Sunday, September 21, 2008

This is a Stickup - Hand Over $700 Billion and No One Gets Hurt

Remember when I wrote earlier about that meeting between Bush administration officials and members of Congress? I was skeptical as hell; sounded like yet another scare-em-into-another-bad-swindle scheme. Even given the state of this financial crisis, you would be crazy to trust these criminals.

Well, surprise, surprise. Bush is asking for a $700 billion handout to Wall Street. It's not even a bailout, like the bailout of the Savings & Loans two decades ago. We're just handing away the money, no strings attached. Good lord, Bush's proposal didn't even fill three pages. The largest bailout in this nation's history, and the damned paper is less than three pages. This is bullshit, folks.

We've seen this game before, and I have no doubts the Dems can be rolled once again, as they've been rolled so many times. There's that imperative to show the voters that you're doing something. Doesn't matter if that something is a lousy, terrible idea. Just show the voters you did something. The consequences, naturally, won't become painfull obvious until months later; after the election, of course, which is the only thing these spineless weasels care about. It's a wonder that representative democracy ever worked in this country.

What makes me angry is the simple fact that there's no give-and-take on this $700b handout. We, the taxpayers, pick up the tab on all this bad debt, and we get nothing in return. No sensible regulation. No rollbacks on the de-regulation frenzy pushed by the Republicans and men like former Sen. Phil Gramm (who would likely serve as Treasury Secretary in a McCain administration). No takeover of the bad banks themselves. No firings of executives. No prosecution for the corporate crimes that threw our economy into chaos. No nothing.

Just gimmie your money. Or somethin' bad will happen to you. Wall Street has WMD's. Or somethin'. This whole damn thing just stinks to high heaven, and you know in your bones that the bad guys will get away with it, laughing all the way. And don't fall for the line that we'll somehow get our money back. Fat bloody chance.

I'd like to hear what others think. I'd like to hear from some economists and people who understand this issue backwards and forwards. All I have going for me is common sense, and my gut instinct, and that idiot savant in the White House.

Paul Krugman gives his thumbs-down on this deal...

Here’s the thing: historically, financial system rescues have involved seizing the troubled institutions and guaranteeing their debts; only after that did the government try to repackage and sell their assets. The feds took over S&Ls first, protecting their depositors, then transferred their bad assets to the RTC. The Swedes took over troubled banks, again protecting their depositors, before transferring their assets to their equivalent institutions.

The Treasury plan, by contrast, looks like an attempt to restore confidence in the financial system — that is, convince creditors of troubled institutions that everything’s OK — simply by buying assets off these institutions. This will only work if the prices Treasury pays are much higher than current market prices; that, in turn, can only be true either if this is mainly a liquidity problem — which seems doubtful — or if Treasury is going to be paying a huge premium, in effect throwing taxpayers’ money at the financial world.

And there’s no quid pro quo here — nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving.

1 comment:

David Smith said...

You might want to try http://road-dave.spaces.live.com for some more on the bailout. The true outrage is that there is no outrage.

The public is swallowing this one even easier than the liberation of Iraq.

If the Fed offered a buyout to the cast of "Grey's Anatomy" to shut down the show, there would be riots that would make the Seattle WTO demonstrations look like a kaffeklatch.