Patrick on Bailout
The Federal Bailout
by Governor Deval Patrick
I have mixed feelings about the bailout.
As someone who has worked in the business world and watched markets, I understand it. AIG is in the business of insuring corporate defaults; for that and other reasons, its failure has serious ramifications for the rest of the financial system. That system as a whole is under serious strain, which is limiting the availability of credit, which is in turn constraining both small and large businesses and consumers alike. I understand the need to reassure investors and stabilize the market, where so many people and institutions have their wealth (including retirement savings) tied up.

Of course, the government has bailed out private enterprise before. Serious business people don't really believe all that bunk about an unfettered free market, where only the fittest, smartest and shrewdest survive. The irony -- that some of the loudest advocates of radical deregulation are among the first to seek government salvation -- is also not lost on me.

What bothers me most is that we rarely see this sense of urgency when it comes to the suffering of ordinary people. It took less than 24 hours to find $85 billion to shore up AIG and the investment markets. And only a few days to come up with a broad-based plan for $700 billion to shore up the financial markets. Yet when it comes to homelessness, education, health care, job training, foreclosures, or anything else having to do with helping ordinary strivers, the response is always "how are we going to pay for it?" I cannot make my peace with that.

It seems to me that if we are indeed going to support this bailout for Wall Street, then we had better accompany it with measures for Main Street. How about, for starters, a fund to buy non-performing mortgages and renegotiate terms for people in or nearing foreclosure? That way we have a central decision maker to restructure the debt so that people can stay in their homes or so that vacant and foreclosed properties can be rehabbed for reuse as affordable units. And average people get the kind of attention paid to their calamity that the big shots at AIG are about to get. It would be good for the economy as a whole, too, because it would serve as a place for lenders whose shaky balance sheets have undermined the credit market to send their bad debt and significantly stabilize credit markets.

I am a capitalist, but not a market fundamentalist. I think markets need parameters within which to operate, and that the role of government is to impose those parameters. In addition to exposing the failures of the free-for-all marketeers, I hope we get from these events better oversight of those markets and clearer rules of engagement.