Commentary: Bailout for the rich, but poor pay the price

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Commentary: Bailout for the rich, but poor pay the price

Orval Strong
Article Last Updated: 10/20/2008 09:00:04 AM PDT

Listening and watching the mainstream news gives you the impression that this financial disaster that we're in the midst of came about because poor people took out loans they couldn't make payments on.

Some blame loan agents for giving them the loans in the first place. How about the muti-national corporations that lay off thousands of workers so the CEO can retire with a multi- million dollar retirement package? Many of those mortgages may have been given to good, hard working people who always kept their word and payed their debts.

But its impossible to make big payments when you don't have an income. Some 760,000 jobs completely disappeared from our shores last year. The unemployment rate is now at 6.1 percent. Over the last year, the number of unemployed people has increased by 2.2 million to 9.5million.

If you can't afford to buy or rent a place to lay your weary head you join the ranks of the homeless. Here are some interesting statistics that popped up when I Googled "homeless in the United States."

3.5 million people experience homelessness in a given year.

25 percent are employed.

33 percent are families with children.

40 percent are veterans.

20 percent have a severe or persistent mental illness.

39 percent are under the age of 18.

42 percent of those children are under the age of 5.

All these problems of unemployment and homelessness will soon disappear because we just gave Wall Street, the people who created this financial quagmire in the first place, a little over a trillion dollars this last month. Sure, those people will fix everything for us. Of the U.S. citizens that have jobs, nearly 30 percent subsist on poverty wages, according to a report based on data from 2004 to 2006 gathered from the US Bureau of Labor Statistics, the US Census Bureau's American Community Survey and the Census Bureau's Current Population Survey. called: " Still Working Hard, Still Falling Short."
How often have you heard the word "derivative" in the last couple weeks? A derivative is simply a contract between two or more parties. Well educated financial engineers have spent the last two decades slicing and dicing risk in a manner that was both obscure and difficult to understand. By the end of 1996, the top 10 U.S. banks had nearly $16 trillion worth of derivatives on their books. By June of this year, the Bank of International Settlements estimated that the national value of all outstanding derivatives hit $1,114 trillion. This dwarfs the amount of outstanding subprime loans.

(snip)

Basically, derivatives were a means to circumvent margin requirements on bank's investments. Nassim Nicholas Taleb noted in his bestseller, "The Black Swan," that this government-sponsored institution, Fannie Mae, when its risks are assessed, "seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup."

Treasury Secretary Paulson reassured top bank CEOs in an Oct. 13 meeting that if they accepted the bailout, it would place no real caps on exorbitant CEO pay and exercise no effective oversight of bank operations.

Richard Kovacevich was, I assume, glad to hear that, sinse he is currently entitled to $43 million in retirement benefits and $140 million in stock and options.

So, the bottom line is, if you're a rich bank executive you have nothing to worry about, but if you're not, you do.

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Orval Strong, of Gerber, is a 100-percent disabled combat veteran from the Vietnam War era. He can be reached at strongorv@theskybeam.com.

http://**/opinion/ci_10767678

Don't really know who Richard Kovacevich is. I wonder how well he sleeps at night?