Do you oppose the $700 billion Wall Street bailout? Click here
A flurry of petition-based Web sites have popped up in the last few days with one purpose: persuading Congress to snub the $700 billion Wall Street bailout.
|Bailout type||Cost to taxpayers (Source: Reuters)|
|Proposed Treasury Department legislation||$700 billion+|
|Bear Stearns financing||$29 billion|
|Fannie Mae and Freddie Mac nationalization||$200 billion|
|AIG loan and nationalization||$85 billion|
|Federal Housing Administration housing rescue bill||$300 billion|
|Mortgage community grants||$4 billion|
|JPMorgan Chase repayments||$87 billion|
|Loans to banks via Fed's Term Auction Facility||$200 billion+|
|Loans from Depression-era Exchange Stabilization Fund||$50 billion|
|Purchases of mortgage securities by Fannie Mae and Freddie Mac||$144 billion|
|COST PER HOUSEHOLD||$17,064+|
A flurry of Web activism is channelling misgivings about the proposedinto political action.
There is NoWallStreetBailout.com, which asks visitors to sign a petition to Congress. It features a quote from Allan Meltzer, a professor at Carnegie Mellon University's business school, saying: "This is scare tactics to try to do something that's in the private but not the public interest. It's terrible."
The cross-town competition comes from VoteNoBailout.org, which says: "We are witnessing a bankers' coup d'etat. In the name of saving the economy from a crisis created by their own greed and immense profits, the biggest bankers have taken a country and a people hostage."
Public pressure in opposition to the bailout, from these sites and from unexpected sources like the AFL-CIO and Republican Newt Gingrich, may have helped to slam the brakes on what had been an unusually fast-moving process in Washington.
By midday Thursday, news articles began appearing saying a "tentative bailout agreement" had been struck between congressional leaders and the White House. But the day ended with the talks in tatters, an intra-party rebellion by House Republicans, and a promise to continue the meetings on Friday.
Republicans including House Minority Leader John Boehner objected to the proposal as putting taxpayers on the hook for what could be potentially huge losses, according to the summary by The Washington Post. Boehner and his colleagues are backing an alternative that would involve a rescue plan financed by the banks themselves, not taxpayers. (Because their party controls the Congress, Democratic leaders don't actually need Republican support. They want it anyway for political cover.)
Ask an economist whether the $700 billion bailout will harm or help the economy, and the answer will depend on his or her political (or at least philosophical) predilections.
New York Times columnist Paul Krugman said "doing nothing isn't a serious option." Treasury Secretary Henry Paulson told a House committee on Wednesday that doing nothing would "threaten American families' financial well-being, the viability of businesses both small and large, and the very health of our economy." An editorial in the Salt Lake Tribune took a similar approach.
Other economists draw unnerving parallels to the Great Depression, warning that it was caused precisely by this kind of government intervention in the economy. The Competitive Enterprise Institute's OpenMarket.org says the proposed $700 billion intervention will prove to be either "excessively costly or unnecessary." Peter Schiff, a well-known stock market bear and president of Euro Pacific Capital, warned: "We're going to have a tremendous recession if the government does nothing but we're going to have a worse one" if it does. Also see the Huffington Post's reasons to oppose the bailout, and Republican Rep. Ron Paul's warning that "it's the same destructive strategy that government tried during the Great Depression: prop up prices at all costs."
The 1920s boom that led to the Great Depression was aided, and may have been largely caused, by the Federal Reserve's expansion of the money supply by 8 percent a year, or 62 percent over an eight-year period. Such a boom was due for a bust, which started in September 1929.
Instead of taking a hands-off approach, the Federal Reserve intervened on a dramatic scale, in part to allow loans to be taken over; one union leader called it a "barrier against financial demoralization." President Herbert Hoover overruled his Treasury secretary, who counseled a laissez-faire approach, and embarked on programs to artificially keep wages constant (or higher), expand public works, and boost farm subsidies. By 1931, as the Depression was well under way, Hoover was busy calling for an investigation of short sellers. He later summarized his policies as: "We met the situation with proposals... of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic."
It's true that the proposal the Bush administration is advancing today does not come close to the extreme measures that Hoover adopted. But what critics--especially those online--seem to fear is that another step down that path could prove to be an unusually risky one.
Editors' note: For the latest coverage of the bailout plan, see CBSNews.com.