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Tuesday, September 23, 2008

Reich: Why Main Street Needs to be Helped Too

Robert Reich makes an argument for including help for Main Street as part of the bailout package:

Why Paulson and Bernanke are only Partly Correct, and Why Main Street Needs More Direct Help, by Robert Reich: ...Here's Paulson's and Bernanke's logic, made explicit at the Senate hearing today: There's only a certain amount of bad debt on Wall Street's books, left over from the wild and woolly days of lax mortgage lending. Once removed from the Streets’ books, credit will flow again. And once credit flows again, even Main Street can breath a sigh of relief.

P&B failed to mention that bad debts are growing even among people recently considered good credit risks. At end of August, 6.6 percent of mortgages were at least 30 days past due. That’s up from 5.8 percent at end of June. We’re also seeing a growing amount of credit card and auto payments past due.

The culprit isn’t just those sub-prime loans. With jobs and wages are dropping across America, many people who had been able to pay their bills no longer can.

It’s no coincidence that states where mortgage delinquencies are highest are also states with the highest rates of job losses. ...

[F]ewer jobs are listed on the nation’s payrolls than were there last year. Millions more Americans are too discouraged even to look for work. And as employers squeeze their payrolls, even people with jobs are putting in fewer hours. ...

Many of the average taxpayers being asked to take on Wall Street’s bad loans are the same people whose incomes are dropping, which means they’re struggling to pay their debts and potentially creating even more bad loans.

Congress should drive the hardest deal it can with Wall Street. But Congress also needs to pay direct attention to Main Street. It should extend unemployment insurance, freeze mortgage rates, and pass a stimulus package that generates more jobs.

Bottom line: Unless Americans on Main Street have more money in their pockets, Wall Street’s bad debts will continue to rise -- which means the Bailout of All Bailouts grows even larger, which means taxpayers take on even more risk and cost.

    Posted by on Tuesday, September 23, 2008 at 07:38 PM in Economics, Financial System, Housing, Policy, Unemployment | Permalink  TrackBack (0)  Comments (21)


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