by Damozel | Part 1 by Teh Nutroots is here. That was just last week, but it seems like a long time ago. Why, it was only yesterday that the government announced---wait for it---that we are in a recession. (BN-Politics) To which you, I, and everyone in the country except the credulous and naive children of Wall Street replied, "Duh." Informed in plain words of what everyone else knew, they went on a selling spree, causing the market to plummet, till---I suppose---cannier sorts noted that previously pricey stock which still had legs had sunk to low-must-go-now prices. Whereupon the market climbed shakily to its feet and started wobbling around again.
And now here comes Paulson again,
preparing---so the WSJ claims---to press the claims of the financial
industry to the remaining $350 billion. It seems that the Government Accountability Office has expressed concern
about the way he and his minions have been administering the rather
large chunk of change the taxpayers handed over to them.
The Wall Street Journal reports:
Mr. Paulson's dilemma was thrown into relief Tuesday by a report from the Government Accountability Office, the investigative arm of Congress, which criticized the Treasury Department's handling of the Troubled Asset Relief Program, or TARP...
If Mr. Paulson decides to request the next $350 billion, he is expected to do so next week. His hand may ultimately be forced if market conditions continue to deteriorate....While Mr. Paulson wants to steer more funds to financial institutions, Congress has its own ideas, including aid for the auto industry and troubled homeowners -- two ideas Mr. Paulson has resisted. (WSJ)
The report pointed out that Paulson & His Pals in fact don't seem to have put in place any real system for administering the taxpayer largesse he demanded and got and that our "small government Republicans" haven't hired enough people to provide the requisite oversight.
In its report, the GAO said Treasury hasn't yet developed a way of ensuring that firms receiving federal funds are complying with limits on dividends or executive compensation. Officials also have yet to address such critical issues as how to ensure that the injection of $250 billion into the banking system "is achieving its intended goals."
The report suggested Treasury has little ability to monitor potential conflicts of interest among independent contractors helping implement the program. As a result, there is a "heightened risk that the interests of the government and taxpayers may not be adequately protected and that the program objectives may not be achieved in an efficient and effective manner."
The problems are due in part to the rapid implementation of TARP and a lack of staff for the program. The report said about 48 employees had been assigned to TARP as of Nov. 21, only a quarter of the 200 full-time employees the GAO said may be needed to properly implement rescue efforts. (WSJ)
Our scanning of GAO reports over the last few years strongly suggests that a substantial amount of wasted tax dollars can be attributed to Republican "false economies" such as never hiring enough people to execute a responsibility of the executive branch really well, so this comes as no surprise.
Anyway, it seems that Congress is not quite in the right frame of mind to give him any more money just now. For some reason, people---including Republicans---seem to suspect that he doesn't know what he's doing.
On Capitol Hill, there is little appetite to grant access to the second $350 billion. The skepticism that almost torpedoed the original legislation in September has turned into full-blown revolt amid distrust over implementation and frequent changes to the program.
"Paulson is a big part of the problem because they don't have a coherent plan," said Rep. Virginia Foxx (R., N.C.).
Rep. Foxx is one of a number of lawmakers who have laid the groundwork to block access to the second half of the bailout funds. Last month, Rep. Foxx and 15 House colleagues introduced a resolution that would be considered if Treasury does make a request.
For Mr. Paulson to obtain the funds, the administration must submit a detailed report to Congress outlining how Treasury would use the money. Congress can deny the funds by passing a resolution like the one already introduced, disapproving of Treasury's plan within 15 days. If Congress doesn't act, the funds are released. (WSJ)
Meanwhile, bleeding heart Democrats wonder if it might not be a better use of the taxpayers' dollars to help homeowners.
Economics expert Yves Smith at Naked Capitalism touches the sore point with a needle when he testily inquires, "[W[hat pray tell do we have to show for the $350 billion spent so far? Why would you trust this man with another penny, particularly when the terms of the bill put him above the law (although some readers contend that language is unconstitutional). Plus there is no pending emergency to warrant releasing the funds."
No, even an ignorant layperson like myself can read between the lines of the WSJ article sufficiently to see that Paulson's guiding principle is, "Better get it while you still can and before somebody else does."
Smith summarizes the case in favor of refusing to give Paulson any more taxpayer dollars.
1. Paulson got the bill passed (remember the timing: it was signed into law October 3) by threatening Congressional leaders that if he didn't have the funding, the result would be financial armageddon. October delivered that anyhow.
2. Paulson first was going to buy troubled assets, and when that turned out not to be such a hot idea...., he switched gears and started recapitlizing banks directly and inefficiently, putting $125 billion into nine large banks, some of whom profess they didn't need it (and that was a feature, not a bug, with Paulson saying up front that he didn't want to stigmatize banks by singling out the bad ones). Oh, and virtually no strings attached, this was supposed to be user friendly
3. Paulson then renounces the TARP version 1.0 "buy crappy assets" program. Crappy MBS go into a tailspin, necessitating creation of new Treasury/Fed programs to help shore up agency mortgages and asset backed securities, and rescue of Citi.
4. New head of oversight panel, Elizabeth Warren, is already saying that the Treasury is flailing about and lacks a strategy. (Naked Capitalism)
Gah. It's so horrifying and embarrassing and illogical and senseless that it's actually kind of awesome. Sitting helplessly in my small, incommodious abode watching this farce play out has taught me that life is indeed absurd and that however incompetent our "leaders" there is some consolation to be had in realizing that they will be forever jeered by posterity (assuming of course we survive financial collapse, terrorism, famine, drought, and global warming).
Giving out free, no-strings-attached money to the financial industry has not worked and, as we were told straight out from the get-go by people who know something about these things, was never going to work. It was like kicking the tires of your car to make it go when the transmission has failed or yelling at your laptop when the motherboard has died.
In other words, t always had EPIC FAIL written over it in letters 100 feet high, but at least we have the consolation of knowing that most of the executives who drove these companies over the cliff won't have to sell more than one of their half dozen houses or pull their sons and daughters out of Harvard and Yale.
Meanwhile, I can only endorse TN's summing up of the situation:
Memeorandum has more and other.
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"Is Kashkari a Chump?"
seems we both have the same prayer
Posted by: rawdawg | December 03, 2008 at 10:42 AM
she will be greatly missed and what a voice
Posted by: rawdawg | December 03, 2008 at 10:50 AM