Hold your nose and vote: why experts are arguing for the $700 billion bailout
And I've heard the same thing, from friends and family, or just by watching the news, when a reporter will stick a mike in front of some random person on the street, who replies "Why should we do this?" Or better yet: "They got into this mess. Let them get out."
And it's not just the random people on the street who are against the bailout. CNN commentator Lou Dobbs, for instance, is adamantly opposed to it, and plenty of politicians are against it, as we learned when the House of Representatives narrowly defeated the bailout package.
Look, I'm not an economist, but I lean towards thinking we should listen to economists, just like we tend to listen to the other experts out there. If my plumber gives me advice about a faulty sump pump, I tend to do what he says, just as I do if my family doctor prescribes a medicine because my immune system has stumbled into some fun malady like bronchitis.
So if you're wondering what some of the arguments are for supporting the bailout, here's what I hope is a helpful round- up of reasons why bailing out Wall Street will help Main Street.
You may not play the stock market, but your 401K does. As writer for SmartMoney magazine, James B. Stewart, writes in today's The Wall Street Journal, "Over half of Americans have some exposure to the stock market. Many depend on pensions and retirement programs whose assets are invested in stocks. The stock market affects nearly all institutions, from hospitals to universities, whose endowments support spending."
Like your paycheck? As one economist explained in yesterday's Los Angeles Times, "If you're trying to borrow money for your business to make payroll, and you have to pay 4% for it, it's very difficult to run a business that way." CNN's senior business correspondent Ali Velshi echoed the same thing on television the other day, explaining that many corporations wind up borrowing money--loans called commercial paper--for day-to-day operations, such as buying inventory and making payroll.
Want to buy a house or car or pay for college in the next several years? If Wall Street, and I use that as euphemism for the financial sector, is afraid to loan money to giant corporations, I doubt they're going to want to issue many loans to individuals. That doubt, based on what every economist under the sun seems to be saying, that if we want to continue having an economy based on credit, we need to help out Wall Street. And, sure, there's a fantastic argument that we shouldn't have an economy based on credit -- look at all of the great things that are happening. But as U.S. Rep. Jim Marshall, a Democrat representing Georgia's 8th Congressional District, discussed on CNN.com yesterday, we can't go "cold turkey" on credit: "When credit is quickly withdrawn, everyone in the business of lending panics. Credit becomes scarce and is not available at a reasonable interest rate. Institutions that need to use credit daily start to fall like dominoes. The financial fallout -- bank failures, risking a stock market crash, worthless retirement and pension funds -- could kill us. We need to reduce our dependence on credit gradually but steadily and with no excuses."
I have my own misgivings about this bailout, and I'll be the first to admit that I don't know what the right answer is. If people are against the bailout because they think what this country needs is cold turkey, or some tough love or a credit diet, those opinions may prevail and be correct. But I am confident that if "regular people" on Main Street don't want to do the bailout because they want to punish Wall Street, that's the wrong logic, in the vein of cutting off your nose to spite your face. Think of the financial system like a power grid. If we shut off Wall Street's power, our own cable and electric lights are going to flicker and quite possibly go out as well.
Or imagine that we're all on an airplane somewhere over the Atlantic, and we discover that we hate the pilot. In fact, we learn that he is a terrible pilot, and a terrible person. But if he's sick and needs medicine to stay alive, and he's the only guy who can fly the plane, the airplane that we're riding in with our family and friends, we aren't going to withhold medicine just to enjoy the thought of him screaming in terror as we spiral downward into the abyss. Are we?
Geoff Williams is a freelance business journalist and the author of C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America (Rodale).