Bail Out the People, NOT Wall Street!
Please tell President Bush, Candidates Obama and McCain, Members of Congress, Treasury Secretary Paulson, Federal Reserve Chairman Bernanke, and members of the media you want them to Bail Out the People, NOT Wall Street!
To: President Bush, Candidates Obama and McCain, Members of Congress, Treasury Secretary Paulson, Federal Reserve Chairman Bernanke, and members of the media
Bail Out the People, NOT Wall Street!
Tens of millions of working and poor people are facing the most dire economic crisis since the Depression of the 1930s. Yet our government is planning to hand over the U.S. treasury to Wall St. bankers. All that the politicians offer to people who are losing their homes, jobs, health care, education and pensions are bigger and bigger budget cuts to vital social services.
Enough is Enough!
I say NO to this injustice. NO Bailout of Wall Street bankers!
Instead, I demand the following emergency measures:
1. Moratorium on home foreclosures and evictions.
2. Freeze all job layoffs and extend unemployment benefits.
3. Freeze all utility cutoffs & roll back gas, food and utility prices
4. Protect workers’ pensions and savings—hands off Social Security.
5. Debt cancellation for working and poor people—no repossessions or wage garnishing.
6. Moratorium on budget cuts in all social programs like health care, education, mass transit, youth programs, seniors programs, veterans programs and others.
Who Wins and Who Loses:
Wall Street Bailout Threatens World’s Poor
Largely missing from debate over the Bush Administration’s proposed bailout of Wall Street has been the impact of this plan on U.S. government spending on human needs in the next Administration. And there has been almost no mention at all of the impact on our global commitments to help eradicate illiteracy and address easily preventable disease.
There are alternatives to the Bush Administration’s plan that would cost the US taxpayers less, have greater chance of addressing problems in the credit market, and not politically threaten the next Administration’s ability to increase spending on human needs. Congress should consider these alternatives before approving the Bush Administration’s plan.
Please ask Congress to consider the cost to the world, as well as to the United States, of enacting the Bush Administration’s plan, and to consider alternatives, by using the form below.
Instead of just purchasing troubled assets the bulk of the funds ought to be used to recapitalise the banking system. Funds injected at the equity level are more high-powered than funds used at the balance sheet level by a minimal factor of twelve – effectively giving the government $8,400bn to re-ignite the flow of credit. In practice, the effect would be even greater because the injection of government funds would also attract private capital. The result would be more economic recovery and the chance for taxpayers to profit from the recovery.
This is how it would work. The Treasury secretary would rely on bank examiners rather than delegate implementation of Tarp to Wall Street firms. The bank examiners would establish how much additional equity capital each bank needs in order to be properly capitalised according to existing capital requirements. If managements could not raise equity from the private sector they could turn to Tarp.
Tarp would invest in preference shares with warrants attached. The preference shares would carry a low coupon (say 5 per cent) so that banks would find it profitable to continue lending, but shareholders would pay a heavy price because they would be diluted by the warrants; they would be given the right, however, to subscribe on Tarp’s terms. The rights would be tradeable and the secretary of the Treasury would be instructed to set the terms so that the rights would have a positive value.
Private investors, including me, are likely to jump at the opportunity. The recapitalised banks would be allowed to increase their leverage, so they would resume lending. Limits on bank leverage could be imposed later, after the economy has recovered. If the funds were used in this way, the recapitalisation of the banking system could be achieved with less than $500bn of public funds.
A revised emergency legislation could also provide more help to homeowners. It could require the Treasury to provide cheap financing for mortgage securities whose terms have been renegotiated, based on the Treasury’s cost of borrowing. Mortgage service companies could be prohibited from charging fees on foreclosures, but they could expect the owners of the securities to provide incentives for renegotiation as Fannie Mae and Freddie Mac are already doing.