independent senator from Vermont. He was elected to the Senate in 2006 after serving sixteen years in the House. He is the longest-serving independent member of Congress in American history.
Economist and co-director of the Washington, D.C.-based Center for Economic and Policy Research. He is a frequent commentator and columnist, and his blog is called Beat the Press. He is the author of several books including The United States Since 1980 and The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer.
It’s being described as the largest government intervention in private markets since the Great Depression. The Bush administration has asked Congress to swiftly approve a massive $700 billion package to rescue the crippled financial institutions on Wall Street. Some analysts say the final cost to taxpayers could top one trillion dollars. Over the weekend, the size of the proposed bailout grew as the Bush administration said foreign banks, including Barclays and UBS, should be eligible for the bailout. [includes rush transcript]
JUAN GONZALEZ: It’s being described as the largest government intervention in private markets since the Great Depression. The Bush administration has asked Congress to swiftly approve a massive $700 billion package to rescue the crippled financial institutions on Wall Street.
But Congressional Democrats have begun to draw up their conditions for the proposed bailout bill. Their terms include limits on the salaries and severance packages of executives at firms participating in the bailout. They also call for increased assistance to distressed homeowners across the country and greater congressional oversight of the Treasury Department. House Speaker Nancy Pelosi warned against giving Wall Street a $700 billion blank check.
The bailout plan was drawn up by Treasury Secretary Henry Paulson and would set up a fund that uses taxpayer money to buy out the bad debt on Wall Street. The plan would also give nearly unlimited powers to the Treasury Secretary.
Meanwhile, the last two major investment banks — Goldman Sachs and Morgan Stanley — have changed their status from investment banks to bank holding companies. This change, approved by the Federal Reserve Sunday, allows them to create commercial banks and also gives them access to the Fed’s emergency loans.
AMY GOODMAN: Speaking on NBC’s Meet the Press Sunday, Paulson admitted he was humbled by the crisis but added Americans would “work through this.”
HENRY PAULSON: Well, what I would say is I won’t bet against the American people. We’re an entrepreneurial people, a hardworking people, and we will work through this. We always do. I wouldn’t bet against the American people, and I wouldn’t bet against the long-term fundamentals of this country. But this is a humbling experience to see so much fragility in our capital markets and to ask, “How did we ever get here?”
AMY GOODMAN: President Bush defended the Treasury’s rescue plan Saturday, arguing it shielded “average citizens” from the crisis.
PRESIDENT GEORGE W. BUSH: Yeah, this is a big price tag, because it’s a big problem. I told our people I don’t want to be timid in the face of a significant problem that will affect the average citizen. You know, some say, well, this is — we could contain this to just the financial community. In my judgment, based upon the advice of a lot of people who know how markets work, this wasn’t going to be contained to just the financial community. This problem could — would spread to the average citizen. You know, you hear them talk about Wall Street and Main Street, well, this is Wall Street plus Main Street, and I’m worried about Main Street.
AMY GOODMAN: The Democratic and Republican presidential nominees also addressed the financial meltdown from the campaign trail. On Friday, Senator Obama said he supported efforts by the Treasury and the Federal Reserve to work out a rescue package.
SEN. BARACK OBAMA: Today, I fully support the efforts of Secretary Paulson and Federal Reserve Chairman Bernanke to work in a bipartisan spirit with Congress to find a solution of this sort. What we’re looking at right now is to provide the Treasury and the Federal Reserve with as broad authority as is necessary to stabilize markets and to maintain credit.
AMY GOODMAN: Meanwhile, Senator McCain promised supporters in Green Bay, Wisconsin Friday he would bring changes to help regulate Wall Street.
SEN. JOHN McCAIN: To deal with the immediate crisis, I will lead in the creation of the Mortgage and Financial Institutions trust, the MFI. The underlying principle of the MFI or any approach considered by Congress should be to keep people in their homes and safeguard the life savings of all Americans by protecting our financial system and capital markets.
AMY GOODMAN: In a moment, we’ll be joined by one of the senators who will be voting on the legislation, the Independent senator of Vermont, Bernie Sanders. But we turn now to two other guests.
Dean Baker is an economist and co-director of the Washington, D.C.-based Center for Economic and Policy Research, frequent contributor and columnist. His blog is Beat the Press. He’s the author of several books, including The United States Since 1980 and The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer. He joins us from Washington, D.C.
And we’re joined by Robert Scheer in Los Angeles, California, veteran journalist, syndicated columnist at the San Francisco Chronicle, editor of the political website, Truthdig. He is the author of several books, most recently The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America.
Dean Baker, let’s start with you. Explain the legislation that is being introduced.
DEAN BAKER: Well, essentially, what the President has asked for is a $700 billion blank check. He wants Congress to hand over $700 billion to Henry Paulson to use to buy, you know, bad originally mortgage-backed securities. There’s apparently an effort by the financial community to broaden that, but basically he would have a blank check to bail out Wall Street.
And let me just make one point that everyone should be very, very clear on. This was not an accident, in the sense that this is like a hurricane. This was a totally predictable event. So when President Bush or Henry Paulson say, you know, we have to come to the rescue, it is because of their incompetence, because people who understood the economy — and putting myself among those, but there are others — we were warning about this a long, long time ago. This was a totally predictable event that brought us here.
JUAN GONZALEZ: And Dean Baker, in terms of the — what it would cover, even the White House apparently keeps changing it. By late Saturday night, they were talking also about the possibility of bailing out foreign banks that had invested in instruments in the United States, as well as moving beyond just securities backed by home mortgage loans, but also to other types of debt, as well.
DEAN BAKER: Absolutely, and this speaks to the nature of the bailout. The bailout should not be fun, if it’s constructed right. The way this should be constructed is, if you’re on the edge of bankruptcy, you come to the Treasury, and you get the money. But guess what? You’re selling your company, and you also have serious limits on CEO pay. You know, you only get $2 million a year; how’s that? Or maybe less. You know, some people have proposed less than that. But the bailout has to be punitive, if it’s serious. It shouldn’t be a field day. We shouldn’t have people lining up to get in. That’s telling us that this is not a serious bailout. So the idea that the administration is proposing is that the people who were engaged in incredibly reckless behavior, who made out like bandits, getting tens of millions of dollars in salary and compensation over the last few years are now going to get this $700 billion blank check from the American taxpayer. It’s just unbelievable.
AMY GOODMAN: Robert Scheer, I’d like you to
weigh in here. Actually, when hearing Henry Paulson questioned by George Stephanopoulos on ABC yesterday, the Treasury Secretary said, “We don’t want this to be punitive. We’ve got to basically save the country,” he said.
ROBERT SCHEER: Well, you know, in the clips you played, these people just lied through their teeth. I mean, Bush, who, after all, knows about the Commodity Futures Modernization Act, because [inaudible] —-
AMY GOODMAN: We’re going to have -— Robert, we’re going to have to — we’re going to have to fix your sound. I’ll put that question to Dean Baker, while we correct that.
ROBERT SCHEER: OK.
AMY GOODMAN: Dean?
DEAN BAKER: Yeah, well, as I said, this is really just an incredible — we want it to be punitive. If Henry Paulson doesn’t want it to be punitive, that’s telling us, from the word go, he is not the guy to run this. This is not supposed to be a giveaway. You know, these are the richest people in the whole country. And if it’s not punitive, what we’re telling them is just, you know, “Go out, run your banks in a reckless manner” — because that’s what they did; they wouldn’t be here if they didn’t run their banks in a reckless manner — “pay yourself $30, $40, $50 million a year in compensation. Then, when you get in trouble, go running to the government, and we’ll just hand you hundreds of billions of more.”
If this isn’t punitive, if this isn’t really painful for them to come to the government, then we’ve messed up with the bailout. They don’t have to do it. Again, you know, if your business is good, if you could get by without the bailout, wonderful, don’t come talk to us, don’t — you don’t need the money. But if you’re going to get a handout, it’s going to be punitive. That’s the way it’s supposed to be.
JUAN GONZALEZ: And what were some of the major mistakes or flaws in how these investment companies and banks dealt with this crisis, back now — because we’ve been knowing that this has been building in the heartland now for a couple of years?
DEAN BAKER: Well, we’ve been knowing since six years. The basic story was, we had a housing bubble, which, again, these people are supposed to be smart. They’re paid tens of millions of dollars. They should have recognized the housing bubble. They should have recognized that house prices would fall, as they have been. And what that meant was, you made a loan on a house for $250,000, $300,000, $400,000, that house price was likely to fall. So if you did that with zero down, as many of them did, plus having mortgages, you know, the predatory mortgages, the subprime mortgages that have got them in particular trouble, these were guaranteed to go bad in many cases.
They acted as though house prices would just keep going up forever, and they could just keep, you know, going along these lines. They leveraged themselves to the hilt. The investment banks, like Lehman and Bear Stearns, leveraged themselves to a ratio of thirty-to-one. In other words, if they had $10 billion in capital, they had loans on the order of $300 billion. I mean, this was just asking for disaster.
And, you know, again, it did collapse. It was totally predictable it would collapse. You know, I didn’t know when, didn’t know exactly who, but it was totally predictable. And now they’re running to us and asking us for handouts. Think of what we do to welfare people, when they — you know, everything they have to go through to get, you know, a $500-a-month check, and these people want billions, no questions asked. Unbelievable.
AMY GOODMAN: Robert Scheer, let’s try again in Los Angeles, your analysis of what has happened? And if you could bring into the history of what took place, those words we almost never hear on television: Glass-Steagall.
ROBERT SCHEER: Hello?
AMY GOODMAN: Hi. Can you hear us?
ROBERT SCHEER: Can they hear me?
AMY GOODMAN: Yeah, we hear you just fine.
Well, we’re going to go to a break. We’ll fix this problem, and we’ll come right back. Robert Scheer, veteran journalist; also with us, Dean Baker, who is director of the Washington, D.C.-based Center for Economic and Policy Research. We’ll be back in a minute.
AMY GOODMAN: Our guests, Dean Baker, economist at Center for Economic and Policy Research, his blog is Beat the Press; and Robert Scheer, longtime journalist, columnist and editor at the political website Truthdig.
Robert Scheer, go through the past and also talk about Glass-Steagall.
ROBERT SCHEER: Yeah, well, the point is, when Bush and McCain and Paulson, who was head of Goldman Sachs before he was head of the Treasury, say they don’t know how this happened, they designed this system. We had a regulatory regime in place ever since the Great Depression to prevent this kind of meltdown, and that said that stockbrokers, insurance companies, banks, investment banks, commercial banks, could not merge. And in 1999, they passed legislation, the Gramm-Leach-Bliley Act. Gramm is the guy who McCain supported for president in ’96. He was co-chair of his campaign until he complained about the whiners out there, meaning the public. And that legislation is what caused this. It allowed the swaps and everything else.
And then, in 2000, hours before the Christmas break, Gramm introduced legislation. I’m holding it in my hand. This smoking gun is available on the internet; you can read it. And what it said is that the swaps is defined in the Financial Service Modernization Act, meaning that instead of going into a bank and somebody said, “OK, we’ll give you a loan, and we expect you to pay it over thirty years. We know your house has the equity. We know you have the means to pay it” — that was the traditional way — instead, they allowed these mergers, and as a result, they could buy insurance on it, they could do these swaps, they could do what they call hybrid instruments. And it is legislation that was never discussed, was — never had hearings or anything, says that all of this stuff is exempted from all previous regulation. The SEC cannot regulate it, the Commodity Futures Board cannot regulate it.
So they gave these institutions, of which Goldman Sachs was critical — so was Citigroup, where Robert Rubin, who was Clinton’s Treasury secretary, he had also come from Goldman Sachs. And, by the way, even though this is Republican-led, there were plenty of Democrats, in fact, a majority of Democrats, who voted for this. And Robert Rubin, who unfortunately is advising Barack Obama — I don’t know how this guy can wake up and — you know, and not be embarrassed and how he can appear on television — and Lawrence Summers, these are the two guys in the Clinton administration who teamed up with Phil Gramm to pass that atrocious legislation.
And now, you know, it seems to me, in terms of the bailout, why don’t they do what Hillary Clinton said during the primaries: just put a freeze on foreclosures? Start out with helping the homeowners and say, “OK, we’re not going to foreclose your house for the next year. We’re going to force the banks to work out reasonable payments. We’ll try to help you hold on to it.” That would have stopped the bleeding here much more effectively than throwing $700 billion at these bandits.
JUAN GONZALEZ: Bob Scheer, the issue also of this rush to pass this legislation — I’m reminded somewhat of the PATRIOT Act after 9/11: an immense tragedy occurs, and immediately they try to rush through legislation without many of the members of Congress even having a handle as to what it really contains.
ROBERT SCHEER: Oh, it’s absolutely outrageous, and we can’t let them get away with it. I mean, consider that Paulson was the head of Goldman Sachs, OK? He knew about credit swaps. He knew about hybrid instruments. He knew all of this stuff. And now he’s the guy that says Congress has to give him a blank check, it has to be a pure bill? Nonsense!
This is our money. Why isn’t this money used to help people who are going to lose their houses? You miss two, three payments, and they’re going to foreclose on you; then they say, “Well, we hope the banks will work out new agreements.” Nonsense! Do a freeze on foreclosures. Stop the bleeding. Have a year to let it settle, and force the banks to come to agreements.
You know, but, I mean, the idea that they didn’t know what was going on, well, this is a Ponzi scheme of their creation, and they thought they would bail before it hit the fan. That’s what they thought. They’d be gone, and someone else would be blamed. They’d have their golden parachutes. I don’t know why we’re not considering criminal charges against these people. They have done more to hurt this nation than bin Laden could ever dream of.
AMY GOODMAN: Well, Robert Scheer, we’re also joined on the telephone by Senator Bernie Sanders, the Independent of Vermont, elected to the Senate in 2006 after serving sixteen years in the House, longest-serving Independent member of Congress in American history. Senator Sanders says the middle class shouldn’t be forced to pay for a crisis created by what he calls the Bush administration’s deregulatory fever and Wall Street’s insatiable greed.
Senator Sanders, welcome to Democracy Now! Well, the watchword these days is — or words, I should say — "too big to fail."
SEN. BERNIE SANDERS: Well, Amy, that’s right. And I think if it’s too big to fail, it probably is too big to exist. And, by the way, among many other things, what we’re doing now with the Bank of America picking up Countrywide and picking up Merrill Lynch, you’re creating another institution which is too big to fail, so that, among many other things, in my view, that we have got to do is to start breaking up these very, very large multinational corporations who continuously put us in this position.
But my main concern — I’ve only got a few minutes here — my main concern is twofold. I mean, for the longest period of time, up to literally a few weeks ago, we had our friends in the Bush administration telling us that the fundamentals of the economy are strong, everything is just fine. And now they tell us we’re on the verge of a major economic meltdown. We’ve got to give Wall Street a $700 billion bailout. And, by the way, of course, it is not going to be the people who have benefited, the people at the very, very top who have benefited financially from Bush’s reckless economic policies who are going to pick up the bailout; it is going to be the middle class, which has been suffering for the last eight years.
So the first point that we have to make is, if a bailout is necessary, it is not going to be, if I have anything to say about it, a working people picking up the cost of this; it is going to be the top one-tenth of one percent, who earn more than the bottom 50 percent. It is going to be all of these people who have made out very, very well under Bush’s reckless policies. So that’s my main concern right now.
Obviously, also we have to ensure that the assets purchased from the banks are realistically discounted, so that we don’t get ripped off in the process, and we have to require that taxpayers receive equity stakes in the bailed-out companies.
Also, I think that we have got to be — we on the left have got to be thinking big and learn a little bit from our right-wing friends who are able to pivot on a dime. For years now, they’ve told us that we can’t afford — that the government providing healthcare to all people is just unimaginable; it can’t be done. We don’t have the money to rebuild our infrastructure. We don’t have the money to wipe out poverty. We can’t do it. But all of a sudden, yeah, we do have $700 billion for a bailout of Wall Street. So, my view is that, included in what we do, there should be a significant stimulus package, a really significant one, which addresses healthcare, which addresses sustainable energy, which addresses the infrastructure, which creates substantial number of jobs, addressing many of the long-term unmet needs of this country.
Obviously, also, we’ve got to understand why we got into this business. I was just re-reading a speech that I gave in the House. I was on the House Banking Committee in 1999, when Glass-Steagall legislation was done away with and the walls were broken down. And I think many of the things that I said and a number of other people said at that time about what would happen, in fact, has happened. So you’ve got to go back to re-regulating not only financial services, but you’ve also got to look at energy trading as well, which is certainly one of the reasons that people are paying $3.70 for a gallon of gas today. So I think those are some of the directions that we’ve got to move in the next few weeks.
JUAN GONZALEZ: Senator Sanders, are you concerned that among the Democrats and especially in the — Barack Obama, that many of the advisers and people helping him to shape the policies were involved in the original deregulation process itself?
SEN. BERNIE SANDERS: Well, I think that the people like Bob Rubin and people like Larry Summers come from a wing of the party, the corporate wing of the party, which has done major disservice to the people of this country. And I think Barack and I think the Democratic leadership have got to pick up economic advisers who are going to reject this nonsense of more tax breaks for billionaires, unfettered free trade, deregulation of a whole parcel of right-wing ideology, which has done us so much harm.
AMY GOODMAN: Senator Bernie Sanders, when you say you want this included in this bill, that, well, Paulson says he wants a clean bill, what do you mean when you add healthcare and sustainable energy?
SEN. BERNIE SANDERS: I mean, if we are going to be bailing out people at the top, who have done this country so much harm, obviously part of the package is to understand that we have millions of kids in this country who have no health insurance, 46 million without health insurance, that we have major — six percent unemployment, an infrastructure which is crumbling, but we have the opportunity now to begin the process of rebuilding America and putting people to work. So, clearly, as part of a package, there should be a major effort to create good paying jobs, meeting the unmet needs that Bush has allowed to exist for so many years.
JUAN GONZALEZ: And this issue of the Bush administration wanting to also extend a bailout to foreign banks, whether they be Japanese, Korean or investors in other parts of the world, wouldn’t this explode the actual cost of this bailout, even beyond $700 billion?
SEN. BERNIE SANDERS: That’s right. There are some people — and I’m not going to tell you that I’m an expert on all of this stuff, because I’m really not, but there are some people who think that, in fact, the amount of money that these guys are talking about is not right, that it will end up being more than $700 billion. And the other part, of course, which is not acceptable is that they want to give the Secretary of the Treasury almost — well, unprecedented power in the United States, with no transparency, just to do essentially what he wants to do, and we won’t learn about the kind of deals that he has developed until long after the process ends.
AMY GOODMAN: And the climate in your House and the Senate right now, Senator Sanders? What do you think is going to happen? You have this enormous rush.
SEN. BERNIE SANDERS: Well, [inaudible], I don’t know. I have not been, to tell you the truth, overly happy by some of the responses that I’m hearing. I think we have to start off with the premise that the Bush administration has been the most incompetent administration, certainly, in modern history. They’ve been incredibly dishonest. They’ve been very political. And I think if anyone doesn’t — forgets about the fact that there’s an election in six weeks, I think one would be very, very naive.
So I think the Democrats have got to stand very tall on — I think on everything that I have told you about, who should pay out — pay for this bailout. I think you’re going to have overwhelming support from the American people. The American people understand that, under Bush, they have been ripped off. Their standard of living is declining, while the people of top have made out like bandits. And now is the time to say, “Sorry, we’re not going to pick up — we’re not going to pick up the damage done by these folks.”
AMY GOODMAN: Senator Sanders, what does this mean for the presidential race? How is this political?
SEN. BERNIE SANDERS: Well, there’s going to be — believe me, they’re going to be spinning every other minute. Right now, as you know, John McCain, who is, as I hope all listeners know, is very close to Phil Gramm, and one can argue that Phil Gramm was the leading exponent — he was the chairman of the Senate Banking Committee, the leading exponent of deregulation. He is the guy who got the so-called Enron loophole through. He is the guy who certainly led the effort for deregulation in financial services. He was McCain’s key economic adviser, and there was some talk that he’d be Secretary of the Treasury under a McCain administration. Now — of course, that was yesterday. And now we find McCain, the great trust-buster, the great fighter for regulation, the guy who’s going to take on Wall Street.
And that’s what Karl Rove and the Republicans do very well. They assume that the American people don’t remember yesterday, and you just start off, you know, with today. I hope that the Democrats do a good job in exposing that. I think Obama is getting that word out.
I think the message for this campaign is that we have had eight years of right-wing extremist ideology. We have given incredible tax breaks to the very wealthiest people who don’t need it. We have worked aggressively, and Bush and McCain are working on it today, for unfettered free trade, which has meant the loss of millions of good paying jobs. We have done an enormous amount of deregulation, so that you can end up in the situation we’re in today. And that’s obviously McCain’s philosophy. And if the American people understand that and they understand what a disaster Bush’s policies have been, it would seem to me that Obama should win with a very comfortable vote.
JUAN GONZALEZ: One of the other things that the administration has done is it’s now extending insurance to money market funds of Wall Street firms, especially in retirement accounts, when previously the government was only insuring bank deposits. Do you support this, as well?
SEN. BERNIE SANDERS: Well, do I support what the Bush administration is proposing? No, I don’t. Because there’s going to be a lot of work that has to be done in a very short while, I am certainly not going to be supporting anything close to what the Bush administration has brought down. Amy, with that, I’m afraid I’m going to have to run.
AMY GOODMAN: Well, I thank you for being with us.
SEN. BERNIE SANDERS: My pleasure.
AMY GOODMAN: Independent senator of Vermont, Bernie Sanders, will be one of those voting on this legislation.
Robert Scheer, I want to go back to you. What does this mean for the future of American capitalism?
ROBERT SCHEER: Well, I think Senator Sanders made a very important point, that, you know, Barack Obama, back in March at Cooper Union — Robert Rubin, who is now unfortunately close to the campaign, in January of this year — he’s the guy who in the Clinton administration pushed through the Financial Services Modernization Act, allowing this madness — but in January, he said we don’t have a problem, this is just the normal fluctuation of the market. That was in a speech he gave at Cooper Union. However, in March, Barack Obama gave a very good speech on the economy. He said much of what we have been saying on this show so far. Unfortunately, he lost that voice temporarily, and these people like Summers and Rubin moved over to his campaign. So, I think if Barack Obama can recover his populist voice that got him where he — so far in the primaries, I think this should be a runaway. I mean, it’s unbelievable that the American people would want four more years of this madness.
I would point out, you have asked the question about covering foreign banks. One of those foreign banks, UBS, Swiss bank, is where Phil Gramm works. He was rewarded after being head of the Banking Committee, pushing through this deregulation. His wife Wendy Gramm went to work for Enron, was on their audit committee. She runs a big institute for deregulation that the big corporations put a lot of money into. Phil Gramm went to work for UBS, a foreign-based banking conglomerate. And now they want to extend this coverage to those banks. These people have no shame.
I think it’s time, as I said before, to really talk about criminal investigation. They have defrauded the American people, and they changed the laws. You know the old folk song, Woody Guthrie, I guess, you know, some will rob you with a gun, and others with a fountain pen. I mean, imagine, these people came in, rewrote federal regulation to exempt the kind of credit swaps — I notice people find this a bit confusing, but I’m saying they’ve got to read up on it. The hybrid instruments that they talk about, that’s what allowed all of this. That’s why AIG got in trouble. They’re supposed to be selling insurance; they’re not supposed to be backing security packages. And all of this stuff was hidden, it was murky. The bankers themselves admit they don’t know what was going on.
And all of that was made legal; it was illegal up until, you know, less than ten years ago. It was made legal by acts of Congress, led by the Republicans, and unfortunately a majority of Democrats backed it, and Bill Clinton signed off on that first major legislation. So we have to be very wary —-
JUAN GONZALEZ: And -—
ROBERT SCHEER: Yeah.
JUAN GONZALEZ: Bob Scheer, the amazing irony now is, as we read in some of the papers today, that the very firms that were involved in creating this crisis are now lining up in Washington to be able to become managers, in case the federal government buys up this debt, and then it needs to manage how it will get rid of the debt, so that the very firms are now lining up to become the money managers of the distressed debt that the government buys.
ROBERT SCHEER: Right. What you’ve got here is really the end of the Reagan Revolution. And I hate to bring up the bad "F" word, but, you know, there is a model for this, and Mussolini had it in Italy, and it’s called “fascism.” It’s where your big corporate interests throw in with government, destroy the freedom of the rest of the people, and preserve their power. Everybody forgets, private corporations and banks did quite well, made out quite well in Italy and Germany in those days, you know? And I am really worried about this assault on our democracy.
The idea — we didn’t cover insurance, as Sanders pointed out, insurance for four million kids, because Bush vetoed it and said $7 billion was too much to spend to cover insurance, health insurance, for four million kids, but now they can throw $700 billion at these banks, and they say we can’t even have hearings about it. It is absolutely outrageous!
And I don’t want to lose that point I made earlier. The best way to deal with this crisis now is to put a freeze on foreclosures. That’s what the Democrats should be — it’s what Hillary mentioned during the primaries. I don’t know if she did it just as a one-liner. But the fact is, it’s a very reasonable thing to do, say American homeowners should not suffer now, you know, if people were given these mortgages. And, by the way, it’s not just the subprime mortgage holders that hurt; if the housing market collapses, as it has, it hurts everyone. Why not a freeze on foreclosures? And why are the Democrats not pushing that idea?
Let’s help out the people who are suffering, you know, and the working people, middle-class people, poor people, who have these home — it’s their whole asset — instead of worrying about saving Goldman Sachs and saving Citigroup. And it’s amazing to me that a guy like Paulson could have been head of Goldman Sachs — he knew this was all going on — Robert Rubin was head of Goldman Sachs; they go into the government, and now they’re going to bail out their former companies, and we have to pay for it? I mean, it’s outrageous!
AMY GOODMAN: Dean Baker, you’re the head of Center for Economic and Policy Research. It’s based in Washington, D.C. The climate right now? I mean, watching the Sunday talk shows, there was this clear sense that if this is not accomplished in the next few days, that — you know, it’s like before the invasion of Iraq. We can be hit by a weapon of mass destruction, is basically the idea. And this is about not saving Wall Street, but saving the American people. That was the message that was put out immediately yesterday.
DEAN BAKER: Well, I’m going to walk a line here. I mean, there is a point. The system of payments stopped working last week. If that happened, we would have to, like, go to buy our groceries with gold. We had a serious situation. Now, on the other hand, the Fed and Treasury were able to deal with it. They are able to deal with it; they have the resources to deal with that. But that is a very serious situation. So they aren’t talking about total nonsense in that. Now, they’re trying to scare Congress to death, because it’s not as though we have to do it today or tomorrow. And, you know, what I would say is we do have to keep the system operating, but it should be punitive.
AMY GOODMAN: But they’re saying by Thursday or Friday.
DEAN BAKER: I keep emphasizing punitive.
AMY GOODMAN: They’re saying by Thursday or Friday.
DEAN BAKER: Thursday — we could probably wait a week. We could probably wait two weeks. But the point is, it could be punitive, it should be punitive. That is the whole point. If UBS wants to come here and sell 90 percent of their company to us to sell their junk, fine, and their CEOs are going to get a 90 or 95 percent pay cut, fine. It’s got to be punitive. I don’t care if the whole world wants to sell their financial system to us. That’s fine. We can structure this — we should structure it in a way that keeps the system operating and is punitive, so that UBS is not happy to have to come here. That can be done, and that’s what should be the focus.
I should also say, progressives have an unbelievable opportunity here. The people hate Wall Street now. They see that you have the highest-paid people in the country that ruined their companies, ruined the economy, and now they’re asking for a handout. We have a chance to turn around the inequality that’s been built up over the last thirty years by hitting it right at the top, if we focus in the right direction. We can do this. They have to have that bailout. They do need it. We have time, and we can impose the conditions that ensure that the people who got us here get punished.
AMY GOODMAN: On that note, I want to thank you both for being with us. Of course, we will continue to cover this. Dean Baker, with the Center for Economic and Policy Research; Robert Scheer, veteran journalist, columnist, editor at the political website, truthdig.com.