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Jewish World Review
Feb. 4, 2009
/ 10 Shevat 5769
Stimulus Used as a Stealth Package
By
Ed Koch
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http://www.JewishWorldReview.com |
Those in power under former president George W. Bush
contributed to the economic rape of the country by declining to regulate
Wall Street, allowing the economic debacle now unfolding which has
devastated the country, bringing middle-class Americans to their knees
economically with their jobs and savings vanishing with each passing
day.
In the last days of the Bush tenure, his economic team tried
to stem the economic tidal wave overwhelming the country with a team led
by Treasury Secretary Henry Paulson who failed miserably. Bush's team
told us that the major problem was liquidity and that a bailout of the
banks was absolutely necessary; otherwise the country would collapse
into a great depression similar to that which ushered in the FDR
administration. When the Congress which had rejected the first Paulson
plan reversed itself out of sheer terror and voted for the $750 billion
bailout, we found that six weeks later, Paulson was telling us buying
the "toxic assets" of banks was no longer the way to go and instead we
should give these banks more dollars to shore up their capital, which he
did using half of the $750 billion that had been approved by the
Congress for the bailout to secure liquidity. The man who we thought
knew what to do gave those billions away without conditions and the
banks chose to date not to lend, and instead buy other banks, pay
dividends to shareholders and bonuses to their top executives and others
who led them to failure.
The new team under President Obama has asked the Congress
for an additional so-called stimulus bill, now at about $800 billion and
still growing - with about $350 billion remaining and available to the
Obama administration for use from the prior stimulus package. The
administration has the power now or through laws that Congress could
pass to make the banks lend and provide the needed liquidity. When I
wrote to Federal Reserve Chairman Ben Bernanke on October 9, 2008 and
asked why he didn't impose a requirement that the banks do their job to
lend for which they were licensed - and only to those applicants who
were creditworthy and at the same rate as the prior year, his response
was, "...requiring directly that banks extend specified amounts of
credit to creditworthy borrowers would entail many complications. For
example, bank regulators would need to create an objective definition
for determining which borrowers were creditworthy. Moreover, because
the volume of banks' credit activities can fluctuate over time for a
variety of reasons, including those over which they have no control
(such as the rate of economic growth in their geographical regions),
determining appropriate targets for individual banks' lending activities
would be complex and potentially arbitrary. In addition, because of the
very large number of banking institutions in the country - more than
8,000 - administering such a program would be extremely resource
intensive."
Do Bernanke's objections make sense? Aren't those 8,000
banks monitored now? Let me suggest to the Obama administration how
they should react to the current economic crisis:
1. Impose by executive order a requirement that all
banks fulfill their obligations and lend money to creditworthy
applicants. If the Obama administration does not believe it has the
power to impose that requirement, then ask Congress for that power and
in the interim, make it a condition of any loan program entered into by
the banks under future bailouts.
2. Create a new court or use existing bankruptcy
courts with the power to change the terms of mortgages. I suggest new
courts as well as using the existing bankruptcy structure in order to
avoid the need for bankruptcy on the part of the mortgagor because of
the predatory lending practices used in the original mortgage. The New
York Times editorial of February 2, 2009 states, the Obama
administration has rejected the "bankruptcy fix" now "out of fear it
would cause Republicans to delay or reject the package." If true, this
is unbelievably foolish on the part of the administration.
Finally, I am fearful that radicals in the Democratic Party
who support programs such as healthcare and education reform that I have
supported over the years will seek to impose those programs by fiat
without Congressional hearings and laws, by inserting them in the
stimulus legislation. On what do I base that fear? Here are two news
reports.
A January 28, 2009 New York Times article by Robert Pear
stated, "The stimulus bill working its way through Congress is not just
a package of spending increases and tax cuts intended to jolt the nation
out of recession. For Democrats, it is also a tool for rewriting the
social contract with the poor, the uninsured and the unemployed, in ways
they have long yearned to do. With little notice and no public
hearings, House Democrats would create a temporary new entitlement
allowing workers getting unemployment checks to qualify for Medicaid,
the heath program for low-income people. Spouses and children could
also receive benefits, no matter how much money the family had. In
addition, the stimulus package would offer a hefty subsidy to help
laid-off workers retain the same health plans they had from their former
employers. Altogether, the economic recovery bill would speed $127
billion over the next two and a half years to individuals and states for
health care alone, a fact that has Republicans fuming that the stimulus
package is a back door to universal health coverage...As Congress rushes
to inject cash into a listless economy, it is setting aside many of the
restraints that have checked new domestic spending for more than a
decade. The White House said the changes contemplated by Congress would
provide coverage for nearly 8.5 million newly uninsured people who had
lost their jobs and would protect Medicaid for many more whose
eligibility would otherwise be at risk."
On the same day, January 28th, a New York Times article by
Sam Dillon reported, "The economic stimulus plan that Congress has
scheduled for a vote on Wednesday would shower the nation's school
districts, child care centers and university campuses with $150 billion
in new federal spending, a vast two-year investment that would more than
double the Department of Education's current budget. The proposed
emergency expenditures on nearly every realm of education, including
school renovation, special education, Head Start and grants to needy
college students, would amount to the largest increase in federal aid
since Washington began to spend significantly on education after World
War II. Critics and supporters alike said that by its sheer scope, the
measure could profoundly change the federal government's role in
education, which has traditionally been the responsibility of state and
local government."
While I support the ultimate goals of the new Democratic
congressional majority for significant changes in our society, I do not
want those changes imposed through stealth. I want them debated and
voted on by a Congress able to sort out the good from the bad in shaping
legislation. That is not what is happening now. According to Pear's
New York Times article, "Democrats said the current economic crisis did
not allow time for public hearings on the legislation." For me, this is
a form of tyranny and is not acceptable. The ends here do not justify
the means. There is no need or excuse for stealth.
Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.
JWR contributor Edward I. Koch, the former mayor of New York, can be heard on Bloomberg Radio (WBBR 1130 AM) every Sunday from 9-10 am . Comment by clicking here.
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