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The New York Times released the text of the proposed $700 billion bailout plan. It's already easy to see why wall street responded favorably and why main street needs to be concerned.
The first point of concern is two parts. One, the reason we are in this mess and why we can't trust anything John McCain says now.
It's clear Phil Gramm is a key adviser to the McCain campaign. It is also clear that Phil Gramm's bank deregulation push of the 1990's is why the sub-prime market is where it is today. In 1999 Gramm spearheaded efforts to banking reforms that did nothing but empower the banking industry to destroy the markets. The Gramm-Leach-Bliley Act in 1999 reduced government regulation that was created during the Great Depression and separated the banking, insurance, and brokerage sectors.
That is why Mother Jones has aptly called the mastermind of the McCain economic policy, Foreclosure Phil. (If you are concerened about the market or want to know how we got here, this is a must read.)
Who's to blame for the biggest financial catastrophe of our time? There are plenty of culprits, but one candidate for lead perp is former Sen. Phil Gramm. Eight years ago, as part of a decades-long anti-regulatory crusade, Gramm pulled a sly legislative maneuver that greased the way to the multibillion-dollar subprime meltdown. Yet has Gramm been banished from the corridors of power? Reviled as the villain who bankrupted Middle America? Hardly. Now a well-paid executive at a Swiss bank, Gramm cochairs Sen. John McCain's presidential campaign and advises the Republican candidate on economic matters. He's been mentioned as a possible Treasury secretary should McCain win. That's right: A guy who helped screw up the global financial system could end up in charge of US economic policy. Talk about a market failure.
Firedoglake has the gut reaction to Palson's plan-needless to say the Bush administration and King Henry are focusing entirely on how to help their friend on Wall Street first.
- The money is Paulson's to use for buying commercial and residential mortgages and mortgaged backed securities as he chooses. No one has any oversight over him, and he can pay any price he wants to, including face amount of the debt.
- Courts cannot review his decisions, not can any regulators. He has to report to Congress once every six months.
- He gets 700 Billion dollars to use as he sees fit, looking after the taxpayer is a "consideration" not a requirement.
- Bet on that 700 Billion dollars being gone before January 20, 2009. Bet on Treasury asking for more.
- That is $2,324 dollars per man, woman and child in America
- There is no bailout for mortgage holders. Banks get bailed out, but not ordinary people.
- Banks and brokerages made record profits these last eight years. Ordinary Americans barely broke even.
- In 2007 Wall Street paid itself bonuses equal to the raises of 80 million Americans.
- Banks bailed out by this plan need make no changes in how they do business.
- Banks bailed out need not replace the management which drove them into insolvency.
- Shareholders and bondholders of such banks do not lose a cent.
- The securities which caused this crisis are still allowed.
All this, and foreign banks can use American taxpayers money too.
U.S. Treasury Secretary Henry Paulson said on Sunday that foreign banks will be able to unload bad financial assets under a $700 billion U.S. proposal aimed at restoring order during a devastating financial crisis.
"Yes, and they should. Because ... if a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution," Paulson said on ABC television's "This Week with George Stephanopolous."
While Wall Street gets bailed out in this massive increase of federal bureaucracy, what do average American's get to help them in these troubled times? You guessed it, nothing.
USA Today is reporting that Paulsen, a former CEO of Goldman Sachs, has proclaimed "Don't add household to financial bailout".
He expressed little interest in efforts by Democrats to include further relief for homeowners facing mortgage foreclosures, a $50 billion stimulus effort and a cap on compensation of executives at the troubled firms that will be bailed out.
Such efforts, he said, would simply slow down attempts to get a rescue package in place soon.
"The biggest help we can give the American people is to stabilize our financial system right now and prevent the system from clogging up," Paulson said.
The size of this bailout is unprecedented. In one day we will spend almost as much money on bailing out irresponsible corporate giants as we did during the entire Iraq war. Estimates range from $700 billion to $1.3 trillion for the entire program. While we are spending this money, it will not ask for more oversight on what these companies are doing, it won't re-instituting any of the regulations that were in place after the Great Depression, it will not eliminate the golden parachute we had out to failed CEO's like John McCain economic advisory Carly Fiorina, and it refuses to help average people who are seeing their homes foreclosed.
This proposed bailout is bad. Bad. Bad. Bad. The only people this is good for, are the same people that were helped out by Phil Gramm's deregulation of the banking system. If you can honestly say you are doing better now than you were in 2000, then you should support this bailout. If not, you should ensure that there are at least some protections for average American's in this huge taxpayer funded corporate welfare package.
Other great reads on the subject include:
Empty Wheel
Glenn Greenwald
Open Left
gjohnsit's diary on DailyKos
Update: Politico is reporting that economists are skeptical of the Paulson plan.
Many of the same economists and opinion-makers who'd provided a bipartisan sheen of consensus to Treasury Secretary Henry Paulson's previous moves have quickly begun casting doubts on the wisdom of a policy that would allow Treasury to purchase without oversight hundreds of billions of dollars of difficult-to-price assets from financial institutions.
Under the proposal, Paulson would not have to report to Congress until December, and the only safeguard for taxpayers was a provision that the "Secretary shall take into consideration means for - (1) providing stability or preventing disruption to the financial markets or banking system; and (2) protecting the taxpayer." |
