Message to Wall Street: the problem is poverty

NPR reports that the US stock market rallied strongly late Thursday amid rumors that the federal government might create an agency similar to the Resolution Trust Corporation that helped the country get through the savings and loan crisis of the 1980s.

But is a continuing series of bailouts of greedy and stupid Wall Street firms the best way to get out of our current economic situation? Sally Kohn, writing on Common Dreams, points out that Exploiting Poverty Caused the Financial Crisis.

The sub-prime crisis is the result of good people getting bad loans. Loans that triple or quadruple in interest rates, riddled with small print, are unbearable by most homeowners. But they are particularly unsustainable for low-income families working two or three jobs to make ends meet. Still, lenders scammed hardworking families with the promise of owning homes they really couldn't afford. And then greedy Wall Street managers, looking for a new way to squeeze a buck from an already bursting-at-the-seams economy, bundled up these bad loans into worse securities, sold them off, and tried to gain a profit as our national economy lost its shirt.
We could have averted the current financial crisis by creating affordable housing and good jobs, strengthening public education and providing health care and child care for all families, to help hardworking Americans thrive in the middle class instead of being pushed into poverty. We could have averted this crisis if we really cared about all families owning their own homes and created nationwide programs including affordable loans. (Even subsidized loans in the first place would have cost taxpayers less than what we're now spending bailing out Wall Street.) We could have averted this crisis if we put the needs of the majority of American families ahead of the needs of a small minority of greedy investors.
Now, 8,000 American families a day face foreclosure. But instead of prioritizing poor and even middle class families who are increasingly struggling, our government is spending billions and billions to bail out the Wall Street firms that created this crisis. Instead, we should be spending our taxpayer money to help the families who were taken advantage of in the "anything goes" unregulated financial system that years of misguided never-really-did-trickle-down economic policy created. These families need the government to help re-adjust their mortgages and cover bridge payments to avoid foreclosure.

There is also the troubling possibility that the US government's own finances could be dragged down by the bailouts. Here's how the NPR story finishes:

Economist Sun Won Sohn of California State University at Fullerton told NPR that the U.S. can raise the money it needs to pay for the bailouts, but the bigger issue is one of perception. The U.S. financial system seems overextended, and that is causing foreign investors to pull their money out of the country.
"The Federal Reserve and the U.S. Treasury have always been the rock of Gibraltar," he said. "Now we're seeing that people are beginning to wonder, is it really as strong as we thought it was?"