News Release

Bailout: “A Gun Pointed at Their Head”

DEAN BAKER
Co-director of the Center for Economic and Policy Research, Baker just wrote the piece “Why Bail? The Banks Have a Gun Pointed at Their Head and Are Threatening to Pull the Trigger,” which states: “There is no plausible scenario under which the no-bailout scenario gives us a Great Depression. There is a more plausible scenario (but highly unlikely) that the bailout will give us a Great Depression. There is no way that the failure to do a bailout will lead to more than a very brief failure of the financial system. We will not lose our modern system of payments. At this point I cannot identify a single good reason to do the bailout.”

Baker has been warning of the housing bubble and its impact on the economy for years. He is co-author of “Social Security: The Phony Crisis” and author of “The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer.”

THOMAS FERGUSON
Available for a limited number of interviews, Ferguson is professor of political science at the University of Massachusetts, Boston. He is the author of Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems (University of Chicago Press).

He recently co-wrote a piece titled “Bridge Loan to Nowhere.”

Ferguson said today: “They need to get the credit system working. But the current bill is not the way to do it. The Paulson Plan, as modified, is akin to trying to fill the Pacific Ocean with basketballs. The only real fix at this point involves injecting capital into financial institutions that have a chance of making it. And the public needs to get its money back by taking equity positions in the institutions that our money saves and later selling off the stocks. In a word, we need the equivalent of the New Deal’s Reconstruction Finance Corporation.”

CHUCK COLLINS
Collins is senior scholar at the Institute for Policy Studies, where he coordinates the Working Group on Extreme Inequality. He recently co-wrote “Ten Ways to Bail Out Wall Street without Soaking Taxpayers.”

He said today: “Congress considered implementing a securities transaction tax, but punted to the next Congress on including a fair plan to pay for the bailout. With calls to Congress running 100 to one against the bailout, they need to show the American people that Wall Street will pay for its own mess.” Collins advocates a securities tax, aggressive financial disgorgement policies, and a surcharge on incomes and wealth over $5 million.

NOMI PRINS
Prins is a former investment banker turned journalist. She used to run the European analytics group at Bear Stearns and has also worked at Lehman Brothers and Goldman Sachs. She said today: “Another Sunday night, another alteration of the Wall Street landscape. As the latest incarnation of the $700 billion purchase bill (agreed by the House [leadership] to be enacted in $250 billion stages, except where it says $350 billion can be used), marches toward a vote, it addresses many things — except the regulatory vacuum under which Wall Street operated to get us into this mess. Wrapped in a bipartisan bow, dubbed a ‘rescue’ package on the Hill, and a ‘bailout’ elsewhere, it will neither rescue the economy, nor permanently bail out Wall Street

“Industry practices will remain as they are — non-transparent, risky, and under-regulated. Perhaps, the greatest lie resides at the very top of the plan, that its actions will somehow be ‘assisting American families in preserving home ownership, stabilizing financial markets, and protecting taxpayers.’ But, they won’t. The only way to protect citizens is to re-regulate the industry along the lines of Glass-Steagall, divide its players and their books into understandable, less risky, more transparent entities. Unfortunately, the Fed-brokered sale of Washington Mutual (WaMu) to JPMorgan Chase was the latest move toward further consolidation of an increasingly opaque industry, rather than the required opposite tack. …

“Paulson is the ultimate investment banker. His negotiation, merger and acquisition skills propelled him to the top at the world’s most powerful investment bank, Goldman Sachs. And they have landed him unprecedented power and access to the coffers of the world’s largest national budget.”

Prins is now a senior fellow at Demos. She is the author of two books: Other People’s Money: The Corporate Mugging of America and Jacked: How Conservatives Are Picking Your Pocket.

For more information, contact at the Institute for Public Accuracy:
Sam Husseini, (202) 347-0020; or David Zupan, (541) 484-9167