As Federal officials warn of a bleak future and a certain recession if they don’t get their Wall Street bailout plan passed quickly, a look at the emerging details shows what it is they are really asking for:
Passage of the bailout measures would create huge new federal powers, even as they offer no sure success.
• Buying Power: Allows Treasury to buy up to $700 billion of privately held assets in the market. The original proposal called for buying power to be limited to “mortgage-related” assets, but a later draft expanded that to allow the government to purchase any “troubled assets.” There’s a staggering difference in authority between the two phrases, and it is a moving target as of press time. The banking industry generally favors the second version, but that potentially exposes taxpayers to much higher costs.
MY ANALYSIS: Of course the banking industry wants to include bad credit card debt- only helps them out. But should all of us taxpayers be on the hook for people who wanted the latest video game console to go with their big screen HDTV? I don’t think so….
• Managing Power: Under the Bush administration’s plan, Treasury would hire private managers to handle the hundreds of billions of dollars’ worth of assets it will soon own. But Treasury was silent on whether those managers would be able to actually negotiate directly with homeowners who hold the troubled mortgages. Democrats would go further and demand that bankruptcy judges be given the ability to renegotiate those failing mortgages on behalf of homeowners. This will be one of the more contentious sideshow fights of the negotiations.
MY ANALYSIS: Who are these “private” managers? Who has oversight of them? Since Paulson only very recently headed Goldman Sachs, are we just going to get the same folks who helped engineer this whole fiasco running our public money next? Is he going to tap his former pals in private industry? And since Paulson may well be on the way out, would his appointments be permanent or changeable by the new administration? Plus, the Bushites don’t want to help homoeowners at all. They stridently want to exclude the provision for bankruptcy judges to renegotiate mortgages and help people keep their homes. Soem devotion to the “ownership society, eh?
• Global Power: Under one version of Treasury’s proposal, the government would have the power to buy assets from any institution in the world that it deemed worthy of a bailout.
MY ANALYSIS: WHAT THE FUCK??? Now they want the US taxpayer to be on the hook for ANY failed private institution ANYWHERE IN THE WORLD??? This is a non-starter as far as I am concerned. Oh, a a stupid freaking idea too.
• Pay Power: Democrats on Capitol Hill say they want the final plan to include restrictions on payouts to the executives of the financial institutions that take the taxpayer lifeline. Paulson says he doesn’t like this idea, but it may be tough for elected officials to oppose this populist carve-out in an election year.
MY ANALYSIS: Great idea, and no surprise Paulson doesn’t like it. He’s less than two years out of those CEO chairs and can’t imagine his buddies not making their bazillion dollar bonuses for screwing up the whole country’s financial system.
• Equity Power: Democrats would like the government to get shares in the financial institutions that take federal help — effectively giving taxpayers ownership stakes in the nation’s largest banks and providing them with a huge windfall if those institutions prosper in future years.
MY ANALYSIS: Another rational idea. After all, if the taxpayer is going to bail these bastards out, we should get to reap any potential benefits down the road, NOT THEM. Of course, they say that the taxpayer could benefit but really they just mean that lawmakers will get money back in the treasury to waste on some other boondoggle eventually-earmarks that do not benefit the public as a whole. Typical political double-speak.
• Oversight Power: Treasury’s initial proposal included very little room for congressional oversight of the new effort, calling for reports to be sent to the Hill just twice per year. That isn’t flying with Democrats or many Republicans on the Hill; if a bill makes it through Congress, it will almost certainly have much stronger oversight provisions.
MY ANALYSIS: Another demand from this administration for “emergency” legislation rushed through and based on faulty analysis-it’s their key to all their policy “successes.” No oversight sure worked well in Iraq, in the military medical process, in the Katrina contracts, and on and on and on. If anything is to have a reasonable opportunity for taxpayer support it must include strict oversight.
In short, I’m not keen on a massive bailout, but what is the alternative? Massive economic depression? We may yet still get hit with that anyhow, since there is no guarantee that the government bailout will be big enough or strong enough in the long term. There are literally trillions of dollars of bad paper debt waiting to be unearthed when this complicated financial rubicon is deciphered. We may well find ourselves giving away trillions of dollars and be left in the same sorry mess. Still, if tough measures accompany the plan, and serious oversight is instilled, it may well cover the gaping wound long enough for other factors to work themselves out.
Either way, there will be much pain. Thanks, in large part, to the GOP and their culture of anti-regulation and greed.
As John McSame likes to say, Enough is Enough.
(cross posted at Bring It On!)
This entry was posted on Tuesday, September 23rd, 2008 at 10:30 am and is filed under Economy, Politics, Reform.
You can follow any responses to this entry through the RSS 2.0 feed.
You can leave a response, or trackback from your own site.
