Published: October 04, 2008 02:55 pm            

TRIBUNE-STAR EDITORIAL: A necessary step toward financial stability in America

TERRE HAUTE — It’s hard to describe anything in the Emergency Economic Stabilization Act as “good.” At best, that massive federal plan to rescue the collapsing American financial industry was “necessary.”

Congress simply had to act. There were plenty of reasons to let the final pillars of Wall Street fall. The banking and investment firms that poisoned the markets with shady accounting, junk securities and questionable loans in the quest for big money did not earn their lifeline. Taxpayers on the short end of this $700-billion bailout are rightfully mad. Some want the free market’s circle of life to let failing institutions die and over-extended borrowers’ homes to foreclose, so the industry can properly heal itself.

That may seem justified, but the natural free-market reparation in this situation could cause heavy collateral damage. Millions of Americans, who’ve paid their bills and taxes on time, could see their 401(k)s or pensions wither. Businesses that rely on responsible credit, such as contractors and auto dealers, could close as the credit markets freeze solid. In an already struggling, war-drained economy, even more layoffs, plant closings and homelessness could loom.

After the U.S. House rejected President Bush’s open-ended package on Monday, the Senate and House passed a revised version, with restrictions on the rescued firms and CEOs, mechanisms for those companies to pay the government back, greater federal oversight and an increase in FDIC insurance on savings accounts from $100,000 to $250,000. On the down side, lawmakers saddled $110 billion in earmarks onto the bill, which dulls the nobility of their work.

The act guarantees nothing. It does, though, give the economy a chance to start digging out of this deep hole before its walls cave in.

        

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