For Immediate Release
Paulson Plan "Would Be Disaster"
WASHINGTON - AP is reporting: "The man behind the Bush administration's sweeping
intervention in the U.S. financial system is a former Goldman Sachs
executive who came to Washington two years ago hoping to streamline
regulation of the financial services sector."
Isenberg is chair of the Economics Department at the University of
Redlands. She said today: "The problem with the bailout is not its
size, but its structure. The purchase of these financial firms and
assets with taxpayersâ€TM money will not be complemented by an ownership
or control structure that reflects this public ownership. It does not
appear that the American people -- the new owners -- will have a say
about executive salaries let alone disposal of profits. There's not
even a plan for new regulations. As Secretary Paulson noted on ABC's
'This Week' with George Stephanopoulos, he couldn't tell anyone why
we're in the position we're in. From the Secretary's statement it
wasnâ€TMt clear whether he meant that his comments were constrained or
that he didn't understand the mechanism. As the bailout now stands, the
regulatory rules that allowed this risky behavior, which is responsible
for our systemic meltdown, are still in place, and there's no plan to
Isenberg is co-editor of Seeking Shelter on the Pacific Rim: Financial Globalization, Social Change, and the Housing Market.
Hahnel is professor emeritus of economics at American University and
currently visiting at Portland State University. Hahnel's most recent
books are: Panic Rules!: Everything You Need to Know About the Global Economy, The ABCs of Political Economy: A Modern Approach, and Economic Justice and Democracy: From Competition to Cooperation.
He said today: "No, the government cannot walk away from the
financial crisis and let the chips fall where they may. Wall Street,
the Republican Party, and the neoliberal wing of the Democratic Party
have created a mess so huge that at this point the ordinary person on
the street would suffer terribly in absence of massive government
"However, there is every reason to believe the intervention
Treasury Secretary Paulson and President Bush are urging Congress to
sign off on would prove to be a disaster. (1) It is fundamentally
different from the liquidation of failed savings and loan assets by the
Resolution Trust Corporation to which it is being compared, and may
well fail to stem the crisis of confidence. (2) While it seeks to put
Wall Street back on its feet with a full pardon, it offers no
comparable relief or pardon to citizens who have already or will soon
lose their homes or suffered bankruptcy. (3) It maximizes taxpayer
liability and minimizes opportunities to recoup taxpayer losses when
financial institutions recover. And (4) at a time when investment
priorities must shift dramatically to move us toward a carbon neutral
economy, it would leave these crucial choices in the hands of the same
people who squandered the nation's investment resources over the past
two decades while feathering their own nests handsomely. In short, it
is a Wall Street idea, peddled by a former Wall Street CEO, that is
likely to prove as bad an idea as Wall Street's last bad idea --
deregulate us and allow us to run the nation's economic business."
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