While Paulson Waffles, the White House Dawdles, and Congress Dithers, the Economy Continues to Burn.

So, $290 billion into his bailout plan, Hank Paulson is calling for a do-over. Now there is a confidence booster.

Providing "I-told-you-so" talking points to the what's-the-rush crowd, the Secretary of the Treasury announced yesterday that the government is no longer going to use any of the $700 billion Congress allocated to the Troubled Asset Relief Program (TARP) to buy, well, Troubled Assets from financial institutions -- the original centerpiece of the plan.

Instead, Paulson is looking to fortify the financial industry by continuing to buy premium stock in banks (aka the Warren Buffett approach). Unfortunately, instead of sending Paulson a thank you note in the form of increased consumer lending, the banks are depositing the government checks and taking a wait and see approach. (Among the things they've seen: another $40 billion handed over to AIG.)

This is not to say that Paulson's midstream direction change is a bad thing -- indeed, the lip service he's now paying to putting the focus on consumers is encouraging -- but it shows just how uncertain official Washington is about how to keep the economy from imploding.

In the meantime, oversight of the massive bailout plan remains a mirage -- undermined by White House inaction and Congressional turf wars.

Remember all the promises that the $700 billion in taxpayer money would be closely supervised? No blank checks here, we were told. A special inspector general was going to be picked by the White House and Congress was going to hand-select an oversight panel.

But despite over a quarter of a trillion dollars having already been doled out by Paulson, so far both the inspector general position and the five Congressional Oversight Panel slots remain unfilled.

The White House appears ready to nominate New York prosecutor Neil Barofky as inspector general, though it's up in the air how quickly Congress would confirm him (if they confirm him at all). Among the looming issues, a squabble between the Senate Banking Committee and the Senate Finance Committee over which would have control of the confirmation process.

"It's a mess," said Eric Thorson, the Treasury Department's inspector general, who has been doing fill-in oversight duty until the special inspector general is confirmed. "I don't think anyone understands right now how we're going to do proper oversight of this thing."

Bartender, another round of lack of confidence for everyone.

Unfortunately, while Paulson waffles, the White House dawdles, and Congress dithers, the economy continues to burn.

The number of Americans filing new claims for unemployment last week -- 516,000 -- was the most since September 2001, in the wake of 9/11. And the number of people continuing to collect unemployment -- 3,897,000 -- was the highest it's been in 25 years.

"The labor market is deteriorating more rapidly than previously thought," Andrew Gledhill, economist at Moody's Economy.com, told CNNMoney.

In the past week, Ford said it would cut salaried employment costs by 10 percent, global delivery company DHL said it was cutting 9,500 jobs and financial service provider Fidelity Investment announced 1,300 job cuts. The list goes on and on: Circuit City, Pizza Hut, Morgan Stanley, Condé Nast, Yahoo, US Steel, Cesna, and QVC.

According to the Department of Labor, 240,000 jobs were lost in October, bringing the total of 2008 pink slips to 1.2 million. The unemployment rate is 6.5 percent, the highest it's been in 14 years.

On the housing front, another 84,868 homes were lost to foreclosure in October; there have been 936,439 home foreclosures since August 2007. And the housing future continues to look bleak: in October, 279,561 borrowers received at least one foreclosure-related notice, including default notices, notices of auction sales and bank repossessions, according to RealtyTrac. One in every 452 housing units received one of these. Nevada, Arizona, and Florida had the country's top three foreclosure rates.

Despite the carnage in the housing market, the White House continues to offer what the New York Times labeled "pathetic responses" and inadequate "half measures." And much-discussed legislation allowing bankrupt homeowners to rework their mortgages in court remains in a holding pattern, awaiting action from the lame duck Congress. I wouldn't hold my breath.

January 20th cannot arrive fast enough for the American people.

 

 

Follow Arianna Huffington on Twitter: www.twitter.com/ariannahuff

Comments

[SLmavin]

Bailout monies MUST be tied to a little personal hurting on the part of top executives:
~ salary caps ($400,000 annually)
~NO bonus for ANYBODY until further notice

Common sense!
" I"M SICK AND TIRED.....­..........­......"
And nearly broke.

[Rosey]

One would have to be nuts to give Paulson any more money without making doubly sure there are rules written in to the gift..... Paulson, apologist for the mismangement on Wall Street, gave the money to the banks without making sure they used it for loans. As far as I can see, banks are buying other banks and giving money to stockholders.
Any money given to the big Automakers MUST have parameters/rules whatever you want to call it where they stop making huge gas-guzzling tubs. They should be forced to make smaller cars with better gas mileage and I do not mean maybe get 5 gallons more per mile. They big 3 have fought this effort and look where it has gotten them.... close to bankruptcy. Don't they realize we buy European cars because they get better miles to the gallon?

[Rosey]

One would have to be nuts to give Paulson any more money without making doubly sure there are rules written in to the gift..... Paulson, apologist for the mismangement on Wall Street, gave the money to the banks without making sure they used it for loans. As far as I can see, banks are buying other banks and giving money to stockholders.

Any money given to the big Automakers MUST have parameters/rules whatever you want to call it where they stop making huge gas-guzzling tubs. They should be forced to make smaller cars with better gas mileage and I do not mean maybe get 5 gallons more per mile. They big 3 have fought this effort and look where it has gotten them.... close to bankruptcy. Don't they realize we buy European cars because they get better miles to the gallon?

[confuseddemocrat]

Call me cynical but I think the republicans know that any solutions to the current crisis will be painful and thus they do not want to be blamed further or assist the Dems by participating in any policy decisions.

The Repubs are also looking ahead to 2010 elections. The Repubs are not trying to do anymore because they are hoping that they can saddle the Dems and Obama with the economic mess and exploit the crisis in 2 years to regain control of the congress or at least to diminish the Democratic lead.

Thus as the strategy goes: The Repubs want the the economy to slide further for the next two months; this will then prevent Obama from enacting all his policies before 2010

If this occurs, then the republicans can claim that the Dems and Obama reneged on promises or are ineffective leaders

I hope I am wrong.

[Artos]

If the Republicans hinder progress on cleaning up the mess they made it will be self- evident in the bills that they will refuse to Pass. What the Democrats need to do is to make sure the bills are clean. In other words no earmarks and no deals to include some crap the Repubs want thrown in as a bribe to pass it. Make them have to say "Up or down" , "Pass or No Pass" and then if they thwart a decent bill then publish it for all to see. But and I think this is very important. The Democrats had better think long and hard about the specifics and just what kind of Bills that they are trying to pass. That is going to be all important. Otherwise you are correct, they will get thrown out too and it will be their own fault.
This is not the time to screw it all up.

[dessertsfirst]

Well said, Ariana,
I keep reminding everybody that based on what many noted economic professors, and others in the industry were recommending, (i.e., that we should leave it alone and let it figure itself out, that to bail them out would only prolong the inevitable....) many, many of us called and emailed our senators and congressmen to voice our opposition to the $700 Billion bailout, but they went ahead and voted for it anyway.
You see, Pres Bush refused to listen to anybody but Paulson and Bernanke, on whose watch the problem happened, and then put them in charge of "fixing" the problem. All they have done is make it worse, and the people are the ones still holding the bag, and they are mis-spending the taxpayers money. It's absolutely insane! And we the people, have absolutely no recourse. All we can do is sing ninner-ninner- ninner... we told you so. And what good does THAT do? In the meantime, the economy gets worse and worse. I can't say it better that Ariana did..

[mylegsareswollen]

Until Congress passes legislation to restrict it's own access to lobbyists and restricts it's individual members ability to rake in big $$$$$....nothing will change. Ever.

[arcoftheancients]

Let's get this straight, those of us who are not experts are the ones to blame and must bailout the “experts”? Couldn't be these “experts” such as Paulson himself made bad investments with their addictions to greed that went bust? Since 3% of the population holds 95% of the wealth and all the people in that category saw increases in incomes upwards of 100% over the last 8 years; how is it mathematically possible for the problem to rest within the 5% category of “unexperts”?
Of that we are asked to believe that a small percentage of those have faulty “sub-prime” mortgages they were sold by “experts” that they had no business making and now cannot pay what? Anything?
The solution is to kick them out of their homes? Even taking this as the source for trillions of dollars that somehow is “missing”, then why are we not fixing the source of the problem? Why wouldn't we make the bailout as a loan to mortgage company's as exchangeable payments for these homeowners who would have them added onto the back ends of their mortgages and demand refinancing that was affordable if possible to keep people in homes?
Why don't we recreate community banks trading out foreign debt from the banks for local debt and shore up the taxpayers within the community they are being asked to pay for?
Could Paulson and others have done what Lincoln and Silverado did in the 80's?

[ntmessage]

Adding my 2c (Old saying or financial statement?) to a solution, we desperately need but is so easily skewed rhetorically by self-interests as evidenced by the billions of added pork the bill that no one seems to want to debate.

The first part of the rescue money was used to recapitalize financial institutions, in return for ownership and potential gains, a must do or everyone shuts down. This alone helped unfreeze interbank lending. Most of those CEOs have already lost their jobs and millions throughout the ecosystem are being laid off. Part II of the funding is being changed away from throwing good money after bad to directly affect mortgages that people have as opposed to the derivatives. A good move. However to pay off mortgages or to buy down capital is not the solution. Refinancing everyone’s at something like 3-4% is. With Frannie/Freddie we have always socialized housing anyway, we should just fess up.

The management at the big three have not been able to make cars that people really want to buy for over 30 years. Do not let them touch any taxpayer money. Either take the money to retrain all those workers into better green jobs, allow them to import cars that sell well elsewhere, or restructure the big three all like we did to the financial institutions (in case anyone was paying attention). Companies still function under bankruptcy protection - the big three are essentially bankrupt now. Lastly we must lower healthcare 10:1.

[dagumpster]

Paulson has made the statement that he is putting the bailout money into financial institutions. This is so they can jump start the economy and increase lending but so far all they done is hoard the money and have not done much lending except among themselves. Paulson must realize that millions of Americans have been putting money into these same financial institutions and have been burned greatly. So it seems the American public is way ahead of Paulson on the method and it has been shown wanting. Putting bailout money into only the financial industry is not the only panacea. The bailout should go to all industries. If the economy is going to tank then it is better that all methods be supported. It is no time for half measures and the financial leaders are taking care of themselves first. For them to collect bonuses in this economy is an absolute slap in the face to the American taxpayer. What do these people base their bonus on? All the top executives should have been fired but I guess Paulson takes care of his friends first. The only people singing the praises of Hank is the financial people. What is needed is less financial engineering and more manufacturing engineering.

[getoffmedz]

Dear Arianna

Do you really think this current administration can do anything to forestall the mess they generated except to make it much worse?

Patience and prudence.

Oh and great job on helping our next administration and a renewed Congress come to our rescue.

Kudos.

[Stoyver]

Underscoring "getoffmedz" comment was a photo in today's newspaper of Bush presiding over the G20 economic disaster abatement meeting with Hank at his side. Bush brings the poster child for greed and economic ruin with him to this economic summit, oh the irony! How utterly embarrassing for us all. Bush will be a total loser to the very end, which can't come soon enough!

[killpack]

Don't hold your breath for the President-elect to fix our economy. He voted FOR the bailout.

[Vinca]

I read that the Swiss may be close to revealing, info on bank accounts of US citizens , hidden away, from taxes, IF ONLY WE COULD GET TAXES< FROM OFFSHORE BANK ACCOUNTS< IT WOULD ALMOST BALANCE OUR BUDGET< SURE HOPE THEY CAN DO THAT

[Hopefulinfl]

I don't think the Swiss will turn over names of depostiors. That would mean the end of their banking system and I don't see them doing that just to be helpful. I would not hold your breath on that one.

[freerbird]

I have read so many comments on this post in here. And it is so very sad that so many people are looking to place blame on one party or the other. People, you have to realize that this great mess that we are in is the fault of both parties, and if you want to point your finger at one party, and hope that the other party will help you, forget it. The time for blame is over, what has happened did happen, it is a fact, and it is not just America, it is the whole world that is screwed. So how are we going to get out of this mess that we have gotten ourselves into? First of all, do not buy anything on credit anymore. Cut up your credit cards, and save your money, and always have a cash reserve. When you feel that you have saved up enough money that you can reward yourself by purchasing something that you want, then do it. I find it so very funny that the results of sales for October showed that everything went down, except for the purchase of video games and video game players, which was up by 18%. And that the sales at McDonalds for hamburgers was up by 18%. What doe this tell you? Surely it does not tell you that Americans have any clue as to what is important.

[bascombe]

Too true. Sadly.

[Anciano]

Welcome to the Bush Depression.

[freerbird]

The Bush era is over, George Bush is gone. So just who are you going to blame now? Remember 2006, when the democrats were voted into power in congress? Do you remember the promises that Nancy Pelocie and Harry Reid promised ? First, they promised us that they would have us out of Iraq in 6 months. When the democrats had the chance to get us out of Iraq by voting to end the funding? And they even tried to tie a timetable for withdrawel of our troops to the bill, and they folded again when it was vetoed. And the democratic congress promised us that they would reduce the price of gas for us. Another big lie.And they promised that they would fix the economy, that they would work hard to do that, and the economy failed, so now they decide to blame that on Bush, because the democrats failed. And I can go on and on about what Nancy Pelocie and Harry Reid promised to do for us Americans when they took over, and they have taken over, and they have done nothing, nothing at all while they have controlled congress. THe only promise that they have fulfilled since the democrats have taken over congress is to raise the minum wage. And that was a no brainer, which is why the democrats could do it. So now that Obama is in charge, But you will be able to to blame George Bush for many years to come.

[freerbird]

Totally finaced and supported by the democrats

[freerbird]

The whole problem with the breakdown in our economy has to do mostly with easy credit. So many unqualified people were given easy credit, a homeless peson could get a credit card and charge it up and default on it. The banks are crying that people who default on their credit cards are breaking them. DUH!!!! Do not give them credit cards in the first place. And why are executives of companies getting millions of dollars in bonuses????? Why do they get bonuses, while our economy is failing??? And our government is giving them money, so that they can pay their executives their bonuses???

And just what is Obama planning to do to help us little people?? He is going to raise our taxes, and follow Nancy Pelosies advice to give money to the automakers to bail them out, because the democrats are enslaved by the auto unions. The best thing for the automakers to do is to file for bankruptcy, and then to restructure, and to re-negotiate with the unions, just like all of the airlines have done. We all have to tighten our belts now, and that includes the union workers, many of which have already lost their jobs, and their benefits. And we also have to crack down on the crooks in Washington, and their earmarks and pork projects.

[getoffmedz]

Too bad your pathetic loser party lost the election.

Now all we hear from trolls is whine whine whine.

heh

[Stoyver]

It is painfully obvious that "Freerbird" gets all his info from Fox News and their internet equivalents. Many Americans are under informed thanks to the corporate media. A small cadre of grossly misinformed are out their proudly parading willful ignorance for all to see.

Obama repeatedly says he favors tax cuts for people with taxable incomes under 200K. For Fox watchers the message is distorted to mean the opposite. Fox News tries to force events to fit Republican talking points, even the the ludicrously false talking points. Oddly though, in a relative sense, Bush's tax cuts for the rich combined with deliberately understated inflation have forced the working class to pay a larger portion of total revenue collected. Is that a tax increase on the working class? Oh I forgot, Fox watchers don't do nuance!

If you get the chance, watch the movie "Idiocracy" it is painful look at how things are going in America. It is supposed to be comedy but tragically shows among other things, how Fox watchers contribute to our steady decline (often referred to as Globalism).

[jaslyn]

Obama's going to 'raise your taxes'???? You need to slowly detox yourself from the McFailin' lying machine. As to the automakers, restructuring and renegotiating is not the answer. They need to stay afloat with the proviso that they start producing energy saving cars that Americans actually want to buy instead of Japanese cars. Nothing bolsters a company more than people buying it's merchandise.

[dessertsfirst]

Freerbird:
Unless you make more than $250K a year, you will benefit from Obama's tax cuts on the middle class, along with everybody else. Then you can change your name to "freeasabird". LOL

[triplec]

This obsession by our leaders to keep homeowners in their home will mark the end of whatever is left in this country resembling prudence and morality.

Congress and Sheila Bair's obsession with this spend-only bailout rewards the reckless and punishes the prudent. Consider the lesson it imparts to promote bailouts to the reckless. City by city, neighborhood by neighborhood, people who live beneath their means and manage money carefully will see more careless neighbors supported by federal decree. And what about the 30 percent of this nation who were smart enough to rent? Or how about the large percentage of us who gave plenty of warnings to these same people the government now wants to redistribute my taxes to so they can stay in a house twice the size the home I live in. The backlash to the 700 B bailout package was not only because of the bailout of wall street but also the bailout of the reckless homeowners and their relentless ATM / HELOC spending.

We are becoming a nation of people who feel it is not only okay but justified to cheat, lie, and swindle each other and the rest of the population. Personal responsibility is discouraged by the government and the mainstream media. Our nation is eating ourselves from within just to keep a facade of prosperity. Hope is being replaced by anger and desperation.

[billyfitz]

The government should make sure families have a decent roof over their heads, but why someone should get to keep a house they should never have tried to buy in the first place is beyond me. I live in a rented apartment, my wife and I are saving money to buy a home and when we do it will be one we can afford.

I have little pity for someone who willingly entered into a shady mortgage and is now losing their house. I especially don't want to bail people like that out. I want to bailout the greedy bankers who sold them the mortgages even less.

This whole bailout was a crime and both the Republicans and Democrats are guilty. I hope Paulson ends up in jail, but there is no justice in America anymore. Obama was the better choice, but I still don't see him bringing that type of change.