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Will $700B bailout help ‘Main Street’? |
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Written by Sonia Morgan
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Sunday, 28 September 2008 |
 But the burning question is: Will it help ‘Main Street’ and the very taxpayers whose money will be tied up in this massive bailout? In essence, will it work?
President Bush has said the situation is dire and there is no doubt that the funds are needed to rescue Wall Street and stem the hemorrhaging tide that has become the US economy. Critics say that the amount could be too small to prevent total financial meltdown or the way in which the bill is written might not guarantee enough oversight to make sure it happens.
The plan currently, is that the government will buy assets to the tune of $700 billion from private holders on Wall Street which would help banks to even out their balance sheets. They are hoping that this will give banks incentive to start crediting each other again, which will push start the stalling financial system.
There is the possibility that it might not work, even with this pumping of $700 billion into Wall Street. And it may require even more tax dollars to restore the nation’s economic stability.
Some members of the House and Senate, including Senate Banking Committee Chairman Chris Dodd, (D) wanted more time to ensure that the plan is not hastily done without the necessary checks and balances to ensure that it is being executed in the best possible way. Dodd said, “The last thing any of us want is to be back here in a month coming up with some new plan, because this didn’t work. It’s important that we act quickly, but it’s more important that we act responsibly.”
Obama, McCain weigh in on crisis
Democratic presidential nominee Barack Obama and his Republican counterpart John McCain have weighed in on the plan and are asking for certain provisions before they sign on the dotted line.
McCain, who has suspended his campaign until an agreement is reached, called for a bipartisan board to provide oversight, a plan to recover the money, a cap on compensation for executives of firms that will be helped by the bailout and a ban on earmarks on the legislation.
Obama said the bailout plan cannot be designed as a “welfare program” for Wall Street executives, and the power to spend this much money cannot be left to one man, Treasury Secretary Henry Paulson.
If consumer confidence is raised and companies begin to operate optimally again, then the taxpayers may even be able to profit from the bailout.
But this may not happen soon enough for the myriad of people who are losing their jobs, losing their homes and whose quality of life has diminished since this economic downturn.
Plan should include at risk homeowners
The Illinois Senator insisted that the plan should also help families struggling to stay in their homes. “We cannot simply bail out Wall Street without helping the millions of innocent homeowners who are facing foreclosure.” He said government should be given the authority to purchase mortgages directly instead of only mortgage-backed securities, because it’s doubtful that the general economy can recover without the restoration of the housing sector, including a rebound in home values. After the problems of Wall Street are met, the government should move with urgency to help Main Street, Obama said, repeating his claim for a new stimulus package for America taxpayers.
Maria Kong, president of The National Association of Real Estate Brokers (NAREB), said while Bush and the Congress work to restore consumer confidence they should also “pay special attention to, and not overlook the plight of the millions of economically distressed African American and other minority homeowners who were disproportionately steered toward onerous subprime mortgage products.”
She pointed out that “African Americans and Latinos have lost $164 billion in home equity with estimates as high as $200 billion. We know that all Americans are suffering and need an immediate indication that our government is prepared to include an economic prescription for Main Street as it addresses the meltdown on Wall Street. A strategy for both is critical. But, not including a plan that immediately and meaningfully assists at-risk homeowners short-circuits, if not negates, the government's efforts to restore the public's confidence.”
Kong said, “the current economic crisis will not diminish until the foreclosures are halted, now estimated to be occurring at a rate of 10,000 per day, and distressed homeowners have a real and immediate opportunity to remain in their homes. The $700 billion dollar price tag on the bailout needs to benefit directly the very people crippled by predatory lending practices.”
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