We Need a New Jesse H. Jones
After capitalism failed to right itself after the 1929 Crash, Herbert Hoover created the Reconstruction Finance Corporation in 1932. Jesse H. Jones, a self-made millionaire banker and developer from Houston, was named to the board. The RFC was charged with giving loans to banks, railroads, and other corporations to try to get credit flowing again in the U.S. Bureaucratic and narrow in scope, the RFC was not initially successful. Jones chafed at its limitations.
When Roosevelt came in, he put Jones in charge, who greatly expanded the RFC's mandate while streamlining its operation. Now it could take equity stakes in banks. And its equity and loans could come with major strings--including cutting executive salaries and replacing incompetent executives. Jones forced banks to look past their fear and start lending.
Jones was no socialist--far from it. He was an ardent capitalist, and what he did with the RFC was done to save capitalism and to save American democracy. But he recognized that government had a role--especially in a crisis--in governing capitalism. The equity the government bought was eventually sold (with positive returns for the taxpayer), and America survived the Depression with capitalism intact and strong, but chastened after decades of hubris.
Now facing a similar crisis, we can be happy that our leaders are responding faster than Hoover did. They should have started sooner, but the political environment which elevated the notions of government deregulation and the genius of Wall Street made an RFC impossible until now. That old hubris had returned, unfortunately. We let the big swinging dicks of Wall Street remove regulatory protection. We are reaping what they sowed, and we must respond. Even so, the first TARP bill proposed by Treasury Secretary Paulson was an abomination--too narrow in its remedies and too weak in oversight. The revised TARP bill that the House voted down was better, but still just as weak, in its way, as the Hoover RFC. The final version, which added the ability for the government to take equity stakes in troubled financial companies, comes closer to being new RFC. Now if the next president can find a man with the vigor, vision, background and ability of Jesse H. Jones to run the thing, we might pull through this thing.
What we don't need are people like Representative John Culberson (Republican, 7th District of Texas). This know-nothing boob has been an embarrassment to my Congressional district for years now, and the potential meltdown of the world financial market has not injected him with new brains. Here's why he opposed the bailout and voted "No" twice:
My preferred solution to the credit crisis was to repeal the mark-to- market accounting rule and raise the $100,000 FDIC insured limit on bank deposits to $250,000. Unfortunately, this bailout bill also included $42 billion in tax increases and pork barrel spending, and I could not support it. I am committed to finding a solution that restores liquidity to the banking system, and these two steps will help immensely, giving Congress and the Administration time to think the problem through carefully. While I am glad the SEC Chairman Chris Cox repealed the mark to market rule, and that the bailout bill raised the FDIC insured limit to $250,000, I co-sponsored the conservative alternative, H.R. 7223. To read about the Free Market Protection Act, click here.
(This feeble, hopeless act included the Republican's favorite response to any problem up to and including tooth decay, tax cuts. Specifically a cut of the capital gains tax, which would be great news for all six people who will have capital gains this year.)
The White House and the Treasury both tell us that nothing in this bill will prevent this crisis from happening again, or bring those responsible to justice and that $700 billion may not even be enough.
(True--this is a rescue package, triage to fix a crisis. Preventing the crisis from happening again is not its function, and would be inappropriate for this administration to create anyway. That belongs to the next administration. Hopefully one that won't have to worry about Mr. Culberson's votes.)
Since we will have to borrow the $700 billion by selling TBills on the international bond market, and the largest percentage of TBills are bought by the Chinese or other hostile powers through Middle Eastern sovereign wealth funds, under this bill, American taxpayers will borrow billions of dollars from Chinese and Middle Eastern banks to bail out Chinese and Middle Eastern banks.
(Huh? In case he hasn't noticed, several U.S. banks just failed. And thousands of U.S. corporations just lost their access to credit and huge chunks of market capitalization.)
This bill also raised the national debt to $11.3 trillion, doubled the deficit overnight, and saddled our children with at least $1 trillion in new unfunded obligations. All for a bill the Treasury Secretary admits won't prevent the problem in the future and may not solve the urgent problem in front of us.(Since when has he seriously given a flying fuck about the deficit?! Hasn't he voted with Bush for the past eight years, while we turned a surplus into the biggest deficit in history?)
Federal property managers will be able to rewrite mortgages to reduce principal and lower interest rates to zero if they wish, and they can give away foreclosed or distressed-loan homes in your neighborhood to anyone they wish. Liberals who manage these programs will give away millions of free or reduced homes in neighborhoods all over America to families who could not otherwise afford them. The federal government now has the power to create federal housing projects, house by house, in neighborhoods all over America. Just imagine what that means for property values and the safety and security of your neighborhood.
(Oh noes! You may be forced to live next door to a negro or a Mexican! This is the biggest piece of quasi-racist balderdash in his entire screed.)