Why are we doing this?
A $700 billion expenditure on distressed mortgage-related assets would roughly be what the country has spent so far in direct costs on the Iraq war and would amount to more than $2,000 for every American citizen.
The primary function of the Bush administration has been to empty out the U.S. Treasury and funnel the proceeds into the pockets of their cronies. This is another instance of what Naomi Klein calls the Shock Doctrine where a fabricated emergency is used to push through an ideological position that would ordinarily be untenable.
You think I’m kidding. Here’s what the bailout proposal says:
(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:
…
(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;…
Sec. 8. 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.
Got that? No limitations. Not reviewable by any court of law or agency. Just a blank check to Hank Paulson to do as he pleases. And it’s not like they’re buying real-estate or anything tangible. They’re using this money to buy off the junk paper — the artificially inflated credit default swaps — that these people bought and sold like mainlining junkies. There’s no regulated market for these things, so the price is basically whatever the market will bear.
It’s like you give an IOU to your beer-buddy, he gives it back to you for an even bigger IOU, and I step in with a bag of cash and offer to take it all off your hands. What’s the price again?
This is a phony-baloney crisis and the last chance by this administration to sweep out what few crumbs are left in the empty national vault out into the pockets of their friends. The direct beneficiaries of this $700B bamboozle will be banks and insurance companies. Not mortgage owners, not working families, but investment bankers and shareholders.
This whole proposal is fucked on so many levels, I can’t even start. Worse than Enron, the Medicare scam, Interior department giveaway to Oil companies, and Iraq rebuilding scams put together. To the tune of $2,000 directly out of the pocket of each and every man, woman, and child, handed over to greedy Wall St. bastards. They’re not even pretending it’s for any tangible reason. Your $2,000 buys stability in the marketplace. That’s what we’re getting in return.
Go tell your Congressperson to stop this now. This isn’t prudent government and there is a reason it’s being rushed through Congress. They don’t want anyone smelling it. It’s theft. Pure and simple. Taking what is yours, giving it to somebody who doesn’t deserve it, and getting nothing in return.
It must be stopped.
Stumble it!
September 21st, 2008 at 4:33 pm
http://thepage.time.com/pelosi-s…ancial-markets/
Pelosi Statement on Legislation to Address Crisis in Financial Markets
Washington, D.C. — Speaker Nancy Pelosi issued the following statement today as Congress and the White House work to craft legislation to address the crisis in our financial markets:
“Congress will respond to the financial markets crisis by taking action this week in a bipartisan manner that will protect the taxpayers’ interests. The Administration’s $700 billion proposal does not include the necessary safeguards. Democrats believe a responsible solution should include independent oversight, protections for homeowners and constraints on excessive executive compensation.
“We will not simply hand over a $700 billion blank check to Wall Street and hope for a better outcome. Democrats will act responsibly to insulate Main Street from Wall Street.
“As we proceed to deal with this crisis, this is clear recognition that the party is over for the Bush Administration’s anything goes, failed economic policies that have damaged our economy, undermined the middle class and further pointed out the need for a New Direction.â€
…………….
We do not appease economic terrorists.
September 21st, 2008 at 6:49 pm
Write your member of Congress, don’t trust the press releases, they need to hear it loud and clear. I sent 4 letters today — my 2 senators, my rep and Pelosi. Do it for the children.
September 21st, 2008 at 8:57 pm
Well said, Fubar. I don’t do these posts well, so I’m glad you stepped up to say what needed saying.
September 21st, 2008 at 9:15 pm
[...] the subject of the outrage described by Fubar below, the New York Times reports tonight: Congressional Democrats began to set their own terms on Sunday [...]
September 22nd, 2008 at 10:51 pm
[...] though, has anyone looked at what is to be proposed in that proposal? Not only is it wastin’ two thousand dollars from every man, woman and child [...]
September 23rd, 2008 at 7:36 am
Sorry, fubar, but I’ve got to disagree with this on a number of levels. First, the idea that this is an example of Klein’s Shock Doctrine (which I think is a load of hooey anyway) misjudges the gravity of the global financial situation. With the outflow of about $200B from money market funds last week, the ability of banks to fund their daily obligations was threatened, making the “empty ATM” threat (which some call a replay of the WMDs in Iraq) a reality. The inability to get consumer credit has already decimated the auto industry, has frozen the mortgage market even for those with good credit and the ability to pay, and has exacerbated the plunge in home values. The credit freeze will, if left unchecked, murder small businesses that need credit much more than large corporations, which typically have cash stashed, and so kill any chance at an employment recovery. The clauses calling for no oversight that fubar quotes have already been negotiated out, and will not stand in the final bill. fubar is also incorrect in stating that this bailout purchases credit default swaps – in fact, it enables the purchase of any mortgage-backed securities, and will be used to purchase high-risk “bad paper” (low tranch mortgage-backed securities) which, while seized up by the current credit freeze, have significant underlying value (even in the current crisis, defaults in the lowest-tranch securitized mortgages run at 24%, and the underlying mortgage assets (homes) would have to fall to 0 for these assets to lose all value). His comment that the taxpayer gets nothing but “stability” for the money is factually incorrect…in fact, these assets have an excellent chance of being profitable once the credit markets regain confidence and begin loaning again. The concept of a “bad bank”, which isolates “stuck paper” and therefore allows banks and other credit entities to resume their role of extending and servicing credit (rather than working out bad loans and trying to price frozen assets), is well accepted and was proven in the savings and loan crisis – expensive, perhaps unfair, but effective.
While this is unpalatable, and a direct cause of the Republican deregulation obsession, crony appointments of the Bush regime (anyone remember SEC Chairman Pitt, who had to resign under a cloud in the first Bush term?), and the misguided “mark to market” rules that forced firms to mark assets at 0 when credit seized up, the idea that this is a “phony baloney” crisis, and that it will not benefit families, the unemployed, retired folks living on market interest and gains, and stressed mortgage-holders, is simply incorrect. I agree with Dems that this needs significant oversight, foreclosure protection, and regulatory language that protects taxpayers in the event of profits, but a populist movement to stop this action would be a grave error, in my judgement.
September 23rd, 2008 at 9:03 am
I’ve been going back and forth on this for awhile, and I think I am sort of in-between rick freedman & fubar’s positions. Some type of bailout is needed. However, some asses need to be kicked as well. If we bail out Wall Street by acquiring their bad paper, but leave the same venal management in place, we’ll just be back here again in a few years with the next irrationally exuberant bubble. Worse, the same Repug fuckup politicians and extremist reactionary think-tanks will have emerged unscathed, in a position to screw us again in a few years with their ‘gubbermint is bad’ rhetoric. Some execs, firms and pols really need to be punished as the strings in the bailout.
September 25th, 2008 at 1:31 am
I agree with Rick that something has to be done to help unclog the credit markets, but throwing $700B at the Treasury Secretary with no oversight and no accountability doesn’t even pass the smell test. Fortunately, the Dems seem to have grown a spine on this (perhaps emboldened by the screaming shit-fit fiscally conservative Republicans — people like Newt Gingrich — have thrown). Chris Dodd’s counter-proposal was a good start and this draft plan looks even better.
Rick presumes that this will be used to buy low-tranch mortgage-backed securities, but there was (and still is) nothing in the proposals to require this. If you go by the original proposal (which was the only thing floating around when I originally wrote that post) the Treasury is basically given complete discretion on the what, who, where, and how much.
There’s also no indication as to whether the price paid will be ‘market’ or ‘hold to maturity’ prices. That could make the difference between taxpayers ever breaking even on this deal.
The last thing I’ll say is that there was a radio interview a couple days ago with a former Japanese finance official (Japan basically went through the same thing a dozen years ago). His sentiment was that no amount of government interaction at this level is going to make much of a difference. Instead of freeing up the credit markets, what happened in Japan was that financial institutions hoarded whatever cash was thrown their way, if only to improve their balance sheets. Most sat on it for the next decade, leading to basic stagflation and caused deep structural issues in the Japanese economy that they still live with today (that’s how the infamous 0% prime-rate came to be — and even that didn’t help).
His point was that the best way to invest money is to do whatever it takes to bring up the value of the underlying real-estate, so all the securities that rely on it will rise as well — by doing the sort of thing that needs to be done to increase property values and reduce mortgage defaults. Offering incentives to builders and buyers, to get the real-estate pump going again so this stuff is worth something. That’s the only way you work your way out of the hole, not by handing off some cash to banks and hoping they circulate it.
Sounded like pretty good advice.
December 22nd, 2008 at 9:04 am
[...] Back in September when Shrubya warned of economic doomsday if we didn’t immediately give $700 billion to the financial services execs with no-strings attached, Fubar smelled a rat. [...]