Lesbian politics: Why exactly $700 billion?, and why are these Democratic Senators smiling?

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.

L'shana Tovah.


Sei said...

They're smiling because, in a year when their fortunes are rising fast, they managed to get the Republicans to agree to a plan with enough votes to override it if Bush says no, and which will anger the Republican base far more than it will the Democratic base. What's more, this put the Republicans at complete odds with their own Party Platform which decries any and all bailouts.

While most Americans hate this (mostly because of the bill and the fact that this doesn't help the small businesses), they feel that this is necessary. A lot of this, though, is stop gap. The Dems can't get enough to override Bush if they push through the really important stuff since the Reps believe it is necessary for things to be absolutely free market even if it means that we're all scrambling for a single baked bean on the floor. However, if they tie the Reps to this bill, which they have, then in January they can push through the important stuff while using this to both make a profit and to allow the markets to stabilize for a while.

It's a long term gamble, but it may pay off since a lot of what it is doing is based off of FDR's plans durring the Great Depression. The ones, especially, that allowed the government to make a huge profit when the markets and economy turned around.

I'm not happy with this deal, but I have to hope that it will allow things to stabilize until they can finally put things back in place to prevent this from happening.

Ma'amselle Lezident said...

Sei, typically I agree with you on most stuff, but this time I don't understand your argument at all. Why would Bush say no if it's his/Secretary Paulson's plan? If Bush was the one who came up with the $700 billion figure? If all the money goes to Bush no matter what? And as for putting Republicans at odd with their party, so the Dems voted for something to humiliate the Republicans even though it was the Republicans who pushed for the bill in the first place? How do you figure? I also don't see how this is a stop gap when they could have kept the conversation going; they didn't have to come to an agreement this weekend, and they didn't have to endorse the $700 billion figure. Schumer is the only one I know who even questioned the $700 billion number.

Also, I find it impossible to believe that the Dems have some secret plan come January to right everything. That was Obama's argument for his capitulation on the telecom immunity bill when everyone knew the telecoms were slipping him money under the table and nothing will ever come of it. I think it underscores that the lawmakers are profiting at everyone else's expense. This is not a longterm gamble; longterm implies careful planning, and this was a snap decision based on a soundbite.

The New Deal came about from union pressure; unions in this context are asking for exactly the opposite. I'm not convinced!

Sei said...
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Sei said...

To be honest, Lezident, I've been in similar arguments before and never come to an agreement with anyone. I see things differently at times and it can be far, far harder to explain them then for me to see them. I doubt that I can come up with an argument that will agree with you. Sometimes I can see the patern that is there, but I cannot form the words properly to explain what I'm seeing.

What I do know is that this bill had the important stuff stripped away from it that actually would have benifited the economy from the bottom while the bailout benifitted it from the top, and that the Dems are actually rather powerless to prevent that from happening because they cannot override either a veto or a fillibuster. Bush might veto this because it does not give him what he wants. In reality, it gives him half the money and a whole lot of prying eyes from the Congress. The fillibuster was the bigger issue, and what they were forced to remove should be worrying us.

I am uneasy about this for reasons other than the ones you are, but I believe that, after the election, those can be rectified and this will act as a stop gap measure.

I think, though, this is one of those points where we will have to agree to disagree. Heck, I've had that happen a lot.

Ma'amselle Lezident said...

The Dems could have run out the clock on this one, but instead, they decided to do a legislative "news-dump" on a Sunday. There was absolutely no reason any one of them should have endorsed this plan--not a one.

Love or hate Michael Moore; here's what he's saying about it:


Let me cut to the chase. The biggest robbery in the history of this country is taking place as you read this. Though no guns are being used, 300 million hostages are being taken. Make no mistake about it: After stealing a half trillion dollars to line the pockets of their war-profiteering backers for the past five years, after lining the pockets of their fellow oilmen to the tune of over a hundred billion dollars in just the last two years, Bush and his cronies -- who must soon vacate the White House -- are looting the U.S. Treasury of every dollar they can grab. They are swiping as much of the silverware as they can on their way out the door.

No matter what they say, no matter how many scare words they use, they are up to their old tricks of creating fear and confusion in order to make and keep themselves and the upper one percent filthy rich. Just read the first four paragraphs of the lead story in last Monday's New York Times and you can see what the real deal is:

"Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.

"Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.

"At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees.

"Nobody wants to be left out of Treasury's proposal to buy up bad assets of financial institutions."

Unbelievable. Wall Street and its backers created this mess and now they are going to clean up like bandits. Even Rudy Giuliani is lobbying for his firm to be hired (and paid) to "consult" in the bailout.

The problem is, nobody truly knows what this "collapse" is all about. Even Treasury Secretary Paulson admitted he doesn't know the exact amount that is needed (he just picked the $700 billion number out of his head!). The head of the congressional budget office said he can't figure it out nor can he explain it to anyone.

And yet, they are screeching about how the end is near! Panic! Recession! The Great Depression! Y2K! Bird flu! Killer bees! We must pass the bailout bill today!! The sky is falling! The sky is falling!

Falling for whom? NOTHING in this "bailout" package will lower the price of the gas you have to put in your car to get to work. NOTHING in this bill will protect you from losing your home. NOTHING in this bill will give you health insurance.

Health insurance? Mike, why are you bringing this up? What's this got to do with the Wall Street collapse?

It has everything to do with it. This so-called "collapse" was triggered by the massive defaulting and foreclosures going on with people's home mortgages. Do you know why so many Americans are losing their homes? To hear the Republicans describe it, it's because too many working class idiots were given mortgages that they really couldn't afford. Here's the truth: The number one cause of people declaring bankruptcy is because of medical bills. Let me state this simply: If we had had universal health coverage, this mortgage "crisis" may never have happened.

This bailout's mission is to protect the obscene amount of wealth that has been accumulated in the last eight years. It's to protect the top shareholders who own and control corporate America. It's to make sure their yachts and mansions and "way of life" go uninterrupted while the rest of America suffers and struggles to pay the bills. Let the rich suffer for once. Let them pay for the bailout. We are spending 400 million dollars a day on the war in Iraq. Let them end the war immediately and save us all another half-trillion dollars!

I have to stop writing this and you have to stop reading it. They are staging a financial coup this morning in our country. They are hoping Congress will act fast before they stop to think, before we have a chance to stop them ourselves. So stop reading this and do something -- NOW! Here's what you can do immediately:

1. Call or e-mail Senator Obama. Tell him he does not need to be sitting there trying to help prop up Bush and Cheney and the mess they've made. Tell him we know he has the smarts to slow this thing down and figure out what's the best route to take. Tell him the rich have to pay for whatever help is offered. Use the leverage we have now to insist on a moratorium on home foreclosures, to insist on a move to universal health coverage, and tell him that we the people need to be in charge of the economic decisions that affect our lives, not the barons of Wall Street.

2. Take to the streets. Participate in one of the hundreds of quickly-called demonstrations that are taking place all over the country (especially those near Wall Street and DC).

3. Call your Representative in Congress and your Senators. (click here to find their phone numbers). Tell them what you told Senator Obama.

When you screw up in life, there is hell to pay. Each and every one of you reading this knows that basic lesson and has paid the consequences of your actions at some point. In this great democracy, we cannot let there be one set of rules for the vast majority of hard-working citizens, and another set of rules for the elite, who, when they screw up, are handed one more gift on a silver platter. No more! Not again!

Michael Moore

P.S. Having read further the details of this bailout bill, you need to know you are being lied to. They talk about how they will prevent golden parachutes. It says NOTHING about what these executives and fat cats will make in SALARY. According to Rep. Brad Sherman of California, these top managers will continue to receive million-dollar-a-month paychecks under this new bill. There is no direct ownership given to the American people for the money being handed over. Foreign banks and investors will be allowed to receive billion-dollar handouts. A large chunk of this $700 billion is going to be given directly to Chinese and Middle Eastern banks. There is NO guarantee of ever seeing that money again.

P.P.S. From talking to people I know in DC, they say the reason so many Dems are behind this is because Wall Street this weekend put a gun to their heads and said either turn over the $700 billion or the first thing we'll start blowing up are the pension funds and 401(k)s of your middle class constituents. The Dems are scared they may make good on their threat. But this is not the time to back down or act like the typical Democrat we have witnessed for the last eight years. The Dems handed a stolen election over to Bush. The Dems gave Bush the votes he needed to invade a sovereign country. Once they took over Congress in 2007, they refused to pull the plug on the war. And now they have been cowered into being accomplices in the crime of the century. You have to call them now and say "NO!" If we let them do this, just imagine how hard it will be to get anything good done when President Obama is in the White House. THESE DEMOCRATS ARE ONLY AS STRONG AS THE BACKBONE WE GIVE THEM. CALL CONGRESS NOW.

Ma'amselle Lezident said...

Here's another good article: http://seekingalpha.com/article/97672-wall-street-bailout-congressional-cover-up-or-sarbanes-oxley?source=feed.

From that post: "This is no bailout of an industry, it's a transfusion of capital needed to allow an industry to comply with legislation that just doesn't make sense. And while the politicians posture and pontificate, bluster and blame, banks are failing and irreparable harm is being done to John Q's nest egg. Yours and mine!"