by Deb Cupples |
Yesterday, President Bush signed the $700 billion Wall Street bailout bill, after the House passed the bill on a 263 to 171 vote (see roll call). The most interesting reaction (i.e., the one I most agree with) came from Rep. Marilyn Musgrave (R-CO):
"'Some things have changed in this bill but taxpayers will still be picking up the tab for Wall Street’s party.... I am voting against this today because it’s not the best bill. It’s the quickest bill. Taxpayers for generations will pay for our haste and there is no guarantee that they will ever see the benefits.'” (NY Times)
Below is how the New York Times described the 400+ page Bailout Bill (pardon me, I mean "Rescue Plan"):
"The rescue plan allows the Treasury to buy troubled securities from financial firms in an effort to ease a deepening credit crisis that is choking off business and consumer loans, the lifeblood of the economy, and contributing to a string of bank failures.
"Officials say the final cost of the bailout will be far less than $700 billion because the government will resell the assets that it buys.
"The final agreement disburses the money in parts, with Congress able to block the second $350 billion. It also provides for tighter oversight of the program by two boards, and requires the government to do more to prevent home foreclosures. Lawmakers also included efforts to restrict so-called golden parachute retirement plans for some executives whose firms seek help, and a provision allowing the government to recoup any losses after five years by assessing the financial industry."
About the "golden parachutes" (bundles of cash and benefits given to executives at retirement): I'm glad that someone made an "effort" to restrict them, but the phrasing makes me wonder just how serious that "effort" was.
If Congress had really wanted to restrict the flow of our tax dollars into executives' personal pockets, then Congress COULD have restricted the salaries, bonuses, and stock options of all execs at the firms that receive tax dollars under the Bailout Plan. Period.
Congress failed or refused to do so.
Another thing concerns me: the notion that the government plans to re-sell the toxic assets that it buys from Wall Street firms pursuant to the Bailout Plan. Those "assets" include mortgage-backed securities, which seem to be tied to the houses that collateralized those mortgages.
Let's play to the end of the tape, here.
In part, the government plans to buy a bunch of houses whose value has declined below the value of the mortgages they're attached to.
During the bubble, housing prices were artificially high, and most people could not truly afford to buy houses. Prices have come down some since 2006, but the bubble has not yet fully deflated and prices have not yet come back down to Earth.
If housing prices continue to deflate (as they should), then all those houses that we taxpayers buy under the Bailout Plan -- all those houses the government plans to re-sell -- will become worth even less over time.
If that happens, the taxpayers' chance of seeing a decent return on their Bailout investment will diminish.
If housing prices instead artificially re-inflate, most Americans won't be able to buy the houses from the government -- leaving the government with a large inventory of empty houses, unless our officials decide to sell those houses to foreign individuals or corporations.
In short, it seems that we taxpayers will likely recoup some portion of the $700 billion we dole out to Wall Street firms that helped drive our nation's economy toward the cliff's edge.
However, the chances of the taxpayers' breaking even seem mighty slim.
Firedoglake's Ian Welsh mentioned something that I didn't know before: some of the mortgage-backed securities may not even be tied to anything as concrete as a low-value house. If that's the case, than the consequences of this bailout may be even worse for us taxpayers.
Memeorandum has commentary.
Other Buck Naked Politics Posts:
* Door in Face: Administration Dupes Congress re: Bailout Deal
* Against Bailout Before he Was For it: Why Does Gingrich Speak?
* Did Bailout Really Cause Dow to Drop? Bailout Fans Say So
* McCain Strategists Make Palin Seem Moronic Again
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