We now have access to a first draft of the proposed Wall Street bailout, and while economic policy and legislation may make your eyes begin to glaze over, I would strongly suggest you take the time to read it. Whether you support it or not, we should all be in touch with our congressional representatives because this is absolutely massive. I believe that many of us – the regular Joe or Jane Six-packs out here – often look askance at the upper echelons of government or big business with a sneaking suspicion that somebody, somewhere, is getting away with something while we’re about to be screwed. We’ll want to make sure this gargantuan bailout doesn’t turn into one of these situations.
I believe that there are four key questions which we need to wrestle to the ground before Congress moves forward on such a plan.
1. Have we completely identified the extent of the problem and the danger it poses to the government, the economy and the taxpayers?
2. Will the proposed remedy adequately address the problem?
3. Does the proposed remedy take steps to ensure that the problem will not occur again?
4. Will the remedy fall victim to the law of unintended consequences and create new problems of its own further down the line?
I’m not an economist – though I play one on tv – but after mulling it over and reading the analysis of some serious minds, such as Paul Krugman among others, I would have to say that the answers to numbers one and two are a definite “maybe” at best. The answer to number three is a resounding no and question four looms like a second freight train barreling down the tracks toward us. While I’m not ready to take to the streets with torches and guns as some seem to be, and I would be hard pressed to ascribe this crisis to some intentional plot by the Bush Family to seize control of the government, there are too many questions surrounding this plan for us to allow Congress to simply rush in blindly. The number of things which are missing from the proposal are legion, and some of the elements it does contain are very troubling.
In reverse order, here are a couple of the disturbing entries:
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.
We’re talking about 3/4 trillion dollars of taxpayer money (which every analyst seems to feel could be – and will be – nearly doubled with a single stroke of the pen in the very near future) which will be spent to purchase financial instruments so toxic that they threaten to bring the global economy to its knees. Economists all seem to agree that we’ll be paying premium prices for these diseased mortgages too, since paying the few pennies on the dollar they are actually worth wouldn’t help the financial companies at all. There is no provision to prevent the villains in this play from doing the exact same thing again. Suggestions that the CEOs of these companies share some portion of the blame for their failures, and perhaps give up bits of their massive salaries and multi-million dollar golden parachutes was termed a Poison Pill by Paulson. Expanding the federal debt ceiling to 11.3 trillion is a figure which the Wall Street Journal notes is well in excess of the current and projected future GDP once adjustments are made for backing out hedonics, imputations and adjustments for misstated deflators. Could this lead to a downgrading of our credit rating and a surge in the cost of servicing the federal debt, which already eats up nearly ten cents of every dollar spent by the government each year?
On ABC this morning, George Will referred to this week a the “beginning of the Paulson administration, or perhaps empire.” We’re about to hand unbridled and unquestionable control of the nation’s economy to a single, unelected official appointed by the president. He would stand as the sole guarantor of the rights and protections of the taxpayers while we pay to finance the continued bad behavior of the Wall Street barons. And Paulson, himself, is not some millworker’s son – he’s a former CEO of Goldman Sachs and has his own considerable stock portfolio to look out for.
Are you getting that old familiar feeling again? Somebody, somewhere is getting away with something and the message to the people funding this boondoggle seems to be BOHICA.