Fetters
The administration is requesting “unfettered authority” to buy whatever with the $700 billion worth of bailout money they’re asking for. And of course that’s what they want. If you were to give me authority to do something, I’d prefer to get the unfettered kind. But you almost certainly wouldn’t give it to me. And you especially wouldn’t give it to me if the problem the authority was meant to resolve had occurred under my watch. If this scale of funds is going to be spent. Here’s Ed Paisley for CAP on what a reasonable package could look like:
Thanks to the leadership of Federal Deposit Insurance Corporation Chair Sheila Bair, Congress has a model to work with. The FDIC is doing just this at failed California-based IndyMac Bank. By engaging in systematic loan restructuring, rather than foreclosing on the failed bank’s mortgages, the FDIC will likely end up preserving more value and reducing taxpayer exposure. Whatever agency Congress assigns to this broader task should do the same, restructuring troubled loans in the portfolio of mortgages they purchase in a systematic manner, rather than through piecemeal modifications. The result of refinancing more loans than private holders have been able or willing to do will be fewer defaults and foreclosures.
The financial markets are but one of the economic problems we face. The last eight years brought stagnant wages and weak job creation—with the situation getting even worse over the course of this year. Restoring our economy requires a plan to address the financial crisis and the underlying weakness in our economy. We need to make job-creating, growth-producing investments in our infrastructure and transform to a low-carbon economy. The legislative package that moves rapidly through Congress to implement Paulson’s new plan should also include expanded unemployment benefits and heating assistance for low-income families, increased food stamps, and assistance for states in providing health coverage to families in need during these difficult times. The folly of Wall Street and the negligence of the Bush administration has produced today’s pain on main street. It would not be right if the rescue only rescues firms and not families.
To give the regulatory authorities who failed to prevent this crisis carte blanche to hand out money to the financial institutions who caused the crisis while doing nothing for ordinary people would be outrageous.
29 Responses to “Fetters”
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September 20th, 2008 at 3:23 pm
I’m very interested to see how the D Congress responds to this “unfettered” request. They should fight to make sure the 700B extends to all those who need it as you state and not just “insurance” for the greedy MBA types who can live on their record bonuses of 2006 and 2007.
thanks for the mess I-bankers, you guys are awesome…seriously!
k1
September 20th, 2008 at 3:30 pm
My hat’s off to the Bush Jr. Republicans for managing to exceed my expectations for depravity once again. Man, they are some impressively committed sons of bitches. I am impressed.
I really would like to imagine that there’s some snowball’s chance in hell that the Democratic leadership in Congress would have more to say on this than “Yes-siree-bob Mr. Paulson! Whatta swell idea, let’s sign!”.
But right now I’m not prepared to believe that any of them are preparing anything other than a plan for complete agreement.
I love the fact that after having proven deregulation wrecks our economy, the rescue plan demands that Congress deregulates the rescue plan. Neat-O.
September 20th, 2008 at 3:31 pm
Thanks Matt for your interest in this subject because it really is important. Now I can post this without being off topic.
FROM: http://globaleconomicanalysis.blogspot.com/
Here are some of the provisions of the draft version of the bailout bill, from the NYT. For full draft and commentary do the above link.
Sec. 2. Purchases of Mortgage-Related Assets.
* 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….
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.
* 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. 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
There you have it. Your money will be spent per the decisions of Paulson, former CEO of Goldman Sachs and NOBODY ELSE. His decisions will final and not subject to any kind of review, judicial recourse, or “any other provision of law regarding public contracts”. The $700,000,000,000 is just for starters
There’s your democracy folks. Don’t hold your breath – it will pass. The GOPers want it and will get plenty of help from the other side of the aisle including the usual suspects: Chuck Schumer (D-WallStreet), Chris Dodd (D-Hedgefundistan) and Barney Frank (D-FannieFreddie).
September 20th, 2008 at 3:36 pm
Shorter Rescue Plan:
Due to the recent difficulties caused by trusting Wall Street executives to avoid the temptations we legally allowed them to pursue, we would now like all regulations taken off the Treasure Executive to do anything he wants with the 3/4 of a TRILLION dollars you give him, because, like, how could that go wrong?
September 20th, 2008 at 3:45 pm
Matt, a couple of points… first of all, the current incumbents at Fed and Treas didn’t really cause the problem, but they are charged with dealing with it. Second, I like anti-GOP partisan hackery as much as anyone these days, but I also know that this is a HUGE HUGE HUGE GLOBE-WRECKING problem, that Paulson’s plan may be terrible, but is also the best solution so far advanced, that time is of the essence — we’ve got a week, basically — and that holding things up to play games could do incredible economic damage that could take a decade or more to sort out.
There are lots of reasons to spend the next several years investigating and unraveling the awfulness of the Bush administration. Add the lack of regulatory oversight in the derivatives markets to the pile, to be sure, but don’t blow up the freaking world here and now to score cheap partisan points.
And no, I’m not a gullible troll, I’m someone who writes (skeptically) about Wall St for a living and understands how bad things really are.
September 20th, 2008 at 3:50 pm
May I be so bold as to humbly note that if Paulson’s plan basically involves him being granted free reign to do whatever he thinks needs to be done with $700 billion that this doesn’t even the minimum standards of what it means to ‘have a plan’?
September 20th, 2008 at 3:51 pm
…s/b “that this doesn’t even meet”
September 20th, 2008 at 4:05 pm
El Cid,
The plan seems pretty clear: Transfer certain debt from Wall Street to the federal government.
Due to the complexity of financial instruments, as well as the urgency of the situation, I do not see how you can draft a more specific bill.
As far as I know, any out and out corruption would be illegal under other laws.
September 20th, 2008 at 4:10 pm
“but I also know that this is a HUGE HUGE HUGE GLOBE-WRECKING problem”
How do you know that? What’ll happen if the go belly up? Shareholders will lose all their money. Tough shit. In the case of the commercial banks, the Fed will step in and take them over. The FDIC will take a hit, but that’s what it’s there for. Some non-commercial-bank financial institutions will merge. Some will declare bankruptcy. We should just let the system work this out and stop listening to people like Chuck Shumer who have a conflict of interest.
September 20th, 2008 at 4:15 pm
John, this is the worst idea in world history. The best-case scenario is that Paulson simply gives the money directly to rich people. The other possibility is that the government buys the shitpile–and the TRILLION DOLLARS VANISHES.
If we institute this plan, the US government will declare bankruptcy in the next few years, and the US will go away.
Here’s a plan: we nationalize the banking industry, such that its eventual profits go directly into the treasury. Or another: the government buys every mortgage in the country, and automatically changes it to a fixed-rate at 5.5%.
There are two better ideas, right off the top of my head.
Who gives a fuck if investment banks go under? We’re concerned about the people SERVED by the investment banks.
September 20th, 2008 at 4:24 pm
You know, for 3/4 of a trillion dollars, I think we can afford to hire a few hundred fucking economists and accountants to work 24 hours over the next week so that we could maybe draft something more specific than “WHEEEEEE!”
September 20th, 2008 at 4:24 pm
Also, I have a new “plan” to save my small business which involves you giving me a million dollars and then going the hell away.
September 20th, 2008 at 4:39 pm
I don’t understand why we aren’t just buying the bad mortgages. Why the hell are we buying the bad mortgage-backed securities?
September 20th, 2008 at 4:42 pm
1) It’s simple, The Democratic Congress should raise the $2 Trillion needed for the bailout by imposing a income Surtax on the richest 3 percent of the population to raise the money.
George is the Superrich’s puppet –let them pay for his screwups.
Plus Wall Street and the financial system is their Game. They broke it– they bought it.
September 20th, 2008 at 5:12 pm
“You know, for 3/4 of a trillion dollars, I think we can afford to hire a few hundred fucking economists and accountants to work 24 hours over the next week so that we could maybe draft something more specific than “WHEEEEEE!””
Heh, point take. Certainly Congress should take a look at it. I wasn’t properly taking the scale of this moeny into account.
Don,
Is it possible to raise that much via income tax surcharges? I’ve seen estimates that the repealing the Bush tax cut will only net 54 billion a year…
September 20th, 2008 at 5:19 pm
David, were those estimates created by the economists that didn’t see this coming? Or were they created by the many, many economists who KNEW this was coming and are STILL being shut out of the solution?
September 20th, 2008 at 5:24 pm
Does anyone else think this feels like one last “eff-you” parting shot, that the administration intends to starve the beast, leaving Obama with a “Carcetti getting the school budget moment”..
September 20th, 2008 at 5:31 pm
The optimist in me would like to agree with the above statement.
The realist in me now fears that the notion that this is the “last” F-U is rather naive. Maybe there are more.
September 20th, 2008 at 5:41 pm
El Cid… Right, its not even October. Poorly worded.
September 21st, 2008 at 2:11 am
unfettered means paulson will give most of the money to goldman sachs to “oversee” the buyouts.
September 21st, 2008 at 9:33 am
I have an even better solution. I am putting up another 700 billion, that I don’t have either, to rescue the ’system’. That makes 1.4 trillion dollars (am I counting right?). The only difference between me and the government is that I have zilch in my bank account and the government is already 10 trillion in the red (give or take a few billion). That makes me a whole lot more solvent than the government. Any other philanthropists out there? Join the club! Let’s have fun!
September 21st, 2008 at 12:30 pm
well, clearly you are ill-informed. i watched the sunday political chat shows this morning and the experts told me very clearly that this is all bill clinton’s fault.
so there.
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