The Paulson RTC will buy toxic assets at inflated prices thereby creating a charitable institution that provides welfare to the rich—at the taxpayers’ expense....
Since we do not have time for a Chapter 11 and we do not want to bail out all the creditors, the lesser evil is to do what judges do in contentious and overextended bankruptcy processes: to cram down a restructuring plan on creditors, where part of the debt is forgiven in exchange for some equity or some warrants. And there is a precedent for such a bold move. During the Great Depression....
The major players in the financial sector do not like it. It is much more appealing for the financial industry to be bailed out at taxpayers’ expense than to bear their share of pain..... The appeal of the Paulson solution is that it taxes the many and benefits the few. Since the many (we, the taxpayers) are dispersed, we cannot put up a good fight in Capitol Hill; while the financial industry is well represented at all the levels.
....
The decisions that will be made this weekend matter not just to the prospects of the U.S. economy in the year to come; they will shape the type of capitalism we will live in for the next fifty years.
Another top-rated economic blogger, Mike Shedlock a/k/a Mish who has a Ron Paul-ian political bent, begs for a Senate filibuster:
Congress is lining up to give "Unreviewable Dictatorial Power"to the Treasury while increasing the size of the already ridiculous proposal.
Contact Your Senator Today!
It's time to contact your senator. Here is contact information for Senators of the 110th Congress.
Phone or Email your Senators today. Tell them in your own words
Urge your senator to Filibuster any bailout legislation.
Emphatically state you do not want a bailout of any kind for anyone.
No Dictatorial power for Paulson or Bernanke
Taxpayers should not have to bail out banks making bad loans
Tell them that "The Fed" and Paulson are systemic risk".
So does Lee Adler of the Wall Street Examiner whose views are generally more progressive:
Dear Senator:
By assuming most of the bad debt from the financial system (if that’s even possible), the government will be infecting itself with the disease it has been seeking to treat. Interest rates will soar as investors perceive not only an increased threat of inflation from the Fed’s money printing that has already begun, but also from the correct perception that the government is destroying its own creditworthiness.Through a combination of softening tax receipts, a thermonuclear explosion of government spending for bailouts, and rising expenditures in all other aspects of government, the US will soon be facing trillion dollar deficits at a time when the only way to pay for them is to sell more and more bonds.
..... The government has in turn taken us from the the brink of financial system collapse and added to that the threat of financial collapse of the government itself, a fate which I would suggest is far worse than allowing Wall Street to collapse and money market funds to break the buck. No question, that’s a bad thing, but a loss of faith in the financial system is one thing, a loss of faith in the government’s ability to pay its bills and protect the public is a catastrophe of unimaginable proportions. If this program is passed by Congress, I fear that our fate will have been sealed.
I have no hope that this can be stopped in the House. Let’s hope that enough of our Senators are wise enough and courageous enough to stop this madness before it destroys our beloved Republic.
Finally, Stirling Newberry who once upon a time was a top-rated diarist here at DK, says this is a "defining moment" for Obama:
Liberals have pined for a new deal moment, well, it has arrived.
....
One of the crucial moments of the New Deal was one which occurred before FDR was in office. He was offered, by Hoover, a chance to wield the powers of the Presidency early, if, and only if, he renounced the "so-called New Deal." .... FDR replied that he was still a private citizen, and would assume the duties of office at the constitutionally appointed time.
That is to say, FDR invited Herbert Hoover to engage in political auto-fornication. Now this is one of the most hard minded decisions that could have been made. It is absolutely true that some people who lost everything in the intervening months would have been temporarily spared had FDR accepted the agreement. It is also clear that millions more would have suffered far worse. FDR, as much as he would be the architect, or at least General Contractor, for the liberal state in America, was also willing to break eggs to make an omelet.
It is precisely this willingness to take short term losses, to not be held hostage by a mad man, that made FDR able to see through the project to its conclusion.
....
They key is to avoid being saddled with the debt, and leaving the same bums in charge. It's really that simple. That's why the Village is all fuzzy for the RTC all of a sudden: the consumer takes the shaft, and the people who crashed the sports car walk away scott free.
This is Obama's Presidential moment. If like FDR and Lincoln he torpedoes an unacceptable deal imposed on him by an outgoing order that wants to get everything in return for not knocking over the apple cart, then he has a chance at greatness. Otherwise he's just another janitor in the elephant parade....
His campaign option is simple: this bail out, if passed is toxic to the American public. People who have not seen a raise in 8 years, who are upside down in their homes, who are going to get laid off from some of the few good jobs streams left, who are in industries not being bailed out, are all going to be united in seeing this as what it is: odious frat boy socialism. If Obama wants to right flank the Republicans, then here is also his chance. He can present himself as a Main Street Republican at heart, as FDR often did, saying that the people who got to play, must now pay, and that personal responsibility attaches to great wealth.
So here it is Obama people, your guy wanted a defining moment. Today and tomorrow are it.
I'm sure I've missed a lot of other, excellent commentary. Please link to it in comments.
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