News of the week, of course, is Secretary Paulson’s and the Bush
Administration’s blackmail efforts for a rushed $700 billion bailout subsidy to Wall Street. If done poorly, this could sabotage any efforts to tackle energy and global warming issues. So far, at least two leaders of “Green” organizations have spoken out strongly on this issue: Brent Blackwelder of Friends of the Earth and Carl Pope of Sierra Club.
When it comes to the bailout, Brent has some strong words:
“This financial crisis has exposed the right-wing’s anti-regulation philosophy as an abject failure. This hands-off approach to managing the economy has resulted in greedy corporate titans getting rich on the backs of working people. This same philosophy is causing irreparable harm to the planet. And now we face a trillion-dollar taxpayer-funded bailout. Enough is enough.
“Friends of the Earth opposes the Bush administration’s proposed blank-check bailout for these wealthy financiers.
Forget a “blank-check bailout” without serious reform, the “blank check” will result in a renewed (reinforced) blank check for devastating the planet.
Carl has some serious questions with serious implications:
People are losing their houses in part because their mortgages are too high. But they also can’t afford their utility bill and the cost of driving. If we massively retrofitted homes and offices to reduce energy waste and lower utility bills, and aggressively improved vehicle fuel efficiency, might the return on those investments be higher than what Secretary Paulson is talking about?
The amount being talked about — $700 billion — is roughly equal to this year’s bill for imported oil. So if we really took ending our addiction to oil seriously, we could repay the Treasury for the bailout — and it’s hard to see any other pot of money lying around big enough.
Okay, sustainable energy independence vs money in the pockets of Wall Street financiers. Why is there a question here? Which would you want to move forward with?
Somewhat disappointedly, despite the the massive implications for the environment of a badly executed bailout, other “Green” group leaders seem to be silent on the issue.
FOR IMMEDIATE RELEASE
September 22, 2008
CONTACT:
Michelle Chan, 415-544-0790 ext. 14
Erich Pica, 202-222-0739
Friends of the Earth Opposes Bush’s Trillion-Dollar Blank-Check Bailout
Government response to financial crisis must include fundamental structural reforms; Oversight, re-regulation, and means of returning lost revenue to treasury are needed
WASHINGTON, D.C.—Friends of the Earth announced its opposition to the Bush administration’s proposed trillion-dollar bailout of the financial system today, and called on elected officials to ensure that any government action related to the financial crisis fixes deep structural flaws in the financial system that have spawned not only the current financial crisis but are also jeopardizing our planet’s future.
Friends of the Earth President Brent Blackwelder had the following statement:
“This financial crisis has exposed the right-wing’s anti-regulation philosophy as an abject failure. This hands-off approach to managing the economy has resulted in greedy corporate titans getting rich on the backs of working people. This same philosophy is causing irreparable harm to the planet. And now we face a trillion-dollar taxpayer-funded bailout. Enough is enough.
“Friends of the Earth opposes the Bush administration’s proposed blank-check bailout for these wealthy financiers. What is needed is truly fundamental reform, not this no-strings-attached proposal. The government must impose oversight and re-regulation on the financial system. The days of the fox guarding the henhouse, with corporate lobbyists writing the laws that regulate their industries, must end. And we must consider environmental impacts to be economic impacts as we move forward. While the risks posed to the economy by the current financial crisis are indeed dire, we also face long-term risks posed by the climate crisis. These problems are intertwined, and reforms of the financial system must take this into account.
“Reform must be conducted in a just way that helps people on Main Street more than it helps corporate fat cats on Wall Street. Taxpayer funds taken from the treasury to prop up Wall Street must be replaced so they can be used to fund other necessary initiatives.
“It’s ironic that when many countries run into financial trouble, the International Monetary Fund imposes serious economic restructuring, but President Bush and Secretary Paulson now see no need for restructuring at all. They’re wrong, and their proposal should be rejected.”
This unprecedented bailout not only imposes a hefty monetary cost on taxpayers and future generations, but it represents enormous opportunity costs. In response, Friends of the Earth is calling on Congress to consider the following specific reforms, which adhere to the principles stated above:
Any bailout package should be just.
– Financial institutions should bear the brunt of the losses from this crisis; taxpayer monies should be used to only cover the bare minimum to keep our banking system functional.
– The government should acquire an ownership stake in the institutions that are bailed out.
– Bailing out Wall Street banks without making proportionate efforts to keep American families in their homes is unfair. Friends of the Earth supports organizations such as the Center for Responsible Lending, National Community Reinvestment Coalition and the National Council on Civil Rights, who are advocating Chapter 13 judicial modification relief to keep homeowners from losing their homes.
– In addition, failing to hold executives accountable for the disastrous consequences of their actions is unconscionable; those who were responsible should be persecuted to the full extent of the law. In the future, fines and penalties for financial and corporate malfeasance must be increased, and executive compensation must be reigned in at all companies that are being bailed out.
Any bailout package must be tied to a restoration of regulation and supervision of the financial services industry.
– Decades of deregulation have allowed this industry to “innovate” new financial products, structures, and vehicles at an astonishing rate without monitoring and supervision. Friends of the Earth supports the call from Center for Economic and Policy Research to require tradable instruments, such as credit default swaps, to be standardized and traded on exchanges, which would subject them to regulation and transparency.
– Now is the time to ensure proper oversight over the financial services sector, and tighten up rules on accounting and offshore tax havens which allow clever financial engineering to hide real risks and liabilities. It is time to bring hedge funds under supervision; and no hedge funds (which have refused to even register with the SEC) should be bailed out.
– This is the time to reinstate the Glass-Stegall Act, which regulated the banking and investment industries after the Great Depression. The repeal of the act in 1999 paved the way for massive overleveraging among financial institutions, increased the risk of conflicts of interest, and put consumers real savings at risk.
Any bailout package should include measures to cool down speculative hot money flows and asset bubbles.
– The Fed should take on a new role of proactively preventing asset bubbles, and take measures to cool down overheating parts of the financial markets.
– As Friends of the Earth has proposed since 1995, a Tobin-style tax (for example, 0.25 percent tax on stock trading, and 0.02 percent tax on options, futures, swaps, and currency trading) should be introduced to curb excessive speculation and promote longer-term investing that serves the real economy. Tobin-style tax revenue could be used to help pay for the bailout and address critical social and environmental needs.
Government-owned financial institutions have the ability and responsibility to foster an environmentally sound future.
– AIG, as it becomes a federally controlled entity, should cease underwriting fossil fuel energy projects and focus on facilitating a clean energy transformation. The same principle should apply to other new federal entities that are created via this bail out. The National Environmental Policy Act should apply to such entities.
– In the future, Fannie and Freddie Mac should institute a policy to require an increasing percentage of the mortgages they purchase to be “green” (location efficient, energy efficient, and/or sustainably designed). It should phase out purchasing mortgages for development in flood plains and coastal hazard zones.
Carl Pope in full:
Some Questions on the Bailout
September 22, 2008
New York — Obviously the collapse of the financial markets has taken over the political discourse. And while I don’t have a lot of expertise, I do have some questions, based on what I learned in a college class in 1966. The professor, John Kenneth Galbraith, one of the great experts on the Depression, predicted this moment almost exactly. He told my class that “the financial bubbles that led to the Depression will return as soon as America is led by politicians who didn’t live through it. Capitalism has no permanent memories, but one of its permanent vices is gambling with other people’s money. So a post-Depression generation politics will dismantle the safeguards the New Deal put in place, and another financial collapse will then be inevitable.”
Sure enough, by the end of the Clinton administration two post-Depression Presidents had deregulated financial markets. And now the government is telling us we have to bail out Wall Street for the gambles they took — but not to restore the money lost by the ordinary homeowners and credit card debtors who were the real victims.
So a few questions come to mind —
This morning’s New York Times says that the decision by Goldman Sachs and Morgan Stanley to reorganize as integrated investment/consumer banks takes the financial sector back to where it was in 1928 — the very structure that caused the Great Depression. Is this really where we ought to go?
Much of the bad paper that is dragging down the financial sector is bad because homeowners and credit card debtors got stuck with very expensive loans. And no one believes that investors will get more than about fifty cents on the dollar. What would happen if we gave $700 billion to average people and helped them renegotiate their debt down by 50 percent? Could that have an equal benefit on financial markets while keeping more people in their homes?
People are losing their houses in part because their mortgages are too high. But they also can’t afford their utility bill and the cost of driving. If we massively retrofitted homes and offices to reduce energy waste and lower utility bills, and aggressively improved vehicle fuel efficiency, might the return on those investments be higher than what Secretary Paulson is talking about?
The amount being talked about — $700 billion — is roughly equal to this year’s bill for imported oil. So if we really took ending our addiction to oil seriously, we could repay the Treasury for the bailout — and it’s hard to see any other pot of money lying around big enough.
So presumably we do need to do something, but we ought to ask a lot of tough questions. Because the administration that is asking for a trillion dollar blank check, when all is said and done, is the same one that completed the process of taking us back to 1928.