By Michael M. Shapiro
The federal government’s proposal to spend approximately $700 billion to bail out financial institutions drowning in the sub-prime mortgage mess raises the issue of whether such a bailout should be taking place. It would seem that without the aid package, the major banks/investment firms in our nation would go under, causing disaster and triggering a rapid sequence of events that would impact all Americans and perhaps lead to an economic depression.
To prevent such an occurrence, the bailout would appear to be justified. However, it is troubling that American taxpayers are likely going to have to foot a very large bill because our financial institutions took investment risks and lost.
Millions of Americans have mortgages and investments. If they lose their jobs, they still have to pay their mortgages. If they can’t pay them, they lose their homes. Similarly, if their investments lose money, the federal government does not make up the difference. This leads to the obvious question of fairness.
It would seem that if financial institutions made unsound investments in the subprime market or miscalculated the risks involved, that is their problem. If the failure of these companies would not lead to widespread financial distress and potential collapse of the United States economy, it would seem the appropriate course is for these institutions to pay the price for their mistakes, not the American taxpayer.
However, here, the ramifications of our nation’s largest banks/investment firms filing for bankruptcy are too serious, too severe, to be ignored. As a result, the federal government is justified in bailing out these companies. Hopefully, a mechanism can be developed so that when the banks are once again in the black, Washington can reclaim the funds provided, plus market-rate interest.
The question remains, who is going to bail us out? By us, I mean American taxpayers who are struggling to make ends meet, many of whom are facing foreclosure, loss of retirement savings, and other economic hardships. Little is being done to help these people.
One possible idea, which will likely never see the light of day, is for Uncle Sam to develop an extensive jobs program to research and create an America not dependent on foreign oil, by using green technologies. Hundreds of thousands of people can be employed in this program, creating cottage industries, revitalizing burned out industrial areas, and allowing America to be safer and more secure, both domestically and internationally. With the goal of making America energy independent within 10 years, and rigorous benchmarking to achieve that result, such a program could help provide for our nation’s economic future.
Michael M. Shapiro is an attorney who resides in New Providence. He currently serves as the editor of The Alternative Press, www.TheAlternativePress.com. Contact Mike at MikeShapiro@TheAlternativePress.com