When one after another financial institutions in America either declared bankruptcy (Lehman Brothers) or taken over by the federal government (as in the case of Freddie Mac and Fanny Mae), accordingly for purposes of reviving the capital industry in particular and the US (and global) market in general, the Secretary of Treasury, Henry Paulson, unveiled a financial rescue plan worth 700 billion dollars.
This amount is said to be as high - if not higher - than the height of the world (that is, perpendicularly) if the money in 100$ bill is filed up one over another. Such large amount of money! Well, anyway, the intent is also as grand and as spectacular as the entire amount involved.
Let us just highlight particular “trivia” about the rescue plan.
First, the 700 billion dollars was just the original amount. After it was initially junked by the US House of Representatives, there was an increase of 21.43 per cent; that is, the 700 billion dollars became 850 billion dollars. Why the increase? The increment was gratuity to satisfy the needs of lawmakers who are up for re-election.
Why politicized the economic rescue plan? The plan - despite the support and endorsement by the US president, the treasury department, the federal reserve, and the leaders of both congressional parties - was and remains extremely unpopular. The latest polls place 9 out of 10 Americans either oppose it or are angry about it. Now, around two out of every three American lawmakers are standing for re-election. And, so, they have to show some consideration for the sensibilities of the overwhelming majority of their own people. Now, anticipating the backslash of their approval of the rescue plan, House of Representatives members can do without the support of the financial and credit system, or do without the support of major companies. And these financial backers are all in deep debt - or in the same condition where many voters also are, whose behavior is already “conditioned” by the capitalistic financial system of America.
Thus, practically, this is said to be the real score about the American congressmen's “action against their (own) will and… out of sense of responsibility.”
Second, in the name of rescuing the banks, insurance companies and financial institutions, each of about 296 million Americans will pay $2,868! Of course, the money for Paulson rescue plan is taxpayers' money! While it is obvious that the actual American contributors will be far fewer, by American residents we mean to include the disenfranchised, the elderly and the children!
Third, by way of comparison, it is being said that the 850 billion dollars is equal to around 6.15% of the US gross domestic product (2007 figures from WB). Indeed, it's huge! However, whether it is sufficient to confront the real dimensions of the problem remains an issue. For, if one factors in the data from the end of 2007 from the International Settlement Bank, one finds that the total value of over-the-counter financial derivatives i.e., these are unquoted - inclusive of the interest rates, currencies and the infamous CDS - comes to about 700 trillion dollars. Or it is 1,000 times the amount of Paulson Plan!
Fourth, it seems to show that the Paulson plan is only going to serve a couple of months until the inauguration of the new US president and the new Congress. Then, when Bush steps down, the problem in all its brutish and monstrous dimensions will again emerge. It's back for a vengeance!
This seems to proceed from a pessimistic prophet. Actually, considering the REAL effect of the problem to REAL people, everyone should only hope for the better.
In parting, I am reminded of the movie Robin Hood. Robin Hood would steal from the rich to support the poor.
The Paulson plan works differently. It's akin to the solution applied by the Sheriff of Nottingham in the modern version of Robin Hood. He steals from the poor to support the rich.
