Why Congress Should Oppose the Bail-Out Package
Below are the reasons Congress should reject the package unless there are major changes to the bill. Simply put, as it stands the bill will grant far too much power and authority to the Treasury and will screw the US taxpayer while rewarding companies for incredibly bad decisions.
Let's go through all the arguments against this package.
Let's start with the text of the deal:
(a) Authority to Purchase.--The Secretary 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.
(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;
(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and
(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
Note all of the authority given to the Treasury secretary. He buys and sells securities at terms he deems necessary. He appoints firms to be "financial agents of the government." He creates any vehicles used to deal with this mess. In short, he is given a huge swath of power to handle this mess.
Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.
He makes literally no reports to Congress. After three months and then "semi-annually thereafter." That is way too much time between reports. Also note there is no mention of what information he is supposed to present to Congress. The Treasury Secretary could come into Congress with nothing -- no reports, not facts, no stories to tell -- and be in compliance with this act.
Sec. 6. Maximum Amount of Authorized Purchases.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
Did you catch that? There's a great little language shift. The Treasury Secretary's authority is limited to $700 billion outstanding at any time. That means he could buy $700 billion -- then sell some at a loss -- and then buy more to get back to $700 billion. This is a revolving credit line, not a firm upper limit. It's conceivable the Treasury could but and sell trillions of dollars under this authority.
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.
Excuse me? What country are we living in? Paulson could grant total authority to, say, Goldman Sachs (his former employer) and we the taxpayer would have nothing to say about it.
Folks, this is a boondoggle for several reasons.
1.) There is no oversight. Period. No one should be given this amount of power without any check and/or balance.
2.) Why this huge dollar figure?
"One of you mentioned that you will use about $50 billion dollars a month. If that's the case, and you're certainly not going to use all $700 billion immediately, and as you can see there are a lot of questions about whether this will work, we understand you've done your best and you think this will work best, but it's clear we're in uncharted waters. But what about doing this in tranches? Why couldn't you ask us for $150 billion, and on January 15th or January 20th we would come back, we would assess how this worked and grant some more money if it's really working?"
He's asking for 25% of the 2007 federal budget in one fell swoop. That's a ton of cash.
3.) Bernanke's statement regarding purchase prices yesterday is pure crap:
``Accounting rules require banks to value many assets at something close to a very low fire-sale price rather than the hold-to-maturity price,'' Bernanke said in testimony to the Senate Banking Committee today. ``If the Treasury bids for and then buys assets at a price close to the hold-to-maturity price, there will be substantial benefits.''
Really? I've been involved with finance for 15 years, and I have never heard this distinction before. When I was a bond trader, I do remember getting calls at the end of the month asking for bids on bonds because clients had to mark their portfolios to market. But I don't remember anybody every saying, "let's mark this to "hold-to-maturity." This distinction is bullshit, plain and simple.
This is a huge boondoggle waiting to happen. If we give all of this authority to the Paulson we will live to regret it in a big way. And so will our children.
A friend of mine (New Deal Democrat over at Economic Populist) made an observation. Over the weekend we saw people in Congress "shocked" by what was happening. Paulson and Bernanke also qualify as the "deer in the headlights" for this mess. In other words -- everybody who should have seen this coming is now shocked we're in this mess. The only people to get this right were the bloggers -- or as NDD says, the "dirty hippies." Now, these same people who have gotten nothing right over the last year are desperately seeking money to help stave off a disaster. These people have no credibility on this issue. None. Nada. Zip. Zero.
Please call your Senator and Representatives and tell them to vote no on this piece of legislation unless there are major revisions.
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8 Point Plan: An Alternative to Madness!
1. Give immediate authority to an Energy Commission to control the SPR. Offer 20% (140,000,000) barrels for sale immediately @ $50 per barrel to domestic "Independent Refiners" only.
2. Make public policy that the "Energy Commission will continue to utilize the SPR as a price stabling devise and consolidate long term purchasing contracts with direct producers of crude feedstocks.
3. Immediately create a "Purchase Rebate Program" funded by the SPR sales offering $5,000-$10,000 instant rebates to buyers of domestically manufactured or "Remanufactured" vehicles with MPG ratings of 50mpg and over on an escalating scale.
4.Immediat
Let that sink in for a bit and we'll get the other half of the plan to you.
These four items will turn this economy around over night. It will reduce the price of every product in the country by first reducing the price of energy. In creating immediate relief from these unbridled energy prices, we give Americans some breathing room to do things like, pay their "Mortgages",
buy a new pair of shows for their children, and maybe even save a buck or two.
The impact of the energy theft is averaging $200-$400 per month per family inclusive of gasoline,e
You have touched on something everyone seems to have forgotten. The oil speculation run up of prices. Drill baby drill indeed. It was this deregulation madness that led to this Wall Street like inflation.
Are you feeling like a Pee-on? I am and I for one can tell you I want all New style Republicans to fess up that thier ideas are just the rantings of thieves. Where have all the fiscal responsibility republicans gone?
I have always believed 2 parties were necessary. The Democrats for dreaming of what could be and including everyone. The Republicans for saying "watch your step and can we afford it?" But the new republicans seem to be "every man for himself, damn the country and damn the people while I line my pockets" I think they need to clean house. WE need both parties. But folks, a dollar is only worth what our country is worth. Make our country a plundered and injured entity then that almighty dollar becomes wounded.
Don't vote for McCain if for no other reason then he is one of thier acolytes and he will be able to select justices that will give corporations more power and will take power from us. He has said so.
At issue is that many economists say it will not work simply because,
A.) the amount of bad debt far exceeds $700 billion...
http://www
B.) the whole bailout is to restore 'confidence'.
It is not based upon any formula or real target. The money amount Paulson has chosen (and is only a STARTING amount) is to make banks feel 'better' about loaning. There is nothing to stop them from loaning without a bailout package.
Also Barnacke and Paulson are not even offering other options. Check out this link from Richard Reid, our 22nd secretary of labor who proposes a government sponsored Wall Street reorganization that does not use ANY taxpayer money.
http://rob
Yet congress is not interviewing people like this...we are only seeing Bush, Paulson and Barnacke pushing for this one idea (or a modification thereof) which is inherently bad no matter how it is modified.
Call and/or write your representatives and senators and tell them NO! on the Paulson plan and tell them to revisit other options!
I wrote my senators and rep yesterday and called too. Basically I asked them to do what Senator Schumer suggested, that is, give $150 billion now and come back in a few months, see how it's working, what's going right and what's going wrong before committing more dollars to this. I just don't see why they need to rush this through with the full $700 billion other than to tie the hands of the next administration. Strict oversight and installments are key.
I think Paulson and Bernanke's whole mess is bogus, a scam.
1. They precipitated this mess. Paulson wrecked the Lehman negotiations with Barclays by making no-bailout remarks during the negotiations. This told Barclays that Lehman would be allowed to collapse so Barclays stalled and picked up the pieces much cheaper after the bankruptcy. Lehman's bad loans were in default and hit AIG hard.
2. The whole mess is about leveraged assets. Paulson wants us to pay the multiplied price at the top. The underlying at-risk assets are much less expensive. We could buy them ever month or so, with oversight probably for a fourth as much, in monthly chunks. Or we could work out other aid to effect a moritorium.
What is the definition of a Ponzi Scheme? Isn't it when the new investors 'invest' only to enrich the folks at the top of the pyramid.
Substitute us, the American taxpayer as the "investors', and wall street firms as the originator of said 'investment'.
I don't see much difference, or am I being a bit myopic?
If this package, or something very much like it isn't passed, then it's the Great Depression, Version 2.0 and everyone will suffer, Rich Man, Poor Man, Beggar Man, Politician, Populist, Children, Grandchildren, Great Grandchildren, Uncles and Aunts, Grandparents. Everyone! Our Banking system will totally collapse, and houses, the storehouse of most people's wealth, will not sell and will become virtually worthless.
That may be true, however, the boy who cried wolf may have cried one too many times. Everything is always in a crisis with this administration. What kind of management is that?
We are part of a private lending organization. It is our direct experience that every solicitation for funding that has come with a fast track component, has been structured as such with a strategy created to obscure and short circuit the "Due diligence process". If a project is worth funding, it is worth the time for adequate and complete due diligence.
When mortgages are non preforming, work out standards need to be brought to bare.
Work outs, write downs, forbearance agreements and rewrite, along with foreclosures are the industry standard. If losses are to be realized, that too, is part of the balancing of process.
If organizations failed to fully evaluate their collateral positions prior to making investment decisions, shame on them, pay the consequence. We the People did not share in the front end loaded profits that have been stripped from these deals already. We will not be subject to the ultimate accounting that imprudent practices have brought for their makers. Let the chips fall where they may, those that have gleamed great wealth as a result of these and other scams, have ample reserves to pick the spoils from the remains of our economy without digging further into our children's future finance!
Sounds great Hale but the Democrat majority will find a way to pass it. Maybe they will sneak in a way for people to keep their houses that don't deserve to in many cases.
America is a great place isn't it, we reward the irresponsible and punish the responsible.
Those like myself that pay my mortgage will get nothing while the bums that don't will get a free handout.
This dire emergency tactic is typical for the Bush Administration. The only thing missing so far is the "mushroom cloud."
Please contact your representatives, and share your wisdom. The financiers are about to saddle our economy down with yet more debt to pay "tribute" on.
This is the future of all Americans at stake.
Thank you.
I have contacted my reps via email and phone asking them to vote no. I have read in the SLC Tribune this morning that they all are inclined to vote no!!! I have they stand firm.
Taking on additional debt is a very small price to pay compared to what will happen if this package doesn't pass.
Only if we accept a deal that doesn't require interest in return. And a payment plan that falls on the backs of the wealthy, not the person who lives by toil.
Thank you VERY MUCH for that nice job of fact-finding, Mr. Stewart. The smell of this pig-in-a-poke was powerful enough to waft all the way over here to South Korea ... where the English-language press has been notably quiet.
Question for fellow HP'ers: Are there *ANY* Congresscritters now on record as supporting this atrocious deal in its current form?
(I've already written mine back home in WA State.)
Unless I'm missing something, the only real cheerleading I've heard thus far has been from Paulsen, Bernanke, and Bush ... crickets from everyone else ... thank God ...
The quandry that congress finds itself in is laughable! Just have them "pretend" that the $700B is THEIR OWN MONEY and then do what they would do! This is NOT rocket science! The only reason there is any consideration of this is that it is easy to spend money when it's not yours! FIGURE THIS OUT!!!! It's not even hard!
This "financial crisis" is similar to the "energy crisis" - both are examples of outmoded, destructive systems in their death throes - and the "more of the same" proposed solutions (bailouts and "drill baby drill") will only dig the hole deeper, isn't that obvious?
As with energy, we need a "clean slate" solution. Capitalism must be returned to it's historical position as a sidelight to human activity, not the underpinning of it. It should serve humanity, not the other way around. Those who want to trade paper should be allowed to do so, but that activity should be in it's natural, proper place: subservient to the truly productive and respectable pursuits of average working people. Currently, the system is "upside down", and perhaps this crisis will give us the opportunity to right it. If not, then humanity is in deep trouble, because capitalism is a system that cannot sustain itself, by it's own inherent principles of greed, consumption, and elimination of competition.
It's fine to oppose something, but if you don't have a credible alternative isnt the best way to go about it would be to amend the proposal. Doo you really think, given AMerica's really boffo balance sheet, that the credit market are going to allow this to fester. Perhaps this really should be seen not as a bailout of Wall Street, but of Main Street because we all are the ones who are going to suffer if this pushes the economy over the edge, and we all are going to be to one;s who are going to pay for the collective sins of the 00"s in the years to come
Its so easy to be against something, its time we all found something useful to rally around and get us out of the mess the Bushie;s got us in
If they dump their investments, they and their global plantation will contract to the level that wages will support.
nclwtk:
It is inevitable that we will suffer. Heck, the quality of life has eroded in the last few years anyway, and inflation has been doing a job on us all in 2008. They (Paulson and Friends) want us to cave. Which, in all honesty, and in agreeance with Nader, the Dems will eventally cave, as they always have, especially since taking the "Majority" in Congress. So as you can see you will get your wish of accepting this cluster f#2! of a bail out with provisions or with provisions. If I have to pay for it no matter what happens, I'd rather toss this bailout plan and let the markets do what they need to do to correct it no matter how painful, jail for the overseers and perpetrators, help for the common man and woman in the form of mortgage restructuring, a seizure of all assets of these CEO's involved, Alan Greenspan arrested, Bush/Cheney impeached-did I leave anything out. Oh, yes, and finally some political representation for the unbelievable taxation we are getting already.
Coloredgyrl I like how you think. Might I add "OFF WITH THEIR HEADS".
Everything you've said is exactly right, except for the part where you say that these people gotten nothing right in relation to this mess.
Timing the appearance of a crisis, that would convert the economy of a country to be subservient to Wallstreet, to occur a few months before an election is pure artistry. Paulson and Bernanke are some of Wallstreet's "smartest guys in the room", when they misrepresent something it's not because they don't understand the implications of their lies.
If they hadn't asked for complete control of government spending with no oversight it probably would have gone off without a hitch. As it is the mere fact that virtually no one on Main Street approves seems to be having very little impact. Might have something to do with the fact that most of the powerful guys in government are millionaires and no which side their bread is buttered on.
On thing is for sure, Paulson didn't ask to raise the debt limit to $11.5 trillion without expecting to do some serious spending. Once the US is unable to borrow anymore, the money will be safely tucked away in Paulson's best friends keeping.
I heard BUSH is gonna try to do a full court press tonight like he has any credibility left. I am sick to my stomach with rage at this snatch & grab job.
Follow me on this one people if you would. This Bailout is more Trickle Down Economics, simply put they are telling us that if we bailout Wall St. that will TRICKLE DOWN and save Main St.
I say No Deal, we need to bailout Main St. and let it Trickle Up to Wall St.
This is just more of the same BS policies that got us here in the first place.
ENOUGH!!!!
It seems to me that we heard, over and over again, time after time, that the market was overloaded and due for a 'correction'. Well, now that 'correction' has happened, and the people on Wall Street and the people in the Administration, don't want the party to end.
This 700 Billion dollars should go to rebuild this country. Put people to work on infrastructure, alternative energy, rebuilding factories, etc., etc., etc.. Where in the world did this "INVESTMENT CRAZY" society come from? We used to build things. We used to buy things with real money, not credit cards. We used to be able to heat our homes and buy cars and put gas in them. What happened to this country? I remember a college student telling me a few years ago, that he planned on being a 'millionaire" by the time he was 30, eight years from then!! This is the problem. We brainwashed people into thinking they could get rich off wall street, and do nothing to earn a living. Some did, but when you consider the millions here in America, it was not feasible.
Give the money to the working class. Let's rebuild America from the BOTTOM up, instead of 'trickle down'.
Exactly. Putting money in the hands of the middle class, they will buy cars, houses, furniture, appliances, electronics, you know durable goods. That's what gets the economy going. Wasn't that what we were told after 9/11? Go shopping!! And who could forget the recent stimulus checks sent to every family to "stimulate" the economy? Giving money to rich people just goes into investments which does not stimulate the economy. It's the same as putting cash in a box out of circulation. What about a moratorium on federal income tax for the third quarter instead of a bailout? Just a thought-but how much cash would that put into circulation?
... and stop giving tax breaks to companies that move manufacturing overseas. There should be a penalty not a tax break!
The "middle class" won't be able to buy cars or houses because they won't be able to obtain loans. Plus, millions of folks in "middle class" will lose their jobs and won't be able to buy anything, but rather will be forced to sell their owns, adding to the mess, and likely even file for bankruptcy.
Investing on a credit card?
Do you make cash advanced on your credit cards to put the money into the stock market?
Do you know anyone that does?
Why would borrowing $700 billion to "invest" be any more successful?
If we want to invest in this country, then let's PAY FOR IT! I know, it's a stunningly novel concept to most libs, and to crook politicians.
No one said a thing about "advancing the money on their credit card" to put money in the stock market or anything else. What I was saying is, if we are going to put $700B in anything, the WORST place would be the Investment Banks on Wall Street. So what if they will then allow you to buy a new car or a new refrigerator or whatever. It is time we, in this country, learned to live within our means. Actually, whether we want to or not, there is going to come a time in the very, very near future, that we will be FORCED to live within our means. I realize that our lifestyle will change dramatically, but, like it or not, it WILL change.
Trickle down doesn't work, as has been proven. We need "bottom up" rebuilding. $700B would do a lot to put people back to work. The money to Investment Bankers on Wall Street will do NOTHING, except hold off the inevitable for a while longer. Till you Republicans are out of office?
Oh, and as for your little jibe about "most libs", perhaps I can remind you that your party is the one who got us into this mess in the first place, so your little critisizm is unwise and unwelcome.
Apparently you and a lot of other folks don't realize that without this package, little to no money will be available to build infrastructure, anything involving alternative energy, factories, etc. etc. Without credit the economy will not function. I'm absolutely startled that many don't understand this.
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