Obama, McCain and Bush’s bailout swindle
By Barry Sheppard, in San Francisco
September 25 — Today there are spontaneous demonstrations occurring on Wall Street and over 200 other places across the country denouncing the plan to bail out the Wall Street financiers to the tune of US$700 billion. One journalist sent out an email proposing such demonstrations and then support for it exploded on the internet. People in each area decided by email where to go. No single group organised these actions.
While thousands are demonstrating, they represent tens of millions who have reacted with rage right from when they heard Treasury Secretary Henry Paulson six days ago on national TV demand that Congress cough up the cash immediately and without any strings attached. At first both Democratic and Republican politicians rallied behind the proposal. But they were immediately barraged with phone calls and emails from outraged citizens, and they began to change their tune.
Coming on the heals of the bailouts of Bear Stearns, Fannie Mae, Freddy Mac, and AIG — all of which are now under criminal investigation by the FBI for fraud — which will cost hundreds of billions, the Paulson “shock and awe” demand for a $700 billion fund to buy up Wall Street’s “toxic” debt was just too much for most working people. This is true whether they were leaning toward voting for McCain or Obama. This explosion of outrage at giving such an amazing amount to the very people who have caused the crisis in the financial system came before the actual proposal was made public. Since then the anger has deepened.
Paulson’s proposal was contained in three pages! This reflects the lack of details on just what will happen. He just said the fund would be used to buy up the bad debts of banks and other financial institutions. But no-one knows exactly how much bad debt there is, because it has been bundled up with other debts and then resold as complicated financial instruments. If the government bought these at their actual market value, then the bailout wouldn’t be necessary since they could be sold at that level in the market. So what will happen is that the government will pay for those toxic assets at prices much higher than their market value, giving the banks and Wall Street brokers an influx of cash in the hope that they will use that money to make more loans and alleviate the credit crunch. And, by the way, pocket millions for themselves.
It is not at all clear that this plan would even work, since the squeeze on credit was not caused by a lack of money but by the larger financial crisis that began with the collapse of the housing bubble. Many economists from Harvard, Yale, MIT, the University of Chicago, and other prestigious institutions have written to members of Congress saying the Paulson plan will not work.
Paulson’s proposal was that he be given absolute power to decide what to buy and from whom, at what price and with immunity from review “by any court of law or any administrative agency.” Furthermore, he would hire “contractors” to help make those decisions, and they would be given the same immunity, taking a page from US policy in Iraq. Who would those “contractors” be? Experts, of course — that is, bankers!
It wasn’t President Bush who made the proposal, but Paulson. And he did it without consultation with Obama or McCain. Bush and the candidates were brushed aside. The bombshell was dropped to play on the real fears of working people about the economy to ram it through. Paulson, a former CEO of the Goldman Sachs investment bank who reportedly “earned” $37 million in 2005, was on the cover of Newsweek with the caption “King Henry”. Goldman Sachs will be a major beneficiary of the bailout plan.
Paulson and Federal Reserve Board chief Ben Bernanke thought they could get a repeat of the way fears after the 9/11 attacks were used to ram through the Patriot Act and congressional backing for the invasion of Iraq. But it backfired.
The whole context of the election campaign has changed. The Democrats are tinkering with the proposal and many Republicans, including leading conservatives, are opposed to the Paulson plan. There may be some kind of compromise plan that still has as its heart “cash for trash”. But any such plan will not quell the public anger.
In the September 24 Washington Post there was a report of a new poll taken after the Paulson announcement. “Turmoil in the financial industry and growing pessimism about the economy have altered the shape of the presidential race, giving Democratic nominee Barack Obama the first clear lead of the general-election campaign over Republican John McCain, according to the latest Washington Post-ABC News national poll”, the Post reported. The poll found Obama now leads McCain by 52% to 43%. It also found that more voters trusted Obama to deal with the economy than his opponent.
McCain panicked, announcing that he had unilaterally suspended election campaigning and a call for postponing the September 26 nationally televised debate with Obama, to concentrate on achieving bipartisan congressional support for a financial bail-out plan. He was pressured to reverse this stand (and eventually did so).
The McCain campaign received a boost at the Republican convention when he chose Alaska Governor Sarah Palin as his vice-presidential running mate. She is an extreme right-winger, and this choice energised the Republican base among the white Christian right and others. But the bailout plan has eclipsed the Palin effect, and crystallised the economy as the main issue in the election. However, neither Obama nor McCain are showing any real leadership on the economy or even on the bailout. The $700 billion to be given to Wall Street’s fraudsters could alleviate the effects of the year-old recession on working people — if spent on programs for healthcare, education, public works to repair the nation’s infrastructure, etc.
On the front of foreign policy, the two candidates are becoming closer. Both think that more US troops should be sent to Afghanistan. Obama’s position, stated months ago, that the US should militarily strike into Pakistan with or without Islamabad’s agreement is now official US policy. It turns out that Bush authorised such attacks last July.
Obama’s position on Iraq has become murkier. He had said that he would, if elected president, immediately begin to draw down combat troop numbers and have them all pulled out in 16 months, that is, by May 2010. Now he seems to be going along with the Iraqi puppet president’s proposal that the combat troops would leave by December 2011. McCain still maintains that all the troops should stay in Iraq until the US “wins” but he hasn’t been pressing this as much. The reality is that it will be hard to increase troop numbers in Afghanistan without drawing down troops in Iraq.
While Obama is pulling ahead in the polls, in past elections where a black candidate was running, the number of votes they received was less than what the polls predicted. Many whites will not vote for a black person, but are ashamed to admit this to a pollster.
Republicans have been using code words to fan racist flames. One of these is “uppity”. In the US south before the 1960s civil rights movement, blacks were often referred to as “uppity” if they stood up for their rights. A Georgia Republican, Representative Lynn Westmoreland, recently referred to Obama as “uppity”. In Georgia the meaning of the word is clear: Obama doesn’t know his “place”. Representative Geoff Davis, a Republican from Kentucky, earlier in the year used an old racist term for black men, calling Obama a “boy”.
The McCain campaign ran a TV ad accusing Obama of being “disrespectful” of Sarah Palin. In the US south, it was common before the civil rights movement for a black man accused of being “disrespectful” of a white woman to be physically attacked, even lynched. Racism remains an underground theme in this campaign.