Howie Hawkins for Congress - Hawkins Says No to Bailing Out Wall Street Bankers

Hawkins Says No to Bailing Out Wall Street Bankers

Howie Hawkins for Congress
25th District, New York
www.howiehawkins.org

For Immediate Release: Wednesday, September 24, 2008
For More Information: Howie Hawkins, 315-425-1019, hhawkins@igc.org

Calls for Public Banks and Public Works to Stimulate Economic Recovery

Howie Hawkins, the Green Populist candidate for Congress in the 25th District, said today that it will take radical reform to resolve the economic crisis triggered by the implosion of the housing bubble.

"This is a debt crisis, not just a credit crisis. It is an issue of insolvency, not just liquidity in credit and capital markets. I have little confidence that the $700 billion Treasury Secretary Paulson now asks for on top of the $900 billion in bailouts for Wall Street already extended will end the crisis. Not when there is $45 trillion in private and public debt that will never be paid back in full by a $15 trillion economy. Not when there is a Ponzi scheme of $513 trillion in derivatives poised as financial weapons of mass destruction to take the whole economy down with them. When will we finally say no to bailing out the Wall Street speculators?" Hawkins asked.

Hawkins called for a "halt to the mad rush to give away hundreds of billions of dollars of public funds to the robber barons of Wall Street. The American public needs a voice in the decision how about to restructure our financial system. The last thing we need is backroom deals to give new enormous powers to the head of the Treasury Department, who was formerly the head of Goldman Sachs. We need to enact democratic, public controls over our money system. We need to ensure that the average American, not the wealthiest bankers, benefit from this deal. We should do the long overdue economic stimulus package at the same time, which should include substantial assistance for low-income families with affordable housing programs for tenants and funding into programs to help low-income families with their living costs such as for heat, food, and energy."

"We've got to get our priorities straight. Let the failing financial institutions go down with their over-leveraged speculation. They wanted self-regulation. They should get it. We do need to spend hundreds of billions now to deal with the economic meltdown, but not to bail out insolvent financial institutions. It should be used help the 3 to 4 million households facing foreclosure, keep short-term credit markets functioning, and stimulate investment in the real economy of labor and industry," Hawkins added.

Hawkins said "The government should step in as the banker of last resort to provide short-term credit and long-term capital to stem the credit crisis and keep the economy functioning. We need a public bank like the New Deal's Home Ownership Loan Corporation to take over delinquent mortgages and write them down about 70 percent on average to the historic trend-line in housing value before the bubble of the last ten years. It should reset mortgages so people can stay in their homes as owners. If they can't meet reasonable mortgage terms, they should be able pay the market rent to stay in their homes. If they can't meet the rent, government programs should provide housing vouchers for now and build more public housing in the longer term."

Hawkins also said that the Federal Reserve System should use all its policy tools to keep short-term credit markets working and a public investment bank like the New Deal's Reconstruction Finance Corporation should provide long-term loan and equity capital to firms for productive investments. Hawkins said the public banks would help the private banks that have remained solvent to thrive in the economic recovery the public banks would help stimulate.

Hawkins added that once these public banking functions were in place to revive capital markets and help the households facing foreclosure, Congress should turn its attention to four areas of reform to restore prosperity.

1. Restore Regulation: Restore and strengthen regulation of all financial institutions and securities. Enforce anti-trust laws. No private firm should be "too big to fail."

2. Democratize the Federal Reserve System: The House of Representatives, not private banks, should elect its board. The President, not private banks, should appoint the Open Market Committee. Strengthen the regional development mission of the regional Federal Reserve Banks by directing them to target investments to promote key policy objectives, such as high-wage employment, worker and community ownership, inner city reconstruction, and ecologically sustainable production.

3. Progressive Tax Reform: 35 years of deregulation and tax cuts for corporations and high income brackets have left the top 0.1 percent receiving more income that the bottom 50 percent and the top 1 percent owning more wealth than the bottom 90 percent. Two-thirds of US corporations paid no income taxes between 1998 and 2005. The rich and corporations must now help pay for the economic recovery.

4. Economic Stimulus: Hundred of billions of public investment in public works are needed to revive the real economy of labor and industry. Use this crisis as an opportunity to build sustainable green infrastructure of clean renewable energy, passenger and freight rails, and green building retrofits for energy security and climate stability. Pay for the public investment program through a combination of military spending cuts, progressive tax revenues, and borrowing.

"Responsibility for this crisis is bipartisan," Hawkins said. "Both corporate-sponsored major parties have been on a 35-year binge of deregulation and tax cuts for the rich. Instead of stimulating productive investment, their program stimulated speculation. Instead of benefits trickling down to the working class, income and wealth have concentrated at the top. We need to elect new representatives to Congress who are independent of corporate money and control if we are going to make the fundamental changes that resolving this economic crisis will require."

Hawkins said the suggestion by Republican Presidential nominee John McCain that Andrew Cuomo would make a good head of the Securities and Exchange Commission shows "why bipartisanship between the two old entrenched parties won't solve a thing. They are the same parties that enabled Wall Street to speculate us into this mess."

"After first calling on the President to fire an SEC chair he can't legally fire, now McCain wants to appoint someone to head the SEC who is as responsible as any politician in America for the housing bubble that is now crashing. As Secretary of Housing and Urban Development, Cuomo opened up the floodgates for unregulated speculation in subprime mortgages," Hawkins noted.

Hawkins cited a recent article in the Village Voice in which reporter Wayne Barrett documented how "Andrew Cuomo, made a series of decisions between 1997 and 2001 that gave birth to the country's current crisis. He took actions that in combination with many other factors helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded ‘kickbacks' to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why." ("Andrew Cuomo and Fannie and Freddie: How the youngest Housing and Urban Development secretary in history gave birth to the mortgage crisis," http://www.villagevoice.com/2008-08-05/news/how-andrew-cuomo-gave-birth-to-the-crisis-at-fannie-mae-and-freddie-mac/1)

Hawkins noted that McCain's campaign is run by at least 83 staffers who have recently lobbied for the financial industry. Their clients included AIG, Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, and Citigroup, virtually every giant corporation that caused the financial implosion, and who stand to gain from the bailout. Since the deregulatory splurge of the 1990s began, the financial industry has donated almost $600 million to both parties -- splitting their donations almost 50-50. To date, financial executives have contributed $22.5 million to the Obama campaign and $19.6 million to the McCain campaign.

"Those are about the only successful investments Wall Street has made lately. They are getting a 1000-fold return: hundreds of billions in bailout for hundreds of millions in campaign contributions," Hawkins said.

Hawkins said that he had no more hope that Obama would resolve the crisis than McCain. "During Obama's recent emergency meeting to develop his response to the crisis, five of the nine people he said would develop his response were financial executives, such as Robert Rubin who as Treasury Secretary under Clinton was the moving force behind the 1999 repeal of the Glass-Steagall Act separating commercial and investment banks and took less than a decade as chair of Citigroup, now a commercial/investment bank hybrid, to bring it to the brink of insolvency. These people played a major role in creating the crisis in both the private sector and in the Clinton administration," Hawkins noted.

Hawkins also noted that the bailout could drain money that should be used to keep Social Security secure. "The federal government has borrowed over a trillion dollars from the Social Security Trust Fund surplus to help cover its recurring budget deficits. We face a government fiscal crisis, not a Social Security crisis. But I'm afraid the corporate parties are going to use the debts incurred for the Wall Street bailouts to say we can't afford Social Security as we know it in order to justify benefit cuts and privatization," Hawkins said.

Hawkins said he supported the extensive list of solutions and reforms proposed by Green presidential candidate Cynthia McKinney, a former member of Congress from Atlanta, Georgia. McKinney released her proposals in a statement, titled "Seize the Time," last Friday (http://votetruth08.com/index.php/learn/mckinney-messages).

Hawkins noted that "McKinney's list includes a point that is missing in almost all the discussions now about what to do and that is the need to enforce anti-discrimination policies in the credit industry. It is now clear that Black and Latino families were targeted by the subprime mortgage pushers and the resulting loss of homeownership in those communities represents the biggest drop ever in the wealth owned by those communities."

McKinney's proposals:
· Pay for the massive transfer of wealth without placing the greater burden on working people and the poor. Those who made huge profits from the financial policies that led to the meltdown should be expected to pay for the major portion of the bailout, through the closing of tax loopholes and repeal of Bush tax cuts for top income earners, caps on CEO salaries and bonuses and on the corporate tax deductibility of excessive CEO salaries and bonuses, and recovery of exorbitant payouts that financial industry executives have given themselves in recent decades, as well as a windfall profits tax on oil companies.

· In bailing out financial institutions and absorbing their debt, assert the US government's assumption of equity/ownership over them in exchange (as was done with AIG), and replace the secret negotiations and backroom deals that pervaded the industry with transparency and democratic control. "The Federal Reserve is becoming the lender of last resort. This means that the people are becoming the owners of the primary instruments of US capital and finance. This now means that the people have a say in how these instruments are to be used and what their priorities ought to be. The people should now have more say in how their tax dollars are spent and what the priorities of government and the public sector must be. We the people must now set our demands to ensure and promote the public good," said Cynthia McKinney in her statement.

· Stop appointing Treasury Secretaries, Federal Reserve board members, and other top financial policy-makers whose chief loyalties are to the major financial corporations from which they're recruited. Restructure semi-private and private institutions like the Federal Reserve, Fannie Mae, and Freddie Mac to be owned, run, and staffed strictly for the public interest. "[T]he Federal Reserve should operate in the interests of the US taxpayer and not the interests of the private, international bankers that it currently represents. This, of course, means that the Federal Reserve, too, must undergo a fundamental ownership and mission change," said Ms. McKinney.

· Impose a moratorium on foreclosures now before increases in the adjustable rate mortgage interest increases take effect; eliminate all adjustable rate mortgages; renegotiate the latter as 30- or 40-year loans; establish new mortgage lending practices to end predatory and discriminatory practices.

· Promote an economy that's based on sustainability rather than on lending and borrowing beyond one's means. Raising the debt ceiling will lead to greater potential liability and further economic meltdown.

· Establish criteria and construction goals for affordable housing; massively increase funding for housing programs that assist tenants (e.g., Section 8, public housing) that have been slashed repeatedly since the Reagan Administration. Recognize shelter as a right according to the UN Declaration of Human Rights, to which the US is a signatory.

· Redefine credit and regulate the credit industry so that discriminatory practices are eliminated. Fully fund initiatives to eliminate racial and ethnic disparities in home ownership.

· Establish a fund to cushion job loss and provide for retraining of those at the bottom of the income scale as the economy transitions.

· Increase taxes on corporations so that they pay their fair share and deny federal subsidies to those who relocate jobs overseas. Repeal NAFTA and renegotiate trade agreements so that national and local economies, jobs, human rights, and the environment are protected.

· End military-industrial complex handouts. Major cuts in military contracts -- especially if combined with a quick withdrawal of US troops and military contractors from Iraq and Afghanistan -- will provide a huge windfall.

· Downsize the insurance industry. Corporate health insurance is not an essential service and can be replaced with a single-payer national health care program that would drastically cut health care costs, since the profit-taking insurance and HMO middlemen would be eliminated.

· Introduce creative ideas to democratize the financial industry, with alternative models such as public banks and insurance firms, consumer/worker ownership of such companies, and restructuring that would use the financial industry to promote conservation projects, transition to non-fossil-fuel energy and ecologically sound infrastructure, and creation of millions of jobs related to these efforts.