by Damozel | As an ignorant layperson, I never did get why, with all the expertise available in this nation, anyone would ever agree to accept blindly the recommendation of two Bush administration appointees who have already failed to staunch the blood tide hemorrhaging out of our economy. So I'm glad that we have economists and others---not to mention Chris Dodd--- pushing back hard. Deb C has written on the details here.
As for me, I'm haunted by the feeling that I've been here before: on 9-11 and the Patriot Act, the Iraq War, FISA, and---most recently---Iran's supposed nuclear ambitions. With the Bush Administration it's always a Level Red Threat and the argument that there's no time to ponder the issues---we have to act NOW or the world will end. Krugman, an economist who has been proved right by events, says:
Can the Paulson juggernaut be stopped? I’m starting to think yes. Paulson displayed a lot of arrogance here — he basically marched in and said Daddy knows best, don’t worry your pretty little heads about the details. He offered no, zero, zilch explanation of how the plan was supposed to work — just “it’s a crisis and we need to act now.” And he overreached, especially with that demand for immunity from any review.
Now we’ve had a lot of pushback from economists and financial analysts, and the realization has sunk in that this particular daddy has shown very little sign of knowing best. So there’s a real chance to do something quite different.
As Deb persuasively argues, we need to fix the broken system along with the current economy.
The Dodd bill is much more aggressive than the Treasury Plan, says Martin Kady at The Politico. Instead of a $700 billion no-strings-attached blank check for Paulson to allocate, Dodd's bill demands the following:
While the Treasury would receive much of the authority that it wants to buy up distressed assets, Dodd's add-ons have many of the populist ideas that will appeal to skeptical Democrats. His plan is also broader than the one unveiled by House Financial Services Chairman Barney Frank (D-Mass.), so there will be significant negotiations in the days ahead between the House and Senate if Congress is to pass a bill by the end of the week.
Among the major provisions Dodd is adding:
* Authority for bankruptcy judges to restructure mortgages for homeowners facing foreclosure. This was considered a poison pill in a housing bill that passed Congress earlier this summer, but it has gained much more currency now that Washington wants to bail out Wall Street.
* A provision that would require the Treasury to take a 65 percent portion of 20 percent any profits it makes from the newly purchased assets and put it into the federal government's HOPE program, an affordable housing program.
* An oversight board that not only includes the chairman of the Federal Reserve and the SEC, but congressionally appointed, non-governmental officials.
* Limits on executive compensation. This is a major stumbling point for Paulson in his negotiations with Congress, but cracking down on Wall Street executive salaries will be a major selling point for lawmakers. Dodd and Frank have put in place what's known as a "claw back" provision aimed at revoking compensation that executives received based on fraudulent claims.
* An independent inspector general to investigate the Treasury asset program, appointed by the president. (The Politico)
Krugman writes:
[T]his sounds like a big step in the right direction.
...Politico has the text. Very serious stuff — and a major challenge to Paulson’s approach. Treasury should now be required to explain why this isn’t a much, much better way to do this rescue.
Meanwhile, "[f]lying in the face of Congress and both presidential campaigns, Treasury is resisting efforts to impose pay limits on Wall Street executives and bankers whose companies stand to be helped by the government’s $700 billion rescue plan for the financial markets." (The Politico)
Here's what Daddy Paulbucks, who prefers his own plan and thinks his old friends on Wall Street will as well, has to say about it:
[T]reasury argues that such requirements would make it harder to persuade companies to sell their troubled assets to the government. But Democrats, who otherwise admire Paulson, say that the former Goldman Sachs chairman is blind to the politics of the situation and the huge divide between the average taxpayer and the financial world now seeking relief from bad debts that have clogged the credit system — and that threaten the entire economy.
A senior aide to John McCain, the Republican presidential nominee, told Politico on Sunday that the Arizona senator also favored compensation limits as part of the package, as does the Democratic nominee, Barack Obama, according to a campaign spokesman for the Illinois senator.
Democrats admire Paulson? No doubt many do---I'm sure he's a joy to his friends, family, and all who know him. That doesn't mean they are going to open wide and swallow whatever plan he holds out. Other interests are at stake. Anyway, it seems they've at least learned to balk and insist on some sort of accountability, when Bush and his gang scream that if we don't let them do whatever they want, the world will end.
And call it populist if you must, but basic common sense ought to tell the invisible Masters of the Universe who are pulling the strings that the taxpayers are not going to be in a giant-compensation-package-tolerating mood when they're being asked to donate 700 billion bucks to save the financial system.
Our tax dollars, our rules.
Jake Tapper remarks, busting out some real numbers:
In 2007, Wall Street's five biggest firms -- Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley -- paid a record $39 billion in bonuses to themselves.
That's $10 billion more than the $29 billion loan taxpayers are making to J.P. Morgan to save Bear Stearns.
Those 2007 bonuses were paid, even though the shareholders in those firms last year collectively lost about $74 billion in stock declines -- their worst year since 2002.
If split equally among the approximately 186,000 workers at the former Big Five Houses, that bonus money means an average of $201,500 per person -- more than four times the $48,201 median household income in the U.S. last year.
So... if executives at these supposedly desperate companies on the verge of sinking out of sight want to keep "their troubled assets" rather than accept pay limits? I think most taxpayers will say, "Let 'em."
Memeorandum has more.
RECENT POSTINGS HERE
Wall Street Bailout: Ignore the Sales Pitch -- Bush Plan is Not the Only (or Best) Option
Bailout Plan: Dem Thinks Lobbyists Will Shaft us Taxpayers -- and Congress Will Let Them
Conservative Republican Opposes Bush's Bailout Plan
Wall Street Bailout Plan: Dem Congressman uses F-Word; Even Gingrich is Skeptical
Wall Street Bail Out Plan and the Iraq-War-Style Sales Pitch
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