November 16, 2008
Obama has created a momentum for
change over the last 21 months that must be channeled into solving the enormous
problems facing our country beginning with the war in
As I have written about many times the
Secretary of the Treasury Henry M. Paulson, Jr. wants to give Obama as much freedom to implement the economic packages passed by Congress earlier as he can. This is good news for the economy and for our new president. He doesn’t have to wait until January 21.
I found it discomfiting that the government was willing to dole out nearly one trillion dollars without many restrictions in order to salvage a bumpy stock market. While I too am affected by loss in retirement savings, we must strike at the root of the problem. That root is greed, a sickness that has taken over many of us.
Greed has inspired golden parachute contracts that pay executives whether they perform well or not. Greed underlies the structure of securities that have no real value but are based on betting on the future outcome of investments. Greed has generated the widest gap in income between the executives and average workers in many years. Forbes reported that as recently as 1980 that gap was 40 to 1, a ratio even then greater than all other industrialized nations, and now is 433 to one. (2) Now that is redistribution of wealth from the poor and middle class to those who are already wealthy!
Main Street Americans too have suffered from this greed in obtaining mortgages that they could not afford. Some saw an opportunity to buy a home and were encouraged by lax lending practices.
I feel obligated to help a single mom with her mortgage after she lost her job and the housing market tanked. She was merely trying to realize the American dream of owning her own home but I don’t feel obligated to help mortgage speculators. Economic bailouts and stimulus packages need to reach Main Street Americans. Bailing out Wall Street doesn’t help these people.
The Panic of 1907 had similar traits of our current recession. Greed, investment speculation, and lack of adequate credit caused a run on the banks. J. P. Morgan was able to convince the government and fellow wealthy businessmen to put money into the banks which turned the economy around. (3)
I think it would be good for Obama to call together the CEO’s of the 500 largest companies and tell them to solve the problem. A number of strategies could be implemented without the government spending another dime. One is to cancel all the contracts of executives that involve more than one million dollars. While this would not solve the problem on its own, it would be a message to all of us that our corporate leaders intend to help solve the problem. I understand that the government bailout of companies like AIG did not preclude the payment of these contracts that were entered into prior to receiving government money. That’s absurd and must be changed.
In the meantime President Bush graciously invited Obama to the White House on November 10 to aid in the transition. I believe he would be cooperative with Obama in solving the economic crisis and so Obama would not have to wait until January 21 to call such a meeting.
Obama told John McCain a president must be able to do more than one thing at a time. I believe Obama can and will do just that. As Peter Sinclair wrote me in an email, Obama handles challenges “with patience, calm, consummate intellectual discipline, personal grace, quiet iron resolve, and even a little humor.” That’s just what we need.
(1) Spencer Ackerman,
“Petraeus Talk Bolsters Obama”, The
(2) Neil Weinberg, Michael Maiello and David K. Randall, “Paying for Failure”,
Forbes, May 19, 2008
(3) Brian Trumbore, “J.P. Morgan - Savior -- The Panic of 1907”