Thank you to so many of you, for writing to share your thoughts on the proposed Wall Street bailout. As we work our way through your comments, we wanted to offer a few more observations of our own.
Carl Sagan, the famous American scientist, often said that "extraordinary claims require extraordinary proof." We are now being told that if taxpayers don't fork over $700 billion to Wall Street bankers who made bad choices, then "credit" (mortgages, car loans, business loans, etc.) will disappear. That is a really, really extraordinary claim. It requires extraordinary proof. Where is that proof?
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We have never done anything like this before, even during the Great Depression. Since the Federal Reserve was created, whenever there was a need to ease credit, the Federal Reserve lowered interest rates and bought bonds for cash, thereby "injecting" liquidity into the financial system. Just yesterday, the Federal Reserve did this, to the tune of over $600 billion. Where is the evidence that these tools, which have worked for almost a century, suddenly are broken? And if they are, then how did that happen?
Credit relies up the ability of intelligent, hard-working people to pay back that credit. Americans are just as intelligent and hard-working now as they were last month, and last year. Why, then, should we now suddenly fear that credit disappear?
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The Reaction that Wall Street is Looking For
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Since this bailout would be financed with debt, we would be more than doubling the federal deficit this year, and burdening every man, woman and child with over $2000 to pay back. That's over $15,000 for my family alone. Because these are troubled times, I'm not anxious to do that.
It's worth noting that the people who are telling us that we must spend $700 billion of our money to avoid the collapse of credit are the same people who told us that there were weapons of mass destruction in Iraq, which would be used against us. The same people who surveyed the wreckage of New Orleans after Hurricane Katrina, and said that FEMA was doing "a heckuva job."
We are often reminded that we live in a free market system. That certainly does not mean that the taxpayers are the suckers of last resort. It seems as though the free market's "invisible hand" has been balled into a fist, and that fist is about to punch you and me in the face.
We all agree that the credit markets need to function properly. And we are still waiting to see the proof that dumping $700 billion in worthless assets on the taxpayers is necessary for that to continue.
Sincerely,
Alan Grayson