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What’s going on in Washington and Congress now is the Bush administration is trying to pull the Constitution out by its roots and demand that Congress give it a blank check, without any criteria, without any accountability, for $700 billion bailout of Wall Street.
The first question we have to ask as citizens is, why is there a need for a bailout? Just because Bush says the sky will fall and there will be a long term, chronic recession that will freeze up liquidity of banking funds for the purpose of making loans (i.e., credit availability)?.
It’s just maddening to watch how vague Bernanke and Paulson are in answering one question after another. It’s just an evasion, where they keep saying, “We need to do it. We need to do it.” And their Chicken Little material is conducted in closed session with Harry Reid and Nancy Pelosi and the Republican leadership. It’s always in closed session.
The Bush administration is trying to use fear mongering and shock and awe of this crisis, the self-induced crisis to ram through legislation that was highly ill-considered in terms of the actual economic merits, on the one hand, and then, on the other hand, it is an extreme power grab that would give these huge sweeping new powers to the Treasury Department. It’s quite interesting how the Bush regime is creating its own panic. When the government keeps saying Chicken Little, Chicken Little, of course the market is going to react in a very nervous manner.
There is probably pressure from overseas and domestic investors as we see in the wild up and down swings of the stock market. In other words, there may be attempted manipulation by investors of the US government’s policy in order to extort a better deal out of these distressed financial instruments, because Bush’s behavior is a reversal of what the government usually does, which is to counsel stability and patience, etc.
The only conceivable purpose of Treasury intervention is to pump up the market using taxpayer funds by paying higher-than-market prices because the distressed assets are not really able to be valued yet until they are gone through and sorted out. So if these mortgage-backed securities are distressed, they’re going to fetch a lower price. There’s huge amount of money on the sidelines in Wall Street, everybody admits that. So, as a hedge fund manager basically said if the price comes down lower than what the government is trying to keep elevated, private capital will buy this paper. Warren Buffett put $5 billion into Goldman Sachs this week. There’s a lot of money out there to go around.
As I said before, it’s not clear at all why a bailout is needed. That’s part of the stampede in the pack and the panic that Bush and Paulson and Bernanke are pushing Congress toward. You know, it’s eerily reminiscent, when you listen to Bush yesterday, of how he stampeded the Congress and the country into the war in Iraq in 2003. Look at all his statements: the bailout is needed to do this, do that, rescue mom and pop businesses, keep farms from failing, personal retirement accounts…yaada, yada, yada. It’s classic Bush/Cheney Chicken Little, the sky is falling.
So, the first step is to slow down Congress. Once this bill is passed—and it’s a blanket bill. It’s only four pages of a $700 billion blank check, transferring congressional authority wholesale, and I think unconstitutionally, to the White House, King George IV at work again. Once it passes, then the chance for comprehensive regulation and all the other changes to make Wall Street accountable, instead of allow Wall Street to create a corporate state or what Franklin Delano Roosevelt called fascism, which is government controlled by private economic power, represented by people like Henry Paulson—once this happens, it’s not going to be reversible.
Democrats are on the wrong side of this issue, this time. Ironically, the right wing conservatives in Congress may be more correct in saying no way, no bailout, let the companies bail themselves out. Except that maybe they don’t go far enough in demanding accountability form the Wall Street executives and protection for the taxpayer. The government might need to loan money with strings attached so they can dig out. But in this case, the Democrats are not showing any nerve…What are they doing but what they have done with Bush’s shenanigans in the past? They are again caving in. The statements by Nancy Pelosi are not reassuring, as she says “Well, it’s the Republicans’ bill, you know. Let them take responsibility for it.” Sorry Charlie. That dog doesn’t hunt. She’s the Speaker of the House.
The Democrats need to demand and to say, “Slow down. We’re not going to be stampeded into this bill by Friday or Saturday. We’re going to have very, very thorough hearings.” Otherwise, it’s another collapse, at constitutional levels, of the Congress before King George IV. But they’re not even talking about these kinds of reforms. And this is the best time to get these reforms, because this is called a must bill on Congress—in Congress, and if Bush wants his package, he’s going to have to sign them. So, there’s no reciprocity here.
We may get some of the usual fairly good questions by the Democrats at the hearings, but because they don’t follow through, they don’t have adequate leadership, it becomes a kind of posturing.
The Democrats should say, if they’re going to concede this bailout, is to say, “Well, we want comprehensive regulation and disclosure of the financial industry to make sure this doesn’t happen again. We want criminal prosecution of the crooks on Wall Street and disgorgement of their ill-gotten gains. We want a securities derivative tax and higher margin requirements to make speculators use their money, more of their money than other people’s money, like worker pension funds, to keep down speculation, as well as to produce revenues, which might lighten the tax load on working families. And we want to give shareholders control over the corporations they own.”
Rather than a bailout of the same financiers who made this mess, how about the government issuing credit to the distressed companies in the form of formal loans that would need to be repaid by these same companies upon penalty of forfeiture of the company’s private ownership if they fail to repay.
Second is, if there is a need for a bailout, why $700 billion? And third, if there is a need for a bailout, what kind of bailout? Where is the taxpayer equity? The taxpayer needs to recover profits from these companies if they turn around and make a profit, and the taxpayer will be paid back and the government can recover the surplus, perhaps the way they did on the taxpayer bailout in 1979 with Chrysler, where Jimmy Carter demanded that Chrysler issue stock warrants to the Treasury, and Chrysler turned around, and the Treasury sold the warrants for a $400 million profit.
And as far as McCain’s supposed leadership in this goes, why do we need Senator McCain’s grandstanding? It’s not dependent on whether John McCain returns to Washington other than to cast his vote. By trying to suspend the debates, if he does, he’s turning his back on over 50 million American voters who expect him to show up in Mississippi with Barack Obama who has made arrangements to go. McCain talks so much about honor and commitment. Let his do the honorable thing and keep his commitment to the American people and change his mind and get down to Mississippi. .
