Economic bailout plan requires further scrutiny by Congress

It used to be that when your corporation was going belly up, all you needed to do was file for Chapter 11 bankruptcy, then hire a gang of high-priced lawyers to restructure an economic catastrophe into a profitable business. Of course many loyal employees would lose their jobs and many would have their pensions cut drastically, but at the end of the day the company would survive and the upper tier of executives would remain undisturbed.

Sadly, the U.S.'s economic woes have become even more complicated as abusive sub-prime lending practices and faulty mortgage backings have brought the most profitable financial institutions to their knees. Now not even the top executives are safe as major mortgage firms are receiving quite the shock from a record number of defaulted mortgages. Thus, the U.S. Treasury must find a way to sustain our nation's financial system.

Luckily for us, President Bush is able to pick from the pile of taxpayer money and allocate a proposed $700 billion bailout to companies like Freddie Mac and Fannie Mae. Although Congress might not protest the fact that its action is needed in order to save the stock market and help the economy, the issue of assuring that the same problems will not continue to happen is still on the table.

Treasury Secretary Henry Paulson and Ben Bernanke, chairman of the Federal Reserve, have been arguing for a "clean" bill to pass through Congress so that these financial issues can be dealt with as quickly as possible. However, Congress is leery to simply dive into the plan that was handed to them on Sept. 13th and let the Federal Reserve handle the situation as it sees fit.

In an article in the Sept. 23 issue of the New York Times, Sen. Christopher Dodd of Connecticut called the initial plan "stunning and unprecedented in its scope and lack of detail." A major criticism of the treasury's proposal is that the plan does not include measures for oversight. The Federal Reserve will argue that oversight would clog the process of trying to buy back and re-sell devalued mortgage securities from crumbling firms, but when you're asking the federal government and including the taxpayers to float the bill that was brought on by the dysfunction of greedy executives, there is no quick and easy solution.

A bill meant to correct a distressed economy should not be passed without guidelines to specifically address how a lump sum of bailout money should be appropriated. Furthermore, the amount of money being allocated for corporate restructuring needs to be considered and put to debate by Congress and financial wizards alike for longer then a week. A bill that will actually work is needed as quickly as possible but that does not mean Congress should pass the first thing they get from Bush.

It may seem unfortunate that as an average taxpayer you have to compensate for the mistakes of others, but keep in mind what had to happen for the problem to get so big that Congress and the taxpayers had to handle it. Many Americans have lost their homes because a banker loaned them $50,000 when a $30,000 loan was all they could legally borrow. It was only a matter of time before the loss on these sub-prime loans, which was due to mortgages defaulting as interests rates rose, took a slice out of the top and started affecting companies with enough money to buy these bad loans. The owners of these businesses thought for a while that a few defaulted mortgages would make paying the bills much easier on them, but soon found out that too many foreclosures would end up breaking the bank.

The economy might still have a chance if financial organizations look to profit from healthier transactions, which would lead to economic growth for a change. But for that to happen oversight needs to be increased to limit the frequency of delinquent and unpaid loans due to the fault of a manipulative lender. In the meantime Congress needs to keep a closer eye on the greed forgiveness fund, an outdated regulatory commission needs to be updated, and major American lending companies and financial firms should brush up on their business ethics.

Andrew Kindiger is a sophomore English major from Liberty, Mo.