The deal proposed by Paulson is nothing short of outrageous.
Dirty Secret Of The Bailout: Thirty-Two Words That None Dare UtterA critical - and radical - component of the bailout package proposed by the Bush administration has thus far failed to garner the serious attention of anyone in the press. Section 8 (which ironically reminds one of the popular name of the portion of the 1937 Housing Act that paved the way for subsidized affordable housing ) of this legislation is just a single sentence of thirty-two words, but it represents a significant consolidation of power and an abdication of oversight authority that's so flat-out astounding that it ought to set one's hair on fire. It reads, in its entirety:
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.
In short, the so-called "mother of all bailouts," which will transfer $700 billion taxpayer dollars to purchase the distressed assets of several failed financial institutions, will be conducted in a manner unchallengeable by courts and ungovernable by the People's duly sworn representatives. All decision-making power will be consolidated into the Executive Branch - who, we remind you, will have the incentive to act upon this privilege as quickly as possible, before they leave office. The measure will run up the budget deficit by a significant amount, with no guarantee of recouping the outlay, and no fundamental means of holding those who fail to do so accountable.
Is this starting to sound familiar? Robert Kuttner cuts through much of the gloss in an article in today's American Prospect:
The deal proposed by Paulson is nothing short of outrageous. It includes no oversight of his own closed-door operations. It merely gives congressional blessing and funding to what he has already been doing, ad hoc. He plans to retain Wall Street firms as advisors to decide just how to cut deals to value and mop up Wall Street's dubious paper. There are to be no limits on executive compensation for the firms that get relief, and no equity share for the government in exchange for this massive infusion of capital. Both Obama and McCain have opposed the provision denying any judicial review of decisions made by Paulson -- a provision that evokes the Bush administration's suspension of normal constitutional safeguards in its conduct of foreign policy and national security. [...]
The differences between this proposed bailout and the three closest historical equivalents are immense. When the Reconstruction Finance Corporation of the 1930s pumped a total of $35 billion into U.S. corporations and financial institutions, there was close government supervision and quid pro quos at every step of the way. Much of the time, the RFC became a preferred shareholder, and often appointed board members. The Home Owners Loan Corporation, which eventually refinanced one in five mortgage loans, did not operate to bail out banks but to save homeowners. And the Resolution Trust Corporation of the 1980s, created to mop up the damage of the first speculative mortgage meltdown, the S&L collapse, did not pump in money to rescue bad investments; it sorted out good assets from bad after the fact, and made sure to purge bad executives as well as bad loans. And all three of these historic cases of public recapitalization were done without suspending judicial review.
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.
In short, the so-called "mother of all bailouts," which will transfer $700 billion taxpayer dollars to purchase the distressed assets of several failed financial institutions, will be conducted in a manner unchallengeable by courts and ungovernable by the People's duly sworn representatives. All decision-making power will be consolidated into the Executive Branch - who, we remind you, will have the incentive to act upon this privilege as quickly as possible, before they leave office. The measure will run up the budget deficit by a significant amount, with no guarantee of recouping the outlay, and no fundamental means of holding those who fail to do so accountable.
Is this starting to sound familiar? Robert Kuttner cuts through much of the gloss in an article in today's American Prospect:
The deal proposed by Paulson is nothing short of outrageous. It includes no oversight of his own closed-door operations. It merely gives congressional blessing and funding to what he has already been doing, ad hoc. He plans to retain Wall Street firms as advisors to decide just how to cut deals to value and mop up Wall Street's dubious paper. There are to be no limits on executive compensation for the firms that get relief, and no equity share for the government in exchange for this massive infusion of capital. Both Obama and McCain have opposed the provision denying any judicial review of decisions made by Paulson -- a provision that evokes the Bush administration's suspension of normal constitutional safeguards in its conduct of foreign policy and national security. [...]
The differences between this proposed bailout and the three closest historical equivalents are immense. When the Reconstruction Finance Corporation of the 1930s pumped a total of $35 billion into U.S. corporations and financial institutions, there was close government supervision and quid pro quos at every step of the way. Much of the time, the RFC became a preferred shareholder, and often appointed board members. The Home Owners Loan Corporation, which eventually refinanced one in five mortgage loans, did not operate to bail out banks but to save homeowners. And the Resolution Trust Corporation of the 1980s, created to mop up the damage of the first speculative mortgage meltdown, the S&L collapse, did not pump in money to rescue bad investments; it sorted out good assets from bad after the fact, and made sure to purge bad executives as well as bad loans. And all three of these historic cases of public recapitalization were done without suspending judicial review.
As the financial markets took a turn for the worse over the past few weeks, conventional wisdom on Wall Street and Washington was that Hank Paulson, the Treasury Secretary, was the right man for the difficult job. A seasoned hand on financial matters, the former Goldman Sachs head had an acute understanding about how markets work, and had earned accolades from both political parties for his willingness to take a level-headed approach on these matters.
Now, however, confidence in Paulson is eroding, with critics questioning whether the Treasury Secretary's Wall Street connections have impacted his approach to the current crisis. Both progressive and conservatives and sounding the alarm.
"Some are saying that we should simply trust Mr. Paulson, because he's a smart guy who knows what he's doing," wrote Paul Krugman of the New York Times. "But that's only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half -- a period during which Mr. Paulson repeatedly declared the financial crisis 'contained,' and then offered a series of unsuccessful fixes -- justifies the belief that he knows what he's doing? He's making it up as he goes along, just like the rest of us."
Then there was conservative pundit Michelle Malkin, hardly of the same ideological ilk of Krugman, who declared on Fox News: "I think that Hank Paulson's corporate...record is very important. While he was a Goldman Sachs, the company was buying up a lot of Chinese banks in particular, and at the time of his nomination, there were very serious questions raised about the conflicts of interest involved, and where his priorities are, and who he really is looking after."
Malkin was referencing the stipulation, in Paulson's bailout plan, for the U.S. Treasury to help prop up some foreign banks. But the main thrust of her point -- that Paulson's past mattered -- was echoed among economists, analysts, and lawmakers throughout Monday. Some of Paulson's former associates and colleagues are the very people he now is in position to help aide with taxpayer dollars. As McClatchy News reported, "Paulson's former assistant secretary, Robert Steel, left in July to become head of Wachovia, the bank based in Charlotte, N.C., that has hundreds of millions of troubled mortgage loans on its books."
Moreover, as Bloomberg News reported: "Goldman Sachs Group Inc. and Morgan Stanley may be among the biggest beneficiaries of the $700 billion U.S. plan to buy assets from financial companies while many banks see limited aid..."
Now, however, confidence in Paulson is eroding, with critics questioning whether the Treasury Secretary's Wall Street connections have impacted his approach to the current crisis. Both progressive and conservatives and sounding the alarm.
"Some are saying that we should simply trust Mr. Paulson, because he's a smart guy who knows what he's doing," wrote Paul Krugman of the New York Times. "But that's only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half -- a period during which Mr. Paulson repeatedly declared the financial crisis 'contained,' and then offered a series of unsuccessful fixes -- justifies the belief that he knows what he's doing? He's making it up as he goes along, just like the rest of us."
Then there was conservative pundit Michelle Malkin, hardly of the same ideological ilk of Krugman, who declared on Fox News: "I think that Hank Paulson's corporate...record is very important. While he was a Goldman Sachs, the company was buying up a lot of Chinese banks in particular, and at the time of his nomination, there were very serious questions raised about the conflicts of interest involved, and where his priorities are, and who he really is looking after."
Malkin was referencing the stipulation, in Paulson's bailout plan, for the U.S. Treasury to help prop up some foreign banks. But the main thrust of her point -- that Paulson's past mattered -- was echoed among economists, analysts, and lawmakers throughout Monday. Some of Paulson's former associates and colleagues are the very people he now is in position to help aide with taxpayer dollars. As McClatchy News reported, "Paulson's former assistant secretary, Robert Steel, left in July to become head of Wachovia, the bank based in Charlotte, N.C., that has hundreds of millions of troubled mortgage loans on its books."
Moreover, as Bloomberg News reported: "Goldman Sachs Group Inc. and Morgan Stanley may be among the biggest beneficiaries of the $700 billion U.S. plan to buy assets from financial companies while many banks see limited aid..."
posted by Kangaroo Brisbane Australia at 5:02 AM
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