Thursday, September 25, 2008

Thoughts on the Wall Street bailout

I've been a little busy with other things, so blogging has been nonexistent for the past four days. However I have been watching the news with great interest over the Bush administration's $700 to $1.8 trillion dollar bailout package for Wall Street. President Bush gave a prime-time speech, Wednesday, appealing for Americans to support the $700 billion plus government bailout package to Wall Street. Republican presidential candidate John McCain announced he was suspending his campaign so that he may attend to the country's financial crisis--even though he hadn't done a damn thing about the financial crisis for the past two weeks, except saying that the country's "economic fundamentals" were still strong. Both McCain, and Democratic presidential candidate Barack Obama, will attend a White House photo-op meeting to show the American people the leadership qualities they have, even though absolutely nothing will come from that meeting except for political posturing. McCain asked for Obama to postpone this Friday's first presidential debate, pushing the first presidential debate to the vice presidential debate's time-slot, thus canceling the VP debate. Obama refused to postpone Friday's debate. If there is no bailout plan passed by Congress, McCain will not attend Friday's debate:

What a mess.

First, the bailout package. According to the text of the proposed bailout plan, the Secretary of the Treasury "is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States." In other words, Treasury Secretary Henry Paulson will be given dictatorial powers in determining how to bail out Wall Street with a blank check, courtesy of the U.S. taxpayer. In addition, Paulson will report to Congress on the first three months after exercising the plan, and then report semiannually. Congress will have no oversight on this plan, nor will Paulson provide much information about how he will be spending the American taxpayers' money on this bailout. "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." Whatever Paulson says, is law, and is not reviewable, nor can the courts overturn Paulson's dictatorial orders. It is breathtaking in the scope of absolute authority that Paulson, and the Bush administration, will be given in control of the U.S. economy for the benefit of Wall Street's greed and corruption. Finally, you can bet that Secretary Paulson will not demand any increased regulations or oversight of the subprime mortgage industry, or the debt contracts that got Wall Street into trouble in the first place--Wall Street certainly would not want more government oversight into their financial dealings, even though they are asking for a financial bailout from the government after getting into trouble in the first place. And while the government is bailing out Wall Street financial firms, there is complete opposition from the Bush administration, the Republicans, and the banking industry, for the Democrats proposal to allow bankruptcy judges to adjust the terms of homeowner mortgages. So it is okay for the government to bail out Wall Street, but not Main Street. And the Bush bail out plan doesn't say anything about Wall Street CEOs' "golden parachute" executive compensation plans, even as these same CEOs drove these Wall Street firms' excessive greed for this subprime mortgate mess, allowing these CEOs to walk away with millions as their firms go bankrupt. This is such a bad deal for the American taxpayer. We are bailing out Wall Street greed for nothing in return. Is it no wonder that 44 percent of Americans oppose the Bush administration's $700 billion Wall Street bail out plan?

Second, I need to say something about the Bush administration's PR-strategy in pushing Americans to support this $700 billion boondoggle of a Wall Street bail out plan. First, the Bush administration creates this plan to give Paulson, and the Bush administration, almost dictatorial powers over the U.S. economy in order to resolve this financial crisis. Then President Bush gives a prime-time speech, saying that the U.S. economy "is in danger" of a "long and painful recession" if Congress doesn't pass his $700 billion Wall Street bail out plan. Haven't we seen this strategy before--say, the push for giving Bush absolute power for going to war in Iraq to protect us from Saddam's WMDs? Say, the push for giving Bush absolute power to domestically spy on American citizens to protect us from terrorists? Say, the push for giving Bush even more power to escalate the Iraq war with the troop surge from al Qaeda insurgents? Or even the new Bush push for giving even more economic powers to bail out Wall Street from an evil recession? There is a pattern, where the Bush administration would incite fear of a terrible enemy coming to get Americans--it doesn't matter if it is the bogyman Iraqis, the bogyman terrorists, or even the bogyman recession--and demand that Americans give even more power to the Bush administration for the broken promise of protection. This is getting old. And it is not that President Bush is playing these fears on the American people. Bush is also playing these fears on Congress, demanding that Congress submits to his will, or Congress will become the unpatriotic enemy of America, surrendering to whatever bogyman Bush decides to present. Now it will be Congress' fault for this latest bogyman recession because Congress failed to pass Bush's $700 billion Wall Street bail out plan, even though the Bush administration was also responsible for not providing the regulatory oversight on Wall Street for the past eight years of this subprime mortgage collapse, and the economic fallout. At this moment, Congress is brokering a deal on this Bush Wall Street bailout package.

More to come.

Update: It appears that Congressional leaders have agreed on an outline for the government bail out plan of Wall Street. From The New York Times:

WASHINGTON — House and Senate negotiators from both parties said Thursday that they had reached general agreement to move forward with the Bush administration’s proposed $700 billion rescue effort of the nation’s financial system.

Emerging from a nearly three-hour meeting in the Capitol, Republicans and Democrats said they would continue working through the day to complete the legislative language and would begin final negotiations with the Treasury.

It was unclear if a final draft would be ready by 3:55 p.m. when Congressional leaders are scheduled to meet at the White House with President Bush and the two presidential candidates, Senator John McCain, Republican of Arizona, and Senator Barack Obama, Democrat of Illinois.

But lawmakers in both parties said that few substantive differences and no major obstacles remained. They said the bill would authorize the full $700 billion requested by President Bush, but that Congress was intent on disbursing the money in installments.

One plan under consideration would release $250 billion immediately, with another $100 billion available at the discretion of the president.

They also said that there would be limits on pay packages for executives whose firms seek assistance from the government and a mechanism for the government to be given an equity stake in some firms so that taxpayers have a chance to profit if the companies prosper in the months and years ahead.

So the deal will be that Congress will disburse the $700 billion in installments, hopefully with some serious oversight into how Treasury Secretary Paulson will be spending the money. Congress will be limiting Wall Street CEO pay packages for firms asking for the bail out money, and there will be some government equity stake in these firms. No deal on the bankruptcy judges modifying mortgage plans for individual homeowners. However, this detail was very interesting:

A senior Republican lawmaker, speaking on condition of anonymity so as not to undermine the party leadership, said there was a “violent reaction” among House Republicans to the Paulson plan. He said backers of the alternative, one of several that have been proposed, believe that they can force negotiators to accept it as part of a larger deal.

It appears that the Republicans were shocked and angered over the Bush $700 billion Wall Street bail out plan. The Republicans were offering their own versions of differing plans, including one by Representative Eric Cantor, the minority whip, which would rely on government-provided mortgage insurance to Wall Street firms, rather than taxpayer-purchases of mortgage securities. The Republicans appeared to be in opposition of the Bush Wall Street bail out plan. House Speaker Nancy Pelosi stated that she would not approve of any bail out plan without Republican support. So a congressional bail out plan will probably come out over this weekend, looking at the negotiations taking place between the House and Senate. The big question will be how much oversight will Congress demand within this plan? And will the congressional Republicans accept such a plan?

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