I'll be honest, I never wanted to write up a diary piece like this. A week ago, like many of you, my feelings on "bailing out" Wall Street was equally negative. Why? Why in the name of all that is decent should we clear up the bad judgment of folks who really do not care about the common folk?

For years, folks who would be identified as the type who would get the jobs of running organizations like Goldman Sachs or Lehman Brothers, were considered "Masters of the Universe." For them, we, you and I, were the dirty lowers against their kind. We existed to supplement their income. But now the veil has been lifted, and we see now that they are not masters of anything but their own greed and stupidity.

Many have been warning about this impending doom. Untold warning calls to curtail the activities of rogue mortgage lenders to those creating unregulated derivative instruments went ignored. The signs were all there, articles, books and falling stock prices and increasing spread prices were all screaming "GOD DAMMIT, CAN'T YOU SEE, TROUBLE'S COMING!"

Trouble has indeed arrived, and as my old mentor once prophetically noted to me "What's good for Main Street may not be good for Wall Street. What's good for Wall Street, may not be good for Main Street. But, what's bad for Wall Street, will be made bad for Main Street." I've echoed this warning in a previous post, and many agreed. So, why, why would I in my right mind agree to some sort of plan? Oh God it would be so easier to just go with, as the great orator of the airwaves, Mike Mallow says, "let 'em rot" idea. After all, it's not like Goldman Sachs pays your rent every month, or that folks at Morgan Stanley drive your kids to school. Yet, after long hard thinking and internal debates with myself, I find that something has to be done. Why? Because an opportunity is here for our side the likes that we haven't seen in over 70 years!

Capitalism as we know it is dead

Can we all agree that the idea, the concept, the very notion of Anglo-American style of laissez fair capitalism is a goner? That deregulation has been proved to be the access card to grand larceny? That free trade has proved to be unfair trade? I think so, I really think that rotting corpse called Reaganomics can finally be thrown into that mass grave along those of other conservative ideas.

John Maynard Keynes, John Kenneth Galbraith and Hyman P. Minsky had longed called for a proper management of the market system. Left on it's own, well...you know. The problem lies in the instability in the pursuit of not just normal-sized profits, but massive profits. Of course, there is the question of what constitutes "normal-sized" profits? There have been many industries, when they were heavily regulated in the past, that came to expect a steady but small margin.

Yet conservatives and libertarians and neo-liberals like Phill Gramm, Milton Friedman, and well take your pick from the 1990s, advocated less government. Everyone's familiar with what happened, we got drunk off the supposed "peace dividend" from the end of the Cold War. Oh the hosannas and praises on now the defeat of a rotting Soviet system exemplified how free markets (often equated to liberal democracy) should be made "freer" (thus linking it to even more political freedom). This three card Monty was pushed on us, and for a long time, the average investor saw his 401K plan go up as the S&P 500 went from around 300 in 1991 to around 1550 in 2000.

Still, in that time, despite the many job growths in the 1990s, so much of our industrial economy was hauled off en mass overseas. This didn't start under Clinton, but more like around Nixon's time. Tricky Dick went to China and returned, but our manufacturing jobs decided to start pitching up tents over there; or I should say the factory owners who wanted to begin the game of wage arbitrage. And this arb game has been going on now for over three decades. The final results of such economic rape can bee seen in the hallowed out mills found from Toronto to Pittsburgh to Cleveland to Chicago to Detroit. We stopped making tangible things to sell to the world, and instead started selling financial intangibles.

So to hell with them?

Now, here we are, the system that was hoisted upon us since Nixon is broken, and beyond repair. I say good riddance, but what to do now? As previously mentioned, we could just let the whole thing collapse on itself with the hope of building something else. Yet this too comes at a high price. Oh, how I would love to show those bankers the same pain that the average working folk have been going through. And perhaps we still can, but I also have to realize that the price may also come at the expense of the same folks who have been suffering.

There is the thinking that if folks like Morgan Stanley and Goldman disappeared, hell I've heard even names like Citigroup and JP Morgan Chase included in that, that we would be fine without them. That during the Depression, many banks were vaporized only to be replaced years later by other ones. Here's the difference, though, this time these organizations are interlinked with so many other institutions, that they instead serve as an artery.

http://www.cnbc.com/id/15840232?vide...
(this is from CNBC, pay close attention to the guy from Hong Kong, I think he makes some good points!)

Say we said to Citigroup, screw you, you're on your own. What will Citi do? Ultimately, they would have to wind down operations, not just their trading desks (which I suspect no one would miss), but day-to-day operations in every division. As the company loses it's credit ratings, the company will then have to seek to raise it's capital requirements even further to forestall any more drop in their ratings. Yet, as Citi goes, it is also mimicking something else that many other financial institutions will be doing, the freezing or cutting back in loan operations. Banks loan money to each other every day. One can see what they pay represented in things like the London Interbank Offer Rate, or LIBOR. This ultimately begins to cascade to their customers.

There are millions of smaller businesses, never-mind the larger ones, that need credit to run their operations. Credit could be used for everything from expansion to meeting payrolls until a receivable comes in. As banks like Citi begin to erode, they will cutback in such activities. When one bank sees this, they till will do this. Now one possibility is that instead of curtailment of short-term loan operations, one would see an increase to costs to the borrower. As Citi, for example, finds that the LIBOR rate increasing, it will then pass that cost on to the borrower. That borrower, if it is a going business concern will have two choices, either eat the cost or pass it on to the customer. Ultimately this will have an inflationary effect. Another eventuality as the costs of business goes up, jobs soon become at risk. One last thing, to anyone who owns a credit card, LIBOR is often the basis for the interest rate you get.

So much to do, so little time

I hope you can see that my main interests here lie not with the Wall Street bankers, but in seeing that jobs are saved and inflation curtailed. The average person in this country is either underemployed or not making enough to meet ends meet. Folks either on disability or social security, including those who managed to save some money for retirement, are also hurting. Everyone is afraid and angry.

What Hank Paulson is proposing is in reality incomplete and an insult to those of us who did play by the rules. I say incomplete because no real regulation was asked. Today, watching the hearings, it pleases me that our cries for such are being answered. We can't let them get away with what happened, but at the same time we need to rebuild our economy.

I look at this as the equivalent to rebuilding a city after a major war. Much of the infrastructure is still there, just bombed out and in severe damage, akin to Hiroshima and Nagasaki. Yet, despite having an atomic bomb dropped on them, look at these places now. Back in 1933, when a great man took office, he was given essentially the economic version of this and forged together a binding network of regulation and safety nets that slowly nursed the economy back to health.

Folks, we're at that same position now. This diary has gone on too long to go into details, so perhaps in the near future I will write what I'd like to see. But already, I'm seeing such things on here and from folks like Paul Krugman. We can mold Wall Street, if we force our legislators, to finally work for us. Of course, to be honest, I suspect this God-awful President would hinder us, which is why we need Barack Obama in the White House.

Let's push for the repeal of Gramm and every other bastard Republican-lead derogatory action. Not a blank check, by no means, $700 billion is simply too much at one time. Let us push for audits on every financial company. We should demand a curtailment in all bonuses for financial institutional executives until this mess is cleared up. We should demand part ownership in the banks, and in fact the establishment of a new public-owned neighborhood thrifts whose ONLY goal is to help those get a loan for a home. But that is only the beginning my friends, only the beginning. I suspect that the smart folks on Econ Populist or Daily Kos or MyDD, and don't underestimate yourselves now, could come up with some regulation ideas. In fact, I would encourage in the comments below that you do!

Taxes, my stars, if there EVER was a cover for the Democrats to raise taxes this was it! Say good bye to the Clinton tax cuts for the wealthy. Say good bye to the cut in cap gains for those in the upper stratosphere of society. Inheritance tax, bring it back. I would say, that this crisis even calls for the repeal of the JFK era cuts!

But of course, there is much more to do besides taxes. We have so much reform to enact. Because now, more than ever, if we want to see our children have a better life than we did, we must take action on all fronts. Wall Street wants our money, again, and I say not without our price! Wednesday morning, Warren Buffet went to Goldman Sachs and said he would help them out but on his terms; he ultimately got a sweet deal. I think it's high time we did the same to the rest of the financial industry, don't you?

In our past, there were two separate streets, Main Street and Wall Street. Perhaps, after the latter's disastrous block party that destroyed their neighborhood, it's time we made that separate street a side road for Main Street. Say no to the Paulson Plan, say no to a GOP tax cut, and say yes to progressive actions! There is some sort of planning coming, lets not kid ourselves. I just want to make sure that it's the start of of a new progressive reform front and not just another bailout.

(From this week's New Yorker)