Those Hit Hardest Get No Bailout

Taxpayers' bailout money for AIG bonuses
has rightfully provoked a massive backlash against AIG, Wall Street,
President Barack Obama and his economic advisers, Treasury Secretary
Timothy Geithner and Larry Summers. The U.S. public now owns 80 percent
of AIG. The outrage is bipartisan: Iowa Republican Sen. Charles
Grassley even suggested that AIG executives "resign or go commit
suicide." New York State Attorney General Andrew Cuomo just released
details on the bonuses, exposing AIG's ridiculous claim that they are
"retention bonuses" aimed at keeping key employees, since 11 of those
who received bonuses of $1 million or more are no longer employed by
AIG.

These AIG millionaires may need to
return their unearned millions (Congress may pass a tax law aimed just
at them, taxing their bonuses at 100 percent). But will the outrage
help those who have been hardest hit by the economic meltdown? Will the
hundreds of millions of dollars in various stimulus packages and
bailouts find its way to regular people who are trying to get by, or
will it go only to corporations deemed "too big to fail," leaving
behind millions of people who are, apparently, small enough to fail?

The Center for Social Inclusion has
just issued a report on the economic meltdown and how best to solve the
problem. It links race to the lack of opportunity and to the prevalence
of the notorious subprime mortgages that triggered the economic crisis.

CSI Executive Director Maya Wiley told
me, "We have to stimulate equality in order to stimulate the economy."
Access to education, transportation, housing and a clean environment
give people a firm footing to respond to crisis and to succeed. Noting
that "shovel-ready" stimulus jobs in construction will
disproportionately favor those who are already in that industry,
predominantly white males, Wiley is pushing for "community benefits
agreements for construction jobs [that] ensure when the government has
construction contracts, low-income people, people of color, women, are
going to have their fair share of those jobs." Since people of color
are more likely to live far from available jobs and are less likely to
have cars, Wiley says, "we must ensure that the way transportation
dollars get spent go to transit ... to connect people who need jobs to
the places where there are jobs."

The group United for a Fair Economy
also highlights the racial wealth divide, noting that "24 percent of
blacks and 21 percent of Latinos are in poverty, versus 8 percent of
whites. In the corporate world, we are seeing the highest executive pay
and the biggest bailouts in history. CEO pay is 344 times that of the
average worker."

Prevailing wisdom posits that freeing
up credit will save the economy, thus these huge banks need hundreds of
billions of dollars in taxpayer bailouts. But the crisis was initially
caused by defaults on subprime mortgages. One option at the outset
would have been to support the distressed homeowners, helping them
avoid foreclosure. Wiley points out that "35 percent of subprime
mortgage holders were actually eligible for prime-rate loans. ... Most
of those were people of color ... communities of color did not have
fair access to credit."

The banks and the mortgage lenders
pushed bad loans on poor and minority borrowers. The NAACP has just
filed lawsuits against Wells Fargo and HSBC, alleging "systematic,
institutionalized racism in subprime home mortgage lending."

The banks bundled the bad loans into
securities and sold them, then created derivatives based on these
securities that are impossible to understand, let alone value. AIG
insured the investment banks against potential losses from these
complex derivatives. The U.S. Treasury bailed out the banks along with
AIG. AIG then paid out tens of billions of its bailout money to the
very large banks that already received billions in bailout funds: Bank
of America and Goldman Sachs. Yet, despite the hundreds of billions
being siphoned off by these megabanks, we are told that the credit
market is still frozen. Many European banks also received funds this
way, including Swiss bank UBS, which offers secret bank accounts that
allow the richest Americans to avoid taxes. In effect, beleaguered U.S.
taxpayers are bailing out wealthy U.S. tax dodgers.

Obama has surrounded himself with
financial advisers who are too cozy with Wall Street, like Summers and
Geithner. It's time to direct the stimulus to the people who need it,
to those whose tax dollars are funding it.

Denis Moynihan contributed research to this column.