything to pre- empt, the grave effects that obscure and complex mortgage-backed securities, collateralized debt obligations, derivatives, and other doomed financial instruments have wrought. In fact, mere days before the AIG bailout, Paulson was denying that things were going to get any worse at all.
How are we expected to believe that Paulson and Bernanke have a clear view of the bleak future that 'failure' to swallow their bailout proposal wholesale would ensure when they didn't even have enough insight to make an attempt at preventing this disaster?
By what justification can Paulson defend his attempt to assume very literally unprecedented power?
It has been asked : if we reject this proposal, what comes next? And, are we not losing valuable time every day we fail to act?
What comes next must be careful evaluation of the real situation, serious thought, and a plan of action that includes full detail, full disclosure, and does not violate basic American principles. This plan may necessarily include a fundamental restructuring of what is called the 'financial system.' In any case, it must be cautious, reasoned, and above all, not driven by fear and panic. The 'time lost' by exercising this thought and caution, even if it means tht 'the market' suffers vast losses, is insignificant compared to the disaster that would be brought by a poorly-considered plan with stakes as high as we can see that they are now.
The rhetoric of fear that is being employed by Paulson and Bernanke to persuade Congress to give in to this plan, and the American people to give up their rights, is highly suspicious. When sweeping changes and the surrender of rights are forced in a time of panic, abuses are likely close at hand. One needs only to look at the history of 20th century Europe to see frightening parallels.
On a level of principle, I am repulsed by the idea that I am expected to pay the cost of irresponsible gambling and speculation by Wall Street elites -- or anybody else's bad risk assessment, for that matter.
As disturbing as all that is, can I really face up to a reality where I have no job, no assets, and no way to escape that situation? My earnings skills mean little if nobody has the funds to pay for them. What would I really do if there were a depression? People died in the Great Depression of the 1930s. Could my family even survive?
These are dire thoughts. I don't even like thinking about them. When I really consider how terrible things could be if our economy were to collapse as Paulson says it will unless we sign the bailout proposal, my chest tightens up and I really feel the grip of fear.
Fear can be a useful tool for survival. For example, if you see a snake, your instinct is to fear it because it may be venomous. You pull your kid to your side when a car whizzes by for fear that they may be hit.
However, fear is also a tool that is used against people by those seeking power. When people are fearful, they can be manipulated by promises of security or safety.
If we allow fear of the potential collapse to force us into giving up our rights and principles, and give unlimited power to one man who promises to shield us from a disaster he did not foresee, are we truly making the best and safest decision for our future generations -- even our own children?
I say that we are not.
As much as I would egoistically like to believe that my philanthropic efforts, for which I wish to protect my money, would have a greater net benefit for my children and society at large than would making an effort to re-establish a sound national and financial foundation by opposing this bailout and power shift, I must admit that this belief is wrong. No amount of money that I could make and spend in promotion of the public good can overshadow the negative effects of acquiescence to the establishment of an unsound and dangerous national program. Without a truly viable, free, and stable basis for living in America, all my money and effort has no meaning.
The current financial crisis was precipitated by the effects of market speculation. Many people made risky bets on products they did not really understand. The proposed bailout would use tax dollars to buy these particular bad bets, which hinge on mortage performance at their core, in an effort to stem the downturn. There are many, many other kinds of bets out there right now -- the market is based on bets, some more obscure and risky than others. Paulson, Bernanke, and their operatives did not anticipate that the mortgage-based bets would have such a profound distressing effect on the economy. They likewise can't anticipate which types of bets will go bad next, when they will go bad, and what their effects will be. Are you willing to give away hundreds of billions of your dollars and your rights with respect to a government that is responsible to the people and the law, in exchange for a patch of this one type of bet that has happened to go bad?
This situation demonstrates clearly that it is the basis of the financial system itself that is broken and invalid, not only these particular debts. If it's the case that the speculation of private investors on a single type of bet has the power to put a gun to the head of the entire population, that demonstrates that this system cannot be sustained. After this one, there will be another failure. And another. How many bailouts of private investors using your tax dollars will you tolerate? One more? Two more? If the current proposal is passed into law, you will have no right to challenge further action by the Treasury Secretary with respect to the use of your tax dollars to prop up private firms, including foreign banks with "significant operations" in the US. Is that OK with you? Do you believe that it is acceptable for one person to have unlimited extralegal power in our nation? Is that the system you want your kids to inherit? I say "no."
It's clear that the 'financial system' has too much power over the population at large. But many, many Americans live paycheck-to-paycheck, and a great many have no retirement accounts at all. Our national savings rate is less than five percent of disposable income. The justifications that we should give up our rights to protect the rainy-day funds of the average American are invalid. Is it acceptable to take money from those who have none to spare, to shore up the holdings of the well-off? Again, I say "no."
Perhaps the most disturbing feature of this proposal is that it comes at a time when our national debt is nearly ten trillion dollars and our national budget is running at near-record deficit. The money that would be used for this plan would be borrowed from creditors on already strained credit lines. Many of those creditors are foreign interests that could use our debt as leverage for actions that would be potentially hostile to our national well-being. These debts ultimately have to be paid, and it's our kids who will pay for them -- one way, or another. Is this acceptable to you? Again, I say "no."
Bailouts like this are mechanically acheived by the printing of new money. This drives the value of the dollar down and causes inflation. Despite what you may hear about the Treasury "giving with one hand and taking with the other" to limit the inflationary effects of this practice by controlling US Treasury securities, inflation and currency devaluing is the true net effect. We don't have to look far from our borders, or far back in history, to see the terrible effects of runaway inflation. Yet we gamble with the possibility of these effects by the mechanisms of this proposal. Is this acceptable to you? I say "no."
In conclusion : this bailout plan, which puts a vast amount of your money at risk during a time of massive nationl debt and gives unlimited power to the office proposing it, has been put forth by a person who says that they can see the grim future that would result if we do not approve the plan -- but could not see the problem as it was developing, much less the magnitude of the disaster before it happened. We cannot trust this judgement at its word, regardless of these individuals' apparent qualifications. The plan, while sweeping and unprecedented in scope, lacks specifics and in any case, only addresses one aspect of a fundamentally unsound system. It's a 'Band-Aid,' not a panacea. As long as the system remains structured as it is, other unforeseen disasters will appear to force our hand again. The effects of increased national debt, higher inflation, and a devalued dollar, which will certainly result from an implementation of this plan, will be traumatic. And in the end, it is our children that will inherit this disaster if we allow our course to be steered by fear.
If you have fear that the effects of this systemic failure will seriously endanger your lifestyle and plans, as I do, that means that we are allowing our lives to be dictated by the people who run this financial structure. If it's the case, as it is with me, that most of what we consider to be our 'net worth' is at the mercy of other people or institutions or the winds of gambling chance, that means that we have given up ourselves. Is this acceptable to us? I say, emphatically, "No!"
Stopgap fixes will not save us and will not save our kids. Surrendering our rights and freedoms will not protect our kids. Is it security you desire? That's what I want. There is, in my view, only one way to achieve it.
We must learn self-reliance. Not the self-reliance that we thought we had acheived by accumulating money and betting it on speculative assets. Not even the self-reliance that we thought we had acheived by staking our lives on the outcome of enterprise. Instead, we must learn the self-reliance that was demonstrated by the founders of our nation, who would not permit themselves to be bullied by fear, even fear of death, and created a system amongst themselves that supported their survival and prosperity without putting them at the mercy of anything but Nature. These people knew the value of personal sacrifice for future generations, and of the courage to face difficulty and oppression. It is essential, it is necessary for our survival as a society that we learn these values and the ways in which we can live without our livelihoods being subjugated to financial or other 'systems' run by human individuals. Our nation is fundamentally set up to support the self-reliant; our Constitution encourages and in some ways mandates this courage to rely on one's self.
Do you believe that there is value in being an American? Do you believe that being an American means the embrace of justice and the courage to resist assault? Do you believe that you yourself have intrinsic worth and freedom that no person can take away? Do you believe that you set an example which your children will follow? Do you have the strength to stand up with others and assert your own resourcefulness, ability, and worth?
I say, with the utmost conviction, "Yes!"
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Nicholas DiBiase
September 23, 2008