Or simply another way to redistribute wealth upwards?
I don’t know if this piece of “legislation” is necessary to avert doom for the nation’s and world financial markets – but I doubt it.
There is so much wrong with this bill, and with this process, that it’s hard to know where to begin.
1. The last time George Bush & Co. asked for a trillion dollar blank check, and insisted the deal had to be done or the sky would fall... well, that worked out OK, right?
2. It gives the money to precisely the same people and institutions that got us into this mess. Hank Paulson, the architect of the initial bailout proposal, is one of the very characters that first oversaw construction of the house of cards (as Chairman of Goldman Sachs), and then ensured flimsier building practices in deregulating the financial instruments most responsible for the current crisis.
3. What exactly changed between Monday and Friday to switch the votes of 57 Congresspeople? How did a risky, too-expensive, ideologically unacceptable $700 billion bailout become possible by adding an extra $150 billion of special interest spending? (One version: http://www.nytimes.com/2008/10/04/business/04capital.html?_r=1&ref=business&oref=slogin.)
4. If my math is right, direct Federal intervention in the recent economic crisis exceeds $1 trillion ($29b for Bear Stearns, $200b for Fannie and Freddie, $85b for AIG, $0 for Lehman Bros – no soup for you!, $700b for the bailout). Yet there is no consensus on whether this $1 TRILLION will actually fix the liquidity/credit "crisis," of if this is the best use of $1 trillion to aid the economy as a whole as well as financial markets.
5. What’s your frame? Is it a bailout? A rescue? A hostage negotiation (give us the money or we’ll shoot your economy)? Addiction to pork? A bribe (here’s where the extra $150b comes in)? Or simply Bush & Company’s last chance to steal a big chunk of another trillion dollars (c.f. war in Iraq)?
6. “One of the most bi-partisan efforts I have seen...” (Cong. Joe Sestak, D-PA). Isn’t it amazing what can bring about consensus?
7. Note what is missing from this hurry-up, have to pass the bill this second or Wall Street will collapse and bring down Main Street with it.
- Clear analysis about what caused the problems.
- Hints of regulation to address obvious causes.
- Actual relief for real people, including debt forgiveness and renogitiation of loan terms and prioncipal;
- Actually curing the expressed underlying problem of "toxic" mortgages
8. It's about the money, stupid. $700 billion ought to buy you something. There has been virtually no discussion as to whether buying $700b of stock in companies holding "toxic" debt whould both adress the companies' capitalization problems and give the Treasury a stake in success (or if this would be a bad idea for other reasons). Or whether the approximately $200 billion said to be at risk would be better devoted to actually fixing most of the mortgages in default and foreclosure. $200b divided by 5 million problem mortagages equals an average of $40,000 per problem mortgage to help fix them. Since not every mortgage should be fixed, the actual per mortagge relief amount could be even higher.
9. America has lost its memory. The last major bank crisis - a Bush administration, with cozy relations between legislators and the industry they deregulated at the center.
The signs point to this as a huge problem - regardless of whether it averts bigger problems.