Monday, September 22, 2008

Bailout: Throwing Good (Your) Money After Bad?


Well none of the professionals seems to think that the Bush Administration's Bailout Plan is a good one. By professionals I don't mean the people Bush has appointed (although Krugman has a good point that we could have had Brownie in charge right now, yikes), no I mean actual economists, ones who know what they're talking about.

Steve Benen and Hilzoy at Washington Monthly agree, as does Josh Marshall at TPM, all the credible voices say this is a bad idea, or at least a not well thought out one. (Hilzoy provides a list with links if you'd like) And everyone seems to be labeling this a 'blank check' at least $700 Billion with little to no oversight, not sure who started it but The Authorization To Use Financial Force sounds about right.

I turn to Paul Krugman personally and he started out feeling uneasy, had his doubts, then called No Deal, and laid it all out in this morning's column. First and foremost the good doctor says "Let’s not be railroaded into accepting an enormously expensive plan that doesn’t seem to address the real problem." Read today's column for the four step outline of the crisis but here's the meat:

[T]he financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.

That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)

But Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal.

That's definitely not cool. Don't forget that this is all being run by Bush cronies who for months now (and that's like 12-15 of them not 2-3) have been saying that this wasn't such a big deal, that losses were contained, that the economy was still strong. They had plenty of misleading platitudes to lay on us while main street (that'd be you and me, 98% of Americans) were taking a bath and getting nervous, but as soon as wall street (Bush, Cheney, and all their millionaire friends, i.e. the other 2%) starts to feel the burn well, now the sky is falling and we'd better do what they say and not ask any questions because if we don't let them do their thing disaster looms. Only their thing is to take our (taxpayer) money and use it to save their cash. It makes me sick.

It apparently also sickens at least one, albeit anonymous, lawmaker down on the Hill (too bad he or she is anonymous I'd love it if someone would actually speak up) via Matt Stoller here's a taste of what they had to say (bad language follows):

Paulsen and congressional Republicans, or the few that will actually vote for this (most will be unwilling to take responsibility for the consequences of their policies), have said that there can't be any "add ons," or addition provisions. Fuck that. I don't really want to trigger a world wide depression (that's not hyperbole, that's a distinct possibility), but I'm not voting for a blank check for $700 billion for those mother fuckers.

One Senator who is making her opinion know is Hillary Clinton (also via MS where there's more):

When the American people, facing a foreclosure crisis and struggling economy, turned to this administration for help, the answer was no. Now, the administration is turning to the American people for help, to rescue the credit markets and take on hundreds of billions in debt and financial obligations as a consequence of that same foreclosure crisis. The truth is, Main Street came to Washington and got little. Now Washington is coming to Main Street and asking for a lot. The American people deserve to know that this isn't a blank check. While the need to address the current crisis is clear, I will only support steps that will prevent a widening crisis, tackle the worst kinds of abuse tolerated for too long by the Bush administration, and address the root problems at work.

That's not bad.

Here's hoping we don't get fleeced...


From Politico, "Many Economists Skeptical of Bailout"

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