Monday, September 29, 2008

Wall Street Welfare

To hear Congress and President Bush, you would think the four horsemen of the apocalypse were about to materialize on our doorsteps and take us away to everlasting torture in the fiery dungeons of Dick Cheney's office safe. "We must do something or else there could be another Great Depression." But why must we do something like this? Why must we throw money at the criminals responsible for the collapse?

If this bailout package was about protecting the population, just include an amendment that insulates us from predatory lending practices. Outlaw executive compensation when the company is not making money (instead of waiting for the company to go bankrupt). Ban existing oversized contracts for CEOs (which the legislation specifically refuses to address). Or round up the lot of them and throw them in jail (which obviously will never happen, seeing how both Congress and the White House, as well as the candidates running for the position, accept large amounts of donations from these impacted industries). Better yet, forgive the debts of the people in bankruptcy (which the package does not do) and re-regulate the banking industry by reintroducing the Glass-Steagall Act (the Depression era law that was repealed under President Clinton). Notice, no one is talking about Glass-Steagall in Congress or the White House. The Republicans, who feign cries about "tougher enforcement," would suddenly remember who sponsors their campaigns at the sight of real vigorous regulation--regulation which, if Glass-Steagall was still in place, would have prevented many of the business practices of these companies that put us in our financial bind.

No protection for the average American. You see, that is socialism. But it is OK for the Republicans and their water carriers in the Democratic Party (i.e., DLC) to tell me with a straight face that they believe in free markets, except this one time (when they want $700 billion of my money to subsidize the malfeasance that was committed in a deregulated environment).

Democratic Leadership: Gutless and Spineless

Leave it to Congressional Democratic leadership to cave into President Bush, yet again--just as they did on Iraq war funding, on Iraq period, on FISA, and now the greatest betrayal of them all.

And just as they did in the fangless side agreements on NAFTA, the Congressional Democratic leadership justified their support for the package by claiming that the bill will give some protection to homeowners. Actually, it gives very little. They also claim there should be some oversight, since an oversight board was included (which Secretary of Treasury Paulson never wanted), but it is indiscernible and unenforceable. There is nothing in the bill that holds the Secretary of Treasury, Federal Reserve, or anyone accountable for the spending of our money to prop up their friends on Madison Avenue.

Since the Democrats have taken over Congress, a thousand more of our soldiers, countless thousands of Iraqis have died, and hundreds of billions of dollars have been proposed to assume the debts accrued from the crimes committed by Wall Street. This is the Democratic Party's idea of bipartisanship, to govern like Republicans. This is why we have had to endure some of the most retrograde legislation under Democratic tenures in Congress and in the White House--from free trade, multiple bombings of Iraq (and collusion by many Democrats with Bush on this war), Serbia, and numerous other countries, the Defense of Marriage Act, the Welfare Reform Act, and now this latest act of knee-scraping to their ideological and financial overlords.

For those who think my view of the President and Congress is unwarranted, these are just some of the details of the screwing the American taxpayer is going to endure for Wall Street.

Who wins, who loses under proposed bailout plan?
Monday September 29, 2:58 am ET
By Tom Raum, Associated Press Writer

Financial industry a big winner in bailout proposal, but not so troubled homeowners

Washington (AP)--

The proposal to bail out U.S. financial markets to the tune of up to $700 billion creates a lot of potential short-term winners, as well as some losers.

Wall Street and the banking industry are perhaps the biggest winners. Scores of banks and other financial institutions faced with going under stand to gain a lifeline that should allow them to start making loans again.

Under the plan that congressional aide sought to put into final form Sunday, the Treasury Department can start buying up troubled mortgage-related securities now held by these institutions.

These securities are clogging balance sheets, leaving banks without the required capital to make new loans and putting the banks dangerously close to insolvency.

Banks not only have slowed lending to individuals and businesses, they have stopped making loans to each other. The rescue plan should help restore confidence to financial markets.

There are other winners, too, if the bailout works as intended: anyone soon trying to borrow money -- for cars, student loans, even to open new credit card accounts.

Top executives at troubled financial institutions, on the other hand, are in the losing column because the proposal would limit their compensation and rules out "golden parachutes."

Of course, these executives may take solace in knowing their jobs still exist.

Investors, including the millions of people who hold stock in their 401(k) and pension plans, should benefit. Failure to reach a deal over the weekend could have sent stock markets around the world tumbling on Monday.

Homeowners faced with foreclosure or those who have lost their homes get little help from the agreement. Nor will it help people whose houses are worth less than what they owe get refinancing or take out equity loans.

It would do little to halt the slide in home values that are one of the root causes of the current economic slowdown.

"It doesn't deal with the fundamental problems that gave rise to the problem -- or alleviate the credit crisis," said Peter Morici, an economist and business professor at the University of Maryland

Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke are potential winners.

In just a few months, they have remade Wall Street. If the plan helps to get the economy moving again, they may be remembered for having kept the financial crisis from spreading throughout the economy.

"When I see Hank Paulson and Ben Bernanke on TV, I see fear in their eyes. Like on a battlefield when people are shooting at you. I think they are afraid to say how serious the problem is for fear of making it worse," said Bruce Bartlett, an economist who was a Treasury official under the first President Bush.

Bartlett said the plan is flawed, yet the alternative of doing nothing could be catastrophic.

After the heavy dose of new regulation in the agreement, New York will have a hard time claiming it is the center of the financial universe. That title may have shifted to Washington.

If the plan stays together, Congress -- with approval ratings even lower than those of President Bush -- may be seen as having acted decisively at a time of national emergency.

Congressional leaders added new protections to the administration's original proposal. That was only three pages long and bestowed on the treasury secretary almost unfettered powers.

Instead, the agreement would divide the $700 billion up into as many as three installments, creates an oversight board to monitor the treasury secretary's actions and set up several major protections for taxpayers, including a provision putting taxpayers first in line to recover assets if a participating company fails.

The president, on the other hand, probably would get little credit for the deal. He allowed Paulson and Bernanke to do the heavy lifting. The only time he called all the players to the White House -- late Thursday afternoon -- the wheels almost came off the process entirely.

It's hard to tell which presidential candidate benefits the most from an agreement they tentatively endorsed Sunday, a little more than five weeks before the Nov. 4 election. Democrat Barack Obama and Republican John McCain each sought to claim some credit for the deal, even though they played active roles only over the past few days.

Hard economic times traditionally work against the party that holds the White House, and in recent polls Obama has inched ahead of McCain. Furthermore, there is widespread consumer resentment over being asked to bail out Wall Street and lawmakers have learned the proposal has not been popular with their constituents.

That may help Democrats in general. The strongest opposition to the original bailout plan came from House Republicans.

Lawmakers and presidential candidates alike are "trying to orchestrate everybody jumping off the cliff together," said Robert Shapiro, a consultant who was an economic adviser to President Clinton. "I think we'd have a different plan if we weren't five weeks out from the election."

And ordinary taxpayers?

Nothing that potentially adds $700 billion to the national debt -- already surging toward the $10 trillion mark -- can be considered a winner for those who foot the bills.

But lawmakers did put in taxpayer protections, including one to require that taxpayers be repaid in full for loans that go bad.

The package could even end up making money for taxpayers, supporters claimed.

But only if the loans and interest on them are repaid in full. Few expect that provision to be a winning proposition, however.

This is what I feel about seeing done to the CEOs and Boards of Execs of our Fortune 500 companies right about now.

No, I take that back. This would be a much more preferable place, for the CEOs, Execs, and their lead prostitute Henry Paulson.

Seriously, what a pity we are not the Soviet Union during Stalin, just for this one day.

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