Bailout America: A Peon’s Perspective and Partial Remedy

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Bailout America: A Peon’s Perspective and Remedy

The morning paper confirmed the same report broadcast by the television news of last evening: the House and Senate have finally agreed to move forward with President Obama’s bailout plan for our beleaguered American economy.  I was pleased with the newspapers’ account as it did, in fact, mirror that which had been reported last evening.  This may seem simple or over-cautious to some; but recent histories of political performance, fickleness—coupled with an eager media who so longs to be the bearer of good news—well, these days it’s more prudent to wait, check several references before removing the wire band from about the cork.

I admit to feeling more confident about the pared version of this plan as it identified and deleted some “special interest” expenditures as well as those that could not readily be defined as propositions toward bolstering the economy or, at least, hoisting sandbags where more notable leaks have been expressed.  This, I thought, showed a bit more responsibility toward the venture on the part of the government.  I’m uncertain as to which “programs” actually made the cut and if the plan still includes some special interest criteria; but the mere fact that 11th hour adjustments were made while “odd-visioned” politicians succumbed to the immediacy of the need is a positive sign in and of itself.

The stated emphasis of this historical program is to provide stability to a marketplace that has vacillated in a steady downward spiral for some time.  It nervously recognizes the fear in the consumer and seeks to offer hope and encouragement.  It circumvents powerful decisions made by domestic manufacturers, investors, and bankers—off-handedly ignoring or rewarding them for their respective indiscretions and simply states, “what you did was naughty, please don’t do that again—this check I’m giving to you now has 300 million signatures on it; and I’m watching you this time”.  Well, we should all feel more secure that the government, in all their frugalness, will monitor the wicked.

Simplistically, American economic structure and, to some degree its social structure, can be aptly phrased as excessive—or profit excessive; and this is an American vision and trait.  We want the most.  Enough is never enough.  We always want the best—need the best; and are seldom content knowing that others are doing better.  It’s a relative perspective, I imagine.   However, when you take this ideology and toss it into the sincerity of the bailout program, some of the ingredients congeal and will not blend equally together.  America has thrust its manufacturing knowhow to the foreign marketplace where those labors are significantly less costly and provide an incredible profit margin for the company.  They are indifferent to the American job loss because the new profitability far outweighs the cries of the unemployed; and the board of directors has to answer to Wall Street; it becomes an easy decision.  Now that Company “A” has made this manufacturing move abroad, he has created a significant market advantage for himself and can literally destroy his competition without ever compromising a level of profitability he had realized when domestic.  His competitors, now faced with market annihilation, may choose to ride the “American-Made Ship” down to the abyss or they too may choose to go abroad and equalize the competition.  Here again, they have to answer to investors; and decisions become limited at this point.  American labor needs to be realistic; but it will not exist or thrive on 13-70 cents per hour wage—not in our society.  The manufacturer, prior to emigrating, should examine or re-examine their entire operation and approach domestic suppliers and their labor force with sincerity toward turning-out a superior, cost-effective, marketable product; and if it would also dictate scaling-down the benefits and wage of the hierarchy, then so be it.  After all, it’s what’s best for the country, right?  The bailout then, should exclusively invest in those companies that are primarily invested in the country; and not reward those who have inflicted near irreparable damage to this country’s economy.

Another component of the bailout program is to provide the middle and lower income classes with tax breaks—recognizing that these are the populous that do the bulk of the spending in this economy.  I appreciate this gesture because it’s not actually cash that the government is pulling out of its wallet; it’s more like the government’s conceding that these are funds that will never reach the federal purse.  It is tallied as if it were cash, as bailout figures are compiled; but it is, in fact a subtly different outlay.  The theory is that this large inventory of people will view this credit as cash and feel confident in spending it, thereby priming the economy; and once this machine is started, it is assumed that it will continue to hit on all cylinders.  The former administration tried this with actual cash; and, unfortunately or fortunately (for the consumer) a modest blip of an increase was only realized as fear consumed the consumer and he/she threw it in savings—largely, in part, to the bludgeoning behaviors of the oil producers.  With this history in mind, and being of this class, I have an alternate proposition that is a minor melding of the two theories.  The federal government should forward a, let’s say, $25 negotiable coupon or bond that is recognized as legal tender for the purchase of goods alone to every adult American.  The consumer would be given a fixed period of time under which they could spend it, in order to circulate funds quickly—rather like CPR.  The merchants record this as cash; and by virtue of their taxes paid, reimburse some of the investment back to the government.  The banks who receive this (subsequently credit in full denomination) could realize a 3-4% handling fee from the government.  Should all parties comply, 100% of the government’s investment has gone directly where it needs to go; and is not lost in salaries, management, distribution, or illicit bonuses of corporate/banking hogs.  The funds have been used and had a direct impact and cash influx to a cash constrained economy.  It is not unlikely that a consumer would not forfeit additional funds toward a larger purchase as this becomes “free money”; and this would additionally prime the engine, so to speak.  The cost of dolling-out such coupons/bonds would be far less than what has been spent (to no avail or significant impact) on our financial institutions and car manufacturers alone—never mind the near 800 billion dollar bailout program.

Lastly, I need to address certain matters with the financial institutions.  Much like the manufacturers, aforementioned, they are profit/greed driven and invest as much in foreign countries as they do in this country.  Perhaps the “excess” profitability realized in these foreign markets afford those obscene bonuses we’re all hearing about lately.  I don’t care where they originate from, quite frankly, I simply believe that reinvesting in your homeland is a wise, profitable and patriotic decision; and the “excess” of monies available should be invested as such.  With regards to failed or failing mortgages I have two distinct opinions and remedies on this matter; and my focus is clearly more in the residential scope as this is where the screams appear to be the loudest.  Inasmuch as these bankers have proven themselves as poor judges in domestic real estate decisions in recent past, what is our assurance that they have become enlightened?  Are they then best qualified to decide as to who keeps their home and who does not?  Perhaps this decision should be taken away from them, and from all for now.  I believe that the best way to deal with foreclosures is to prevent them from happening in the first place.  Once a bank has begun foreclosure proceedings or expressed intent, the homeowner is instantly credit-hamstrung and cannot financially move—whether employed or unemployed; and this prevents the homeowner from a host of alternate avenues that would permit restructuring of his/her portfolio.   My remedy is rather simple here:  Identify the cause of the recent insolvency.  Financial institutions make provisions for discussion and disclosure with the homeowner in despair.  The institution should then have a profile to which they may qualify said homeowner into a Federal subsidy that would be designed to forward monies (principal only) to the institution on behalf of the homeowner.  Any payments made by the Federal government would be added to the rear portion of the mortgagees note; and would be paid back, in full, to the government upon sale or retirement of the mortgage.  This would permit the homeowner to maintain his credit score which he/she will need to renegotiate their mortgage terms or sell and be able to purchase more affordable housing contemporary with their needs and situation.  The banks see no interruption in their cash-flow—profitability would be retarded, but peripheral incentives could offset this service.  The Federal Government would only function in direct advancement of funds and would not recognize any losses.  This, again, is a more defined direct-cure approach and doesn’t allow for illegitimate pocket-stuffing or diversion of federal funds toward acquisition or foreign investments—items not critical to the salvaging of the cornerstone of the American dream.

Will the pledged bailout work as drafted?  Who knows?  We, as Americans, are all anxious to see some signs of success.  We’re taken with President Obama’s commitment thus far and his tireless mission to “do the right thing”.  We salute that form of character; and continue to hope that his ideals remain pure and consistent with all that he has previously pledged.  Should the House and Senate learn to forget their own party’s agenda and act correctly and courageously I believe our suffering, and the world’s suffering, will be minimized and short-lived.

Perhaps my next installment will discuss/rant about the skewed terms of international trade; but for now, I thank you for sharing my remedy and vision.

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