Excerpts from an editorial in The Guardian yesterday:
The big news yesterday was that markets did not nosedive. No, the FTSE picked up, while on Wall Street shares began clawing back some ground lost during Monday’s landslide. But do not be reassured. That scoreline masks the deep wariness still felt by bankers, regulators and politicians in America, in Britain and right around the world. After all, on Monday Congress rejected the $700bn bailout that George Bush had insisted was the only alternative to a “long and painful recession”. It ran aground on the hard rock of public anger. The vote in Congress reflected the resentment of ordinary Americans who simply cannot understand why they should pay the bill for clearing up after a particularly ruinous party on Wall Street — one to which they were never invited. President Bush returned to the stump, demanding “decisive action on the part of our government”. But the bold words were not matched by a revised plan which could placate congressional refuseniks. Thanks to political deadlock, at a perilous time, no one is in charge. Yet the indignation evinced by congressmen could burn out before long; only 12 need change their mind for a revised plan to go through. One of the great oddities of the bill’s progress was how swiftly the debate shifted from the ideological — principled if wrong-headed resistance to the government meddling in the markets — to the visceral: Resentment at funds flowing from Joe Sixpack to the super-rich.
The American dream holds that anyone can rise to the top through their own endeavors. The first half of the myth — anyone can do it — has been a formidable ideological weapon for those at the top. For three decades now, runaway boardroom rewards in the US have been matched by stagnant wages for ordinary workers; the gulf has grown to the point where it would not be tolerated were it not for the dream’s second element, the idea that wealth rewards individual hard work. But that seems less plausible now it turns out that many of the wealthy enriched themselves by building a financial house of cards. And now it has collapsed, instead of reconstructing it themselves bankers are looking to taxpayers to do the job — by writing a $700bn check to pay a premium price for shaky assets.
Under the defeated plan the public would receive an equity stake only some of the time — and even then their shares would have no voting rights. That is an odd approach for a country founded on the cry that there should not be no taxation without representation, and one that must change. And before banks get public help must they must agree to come clean about all toxic debt and to suspend paying dividends to shareholders. Other worthwhile concessions — on capping both bankers’ pay and home foreclosures — must be beefed up. Properly handled, a bail-out plan would not just give emergency relief, but would also be a step towards the longer-term health of American society.
