Senators report that they have reached a compromised draft of a bill that reportedly would bail out Wall Street with $700 billion of taxpayer money. The reports of the text immediately scare me and force me to wonder why these Democratic Senators here are smiling in this photo. I think it has something to do with Rosh Hashanah; let me explain.
Zubin Jelveh of SeekingAlpha.com asked the question a couple of days ago: "Does It Have To Be Exactly $700 Billion?" Jelveh writes:
In further testimony this morning Fed Chairman Ben Bernanke expanded on how the $700 billion number came about.
"It's not science," Bernanke said. But there are roughly $14 trillion in outstanding residential and commercial mortgages and five percent is also roughly the loss rate on those categories, he added. Five percent of $14 trillion is = $700 billion.
For once I agree with Bernanke--that's not science, especially in light of where the $700 billion is now proposed to go based on the text the Senators released today:
1. The government (the Treasury) would immediately get $250 billion.
Now, I had never really thought about what the Treasury actually does. I knew that Treasury Secretary Paulson was the guy who supposedly came up with the $700 billion figure, but that was about it. Here's what Secretary Paulson actually does all day:
· He makes sure Uncle Sam's debts get paid. That means when Russia and China come calling for their cash back, Paulson makes sure we drive inflation up by issuing new bank notes with which to pay them.
· He is the President's chief economic advisor. Wow, doesn't that convince you to give him your tax dollars right there?
· He is the administration's #1 lobbyist; he sells the President's economic plan to Congress and tries to put a happy face on things.
· He is also the administration's #1 reverse lobbyist, in that he goes to Fortune 500 companies and banking magnates to push the President's agenda.
· He provides that little sample signature that goes on dollar bills. Oo, neat!
So you heard me; that guy gets $250 billion dollars. What's he going to do with it exactly? He's going to bail out these companies that lied to the top and get banks predatorily lending again. Some economists have said that this a cheap ploy to extend the control of the President over this plan and to keep Congress out of it; others have argued that smaller measures haven't worked well in the past (AIG, Fannie and Freddie) so now we must resort to larger measures.
Might I point out here that if throwing little money at the problem didn't work the first time, throwing more money in that direction might not be the solution?
This new bill would allow the Treasury to buy company stocks and conversely allow companies to buy government insurance. I would like to remind everyone of one of the characteristics of fascism: unstable capitalist markets in which business and government become a single economic unit. Is everyone paying attention??
Okay, so that's where your first $250 billion would go! What's next?
2. $100 billion more would go to the Treasury Secretary if the President were to think it would be a good idea.
3. The remaining $350 billion would also go to the Treasury Secretary, but only with a separate certification subject to a congressional resolution of disapproval; however, even were the disapproval resolution to pass, the President could still veto it, meaning Congress would have to develop an extremely large majority to override the money still going to the Treasury Secretary.
So aside from that painfulness, look at the rest of this bill they've come up with. Another provision accounts for an oversight board that would include the Chairman of the Federal Reserve (Bush appointee and guilty villain in this horrible mess), the Security and Exchange Commission Chairman (Bush appointee), the Federal Housing Finance Board Chairman (Bush appointee), and the Secretary of Housing and Urban Development (member of Bush's cabinet, for real). Doesn't it seem like a problem to put them in charge of catching mistakes since they've caused many of them?
This measure will help no one and will continue to prolong the inevitable collapse of a system that only works in theory. My free market friends complain to me that I just don't understand; that free market economies are not meant to be profitable for everyone, and that workers are not to be considered when companies are at stake. I argue that a system that does not profit anyone except Senators and their favorite lobbyists and turns socialist when banks that foreclosed on people are now desperate for government handouts isn't a free market at all.
So anyway, why are those Democrats up there smiling??
Well, they came up with an extremely smelly piece of legislation after being bullied by the Bush administration into passing it, and they were able to report this on a Sunday, which means hardly anyone is paying attention. Also, they were able to come up with a resolution prior to Tuesday, which is Rosh Hashanah, the Jewish new year--and also a congressional holiday. Hey, message to Jewish and gentile lawmakers alike: 5769 will now be remembered as the year the American financial system collapsed because both Democratic and Republican lawmakers refused to stand up to the Bush administration.