1) I favor an economically strong America capable of acting either independently or in congruence with others, based upon her own decisions.
2) I believe in a capitalistic based system, but fully recognize that pure capitalism is something that was bargained away with a progressive income tax system; and has been bastardized most by those Presidents who spoke most vehemently to maintain it puritanically; for example, Ronald Reagan with supply side economics and busting organized labor.
So my feelings which have a long record in print somehow precede the most recent suggestions of Thomas Friedman and I hope you will take a moment to read his most recent series of columns regarding our nation's economic challenges.
But I speak today about what is the nation's economic Iraq, or economic Katrina.
Only eight weeks ago, this administration went to the Democratic leadership on Capital Hill and warned of an impending crisis - the meltdown of the nation's credit markets under the weight of the implosion of the housing industry. They begged for a capital intrusion, beyond what history had ever seen. Their rationale was that the credit markets would seize and then lead to a meltdown in the stock market.
That's the unvarnished truth. Their claims, their original intent and their original plan was simply to deal with bailing out Wall Street and the investment banks.
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Hank Paulson is a former Wall Street Investment banker, so I'm sure his closest friends were whispering in his ear only days before the implosion of those firms who were leveraged with only 3% equity stakes in their investments.
AIG, the insurance giant was only days behind us. And exposed within each of these discussions was the Bush Administration position that there were some industries that were simply "too big to fail".
This seemed to be the criteria upon which decisions were to be made as to who survived and who were allowed to fail; an artificially 'selective' approach to capitalism, wouldn't you think?
I had been hearing rumors even at local levels as a capital rich regional bank holding group operating within my area was lobbying its way toward gaining a piece of the $700 bailout that the story told the Congress in order to gets it's approval to spend $700 billion in taxpayer money was that we would buy up troubled assets and remove them from the markets and let the markets return to some degree of normalcy before reentering those mortgages to the marketplace. Gone were the discussions of "bailing out the banks". Instead it was now a "rescue package" of buying up assets in order that we could keep people in their homes.
I made several high level inquiries last week of people who supposedly knew what was going on. I made two very heated inquiries to top level appointees of the Bush Administration but they assured me that the plan had not changed.
I guess I wasn't the only one asking.
Finally, Paulson was forced to admit that he had already spent the $400 initial amount and spent it on buying into banks that were in fact, hoarding the money in dividends, executive perks and salaries, and buying up other banks. Not one dime had been invested as it was supposedly intended.
Americans had been duped again by an administration that gave us Iraq under the same lack of credible intelligence and overall honesty. It would lead one to speculate whether there was ever an intent to buy up troubled assets, or did the administration just need congressional approval to write the checks for Wall Street and banks.
To add insult to injury (much as in Katrina fashion) Paulson disclosed that he had a plan to immediately pump an additional $50 billion into the nation's credit card companies - the real buzzards and scavengers of society who had most recently claimed that they would go under if not given lavish changes to the bankruptcy laws to reinstate near debtor prison status to Americans in debt to them.
I am deeply insulted.
What a great word.
This chapter of Bush Capitalism is something that should be read as enough to run the bums out of office, and I'm not sure we can afford to wait the 67 days until a change of administration.
Surely, this congress can stand up to and slap down this co*k-a-mammy brand of economic rescue because it obviously is headed in the same fashion as Katrina.
Bush promised us he would destroy the Katrina model. He sacrificed Brownie and threw him under the bus to save himself. But he didn't break the mold.
Now it's time Congress stepped up and threw Bush and Paulson under the bus for lying to the American people; padding the budgets of Wall Street and banks from the treasury; and then moving to further favor and aggrandize their friends.
This folly would be the stuff of a great book; maybe even set in the French Provincial timeframe with a scoffing of commoners and tax payers while the looting of the treasury was in full fold.
I'm sorry, I guess there's already a book about that.
But today, Bush doesn't want to provide a bridge loan to the auto makers. He returns to his "capitalistic principals" to defer on that issue. He said the risk was that the credit markets would collapse.
Well, I'm a school trained economist who happened to have been a banker before working for the Economic Development Administration. I've got a bit of experience in these matters. My response, you say?
If Bush is sincere; as the American Banker's Association and other lobby groups most certainly are not, then he has exposed either another chapter and book that he failed to read to reach his MBA, or he has exposed that in his viewpoint, capitalism and policy are a selective process of rewarding your friends while punishing your enemies.
The American credit industry collapsed upon its own weight of bad risk management; that is making loans that were not properly secured by either equity or cash flow means [planned incompetence to move banks from lenders to processors and packagers only of loans in search of fees and return on investment as an owner rather than interest as a lender]; mismanaging and misrepresenting debt instruments through bundling and marketing of them [fraud]; and misrepresenting the cause and effect of their own actions through subversion and diversion [another felony].
Instead of being bailed out and profited; many of them should be put in jail and their charters as national or state banks revoked.
Investment banks established known super risky credit instruments built to "bilk" both domestic and foreign investors and bond traders of their equity.
It was a house of cards that collapsed.
With that knowledge, I agreed reluctantly that the only way to keep the American people from paying for the crimes of the banks and others was to take the least painful method of buying up troubled assets. I wrote letters, and three articles which were published supporting the purchase of these assets. It wasn't a grant, it was a loan.
I remember distinctly that Paulson and Bush had said that the nation's taxpayers would, in fact, not have it's assets at risk. At most, they had claimed that $175 billion would be lost.
But Paulson has simply GRANTED - given - $400 billion to the banks without returns, contracts or commitments. That money can not be reclaimed.
We were lied to - again, again and again.
Was there an additional political factor to this latest Katrina Charade?
It seems strange that Bush and this White House couldn't see a way to get even with Democrats and President Elect Baa in just the slightest form. The only problem is, this was far greater than a college fraternity prank of taking all the "Mw's" off the keyboards at the White House. No, this time it was leaving a bigger mess in the economy than there had to be and the real victims would be the same people who had rebuked his Presidency with record low approval ratings.
So what is the nation to do?
Most people don't have a clue.
The Congress - the Democrats and Republicans must take away all additional authority from Secretary Paulson and this administration unless the act is specifically approved by a majority vote of the Congress. Even though this is a lame duck Congress with a higher percentage of Republicans than will be present on January 21, I believe this is a well intentioned Congress of both Democrats and Republicans. I think this is doable. They can easily put together a bi-partisan committee to oversee such a process; or refer the matter back to a standing committee with approval powers.
But the INTENT of CONGRESS is at hand and should be forced. The initial purpose was to "buy up troubled assets" and that's what must be forced.
There should also be a deep investigation that comes up with the money trail and recovery [yes, I said recovery] of every last dime that was granted to the bankers. I think there needs to be an additional criminal investigation that goes after the bank fraud of these people who purposefully built this "built to bilk" scheme. Until that is done, there will be no return of credibility to either the political or the economic and financial sectors.
What is the course of action that must be employed to underpin the economy?
1) We must provide bridge financing [loans] to several industries, but each must be required as a condition of these loans to:
a) set aside their top management team (that's right decapitate those receiving these loans to insure a new direction];
B) establish an independent board that supercedes the board of directors of the firm until all loans are paid back;
c) require a new business plan that meets the needs of the nation, the business model - future, and the investors that includes new vehicle types and standards; (Management by results rather than management by exception).
This will probably be required of the auto industry; the airline industry and maybe others.
Build up the investment within the Small Business Administration and other federal loan guarantee programs to businesses, farmers and others - but as guarantees. Streamline the process for these loans in order that an application can go from entry to decision within 30 days or less.
This has been good word garbage by the past Presidents Bush, Clinton, Bush and Reagan, but it must become a real solution properly and fully funded far beyond any previous levels. Appoint an interim Director of these loan agencies who will continue to focus on this solution even while the transition of power is taking place.
Therefore, I see Congress as the potential bridge between administrations and policy during a very troubling time. I am not asking that they step outside their obligatory role as a legislative body, but that they provide a special mechanism and discussion enforced by conditions on all funding by which we face this mounting nightmare of policy.
The Bush Administration has proven to be able to start emotional things, but seems unable to focus either on proper perspective and process management or upon developing final solutions and closure; hence Iraq, Katrina and other disasters or meteoric proportion. Leaving "unresolved issues" lying around is a terrible inefficiency and a costly one at that.
We have to finish things, rather than just open them.
The nation can not afford to fund all of these things on a continuing basis. There are problems that have been postponed and not answered domestically and internationally simply because our plate has run over - a pure sign of incompetent leadership. We have to appoint key leaders, but mostly those leaders within ranks must step up to challenge, even within their final days.
The Bush Administration hasn't functioned at full bore in several months. It seems asleep almost as it seemed during the flooding of New Orleans at the hands of Hurricane Katrina. The delays within that disaster have proven as or more catastrophic than the disaster itself.
With the poor track record, I feel that the Congress must step forward and alleviate the problem, in the absence of leadership.
There is no doubt that this is a political trap. But at a few moments within this nation, it is the requirement of the nation's needs that speaks above the politics of the day.