The question is whether Congress should agree to this request or not, and I am against it for four reasons that I mentioned on CNBC.
REASON 1: Treasury Says It Doesn't Need the Money
First and foremost, as the New York Times reports, "The first $350 billion in bailout money has been fully allocated and the Treasury says there is no urgent need for more." On top of this, the first $350 billion has been a complete disaster -- as the bailout's congressional oversight panel reports, there has been almost no transparency or even basic proof that the bailout is working to do anything other than subsidize bank consolidation and executive bonuses.
REASON 2: "New" Conditions Are Filled With Loopholes & Omissions
Second, it's not clear that the conditions Democrats are talking about placing on the second batch of money are strong enough -- or, in some cases, even real.
Rep. Barney Frank (D-MA) has put forward legislation that would impose some strings on the money -- and his legislation draws a nice comparison to the auto bailout. Essentially, he wants to impose some of the same restrictions on the money that conservatives demand on the auto bailout. And that's a damn good thing.
The problem is that his proposal still has some gaping loopholes. For example, the Washington Independent reports that while Frank's executive compensation language restricts bonuses, it will still allow executives to pay themselves absurd salaries. Additionally, while it's good that Frank wants to force some of the new bailout money to be used to help homeowners, that money needs to be accompanied with bankruptcy law reform (i.e. giving judges the power to renegotiate loans), so that the money isn't used to subsidize banks' bad loans and can be used in the most effective way that actually helps homeowners and the middle-class.
Of course, word today is that Frank is now backing off even his modest legislation, which leads us to reason 3.
REASON 3: Congress Still Abdicating Its Oversight Responsibilities
To my knowledge, neither Frank nor Senate Banking Committee chairman Chris Dodd (D-CT) has put forward bills that would legislatively mandate exactly how the new bailout money is used, or even seriously better transparency. Instead, they are telling us we should simply trust Obama to use the money more responsibly and effectively than Bush. Indeed, lawmakers are demanding a letter from Obama describing how he would use the money -- but by definition, a letter is non-binding.
Incredibly, we are expected to believe this will better guarantee transparency and effectiveness even though, as the New York Times reports, Dodd "acknowledged that without new legislation there would be nothing to guarantee that those plans would be followed." Arguably worse than Dodd's statement is the behavior of Frank. The Huffington Post today reports that "Frank introduced legislation at the end of last week that would have tied a number of strings to the second $350 billion in financial-industry bailout funds, but on Monday, he told fellow Democrats in a closed-door meeting that he wouldn't push for passage of his bill if President-elect Obama would give "his word" that he would implement major portions of his legislation."
Now, I certainly think Obama will do a better job than Bush in administering the bailout money - but this doesn't mean we should simply accept Congress once again rolling over, playing dead, and effectively delegating its power of the purse to the executive branch. We went down that road once before, and look where it got us. I mean, seriously - didn't Democrats get elected to Congress to be a Congress rather than a rubber stamp?
Additionally, if Congress doesn't play a much stronger role on this bill, it could politically weaken Obama's hand in taking on the financial industry as a whole. By passing the buck, Congress will put the bailout all on him - and he won't have a progressive legislature to play off of if/when he wants to use the bailout in a way that actually makes the financial industry uncomfortable. In other words, he'll be out there all on his own - which isn't good for anyone.
REASON 4: Nobody Has Explained Why This Is the Best Way to Spend $350 Billion
I said this during the original debate over the bailout bill, and I'll say it again: Nobody is explaining why spending another $350 billion on a Wall Street bailout is a better way to stabilize and stimulate the economy than, say, devoting that money to universal health care or a full employment program. Shouldn't that be the very first condition of this amount of money? Shouldn't someone have to make this argument? And isn't the fact that this case hasn't been made a major reason why polls show the American people still strongly oppose this bailout?
Let me say that in the upcoming negotiations over the bailout, some of this might change. For example, some of the loopholes may be eliminated, and lawmakers may step forward and actually legislate the use of the money, rather than simply giving it to the president.
But if everything stays the same -- if these circumstances stand -- then I see no reason for Congress to cut another blank check for $350 billion. There's going to be a huge amount of financial industry pressure to pass this, but progressives have to stand up to that. As George Bush once said, "There's an old saying in Tennessee -- I know it's in Texas, probably in Tennessee -- that says, fool me once, shame on -- shame on you. Fool me -- you can't get fooled again."
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