Publisher's Note: Bail us out
By Jody Reese
I can understand our Congressmen’s reluctance to vote for the $700 billion bailout package. Both New Hampshire’s Representatives Paul Hodes and Carol Shea-Porter voted against the plan. But it is a necessary step to stabilize our economy.
True, many banks and investment groups made very poor decisions — as did many homeowners. These bad decisions are now coming back to hurt us in the form of lost confidence from our financial backers — a good chunk of them from overseas. The reality is that these foreign backers no longer want to own our mortgages and as a result the values of those mortgages have dropped and that in turn has weakened banks that used those mortgages as collateral (lower values of those mortgages mean the banks need more cash on the books).
The bailout would have had the U.S. government buy the mortgages. Although the value of these mortgages has declined lately, they still represent millions and millions of homes we all live in. These mortgage bonds hold real value. It’s ironic that what in fact is happening is that people are frightened to buy these mortgages, so they buy U.S. debt, which in turn under the $700 billion plan would be used to buy the mortgages.
Blaming Wall Street or asking that its leader be punished is a little like blaming a coconspiritor. It’s our love affair with debt and the fear from investors that we won’t be able to pay it back that has lead to this crisis.
Wall Street is not the only culprit here; it’s we consumers who spend beyond our wages. If it weren’t for our appetite for debt (homes and cars many of us can’t afford), these Wall Street banks would not be in the business of selling our debt — and choking on it.
Like the bailout or not, the alternative is likely to be a financial system unable to supply us with the money we need to keep hiring people, building things and producing products. Business requires the ability to borrow. Banks are already beginning to horde cash. Further tightening of lending could mean a lot of small business, and some big ones, will go out of business.
It’s now time for Hodes and Shea-Porter to take the realistic vote and support the bailout.