Gut Check Time: Will Congress Stand up to Wall Street?

It's gut check time.

The attempt by Treasury Secretary Paulson to put a gun to the head of Congress and terrify them into forking over a $700 billion blank check to the Bush administration in 48 hours has failed. Now what?

Most Americans would just as soon the Masters of the Universe were allowed to sink in their own folly. They had the party; let them clean up the mess. But, looking at sinking housing values and shaken retirement accounts, most Americans know something has to get done.

Banks and investment houses carry weapons of financial mass destruction. Last week, they looked into the abyss. If nothing is done, the chances for a deep and long depression are very great. So stocks skied around the world when Paulson announced his support for a massive bailout of Wall Street. And stocks and the dollar plummeted, and oil and gold soared when it became clear on Monday that the Congress wouldn't simply salute and go along. Doing nothing is not an option.

Leaders from unions, consumer and citizen groups have weighed in, demanding strict conditions on any bailout. On Monday, Sen. Chris Dodd put forth a draft bill that called for an independent board to run the bailout, required that taxpayers get partial ownership in any firm bailed out, and mandated steps to forestall foreclosures and work out mortgages, helping to keep people in their homes. House Speaker Nancy Pelosi demands a kickstart for the real economy - extension of unemployment benefits, aid to states and localities, investment in green jobs and basic infrastructure. (But at only $50 billion, a relative pittance for the real economy compared to the sums demanded to rescue Wall Street). Rep. Barney Frank insists on limits on the compensation of executives of any firm that gets bailed out. Together, these conditions begin to make some sense out of a bad fix.

Initially, Bush and Paulson, backed by the slavish Republican leadership in Congress, resisted, calling for the bill to remain "simple and clear." Republican leaders denounced help for homeowners and Main Street as "political" and "partisan" as opposed to bailing out the Master's of the Universe which somehow is an emergency above politics.

But Paulson is a deal maker. As his testimony indicated today, he'll trade nominal oversight and a few bridges for the $700 billion. As someone who made half a billion on Wall Street, however, he's been unbending on limits on pay for his friends, on providing taxpayers with an equity stake in the firms that are helped, and on measures to force work outs of mortgages and a freeze on foreclosures. And he'll resist any detailed measures to regulate Wall Street to insure this doesn't happen again. For all the talk of bipartisan accord, this will be a face off. Democrats will have to stare him down.

With the financial markets reeling, who will blink first? Will the Democratic leadership insist on common sense? Will Paulson be able to panic Congress into folding? Will the financial firm lobbyists now swarming the Capitol like a plague of locusts be able to rent the votes they need?

The decisions will be made over the next few days. If you want to make your voice heard, go here to contact your legislator, or to get more information.

But this staggering bailout - as perilous and costly as it will be -is only a stop gap. Broader lessons need to be drawn; larger and more permanent reforms are needed. One thing should be clear: the conservative era is over. The theology of market fundamentalism has proven to be a false idol once more. As Joseph Stiglitz has argued, the collapse of Wall Street is to the market fundamentalists what the fall of the Berlin Wall was to communism. It's over. The right has proved once more that it cannot be trusted to run the government it scorns. A trillion dollar debacle in Iraq. A trillion dollar bust on Wall Street. Hundreds of billions pocketed by Big Pharma and Big Oil. It is time for a reckoning.

Comments

[katok]

No Robert this is already a done deal. We will get a few sketchy details this weekend, and late Sunday nite, Congress will come forth with approved and finalized legislation. It will probably take us a week to finish discussing how bad it hurts and realize Social Security is gone forever. But War funding has been approved.

[Fordham03]

Well, I'm happy everyone's finally paying attention; unfortunately, a little too late giving Republicans a free hand the last eight years. Two wars, jobs sent overseas, a dwindling middle class, and now a recession spiraling down to a depression. I agree something has to be done but $700 billion bailout with no restrictions is not the solution. I don't trust this administration to handle anything correctly. This has been happening for some time and they just let it spiral out of control--no leadership at the top. How I wish all the millionaires of this country were like Warren Buffet who said, percentage-wise his secretary is paying more taxes than he is, and feels that it is unfair. He just poured millions into Goldman-Sachs. It's time for change, and that's Obama.

Consider this latest stunt--McCains' efforts to cancel the debate tonight and, I might add, the VP debate as well! With less than 40 days to go, the American people have a right to listen to the candidates. One of them will be president; however, I can see why McCain is reluctant to debate after this financial debacle. What can he brag about the last eight years, to give us more of the same? Let's put a cardboard picture of McCain in the chair if he doesn't show, and let the show go on with Obama.

[funkalicious]

People should not be afraid thattheir homes will be worth less than last year that has already happened.
We are there no matter how much money we give WallStreet bankers.
We will have an economic contraction its happened. We have lost 30,40 100% of our 401k's
everyone I talk to has a loss on their families books oh well. Why should we be the ones to keep paying for their profits at our expense. Socialized losses and privatized losses...I dont think that is what the framers of our constitution had in mind, when they were dreaming of an egalitarian society.

This is welfare for the ubber rich, they agree to throw a few scraps to the folks they keep in poverty which
looking around I see more of as they have robbed me and my neighbors.

WE have the power to make them pay, if you want a level playing field you have to hold your mud and stop begging for crumbs from the thieves praying they will throw you a crumb.

If they lose we all keep our homes, what are they going come after millions of us? Get a grip bankrupt banks screw them. This is time to take it all, power to the people.

Just say NO WAY it is our country not just a bunch of rich thieving bankers in Greenwich Connecticut, and Washington .

We have the better hand, with nothing left to lose. NO DEAL

[THEVOICEOFMODERATION]

Think about it. We give banks our money. They lend it to someone else and charge interest. They give us back a small percentage of the interest and keep most of the interest. All according to their rules. The only other business that's better, arguably, is owning a casino!

[lightninbug53]

I am going to be as short about this "crisis" as possible. I don't know if this has crossed anyone's mind, but, If we are going to bail these criminals out, then we should get paid. Profits from where ever could be funneled back to us via rebate checks just like the government has so willing done. The folks on Wall Street are so clever with finances that the surely must be able to find a way to pay "WE THE PEOPLE" from their pocket books. I say MAKE THEM PAY at all costs!!!

[baronblack]

I pulled all my cash out of the bank why give them credit when they are not trust worthy institutions themselves. This bailout is the first step on the road to ruin of the American economy after it fails to stop the hemoraging of money from bad debts what do we do next?

[Donabirdy]

My Fellow Americans...

It's as tho', we American Citizens are the Parents of these Rebellious, Defiant, Drug Addicted Kids... who've Max'd out their Credit Cards, who've been gluttonously feeding their Greedy Habits... And they're now begging us for a Bail Out? To the tune of $700 Billion? No questions asked? No strings attached? Just trust them! I'm sorry, but that doesn't sound like a Responsible, Rehabilitative, Intervention to me! NO! TOUGH LOVE SOMETIMES REQUIRES THAT WE ALLOW OUR CHILDREN, TO SUFFER THE CONSEQUENCES OF THEIR ACTIONS! TO REAP THE HARVEST OF WHAT THEY SOWED! BOTTOM OUT! LET THE CHIPS FALL WHERE THEY MAY?!

We might consider giving them a 10th of what they ask for... BUT ONLY WITH CONDITIONS (i.e., OVERSIGHT... ACCOUNTABILITY... and a Promissary Note for RESTITUTION...W I T H I N T E R E S T ... repaid to U.S., The American Taxpayer! WHY SHOULDN'T these Recalcitrant Corporate Heads/Banks, BE ALLOWED TO FAIL IF THEY MUST? THEY GOT US INTO THIS MESS, SO THEY SHOULD BE MAKING MOST OF THE SACRIFICES! SUFFER THE CONSEQUENCES OF THEIR ACTIONS? The following is a link to what sounds like a VIABLE INTERVENTION, with proven results! IT'S NOT AS THEY SAY; THEIR WAY OR NO WAY! READ AND SHARE! READ AND SHARE!

http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html?em

WE CANNOT CONTINUE TO BUCKLE TO THESE RANDSOM DEMANDS OF THE RAPID! LET'S TAKE BACK OUR POWER PEOPLE!

[pissedmichael]

I agree nearly 100% with this article. However, would someone please tell me what Paulson gives as his reasons for not wanting to set limits on executives or, 'his friends' pay? Like most of us, I have very little doubt that he would oppose this measure of common sense, but I do find it hard to believe that he could be such a monster as to not be able to comprehend why we would be upset with such a position. Is this just another example of the validity of Barak Obama's statements that he and the rest of the Republican party (I hate having to accord them the respect of capitalizing the first letter of their name) think that we are 'Stupid, stupid, stupid!' Thanks

[heal57]

The reasons are simple; Paulson and the republicans have been trying to take money from the poor and middle class and transfer it to their wealthy contributors and comrads. Why is it so hard to believe? It's true. It's been true since Reagain, but especially the last 8 years. that's what the war in Iraq is really about, and the so-called 'patriot act' giving unbridled powers to the executive branch, and now this bailout. This has been in the works for months. Do not think this really just happened. Money was stolen from John Q investor and home borrowers and transferred to a few and now we all have to pay for it. We want the American people to get part of this when it starts to pay off and that includes all Americans; nothing for the CEOs and high level execs who stole and want even more with the republicans winks and nods. NO BAILOUT unless consumers get part of the $$$.!

[JAMES GORMAN]

normally Presidents don't invoke panic and alarm to quell the nation's fears that Monday morning
banks will close. Rooseveld coined his "all we fear is fear itself" early when dealing with the Great
Depression. Now we have the Great Infusion with Mr.P's gun at the head of congress as this
Huffington piece itemizes. It is a wonderful "blog"--Mr­.Borosage'­s article above. And Bush was on
TV to put a 14 minute gun to our head---his favorite tactic--a boyish recital of horrors as he did for the various incursions and pre-emptions into Arab lands. Good God! He, God, has to be a Liberal---after all he gave universal forgiveness for nothing--He the Creator who probably hates creationism--must deliver
us until we get our minds back and drive out every vestige of Bush and the GOP--Grand Old Pigs.
J.Gorman

[ANormalGuy]

CNN had a report on their section of "Keeping Them Honest" a few days ago in which they reported that in 2005 a bill was introduced that would have given far greater regulatory power over these financial institutions and might have prevented the crisis we are in now. What troubles me is that the report said the Republicans supported it but the Democrats were against it and that bill died. The report also stated that McCain issued a dire warning of the consequences which we are now dealing with. What also concerns me yet in a way is funny is that CNN reported also that both Biden and Obama voted in support of the infamous "bridge to nowhere" twice! Hmmmmmmmm

[heal57]

I don't think so!!!!!!!!­!!!!!!!!!!­!!!!!!!!!!­!!!!!!!

[daddysboy]

We need to take a courageous step for once in this country and let the chips fall where they may. There has been enough MONKEYING of our government by people that don't give a moment's thought about their fellow man. We can't count on our week-kneed congress to do a damned thing for us. They will save themselves as usual and the "compromise" won't really be a compromise at all. paulsen said it ALL when he made it clear that a profit for the taxpayers taking ALL the risk was off the table. Are you KIDDING me? The utter NERVE of someone that worships at the alters of money and "free markets" clamoring for socialized banks and then denying the right of the people to capitalize on that socialization is unfathomable and strikes me as the pinnacle of hypocrisy (well I guess if you were nothing more than a selfish, greedy pig all along it isn't really being hypocritical, just slightly more genuine).

[CarryBack]

Interesting isn't it? Congress doesn't see a problem using Public Funds, which has never been done before in US History with some seeing this action as UNConstitutional, going right ahead in spite of a consensus of Public opinion strongly AGAINST this Bail-Out, Voting for **their** bi-partisan version of a proposal going through Congress Bailing-OUT these bankrupt Charlatans.

For an educational Primer on the ramifications of a Bail-Out read here:

http://pumasunleashed.wordpress.com/2008/09/24/mccain-tells-wall-st-drop-dead/

[Traveller]

WHAT WORRIES ME ABOUT THIS ENTIRE ECONOMIC HAIR ON FIRE SCENARIO...

1) With the huge shift in global economic power why should the common man be paying for the this HUGE mistake of the venture capitalists?

2) Why was the wording of Paulson's request so kingly when all he was doing was begging for a handout? Why did he want and demand no oversight?

3) Why is the lame-duck president creating the same atmosphere of doom unless we do EXACTLY as we ask as he did before the Iraq war. There he sent Powell to UN to bolster his case this time he is getting the 2 political candidates?

4) WHAT is the rush?

5) WHY should such HUGE sum of money be given directly to this government who has not solved a SINGLE problem in the past 8 years. What makes us believe that it is not to fill their own private pockets so that they can survive the mess that they created?

6)WHY cant there be a group of economists who have ACTUALLY done somethings positive in the past, take charge?

7) We do not need panic mongers in this time.Congress needs to think and deliberate and come up with a better choice. Why is there always a gun put to their collective heads to do exactly as this government wants and needs?

WE CANNOT AFFORD THIS GOVERNMENT ANYMORE>>>>>> T

[semperfido]

"The theology of market fundamentalism has proven to be a false idol once more. As Joseph Stiglitz has argued, the collapse of Wall Street is to the market fundamentalists what the fall of the Berlin Wall was to communism. It's over."

You and Stiglitz are dreaming, bucko. The theology of the market is never over. Finance is never over. History proves it. The lizard just mutates. And thank God, because without its follies and excesses, none of the good stuff that comes of it happens either.

And just for the record, this collapse doesn't expose the folly of the right alone. I didn't notice the left objecting to the "everyone can own a home" philosophy that was one of the main reasons the financial system came crashing down.

[daddysboy]

I wish the trickle-down fanatics would just trickle on themselves and leave us to our squalor that they have forced upon us by insisting on unsustainable excess. And for the record, everyone in America SHOULD want to own a home. Educated bankers should know which ones are ready and which ones ARE NOT since they used to be at risk of failure before former capitalists started preaching communism.

[christabor]

It is amazing how the people who ridicule the tricle-down theory accept the theory that if we tax the risk more and run the money through the fat buracrats in DC it will then tricle down to the poor and middle class.

[billw8017]

The general rule is that people fix what they know how to fix; other things slide and accumulate. A point comes when machinery breaks down. Paulson and Bernanke know how to cover financial industry coughs with cash. The cash is its own problem and may be the problem behind the problems we recognize. A trillion dollar deficit is almost unthinkable.

You know, America is a great nation, but this is a great deficit. It can leave us just as broke as those little countries that go broke just to support their big boss in the fanciest Western style. 10-20% inflation seems almost certain, but if central banks around the world start dumping their dollars, 1000% and a Dow Jones at 6000 is possible.

[eriana]

We are Asian. We are sure that America is super power country. America president policy affect to global. Hi ! The new America candidate president save economy and do some think for global economy progress.

Erny
http://www.baliglobalmarket.com
baliglobal­market@gma­il.com