Paul Krugman: Paulson's $700 Billion Plan Called "Cash For Trash"

NY Times :

Some skeptics are calling Henry Paulson's $700 billion rescue plan for the U.S. financial system "cash for trash." Others are calling the proposed legislation the Authorization for Use of Financial Force, after the Authorization for Use of Military Force, the infamous bill that gave the Bush administration the green light to invade Iraq.

There's justice in the gibes. Everyone agrees that something major must be done. But Mr. Paulson is demanding extraordinary power for himself -- and for his successor -- to deploy taxpayers' money on behalf of a plan that, as far as I can see, doesn't make sense.

Read the whole story: NY Times

Comments

[SurrealPumpkin]

Is there any economist other then Paulsen, who thinks this is a good plan?

[ssgman]

Yeah, there's a bunch. But they all work for Goldman Sachs and JP Morgan. Oh, and there's Bernanke.

[hellboundtrain]

Is Paulson an economist?

Or, is he just the protector of his one-time cronies in crime?

[JTyroler]

Why is it that people in the Bush Administration want to get "emergency" powers that allow them to do whatever without any oversight?

[IceCold]

Because of the aftermath of what's planned. After getting away with 9/11's prizes: Iraq, Homeland Security, the new FISA, etc, they're convinced Americans are dumb, deaf, and blind and they can do this twice. To wit:

Because Americans seem unable to see, hear, or understand the ticking of the multi-trillion dollar bomb Paulson and his gang are in an urgent hurry to relocate from Wall Street, Banks, and Hedge Funds of all kinds, to main street --- before the bomb goes off and wipes out the aforementioned. Do we the people care? Sure, 'cause we'll suffer serious collateral damage. But we'll survive and, creatively, go on. They won't.

If on the other hand the bomb (it's called "Derivatives" not "illiquid mortgage assets": (that's the fuse)) explodes on Main Street (and after the suckers (us) actually hand over a trillion or more bucks for the privilege of jumping on this atomic grenade, as well as armor-plate Paulson and co's rear ends from any subsequent realizations and reactions from us), Paulson and the folks he represents (Wall St, Banks, Funds, the super Rich) will suffer collateral damage, but, we'll be TOTALLY (that's an understatement) wiped out because derivatives traded in 2008 alone are already north of, take a big breath, no, wait, get an aqua-lung for this - a thousand trillion dollars.

Then they'll OWN Main St. America pretty much lock, stock, and barrel (house, land, and business). [GLOBAL GDP/2007 was ~62 trillion dollars. A trillion's a thousand million]

[hellboundtrain]

I think a billion is a thousand million
and
a trillion is a thousand billions.

Check it out.

[RoloTomassi]

You answered your own question:

"...allow them to do whatever without any oversight"

It's a means to an end....

[playingfair]

CASH FOR TRASH DEMANDS KING PAULSON without review, or oversight of any kind period. Hope the Dems don't get bamboozled into passing it without the caveats that are being proposed.

[eajphd]

I'm sure that Paulson has deep empathy for the tax payers. Of course it may be a challenge since he does have certain fringe benefits the average person doesn't get. According to Fortune Magazine "One fringe benefit was the capital gains tax exemption given to federal appointees who have to sell holdings before they take office: When Paulson sold his $500 million of Goldman Sachs stock, he saved tens of millions of dollars."

http://money.cnn.com/2008/09/19/news/newsmakers/gunther_paulson.fortune/

[Velocitor]

What happened to that old tough-talking Republican outlook on personal responsibility?
What about their desire to keep government out of the free market?

Why doesn't the financial industry "pull themselves up by their bootstraps"???
I guess they must be a bunch of unmotivated, lazy slugs who would rather wait around for a free government than put in an honest day's work for an honest day's pay.

Funny, the nation is supposedly "by the people, for the people", yet who thinks lawmakers would be so sympathetic and eager to bail us out if one of us ran into insolvency? It seems the tender understanding is only reserved for well-represented corporations with lobbying pull.
How much will executives of these nearly-failed institutions be paid in the years to come?

[Snwbnny9]

I agreet with you completely. I guess only us "little people" making under a million annually have to pull ourselves up by the bootstraps and be financially responsible. Consequences are only for the little guy.

[starboymikey]

Why doesn't the financial industry "pull themselves up by their bootstraps"???
______________________________________________________________

That's only for the middle class and the poor. For Wall Street and the banks, it's Socialism pure and simple.

[hurdygerdy]

I've heard estimates that the credit-swap market is 62 trillion dollars. This is more than the value of the stock and bond markets combined. Is a 700b bailout realistic? Where is this 62t?

[rubinoff]

Is there a chess game going on?....ponzi scheme or what?....can anyone only imagine the depth and breath of the deceit/trickery that is going on.... Who is responsible for this current mess....this admin., former admins., the congress; the cabinet, bankers, judges, lawyers....the list is prolly sooo long..As Orwell said, in a time of universal deceit, telling the truth is a revolutinary act...any way ya look at, the every day law abiding citizen is 'boned.'

[hurdygerdy]

Maybe it's time to raid Cheney's cave, wherever it may be.

[Utopia]

Here is another problem Mr. Krugman came close to addressing but still missed the target by a wide margin. It's a financial shell game designed to reward those who created this mess and keep them in business. Part of Paulson's plan calls for the Fed to set up an oversight panel to sell of these bad assets that the Fed intends to buy at almost purchase price from these banks. Paulson acknowledges in his plan the Fed won't be able to sell the properties at the value they paid for them, that's why the final costs are unknown.

What isn't being said, the banks and real estate corporations who will sell these bad properties may then buy those same properties back for resale, thus increasing profits. BTW the companies under our current tax code will be able to write off their losses. Talk about lack of consequences.

[schatsie]

I think when Krugman mentioned OWNING the banks/institutions that this would be covered here....However, you have to remember that Republicans are FAMOUS for NO BID CONTRACTS and we all know how Jeb Bush benefitted to the tune of being able to pick up property at 10 cents on the dollar during the S&L fiasco...

Transparency and oversight are critical and we do have the systems to perform these functions... We spend billions of dollars on Medicare every year and we know exactly where every penny goes...Those books are balanced to the penny....

[starboymikey]

What isn't being said, the banks and real estate corporations who will sell these bad properties may then buy those same properties back for resale, thus increasing profits.
_______________________________________

Buy them back at a fraction of the cost, I take it. And then the CEOs can walk away with 25 million dollar bonuses for "saving the corporation" and making a huge profit ... off us, of course.

[Sparky123]

The president’s desire to have all military options on the table for domestic law-enforcement purposes was not granted by Congress. That was October 2005. However, a few weeks ago we learned that “quietly tucked into the enormous defense budget bill” (that was signed into law by President Bush in October 2006) were provisions “that make it easier for a president to override local control of law enforcement and declare martial law.” (“Making Martial Law Easier,” New York Times, Feb. 19, 2007) Also signed into law at that time were provisions that stripped aliens and possibly US citizens of the right of habeas corpus, which is the constitutional right of recourse to the courts. (See “Repeal the Military Commissions Act and Restore the Most American Human Right,” Thom Hartmann, Common Dreams, Feb. 12, 2007; “What Is Habeas Corpus,” Larry Beinhart, Common Dreams, Jan. 31, 2007; “Democracy The Big Loser on Habeas Corpus,” Ralph Nader, Common Dreams, Sept. 30, 2006). Having essentially overthrown Posse Comitatus and habeas corpus in one month in 2006, there is more to fear than ineptitude from this administration with the onset of a bird-flu pandemic, which the president appears to view as a potential trigger for a declaration of martial law in the United States.

[Sparky123]

When things get too bad, the military will take over and the election will be canceled.

[wassilij]

The plan is for marshall law and stopping the elections in november.Wake up America!

[Sparky123]

I have heard this too. The election will be canceled and Bush will stay in. Not a wild rumor. All planned ahead of time. Do you think Obama knows?

[hellboundtrain]

The Bush family criminals have been very, very,
bad to America.

[pacodog]

Alright, you guys are sounding a little crazy. Even Repubs know that if Bush tried that stunt, only one result would occur: REVOLUTION!

[RoloTomassi]

Wake up; you're in the US of A, not France. We Americans are mostly hat with very little cattle when it comes action. We fear the government...they, however, do NOT fear us.

Sheeple do not start REVOLUTIONS.

[JoeBlough]

Revolution? By whom? Americans hillbillies have a lock on the Republican party. They aren't going to revolt.

[Punkynsnow]

This is really getting frightening.

[coribbean]

It's actually "martial" law-- martial is a word that refers to all things military

[Jepps]

Wasn't the Patriot Act "rushed through" because it was critical to have it done quickly?

I agree that nothing permenant should be done until we know the full scope of the problem and the full scope of any proposed solution. I can't think of one major crisis that his administration has handled correctly, are we supposed to believe this is the one? And when was the last (or first, you choose) time this administration did anything with the common person in mind? If the common person is in trouble now they will continue to be in trouble if this is done...

"They say the risk of doing nothing means more people could be in trouble but they don't say this solution will eliminate that risk!!!! They why do it?

[Sparky123]

Yes. Like the invasion, etc. Same plan, different day.

[Sparky123]

Invade Iraq, take all of the people's money. What else do we have to look forward to?

[Sparky123]

This so called plan has been in the works for a while. The U.S. financial system does not collapse over night. Just like the plan to invade Iraq was ready long before 9/11, the powers that be, i.e. Paulson, etc. have had this ready to go as soon as McCain started looking foolish. His easy election will assure these crooks that the bailout will continue. We must watch with disbelief as our lives are profoundly affected by this blatant robbery.

[JiminNC]

Screw Paulson. He is a bushco thug and simply trying to steal our money. Anything that has a built in immunity from prosecution is bad.

[martinchill]

"I'm from the Government, and I'm here to help!"

and by the way, before i can start helping, i will need you to agree to immunity from review "by any court of law or any administrative agency".

KTHNXBAI.

[Sparky123]

I know. Government used to be the problem. But no more. The tax payer is here to help all the rich guys get richer. Sweet justice.

[martinchill]

"no, we can't afford to give healthcare to everyone."

"yes, we must spend $10 billion a month on two wars."

"no, we can't release any oil from the strategic reserves."

"yes, we must bail out these businesses or the world economy will collapse."