Americans have begun an angry backlash against bailouts that could become a national revolt in 2009.
The Federal Reserve has cut interest rates by some 500 basis points. Government agencies have poured close to $8 trillion into banking bailouts. The Treasury secretary has promoted massive government support of troubled, failed and corrupted institutions.
This program is a 100 percent top-down exercise involving the largest amount of money in history.
Virtually none of this money directly helps average Americans. Virtually none of it trickles down to the people who suffer the most and pay for the program.
After $8 trillion we are still debating whether any money should be used to directly help average Americans.
The Fed has cut rates dramatically. It is shameful that after all of these rate cuts and all of these bailouts, banks continue raising credit card interest rates, lowering credit lines, refusing to lend to creditworthy businesses and allowing the Grapes of Wrath-like foreclosure crisis to continue with minimal effort to address it.
The banks don’t trust the banks. The banks don’t trust their customers. Business does not trust the banks or the government. Taxpayers don’t trust anyone.
The only trust is from the Fed and the Treasury Department that transfer huge sums of money to the large institutions that caused the problem, often in secret, often involving complicated financial derivatives that neither Congress nor many CEOs understand, based on trust that these institutions will use this money wisely, which often they have not.
The Securities and Exchange Commission is discredited. The Federal Reserve has failed in its duty as banking regulator. Congress has failed in its duty of oversight. The most wise and citizen-friendly regulator, Sheila Bair of the Federal Deposit Insurance Corporation, is treated with contempt by the Treasury secretary.
The public backlash is only beginning. It will rise with every new scandal and Ponzi scheme and every new increase in credit card rates. It has already infected good judgment in the auto case, where major support is needed, tied to major plans for industry renewal.
I do not oppose bailouts, I oppose bailouts managed with banana-republic standards of secrecy and incompetence in which recipients of massive taxpayer largesse work against those who pay for this largesse.
Today the Federal Reserve Board refuses to disclose information regarding some $2 trillion provided to financial institutions. Bloomberg business news has filed a historic freedom-of-information case seeking disclosure. Congress and the president-elect should support it.
Bailout money is not a private account that belongs to Fed Chairman Ben Bernanke, Fed governors, the Treasury secretary or the banks. It is the people’s money. It should be used to benefit the people. It should be monitored through the checks and balances of the democratic process.
Secrecy is the enemy of equity, integrity and common sense. Secrecy is the friend of negligence, misjudgment and corruption. There are probably selected instances where the Fed should not disclose, but show me $2 trillion of secretly spent money and I will show you trouble.
In the coming days I will be writing about the Bloomberg case and offering specific bailout proposals on The Hill’s Pundits Blog. The backlash is coming. Time is short. The dangers are extreme.
America needs new thinking and an informed national consensus — and we need it now.
Budowsky was an aide to former Sen. Lloyd Bentsen and Bill Alexander, then chief deputy majority whip of the House. He holds an LL.M. degree in international financial law from the London School of Economics. He can be reached at firstname.lastname@example.org and read on The Hill’s Pundits Blog.