Economy 101: What readers say

If there were ever a need for congressional hearings, it is now. If the taxpayers are required to bail out private companies and quasi-private entities such as Fannie Mae and Freddie Mac, then we need to know where our money is going. There have been numerous reports in the media of mismanagement and perhaps fraud perpetrated by the heads of these institutions. The idea that these people are now walking away with millions and we are left holding the bag is beyond outrageous. Congress needs to step in, get the subpoenas served and let’s find out what happened.

Greg Dail
Cary

---------------------------------------------------------

What shouldn’t surprise anyone of advanced years is that once again, the government is stepping in to hand out more welfare to the rich and corporations. What’s surprising is how quickly our Republican friends change economic positions. If ever there were an indication of how serious the financial crisis is, their colossal flip-flop is it.

What disturbs me most is how the average, middle class taxpayer gets crushed in these transactions. How could the government play out the crisis differently and still spend $1 trillion? It could wipe out every outstanding student loan debt; issue every American man, woman and child a check for $3,600; or chop $15,000 off every homeowner’s mortgage.

The first item would have given this middle class voter an extra $367 a month for 20 years to spend or invest. The final insult is that the Republicans insist the middle class won’t be taxed if they are elected. Who is going to pay for the wars; the crumbling infrastructure; the failing schools?  

Maybe when the oil we get from offshore drilling hits the world market the oil companies will use some of their profits to help bail us out?

Michael Ciriello
Huntersville

---------------------------------------------------------

Remember George Bush’s saying “Heck of a job, Brownie!” while then FEMA director Michael Brown was totally botching the government’s response to Hurricane Katrina?

Why do I have the sickening feeling that we are going down a much bigger and costlier rat hole again? And Bush will be saying: “Heck of a job, Paulsen and Bernanke!” while America financially crumbles? What incredible hubris.

According to one of your AP stories: “Elation in the financial markets over the $700 billion bank bailout plan evaporated Monday and was replaced by all-too-familiar anxiety, pummeling stocks and sending oil prices to their biggest one-day gain.”

Heck of a job, Bush, Paulsen and Bernanke! Should we be fearing the economic terrorism from home-grown corporations and our government far more than any foreign terrorists?

It appears so!

Jules Coco
Cary

---------------------------------------------------------

It is disgraceful that — for the second time in a generation — a Bush is using taxpayer dollars to save his Wall Street friends from the consequences of their own stupidity. This time it will cost at least $700 billion. That’s over $2,000 per U.S. resident! As the head of a family of four, I don’t have the money to give that kind of gift to Wall Street millionaires.

For over two years, foreclosures have been rising into record territory; did the Bush administration have a bailout plan for ordinary Americans who were losing their homes? No, of course not. But now it’s a gang of millionaires who might lose, not their personal fortunes (which are safely offshore), but their investments in shaky mortgage-backed securities. Suddenly, there is no talk of “free market” principles (which I happen to support) or “personal responsibility” (again, which I support). No, these concepts are only for ordinary taxpayers; for the Wall Street elite, the mantra is “to each according to his need.”

Apparently, the lesson to be learned is that if you make big enough mistakes, the government will be there to save you. I say, “Enough!” No bailout! Let the Wall Street banks fail — they reaped billions in profits when the housing bubble was expanding; now that the market is in collapse, let them feel the consequences of their own decisions. That’s the way ordinary Americans experience life in these United States.

Pete Bledsoe
Raleigh

---------------------------------------------------------

Following the recent financial market upheaval, John McCain “assailed ‘greed and corruption’ on Wall Street and promised to clean it up” (news story, Sept. 16). Unlikely! According to economists, market turmoil threatening our economic security is attributed greatly to deregulation of financial institutions over the past 30 years (“Preventing financial crises,” Other Opinion, Sept. 16).

Key players in deregulation have close connections with McCain. There’s McCain’s business partner and campaign contributor, Charles Keating, of the infamous Lincoln S&L scandal, 1987.

There’s “Deregulation Phil” Gramm, of the Gramm-Leach-Bliley Act, 1999, which gutted the 1933 Glass-Steagall Act created to protect markets from another Great Depression. Gramm’s “Commodity Futures Modernization Act” (2000) deregulated derivatives trading, resulting in the Enron debacle. Through the 1990s, Graham lobbied to eliminate rules against predatory lending. In 2007, McCain made Gramm his presidential co-chairman/economic policy adviser. McCain says, if president, he may make this close buddy his Treasury secretary.

McCain dances with the very big guys who create the destructive policies that have hurt everyone making less than about a million dollars. Their big bucks get stowed safely in Swiss banks while our dollars pay the taxes to bail out their institutions. You want more of this?

Barbara Robertson
Durham

---------------------------------------------------------

Concerning the Sept. 23 article “Bush team, Congress haggle over $700B bailout,” I wish to remind people that during his administration, George W. Bush signed into law legislation that greatly restricts an individual’s ability to declare bankruptcy. So restrictive are the rules in this law that it is no longer possible for people to have all of their debt canceled.

However, now that the mortgage lenders are going bankrupt, the president is demanding that we the people bail out the banks and Wall Street, and he is demanding that we be quick in doing this to relieve them and to do it without adequate payback rules and limits on executives’ pay.

Our nation’s debt was $5.7 trillion when the president took office; it’s now $9.5 trillion, and Bush now wants Congress to act to raise the debt ceiling to $11.3 trillion to cover his other spending and the bankers’ debt.

In other words, he wants you to cover all of the debt. It’s pretty obvious to me that Bush has never been for the people who live on Main Street.

Ross L. Pipes
Durham

---------------------------------------------------------

The concern over the financial crisis we are facing is justified. The two areas of concern for the average citizen are their mortgages and their money in the bank. I have heard all the leaders talk about everything but the money in the bank. No one is talking about what happens to the money in the bank if there is a failure of our system. Yes, I know all about the FDIC insurance yet I also know the financial crisis we face was not caused, as is now being reported, by political powers acting to make affordable housing available to low-income families. That is fantasy. Careful study will show that low-income families need low-cost housing, not low-cost loans for overpriced housing. Many low-income families lack the financial knowledge and/or discipline to manage their family budgets. This could be learned if taught, but it isn’t. The knowledge to make this work is not acquired by osmosis, but must be taught.

A simple cost comparison can be made for any given family’s income/expense budget to show the cost benefits of owning vs. renting, but it must be based on the cost of buying an affordable residence using affordable terms. This has to be taught by teaching “household economics” (not home economic). If we want to get households out of mobile homes, apartments, rented condos, etc. and help them to become “homeowners”, more is needed than just teaser loans with predatory terms. These just result in household financial failures and foreclosures.

The housing bubble began because of low interest rates and relaxed qualifications for home mortgage loans.  Unsophisticated home buyers were lured into loans that could be serviced only by lowered teaser rates and lower adjustable rates. Lenders promised to allow refinancing if rates started to climb but the collapse of the overpriced housing market made it impossible to refinance a house having a value that fell below the loan balance. Even if a homeowner still had a job, no refinancing was possible so foreclosures followed. Foreclosures depressed the housing values of owners that had good loans. It just spiraled downward.

Making loans possible now to buy overpriced housing is not a solution.  That just resets the meter. Overpriced houses must be allowed to come down in price and will with realistic appraisals. Builders and developers need to build smaller, lower priced houses which they have gotten completely away from. This, with some education, will begin to correct the housing crisis.

Winston Hooker Sr.
Cary

--------------------------------------------------------

When gasoline prices spiked, Congress called for an immediate investigation as usual.

When $700 billion bailout arose, no congressional investigation.

Could it be that the Democrats and Barney Frank helped structure Fannie Mae and Freddie Mac that forced lending institutions to give loans to people who could not afford these homes?

All I know is that I saved, played by the rules and paid 20 percent down for a 30-year fixed mortgage.

Daniel Layton
Clayton

---------------------------------------------------------

Perhaps I’m being over-cynical, but isn’t it interesting that the neoconservatives have actually achieved Grover Norquist’s dream of starving the beast through their fiscally irresponsible policies during the Bush administration?

A large tax cut, an exceedingly expensive war, the new Medicare drug entitlement and, now finally, deregulation leading to an enormous but essential taxpayer bailout of the investment banking and mortgage industries have collectively replaced our government’s Clinton-era budget surplus with record-setting deficits (“Rush to craft a bailout makes economists cringe,” Sept. 23). What better way could there be to force a reduction in federal spending for everything but our most essential government services? Where will the money come from to pay for badly needed new initiatives like health care reform, new programs to address global warming, and maintenance of our aging infrastructure?

I am disgusted and cannot believe my fellow Americans are even considering putting another Republican administration in the White House.

Etta D. Pisano
Chapel Hill

---------------------------------------------------------

In the movie, “A Big Hand for the Little Lady,” a little lady in a frontier town, holds a poker hand so impressive that the local banker backs the hand with the bank’s money. The other players fold because the banker, in effect, bets against them with their own investments.

Today, the banker wins twice because he can “tax” the players to make up for his losses. Let’s hope the players don’t throw down their cards this week. What happens in the movie? The “Little Lady” wins.

L.G. Williams
Greenville

---------------------------------------------------------

I don’t know how to say this in any plainer English: Don’t let these Republicans spend another penny transferring ordinary Americans’ tax money into the pockets of their Wall Street cronies.

John Iwaniszek
Raleigh

---------------------------------------------------------

I don’t know much about economics, but I do know that most Americans have reason to be wary of the Bush cabal’s proposed solutions in the financial sector meltdown.

Every moment of the past seven years should lead us to believe they’ll try to use this crisis like they used 9/11 — seizing the opportunity to bend rules in favor of the military/industrial/financial complex without that pesky Congress being involved. Call me a cynic, but I’m betting the emergency powers the Wall Street neocons are pushing for carve out the choicest parts of dying companies for themselves, and leave the rest of us a rotting carcass.    

Just wondering: Wouldn’t a $700 billion infusion of magical cash make Social Security solvent for another century or so and provide health insurance for everyone who needs it at the same time?

Tom Stroud
Washington, NC

---------------------------------------------------------

The U.S. government cannot think. However, the individual representatives can, and at times, do. We are not getting this from our leaders at this time.

Consider the following as illustrative. When the Freddie Mac/Fannie Mae companies lost all their stock value, had there been a group of D.C. thinkers, we should have heard this:  Let them fail completely. Let the stock be worthless. Happened to MCI, Worldcom, XYZ.com, etc., to the tune of $100 billions a few years ago. So what if American investors lose their shirts again (a good thing to happen in a free market)? Guess what? With the mortgage companies thusly insolvent, all the mortgage holders of the $5.3 trillion home loans would have no one to pay. Now that would have been a solution to behold!  An immediate $5 trillion infusion into taxpayers pockets and a good, free, capitalistic cure!
Instead the scoundrels never thought of it. And they forge ahead unconscionably now.

Doug Keith
Garner

---------------------------------------------------------

It was with great interest that I read Andrew Foster’s “Help the little guy first” opinion piece.

While there are pieces that I agree with, some of the steps are counter productive.  He blames Wall Street for the problem but seems to ignore the fingerprints of Congress in creating the problem.

First off, he says that we need to help the homeowners who are caught up in this situation. I seem to remember a $300 billion bill that was signed into law this past summer to “help the little guy” — and as one of the 95+ percent of Americans who have paid their mortgages on time, I resent having to prop up people who bought a house that they couldn’t afford. Andrew Foster is suggesting that we do it again/more in the new bailout.

Additionally, I cannot understand why a bankruptcy judge should be allowed to change the terms of a home mortgage (as proposed by Foster and Sen. Chris Dodd) — doing so would impact both the earnings of the mortgage holder and its ability to do future loans. Changing the amount of money coming in alters the amount  available to go out.

His second point, about looking at the 2007 bill proposed by Dodd for regulation of the financial industry, misses the 2003 proposal by the current administration (lauded by the New York Times at the time), the phony bookkeeping that went on at Fannie/Freddie discovered by the GAO, then Fed Reserve Chairman Alan Greenspan’s request in 2005 to have Fannie/Freddie regulated, and finally the 2005 legislation introduced by John McCain that acted on Greenspan’s warnings. To say that no regulation has been occurring misses the fact that the U.S. Congress is responsible because it wouldn’t pass legislation to actually do regulation.

The Community Reinvestment Act enacted by Congress could be considered the root of the current problem (depending on perspective). Financial institutions that wanted to expand could be stopped by “community organizations” unless the concerns of these organizations were addressed. Various tactics would be used by these groups until the financial institution relented — and in a lot of cases, that meant making loans that were “high risk” of repayment. Freddie and Fannie then started buying these loans, so the financial institutions turned around and made more and more — as they no longer had any risk.

These community organizations (ACORN, LULAC, others) who forced the financial institutions to “play ball” now are explicitly receiving federal money to help “counsel” home owners who shouldn’t have been able to buy the home in first place — except for the pressure these groups applied.

A vicious circle, with the home buyer caught — and these community groups gaining more and more leverage/money/power.

His third point is dead spot on. Wall Street should not profit out of this.

Additionally, all the speculators who  were flipping homes should not benefit, either. If you own more than a primary residence, and one of those additional properties is in default, tough!  Speculators got into it with understanding the risk, and now the risk has hit.  

It’s not the place of the government to protect speculators from the financial risk undertaken they’ve undertaken.

Jerrold Heyman
Raleigh

---------------------------------------------------------

The current situation with defaulted loans, bankruptcy and hastily arranged bailouts must stop. The American people are smarter and stronger than the economic structure that is now strangling them. A democracy relies on freedom and justice for all. There must be justice for the unnecessary risks and predatory lending behavior that has led to empty houses and rapidly increasing numbers of homeless families.

Instead of a quick fix, I propose that ordinary Americans be allowed to decide their economic futures. Train anyone who is willing in economics, certify their ability to understand the complex jargon associated with the current financial disaster and then ask them to determine proper actions for restoring good-faith borrowing in America. We have the resources to do this. We train people for war, we can train them in economics. There is synergy when different kinds of people work together and that is what has made America strong in past.

A second objective must be to allow the courts to determine penalties for each transaction involving predatory lending, misrepresentation of assets, and other cover-ups. Accountability must be enforced or the cycle will repeat itself. The wheels are already as greased.

Niki Robertson
Raleigh

---------------------------------------------------------

Recent N&O editorials and forum letters on the mortgage bank failures all have the same spin to them: Wall Street greed and Bush are at fault.  

In reality it was first President Carter and then Clinton who directed that there be an increase in minority home ownership and that through regulatory action a percentage of all loans be sub-prime. The seeds were sown years ago.

On 16 occasions the Bush administration recognized the growing problem, warned of impending failure and tried instituted legislation to correct this growing problem. These warnings and request for action took place in April 2001, May 2002, January 2003, September and November 2003, February and June 2004, Aril and July 2005, August and September 2007, and most recently in February, March, April, May and June of 2008. Every attempt at recognition and corrective action was block primarily by democrats in the House and Senate.

Huge donations by Fannie Mae to Democratic legislators, including Obama, helped kill corrective action.  Hold CEOs accountable for fraud, but let’s also hold legislators accountable for their failures and fraud.

Dave Campbell
Raleigh

---------------------------------------------------------

It occurs to me that while the financial behemoths of the globe are indeed getting bailed out, the real bailout is of the Republican/Libertarian free-market ideology. At this point it should be abundantly clear to all that an ideology that espouses absolute free-marketeering simply is not in our overall interest when our ability to retire, our health or our homes are on the line.

Ideologues of the “short-term gain” approach don’t seem to factor in the cost of the predictable fallout and carnage across vast swaths of society that occur. Nor are we morally willing to live with the results that this mindset brings (e.g. loss of retirement, unsafe food, products and medicine, bankrupting medical bills, or loss of your home).

While capitalism is certainly viable, it necessitates meaningful oversight if it is to sustain itself. Let’s hope that this latest calamity marks the end of the “bad government -good market” paradigm that has taken hold of this country for so long.

Chris Russell
Chapel Hill

---------------------------------------------------------

The economic nightmare was caused by the Bush tax cuts. Today is a virtual copy of the 1920s, when the Mellon tax cuts for the wealthy caused the Great Crash and the Depression.  

The zillionaires who benefited then put way too much into speculation, increasingly and finally totally into stocks, driving prices way higher than values.  

Finally, no one would pay for the shares, so the market and the speculative banking and mortgage system unraveled, and as people had less to buy with, employers fired workers.  

Sound familiar?  

Republicans don’t recognize the role consumers play in the economy. They say the wealth will trickle down to lower-income people. It happens only a little, because there is already enough capability to produce. So the number of jobs created is never substantial.  

Eisenhower and Reagan did it and produced 1956 and 1982, deep recessions that weren’t worse only because the Republicans couldn’t destroy Social Security and unemployment supports. Those New Deal programs may protect us in 2008 from another Great Depression.  

Even when people don’t work they have to spend to keep the economy going. It’s an idea the GOP has never grasped, but instead pours money into wealthy hands.

Tom Generous
Carrboro

---------------------------------------------------------

In 1983, I read an article in the Atlanta Journal-Constitution about the IRS and their attempt to locate the heirs of the owners of the safety deposit boxes confiscated during the Great Depression. The banks had failed and their assets were seized by federal troops. Assets included the safety deposit boxes of the banks depositors. I had always wondered why so many of my grandfather’s generation didn’t trust banks.

His generation earned a dollar that was guaranteed by the Secretary of the Treasury in silver held, in the vault at West Point, N.Y., or gold held at Ft. Knox (article one, section 10, U.S. Constitution). The dollar I hold in my hand today is backed by nothing. They are being printed by the trillions. In God We Trust may be our only comfort.

Francis J. Hale III
Raleigh

---------------------------------------------------------

Back in the ’70s, I was quite a bratty little kid. At 3 years old, I remember demanding in vain that my mother buy me a name-brand cereal from the grocery store. We can’t afford that, she swiftly replied.  

But the cereal had a prize inside, and I wouldn’t go down without a fight!  So I hastily exploded into a major tantrum. I threw myself onto the floor kicking and screaming, I want my cereal! I want my prize!  

My teenage aunt, just 9 years older than me, was shopping with us. She felt so bad for me that she even offered to buy me the cereal. But my mom wouldn’t let her.  

My mom then calmly cavaliered towards the checkout aisle, paid for the groceries, and walked right out to the car leaving me behind. Should I go and get Stevie, my aunt asked. My mom turned to her and replied, no, leave him there. He has to learn the hard way. Within seconds, I darted out to the car.

I learned two lessons that day: 1.) whining won’t get you anywhere and 2.) live within your means.  Too bad Congress and I didn't have the same mother.

Dr. Steven LeBoeuf
Raleigh

---------------------------------------------------------

We are now being told that mushroom clouds are gathering over the market and that things are the worst they have been since the Great Depression. Since these clouds started on Wall Street, I don’t know why they were not seen long ago. In 2003, Congress was urged to take quick action to ward off impending danger. We were told that oil revenues would cover most of the cost of the fix. Will we now be asked just to go shopping while experienced hands in the Treasury handle the current crisis?

Treasury Secretary Henry Paulson is an experienced hand in investment banking who spent years on Wall Street as head of Goldman Sachs (where they just threw out the business model he helped create). Nevertheless, Paulson maintains a great deal of credibility with both investors on Wall Street and lawmakers on Capitol Hill, or else he has come up with a story that has scared the pants off them.

In either case, I urge Congress to be careful and keep in place some real oversight in this bailout. Remember the costs and losses of the last big fix.

Jerry D. Taylor
Buies Creek

---------------------------------------------------------

The current crisis on Wall Street is only the most recent powerful example of the moral failings of those of our leaders who have in recent decades succeeded in imposing on our country a policy of deregulation. Sen. Elizabeth Dole is among those who have advocated the policy without a clue of its inevitable consequences.

Of course, investment banking executives will, if permitted, put other people’s wealth at great risk to secure great short-term profits because they reap great rewards at almost no risk to themselves. Tens of thousands have lost their jobs on Wall Street. Those who knew what was going on have perhaps been served right. But it is better to take the keys away from drunk drivers.

And note that the chief executives who bear the shame of having wrecked their firms, poor fellows, leave with tens of millions of dollars.

Meanwhile, we taxpayers are stung for hundreds of billions. On which taxpayers does Dole or Sen. McCain plan to impose that burden?

Please, let’s bring back the regulators, and let’s elect representatives who have sense enough to do that.

Paul D. Carrington
Durham

---------------------------------------------------------

So, while meaningful investments in infrastructure (transportation, schools, roads, public safety and the general welfare) get shoved into the background, we’re rushing to give a trillion dollars to the people who make money, from money in support of the flat planet they’ve created. Is this the correct “high-level” view? Perhaps not. Regardless, this sounds (smells) like something much worse than socialism to me.  

And, Secretary Henry Paulson, we all understand “pay for failure.” Failure is part of progress. Right? What most of us can’t get our heads around is the truly obscene payments (we’re loathe to call it compensation) a relatively small bunch of overpaid workers (who are consistently major stockholders in the same schemes they support) get out of the deal, simply and precisely because they can.  

Steve Livingstone
Rolesville