Now find a way to bring stability to the economy


POSTED: Saturday, October 04, 2008





        President Bush has ratified a $700 billion bailout for the nation's financial system.



Enactment of a $700-billion bailout for the nation's financial system has put the emergency brake on what threatened to become an economic crisis throughout society. In the nearly four months before a new Congress and administration are in place, a pathway must be charted to begin a full recovery.

With the support of Sens. Daniel Akaka and Daniel Inouye on Wednesday and—in a reversal of their votes in opposition to an earlier version—Reps. Neil Abercrombie and Mazie Hirono, Congress this week enacted the largest government bailout in history and President Bush signed it into law.

In the four days between House votes, members of Congress recognized that the crisis already had spread beyond Wall Street, creating problems for small businesses wanting to finance their purchasing and for people wanting car loans. Nearly 1,000 independent and used-car dealers reportedly went out of business in September alone.

In written statements, Hirono described the Senate changes as “;noticeable improvements”; and Abercrombie said the legislation “;will provide breathing room to address the underlying challenges to the financial system.”; He had said after Monday's rejection of the bill that the “;fundamental mistake is trying to take a bad bill and make it better.”;

One provision added by the Senate and finding widespread praise increases the amount of savings insured by the federal government in a single account from $100,000 to $250,000. It also attached $150.5 billion in tax breaks and a plan for eventually recouping losses from the financial industry.

First, Congress should revisit its 1999 repeal of a Depression-era law that prohibited a financial institution from both lending money and investing it. While some banks responded by making responsible investments, others went crazy, urged on by a 2004 Securities and Exchange Commission action exempting them from a rule that limited the debts they could take on and allowing them to monitor themselves.

Meanwhile, lenders were allowed to embrace policies on home loans on the assumption that real estate values would forever grow. As a result, 40 percent of the nation's borrowers owe more on their mortgages than their homes are worth, according to Deutsche Bank.

The nation's economy might not rebound until the middle of next year, which is bound to cause a slump of Hawaii's tourism until then. “;It will take some time for this legislation to have its full impact on our economy,”; President Bush said. He pledged that the government will “;take the time necessary to design an effective program”; to implement the package.