Did America Get Punk'd on the Bailout?
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Editor's note: David Sirota appeared on Rachel Maddow's MSNBC show on Dec. 16 to discuss the bailout. You can watch the clip at the end of the article.
When I went on Rachel Maddow's show on Tuesday, she asked a question about the bailout that is really the question of our time: Did we get punk'd? As progressive bailout critics have been saying since the current Wall Street bailout was first proposed, the answer is yes.
As the Minneapolis Federal Reserve reports, the major claims about a credit crisis that justified Congress cutting a trillion-dollar blank check to Wall Street were demonstrably false. And new data and reports show they remain demonstrably false.
For instance, take a look at line 1 and line 5 of this December Federal Reserve report on bank lending. That's right -- you see no significant decrease in lending, and in some cases, an increase. Interbank lending has dropped some, but certainly not at the crisis levels the Bush administration and banks claimed.
Then take a look at this story from Reuters, recounting a big report from a widely respected financial analysis firm:
"The credit crunch is not nearly as severe as the U.S. authorities appear to believe, and public data actually suggest world credit markets are functioning remarkably well, a report [from Celent consulting] released on Thursday says. ... The report, much of which is based on U.S. Federal Reserve data, challenges a long list of assumptions one by one, arguing that there is indeed a financial crisis but that, on aggregate, the problems of a few are by no means those of the many when it comes to obtaining credit.
"It is startling that many of (Federal Reserve) Chairman (Ben) Bernanke and (Treasury) Secretary (Henry) Paulson's remarks are not supported or are flatly contradicted by the data provided by the very organizations they lead," said the report.
Regarding U.S. business access to credit, the report says: Overall U.S. bank lending is at its highest level ever; U.S. commercial bank lending is at record highs and growing particularly fast since May 2007; corporate bond issuance has declined, but increased commercial lending has compensated for this; [interbank] lending hit its highest level ever in September 2008 and remained high in October and that overall interbank lending is up 22 percent; the cost of interbank lending ... dropped to its lowest level ever in early November and remains at very low levels; [consumer credit] was at a record high in September; and local government bond issuance had continued at similar levels to those before the credit crisis, while bank lending for real estate reached a record level in October 2008, it says. (emphasis added)
Then there's this from the Wall Street Journal looking at a new study by the National Federation of Independent Business:
The report found that among small businesses "no 'credit crunch' has appeared to date beyond the normal cyclical tightening of credit." The NFIB found that worries about interest rates and financing were a concern to only 3 percent of respondents. ... By and large, the story of the NFIB report was that if credit is going untapped, it's largely because company operators are not choosing to pursue the credit. It's not that companies can't get the extra money, it's that they don't want or need it because of the broader slowdown in economic activity. (emphasis added)
That last point is the big one: The real crisis is in the real economy -- ya know, the real world of jobs, wages, health care premiums and pensions that Washington has totally ignored as it keeps writing checks to its well-heeled campaign contributors on Wall Street under the guise of a lending crisis. Adding insult to injury is the last thing I discussed with Rachel -- the fact that because the bailout money came with almost no strings attached, the financial-industry recipients of the taxpayer largesse are either hoarding the money, using it to pay shareholder dividends and executive bonuses, or devoting it to efforts to buy up smaller competitors.
See more stories tagged with: credit crunch, bailout, financial crisis, paulson plan
David Sirota is a best-selling author whose newest book, The Uprising, was released this month. He is a fellow at the Campaign for America's Future and a board member of the Progressive States Network -- both nonpartisan organizations. His blog is at www.credoaction.com/sirota.
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