Bailout plan gives rise to opposition movement

Christian Science Monitor

NEW YORK — Dragomir Kovacevich is a New Mexico Democratic Party activist who lobbies for a green energy economy. Or at least he was, until last week when stock markets nose-dived and Treasury Secretary Henry Paulson hatched a plan to have the government buy bad securities from financial-services firms.

Now, he’s an antibailout crusader, using planned meetings with several organizations, including the Congressional Black Caucus, to denounce the $700 billion plan rather than talk up alternative energy. The biggest flaw, according to Kovacevich, an economist by training, is that after the government buys up bad securities, there’s a possibility they will lose more value and be bought back, at a discount, by the same firms that caused the problem in the first place.

“There can’t be a flip here,” he said. “This just benefits Goldman Sachs: They take the money from your sack and put it into their sack.”

Kovacevich joins the swelling ranks of a grass-roots movement aimed at persuading Congress to turn down the Bush administration’s plan. The movement crosses party lines. It draws support not only from angry taxpayers but also some economists. And it is beginning to make itself heard in the halls of Congress.

“If it looks like they bail out Wall Street, there’s going to be a lot of anger,” said a Democratic Party staffer in Michigan, who declined to be identified. Michigan is a key swing state in the presidential election.

Not surprisingly, the movement has found a ready audience online.

“A bailout requires responsible Americans to pay for the acts of greedy bankers, mortgage brokers, flippers, and over-extended home-borrowers,” intones StopTheHousingBailout.com.

AngryRenter.com, backed by a conservative lobbying group run by former House majority leader Dick Armey, claims to have 58,300 signatures for a petition opposing the administration’s plan. In less than 24 hours after posting his letter to Paulson outlining an alternative to the bailout, Independent Sen. Bernard Sanders of Vermont said he gathered more than 8,000 citizen cosigners.

Among the “netroots” — blogs that cater to Democrats — the sentiment is also overwhelmingly against a simple bailout.

“We’re opposed to rushing into this too quickly,” said Markos Moulitsas, who runs the Daily Kos site. “We haven’t gotten a proper explanation of the problem or how $700 billion is supposed to fix it. We’re supposed to take it all on faith, and we’ve been burned way too many times by this administration to take anything they say on faith.”

While many who oppose the bailout don’t have ready alternatives, some observers do have specific proposals.

The object of the bailout plan is as much to reassure the markets as it is to actually buy the bad debt securities, said Milton Ezrati, senior economist at Lord, Abbett & Co., in Jersey City, N.J. To that end, another method might have been to do what the Federal Reserve Bank of New York did when Long-Term Capital Management collapsed in 1998. The Federal Reserve told banks that they should lend to LTCM and that they would, in return, have backing from the Fed, Ezrati said.