A lot of people agree with me in thinking the Paulson-Bernanke bailout plan needs to be thought out a lot more before it’s given the go-ahead. Seems obvious and it looks like it’s going to happen.
Newt Gingrich says that conservatives in Congress are confused by the fact that it’s a Republican administration’s proposal:
If a Democratic administration were proposing this plan, Republicans would realize that having Connecticut Democratic senator Chris Dodd (the largest recipient of political funds from Fannie Mae and Freddie Mac) as chairman of the Banking Committee guarantees that the Obama-Reid-Pelosi-Paulson plan that will emerge will be much worse as legislation than it started out as the Paulson proposal.
If this were a Democratic proposal, Republicans would remember that the Democrats wrote a grotesque housing bailout bill this summer that paid off their left-wing allies with taxpayer money, which despite its price tag of $300 billion has apparently failed as of last week, and could expect even more damage in this bill.
But because this gigantic power shift to Washington and this avalanche of taxpayer money is being proposed by a Republican administration, the normal conservative voices have been silent or confused.
It’s time to end the silence and clear up the confusion.
Robert Reich sees the need to reign in Paulson’s proposed fiscal Nazism before it begins:
The public doesn’t like a blank check. They think this whole bailout idea is nuts. They see fat cats on Wall Street who have raked in zillions for years, now extorting in effect $2,000 to $5,000 from every American family to make up for their own nonfeasance, malfeasance, greed, and just plain stupidity. Wall Street’s request for a blank check comes at the same time most of the public is worried about their jobs and declining wages, and having enough money to pay for gas and food and health insurance, meet their car payments and mortgage payments, and save for their retirement and childrens’ college education. And so the public is asking: Why should Wall Street get bailed out by me when I’m getting screwed?
Both of these guys have plans that will add some accountability to the proposal, as does Chris Dodd, former Democratic candidate for president:
Banking Committee Chairman Christopher Dodd is taking much more aggressive approach to the Treasury bailout plan, demanding foreclosure assistance, limits on executive compensation and profit sharing for taxpayers if the Treasury begins to make money back on the bad debt it plans to purchase.
As one might suspect from Dodd’s past work, his proposal is part righteous anger, part wrong-headed leftist dogma. The good: Dodd’s plan would grant authority for bankruptcy judges to restructure mortgages for homeowners facing foreclosure. Many of these loans are bad as they stand now. Getting something out of them and keeping families in their homes is better than the foreclosure/eviction/bankruptcy cycle that will otherwise take place.
The bad: “A provision that would require the Treasury to take a 65 percent portion of 20 percent any profits it makes from the newly purchased assets and put it into the federal government’s HOPE program, an affordable housing program.”
It’s not enough for Dodd’s liberal side that he take action to solve a problem. No, there must always be an additional social program that he and other liberals *feel* should be in place for their constituents’ benefit.
Hope is a great and wonderful thing to have so long as it’s based on something real. HOPE, on the other hand, is simply another government-funded transfer of wealth. It has nothing whatever to do with the home loan fiasco beyond the fact that some of the individuals who defaulted on mortgages they should never have committed to will now have another taxpayer subsidized program to take money from. There’s no reason for it to be funded through Dodd’s bill save for ideologically-based pork.
Polimom says that we should throw the bums out of office and points out Congress’ failure to conduct their oversight responsibilities. That’s an excellent idea, of course. If only it could really happen. But given the tweedle-dee vs. tweedle-dum choices we have, real change is impossible.
Loren Steffy places the blame squarely on the shoulders of Phil Gramm, the leading proponent of the Gramm-Leach-Bliley securities/insurance deregulation act and worries that Gramm may get another shot at implementing his economic deregulation policies if John McCain is elected president.
But lest we forget, GLB was passed with overwhelming approval from both parties. Its successor, the Commodity Future Modernization Act, was widely hailed as finally allowing U.S. investment markets to compete with those in other parts of the world. While Gramm’s fingerprints are certainly all over the deregulation acts there is plenty of blame to go around, for both parties. Where are the new bums to come from in the absence of term limits and/or a true third party?
Fact is that Congressional oversight is the check of last resort, one performed by political animals who have much more interest in nattering over the fine points for FISA’s immunity clause for telecoms, bickering over gay marriage, doing nothing while our energy situation collapses, and electioneering for their party’s presidential nod. Small wonder they didn’t have time to save the free world’s economic base.
Even with Congress’ usual less-than-stellar performance, the fundamental blame for this mess has to be placed at the feet of consumers who deliberately took out mortgages they had no ability to repay. “Who could have foreseen the rise in interest rates?”, some whine. Anyone with half a brain for business, that’s who. Why the lack of interest, no pun intended, on the part of borrowers? Because there is no fear of consequences on their part. The government, they corrected reasoned, is there to clean up their mess.
Similarly, banks’ failure to perform due diligence on their investments is either incompetence or malfeasance. I’m not sure which is worse. Steffy says that the $60T investment market is so arcane that few understand it. Betting on a game one doesn’t understand is risky, foolish business. If Steffy’s analysis is correct, banks had no business playing that game in the first place. In a stock price-driven world, banks’ greed for short-term gains seems to have gotten the better of them. They have no one to blame for themselves and deserve to reap what they sowed.
And therein lies the catch. If we fail to bail them out, we’ll all suffer more in the long run than if we suck it up and pay of the house for investors’ and investment banks’ bad behavior.