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Hobbes
(65.97.179.250) on 9/29/2008 - 2:57 p.m. says: ( 55 views
, 1 likes
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"Bailout Follows Normal Principles Of Government"
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CONTEXT ADDED BY ADMIN:
END OF CONTEXT
Bailout follows the 10 normal principles for how our government functionsThe transfer of hundreds of billions of dollars to Wall Street is anything but "extraordinary."
Glenn Greenwald
Sep. 29, 2008 | (updated below)
The word being used most frequently to describe the bailout package
that is about to pass is "extraordinary." That adjective may apply to
the amounts of money being transferred from taxpayers to Wall Street,
but the process by which this is all happening is anything but
"extraordinary." All of the "principles" that drive how our Government
functions in general -- what explain the last eight years at least --
are perfectly evident in what has happened here:
(1)
Incredibly complex and consequential new laws are negotiated in secret
and then enacted immediately, with no hearings, no real debate, no
transparency. Nancy Pelosi has praised herself for decreeing that the
new law will be online for 24 hours before Congress votes on it -- a
full 24 hours for the American public to understand and assess a law
that forces them to subsidize Wall St.'s losses in a way that may
impact them for decades, if not generations. The most significant and
consequential pieces of legislation over the last eight years -- the
Patriot Act, the various expanded surveillance laws, the Military
Commissions Act -- were the by-product of identical anti-democratic
processes.
(2) Those who created the crisis, were wrong
about everything, drive the process. Experts who dissent from the
prevailing Washington orthodoxy, particularly ones who were presciently
warning about what was happening, are simply ignored -- systematically
excluded from the process. Professor Nouriel Roubini:
It is pathetic that Congress did not consult any of the many professional economists that have presented
-- many on the RGE Monitor Finance blog forum -- alternative plans that
were more fair and efficient and less costly ways to resolve this
crisis. Last week, Hank Paulson -- who bears responsibility
for the crisis in numerous ways -- demanded that $700 billion be
transferred to him in order to purchase toxic assets from his Wall St.
friends, and while there was much howling of outrage in many quarters,
no other framework was ever considered.
(3) Public
opinion is largely ignored, as always, and public anger is placated
through illusory, symbolic and largely meaningless concessions. Much is
being made over the allegedly strong oversight provisions to limit the
Treasury Secretary's power, accomplished through the creation of two
oversight panels -- one that is composed of 5 administration officials
(including the Treasury Secretary himself, the Federal Reserve Chairman
and the SEC Chairman -- the definitive foxes guarding the hen house),
and another that is appointed by Congress but which -- as is true for
everything Congress touches -- has little real authority over what is
done.
Identically, executive compensation limits -- used to bestow the plan with its populist bona fides -- are minimal and extremely limited.
Worse, the public is being told that the financial services industry
must pay for any losses to the Treasury still outstanding after five
years, but the bill requires nothing of the sort, simply requiring that
the president "propose" a plan for recoupment, not that Congress enact
any such plan.
And, most of all, while not as absolute as it was in the original
Paulson proposal, the Congressional plan still vests extraordinarily
vast and centralized power in the Treasury Secretary -- just as Paulson
demanded. As the NYTput it this morning:
"During its weeklong deliberations, Congress made many changes to the
Bush administration’s original proposal to bail out the financial
industry, but one overarching aspect of the initial plan that remains is the vast discretion it gives to the Treasury secretary."
(4)
The Government begins with demands for absolute power so brazen and
absurd that anything, by comparison, seems reasonable. Thus, the law
that will be passed does improve on the original Paulson Plan in
certain ways -- equity shares under some circumstances, some oversight
provisions and mild home-owner protections -- and people thus end up
grateful for what is, by any measure, an extreme outcome, all because
it's not quite as extreme as what the Bush administration began by
demanding.
(5) Wall Street, large corporations and their
lobbyists own the Federal Government and both parties, and (therefore)
they always win. Professor Roubini:
Thus, the Treasury
plan is a disgrace: a bailout of reckless bankers, lenders and
investors that provides little direct debt relief to borrowers and
financially stressed households and that will come at a very high cost
to the US taxpayer. And the plan does nothing to resolve the severe
stress in money markets and interbank markets that are now close to a
systemic meltdown . . . . This is again a case of privatizing the gains
and socializing the losses; a bailout and socialism for the rich, the
well-connected and Wall Street. And it is a scandal that even
Congressional Democrats have fallen for this Treasury scam that does
little to resolve the debt burden of millions of distressed home owners. Both
parties depend on, are drowning in, the largesse of the very industries
they are supposed to regulate, and the only possible outcome from the
very beginning was that Congress would do what most helps Wall St. and
their largest corporate donors. That's what they always do.
(6)
The people who run the Washington Establishment are drowning in
conflicts of interest. Hank Paulson let Lehman Brothers go bankrupt
while intervening to save AIG, only for it to be revealed
after the fact that Goldman Sachs -- Paulson's career-long firm of
which he was Chairman until just a couple years ago -- would have lost
$20 billion had AIG failed. Worse, Goldman's current CEO, Lloyd
Blankfein, was present with Paulson when the decision to save AIG was
made.
Beyond the litany of Wall St.-loyal government officials demanding
this Wall St.-friendly bailout (Bush's Chief of Staff, Josh Bolten, is
also a former Goldman Sach official), Congressional leaders are, with
very few exceptions, all vested heavily in Wall St. As but one example,
Nancy Pelosi's tens of millions of dollars are invested
(.pdf) in firms such as AIG, AT&T and others. It only stands to
reason -- as always -- that if Wall St. is both owning the Government
and running it, it will prevail over the proverbial "Main Street" every
time. And it does, and just did again.
(7) For all the
anger over what Wall St. has done, the Government -- as it bails them
out -- isn't doing anything to rein in their practices. Nancy Pelosi today said:
"We sent a message to Wall Street -- the party is over," but to the
extent that's true, the Government has done nothing to bring it to an
end. To the contrary, by announcing -- yet again -- that there are
never any consequences for recklessness and real corruption on the part
of the ruling class, that behavior is only being further incentivized.
If you were running a large financial services corporation whose
failure would jeopardize many other companies, why wouldn't you
continue to pursue extremely high-risk/high-reward transactions,
comfortable in the knowledge that the Congress you own will protect you
from any real cataclysmic failure (in exactly the way that high
government officials know they can commit crimes with impunity and thus
are incentivized to do so)?
(8) When the Government wants
greater and greater power and wants to engage in pure corruption, it
need only put the population in extreme fear and it gets its way in
every case. Establishment mavens rush forth to assure the public that
they have no choice but to submit to what the Government is demanding.
The anger and impotence level of the citizenry increases further,
further alienating them from their Government and ensuring even greater
levels of submission in the future, grounded in an accurate perception
of futility.
(9) On the most consequential and
fundamental questions that define the country, the
establishment/leadership of both political parties are in full
agreement, and insulate themselves from any political ramifications by
acting jointly. Democrats in particular jump eagerly into line when
told they must cooperate with the White House to avert whatever the
Disaster du Jour is (and in this case, House Republicans were
most impressive in defying these orders until they, too, were basically
whipped into line), but ultimately, the differences between the parties
at the level of their leadership are impossible to detect.
(10)
Whenever you think that the Government has done things so extreme that
it can't top itself -- torture, theories of presidential lawbreaking, a
six-year war justified by blatantly false pretenses -- it always tops
itself. On top of the massive debt under which the country was already
drowning, another $700 billion is now being added in order to save the
nation's richest individuals from the consequences of their own
recklessness, allowing many of them not only to remain enriched, but
become further enriched, all while basically ensuring that the
Government is incapable of spending any money for years, if not longer,
on programs designed to improve the lives of the vast, vast majority of
its citizens -- the same citizens who are forced to fund this bail-out.
That seems hard to top, but the only thing certain is that they will
find a way to do so.
UPDATE: Amazingly, the House just rejected the bailout, sending the Dow plummeting by more than 500 points. According to Kagro:
The
bill is defeated. 205-228 -- there was a last, and I mean really last,
minute switcher. A Dem, switching from yea to nay. Could have been a
yea voter looking to move to reconsider. Partisan breakdown: 140 Dems
for, 95 against, and 65 Rs for, 133 against. The economy
and the markets are clearly in severe distress, and some form of
Government action is needed. I don't think anyone denies that. But this
was the wrong deal, and in terms of market confidence and stability,
there's probably nothing worse than announcing so definitively -- again
-- that a deal has been agreed to, only for it to be defeated. Our
political leaders are as inept as they are corrupt.
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