Our hapless leaders in
As students, we have already been asked to bend over for the next umpteen years. The burdens of today have been put on our backs: the cost of the war we cannot afford, student loans we cannot afford, health insurance premiums we cannot afford and a monstrous deficit of $9.8 trillion we cannot afford. All this, so that when we retire we will be forced back into the workforce because our social security accounts will likely be bankrupt.
What we absolutely do not need now is to add another $700 billion to the national debt. The argument is one of simple — and flawed — Reganomics: If we bail out the top, it will trickle down to us, the student and the prospective homeowner.
It is critical to understand that this bailout is for mortgage-backed securities, not actual mortgages. These are bundled mortgages cut into separate investments, so instead of knowing exactly what you have invested in, you have invested in small portions of property spread throughout the
There is an alternative that is being passed around: Bail out homeowners! Instead of bailing out the rich Wall Street execs so that hopefully the money will trickle down (and I must point out that trickle seems excruciatingly slow), we can start at the bottom and trickle up. In fact, with the same budget we could bail out everyone who is facing foreclosure and still have money left over to help refinance the loans of people who are likely to face foreclosure. Not only would this help the people we want to help immediately, it would also solve all of the other problems. The banks would then have money needed to reactivate the credit market, bad loans would disappear, and loans on the books would be properly valued because the underlying asset — the home — would be appraised at the time of refinancing. Best of all, we would then avoid all of the future costs of foreclosures. This would put seven times more money into the economy than the previous stimulus package, and it wouldn’t even increase our total debt — it would simply shift that debt from a private one to a public one.
The apparent issue with the aforementioned plan is the relatively slow flow of money into these collapsing banks. The bailout plan would supposedly save the implosion of the banks, but because no one knows how much all these mortgages are worth, the current bailout plan proposes hiring a whole bunch of Wall Street lawyers and creating a mess of red tape and bureaucracy to figure out exactly how much money each company would receive and where to allocate it. If you believe the banks are going to collapse within the week, the bailout plan will not save them.
In this case, what is good for our generation is good for the economy as a whole. Why haven’t the geniuses in charge figured this out?
For the same reason Dick Cheney didn’t protest the war — they’re the ones who stand to benefit. We must understand that our generation is not the one that stands to gain here, but more likely the one that stands to suffer. And we must act accordingly.
George Mayer ([email protected]) is a sophomore who is undecided.