Bailing out individual companies such as AIG is one thing. Today’s newspapers are filled with astounding reports that the federal government is devising a plan to bail out the entire financial sector—by taking over all the toxic assets that pollute the balance sheets of banks and other institutions. There is talk that this scheme is patterned on the savings and loan rescue of a generation ago. But unlike that rescue, the idea now is that the feds would, as the New York Times puts it, “take over only distressed assets, not entire institutions.”
“Bailout” hardly begins to capture the magnitude of what is being considered—apparently with bipartisan consent from Congress. This is absolution: the full faith and credit of the United State are being marshaled to absolve financial institutions of their sins. The consequences of years of greed, imprudence and short-sightedness would be wiped clean. With their financial souls thus renewed, we are supposed to believe banks will go forth to lend and invest with care and integrity.
One’s first instinct is to denounce this outrageous use of taxpayer money to rescue wealthy institutions that brought this problem on themselves, and will inevitability do it again. But perhaps that’s not the best response. The severity of the crisis has created openings for unprecedented government intervention. But why should banks get all the benefits? If Uncle Sam’s wallet is wide open, why shouldn’t the rest of us share in the largesse?
If banks are going to have their balance sheets cleansed, why can’t the same be done for the household accounts of America’s working families? Here’s the outline of a program for bailing out the rest of us:
- Wipe out unpaid medical debts of the uninsured and the underinsured;
- Wipe out credit card debt for all households with less than the median income;
- Wipe out subprime mortgages and give immediate title to the homeowners;
- Wipe out payday loans and all other predatory lending obligations;
- Wipe out unpaid student loan debt for those earning less than the median income; and
- Wipe out auto loans and other installment loans for those earning less than the median income.
Sounds unrealistic, ridiculously expensive? Probably so, but it would be no less outlandish than the proposals being made to benefit financial institutions that have brought the country to the brink of economic collapse. If now is a time for bold moves, let’s see some audacity on behalf of the many, not only the few.