Critics see bailout as massive blank check

by Adrianne Appel
Published on Tuesday, September 23, 2008 by Inter Press Service

BOSTON - U.S. activist networks have shifted into high gear to protest the secretive 700-billion-dollar plan to bail out Wall Street, which they say is unfair to average citizens and a giveaway to banks.

"We're outraged," Gael Murphy, founder of Code Pink, told IPS. "We want to see the people who caused this problem and profited from it, pay for it," said Murphy, echoing the sentiment of many activists, and people in general, according to weekend polls.

The skeletal, three-page plan was fielded Friday by U.S. Treasury Secretary Henry Paulson, Jr. and would grant him the authority to purchase billions in bad debts on behalf of the U.S. public, now held by U.S. and foreign banks.

Paulson and Ben Bernanke, chairman of the Federal Reserve Board, say the U.S. must purchase the debts in order to keep the banking system from certain collapse.

The plan is now in Congress and may be approved as early as Friday, when lawmakers want to adjourn to go home and campaign for the November elections. Reports Monday indicated that lawmakers may alter the plan somewhat to include some oversight of the spending, and restrict bank CEO pay, which can stretch into the hundreds of millions.

Paulson, a former CEO of Goldman Sachs who owns $523.5 million in that company's stock, has said he is opposed to placing limits on bank CEO compensation.
While the lawmakers and finance officials met behind closed doors Monday, the Dow Jones industrial average plummeted 372 points, and the price of oil shot up to 120 dollars per barrel. The Group of Seven finance ministers announced that they would keep a close eye on international markets and intervene as necessary to protect the international banking system.

Paulson's proposal does not describe which companies would benefit from his plan and by how much, and calls for no oversight.

"The lobbyists for the banking community are really out in force trying to get as much as possible for themselves," Dorene Isenberg, an economist and chair of the Economics Department at University of Redlands, in California, told IPS.

Code Pink and other groups organised throughout the weekend via phone, internet and late-night meetings, then hit the ground Monday morning and headed straight for the U.S. Treasury building. They made it there by rush hour.

"Stop Paulson's Plunder," blared just one of the large banners they held in front of the building. "Protect Main Street, not Wall Street," said another.

Members of Code Pink then went up to Capitol Hill, to encourage lawmakers to help homeowners facing foreclosure, cut bank CEO pay and boost the economy for the long term. The activists visited the leading banking lawmakers, Democrats Sen. Chris Dodd and Rep. Barney Frank.

Frank told the group of seven activists that he wants the plan to include protections for homeowners facing foreclosure, and to restrict bank CEO salaries, among other provisions, Murphy said.

Frank, known for his quick whit and sharp tongue, "became quite offended" when the activists explained they were visiting Frank out of concern that the Democrats not give in to pressure from lobbyists and the administration, as they have on other issues, Murphy said.

"He didn't like that," she said.

On Thursday, it's Wall Street's turn to hear directly from activists, when a large group from Move On, True Majority, Greenpeace, Code Pink, United for Peace and Justice and others will protest in New York City.

Other groups, like The Backbone Campaign, have already organised a petition drive on their website, calls to Congress and a conference call between activists and progressive economists to answer questions about the complex, near-meltdown of the U.S. economy.

"This is a 700-billion-dollar blank cheque for Henry Paulson to use any way he wants," said Dean Baker, co-director of the Centre for Economic and Policy Research, during one such call.

Any bailout should be overseen by a board, not just Paulson, and help should be very targeted to those institutions that absolutely cannot help themselves, and that are necessary to keep the economy active, Baker said. The U.S. should insist that CEO pay be trimmed to 2 million dollars and that companies hand over part of any future profits as payback to taxpayers.

A payback is "a fine idea economically" but politically is very unlikely, Isenberg said.

Isenberg said it's possible that the added 700-billion-dollar debt will drag down the U.S. dollar, depending on how much confidence foreign investors maintain in the U.S. economy.

"It might lead to a further decline, that's truly possible," she said.

According to Doug Henwood, editor of Left Business Observer, the bailout will not shore up the U.S. economy. The economy is fundamentally weak because the average U.S. worker's standard of living shriveled during the past decade, and at the same time the markets are not creating enough good jobs.

Meanwhile, CEO salaries grew to excess and their income taxes were reduced, especially by the George W. Bush administration.

"We can talk about derivatives but there is a fundamental polarisation of income and wealth that contributed to this meltdown," Henwood said. "We need to get the incomes of the middle class and bottom up, by taking from the incomes at the top."