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Four Reasons to Oppose the Bush-Obama Request for Another $350 Billion Bailout
On Monday, President Bush - at the request of Barack Obama - formally requested the next truckload of Wall Street bailout cash. I appeared on CNBC to discuss the request. Watch it here.
The question is whether Congress should agree to this request or not, and I am against it for four reasons that I mentioned on CNBC.
REASON 1: Treasury Says It Doesn't Need the Money
First and foremost, as the New York Times reports, "The first $350 billion in bailout money has been fully allocated and the Treasury says there is no urgent need for more." On top of this, the first $350 billion has been a complete disaster - as the bailout's congressional oversight panel reports, there has been almost no transparency or even basic proof that the bailout is working to do anything other than subsidize bank consolidation and executive bonuses.
REASON 2: "New" Conditions Are Filled With Loopholes & Omissions
Second, it's not clear that the conditions Democrats are talking about placing on the second batch of money are strong enough - or, in some cases, even real.
Rep. Barney Frank (D-MA) has put forward legislation that would impose some strings on the money - and his legislation draws a nice comparison to the auto bailout. Essentially, he wants to impose some of the same restrictions on the money that conservatives demand on the auto bailout. And that's a damn good thing.
The problem is that his proposal still has some gaping loopholes. For example, the Washington Independent reports that while Frank's executive compensation language restricts bonuses, it will still allow executives to pay themselves absurd salaries. Additionally, while it's good that Frank wants to force some of the new bailout money to be used to help homeowners, that money needs to be accompanied with bankruptcy law reform (ie. giving judges the power to renegotiate loans), so that the money isn't used to subsidize banks' bad loans and can be used in the most effective way that actually helps homeowners and the middle-class.
Of course, word today is that Frank is now backing off even his modest legislation, which leads us to reason 3.
REASON 3: Congress Still Abdicating Its Oversight Responsibilities
To my knowledge, neither Frank nor Senate Banking Committee chairman Chris Dodd (D-CT) has put forward bills that would legislatively mandate exactly how the new bailout money is used, or even seriously better transparency. Instead, they are telling us we should simply trust Obama to use the money more responsibly and effectively than Bush. Indeed, lawmakers are demanding a letter from Obama describing how he would use the money - but by definition, a letter is non-binding.
Incredibly, we are expected to believe this will better guarantee transparency and effectiveness even though, as the New York Times reports, Dodd "acknowledged that without new legislation there would be nothing to guarantee that those plans would be followed." Arguably worse than Dodd's statement is the behavior of Frank. The Huffington Post today reports that "Frank introduced legislation at the end of last week that would have tied a number of strings to the second $350 billion in financial-industry bailout funds, but on Monday, he told fellow Democrats in a closed-door meeting that he wouldn't push for passage of his bill if President-elect Obama would give "his word" that he would implement major portions of his legislation."
Now, I certainly think Obama will do a better job than Bush in administering the bailout money - but this doesn't mean we should simply accept Congress once again rolling over, playing dead, and effectively delegating its power of the purse to the executive branch. We went down that road once before, and look where it got us. I mean, seriously - didn't Democrats get elected to Congress to be a Congress rather than a rubber stamp?
Additionally, if Congress doesn't play a much stronger role on this bill, it could politically weaken Obama's hand in taking on the financial industry as a whole. By passing the buck, Congress will put the bailout all on him - and he won't have a progressive legislature to play off of if/when he wants to use the bailout in a way that actually makes the financial industry uncomfortable. In other words, he'll be out there all on his own - which isn't good for anyone.
REASON 4: Nobody Has Explained Why This Is the Best Way to Spend $350 Billion
I said this during the original debate over the bailout bill, and I'll say it again: Nobody is explaining why spending another $350 billion on a Wall Street bailout is a better way to stabilize and stimulate the economy than, say, devoting that money to universal health care or a full employment program. Shouldn't that be the very first condition of this amount of money? Shouldn't someone have to make this argument? And isn't the fact that this case hasn't been made a major reason why polls show the American people still strongly oppose this bailout?
*******************
Let me say that in the upcoming negotiations over the bailout, some of this might change. For example, some of the loopholes may be eliminated, and lawmakers may step forward and actually legislate the use of the money, rather than simply giving it to the president.
But if everything stays the same - if these circumstances stand - then I see no reason for Congress to cut another blank check for $350 billion. There's going to be a huge amount of financial industry pressure to pass this, but progressives have to stand up to that. As George Bush once said, "There's an old saying in Tennessee - I know it's in Texas, probably in Tennessee - that says, fool me once, shame on - shame on you. Fool me - you can't get fooled again."
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25 Comments so far
Show AllThe CONgress did not listen to WE THE PEOPLE before...why would they listen now??
They won't never will!
Now, if we renamed ourselves AIPAC, we might have a chance.
Hmmm, great idea. Better yet, how about NRA? Now that would make them listen even more as the NRA is the most powerful lobbyist and filthy rich too. Of course, we could learn from them since they fight on all levels of government while we the people never pay attention to the local and state level elections that could otherwise pave the way for a better set of pols in Washington who'll actually listen to us.
O you speak the truth.
Hoa binh
The reason they are asking for the 350 billion dollars is because they can.
And because they know they'll get it.
The economy has been dismantled and gutted for so long that is past the point of no return without revolutionary structural changes. That would upset the applecart--so basically they will apply a bandaid or two, toss a bone or two, but basically they are subsiding themselves and making sure their own nests are feathered and secure in the coming days of want. And Obama ain't nothing but a houseboy doing the master's bidding...
After us, the deluge.
Nobody can understand economics and purposefully so. It is a gimmick to transfer wealth to the top.
Just curious... does not writing any legislation (Dodd) and "trusting" the President to do it "the right way" eliminate any legislative battles or crazy loopholes/amendments (yeah, I'm givin em too much credit...)
Mr. Obama's action are well explained here:
http://www.youtube.com/watch?v=znQe9nUKzvQ
http://www.youtube.com/watch?v=6Op5or_vkcc
It seems to me that the banks are just using the money to buy other banks. It seems that we are still in the 'trickle down' theory of economics. I think we need to try 'perculate up' economics. Instead of giving the money to existing banks, why not just create a government (ie people) owned bank with the $700 billion dollars? Loan the money out at interest. Start by refinancing distressed mortgages at a fair market value and interest. Congress would have complete oversight and could even set executive salaries. Eventually we could use the income generated to reduce budget deficits and even taxes.
Sioux Rose
ED: Excellent idea. And its first priority should be to change the mortgage structure of loans that cannot be met, replacing them with either longer-range loans, or conditions that will keep people in their homes. Otherwise like the game board postulated by Disaster Capitalism, the same banksters that engineered the housing bubble will mop up the board buying up the now depreciated assets, only to sell them again at a time when their values buoy back up.
The news from the United Kingdom is that Goldman Sachs got a 7 billion pound bail out in process of handing out a 6 billion pound package of pay raises and executive bonuses. To illustrate another point, both Paulsen and Bernacke are ex Goldman Sachs executives. And I have no doubt that if you could trace the money, it will end up full circle being given back to legislators from lobbyists seeking favorable legislation.
Do the bail outs fix the real problem? No. Here is the problem. After WWII America was an industrialized economy that generated jobs. Now we are an economy based on making money from money investments. The process of investment is sanitized for stock holder consumption. That is why the toxic loans became a global economic collapse. Not many people knew about how loan sharking was creating the toxic loans and how risky they were. In the meantime, we have outsourced jobs and factories. While some people still steadfastly hold onto the Trickle Down dogma and the myth that we really have free market capitalism, we have actually developed into a TRICKLE OUT economy. This is especially the case with billionaires involved in offshore banking and not supporting the American infrastructure by which they got rich.
We need to reindustrialize, penalize outsourcing, crush offshore banking and the economic treason of billionaires. Obama has it right in his focus on jobs, but he is so far missing the point on re industrializing and stopping the trickle out.
Japan and China have both recently indicated a reluctance to continue lending to America. The national debt is just under 10.7 trillion dollars currently. We are headed fast toward an impasse with having no one to borrow from and needing to LIVE WITHIN OUR MEANS. I believe we are already at a point to sell of government assets to off set deficits, such as selling off some of our 750 military bases world wide. That new self promotiing Congressional Vistors Center could be sold off to become a shopping mall. It is time to slow down the spending.
Nice piece!! Yes -- exactly, people with a living wage plus some extra buy things, create jobs, and pay taxes. Jump-starting a flawed economic borrowing binge doesn't solve anything.
Goldman Sachs has ties to AIG another "Bailout First" of 85 BILLION DOLLARS....It is all connected.
Do you think things get better with the new guy at Treasury, Timothy (I forgot to pay my taxes for four years) Geithner???? Not ! Here is another Bilderberg Club invitee and President of the New York Federal Reserve.....
Why is the New York Federal Reserve important....Have you ever heard of "The Black Eagle Fund"? After WWII, The U.S. confiscated Japanese and German Gold. In 1986, the U.S. found and unearthed almost 280,000 tons of Japanese Gold hidden by Ferdinand Marcos.....That gold was confiscated by the CIA and put away to fund covert operations managed by The Exchange Stabilization Fund (Part of U.S. Treasury without Congressional oversight) Funds for those operations were released through The New York Federal Reserve....
Two questions for "I forgot to pay my taxes": 1. Did you ever attend a Bilderberg Club meeting? and 2. Did you fund covert operations using money allocated by the Exchange Stabilization Fund? (Reference: Google Search: "Collateral Damage (Part 2)The Subprime Crisis and the Terrorist" It is a site with a lot more information.)
for starters, how about this modest proposal: a web site which shows a record for every government expenditure and for every purchase with government money?
How about we stop spending a trillion dollars a year on war and militaristic interventionism?
-- ekaton aka d.k.shaw
That would work and send a message.
Here's Dean Baker's comments from "Beat The Press:
"NPR reported on Representative Barney Frank's effort to ensure that a substantial portion of the money from the second $350 billion in the TARP go toward helping homeowners. The proposals that purport to save homeowners would in fact hand large amounts of money to banks. They involve paying banks far above market prices for underwater mortgages. The benefit to homeowners is that they would be allowed to stay in their homes, possibly with zero equity. (Some proposals also give the homeowner a small equity cushion.)
NPR and other news outlets should be reporting who gets the money under these proposals. In many cases, banks may be paid tens of thousands of dollars to leave a homeowner in a home in which they have no equity. At a time when Congress is debating extending the State Children's Health Insurance Program at a cost of $3,000 per kid, it is not clear how many kids' health care they or the public would be willing to sacrifice to pay a bank to leave someone in a home in which they have no equity."
The Washington Post tells us that Representative Barney Frank, the head of the House Financial Services Committee, wants at least $40 billion of an any additional TARP funds to "help distressed homeowners." This is how Mr. Frank describes his agenda, but the proposes that he has supported would send checks to banks, not homeowners.
Mr. Frank has endorsed the idea of paying banks considerably more than the market value for bad mortgages in order to allow homeowners to stay in homes in which they will have zero equity. If a bank gets $20k, 30k, or even more, and the homeowner ends up with nothing except a new mortgage that is equal to value of her home, it is difficult to see how this outcome is aiding the homeowner.
It is easy to design measures that would help homeowners without giving taxpayer dollars to banks. For example, the government could temporarily change the rules on foreclosure to require that homeowners facing foreclosure be given the opportunity to rent their home at the market rent for a substantial period of time. Mr. Frank has shown zero interest in such measures."
In addition, Propublic has started a new feature which puts a time line on certain promises government officials have made in regard to these issues;
. Sen. Christopher Dodd's (D-CT) promise back in July [3] to release his mortgage documents after it was reported that he received some friendly deals from Countrywide Financial Corp. He maintains that the deals, as far as he knew, was not related to his position on the Senate banking committee, which oversees the mortgage industry.
So far we have been waiting 172 for him to fulfill this promise.
The Treasury Department's promise to reveal how much it's paying to Bank of New York Mellon [4] to be the TARP custodian.
We have been waiting 91 Days for Treasury to fulfill this promise.
"I appeared on CNBC to discuss the request"
Appear on TV to discuss another brass knuckle blow to your front teeth? Instead, try visiting your shrink and maybe a dentist! Get this: We on the REAL progressive left stopped discussing the plunder a long time ago. We're taking action! We're shifting all of our individual exchange/association away from the elite power centers and toward our local communities, to bring the economic/political power back to the people where it belongs, where it will benefit us! Sheesh! We're mopping up! Future is bright for us! And we only need ONE reason to starve the elite - they are predators! Whew! Doesn't take a rocket scientist to figure that out!
TARP is a massive theft from everyone who holds or earns US Dollars. Eventually everyone who has a dollar is robbed because all US dollars will be worth less for the gargantuan dilution. The Fed, the Treasury, and the Banks are directly robbing all of us just as surely as any counterfeiter. They are "legally" stealing from all of us: Left, right, "REAL" progressives, political agnostics, Chinese bond holder, or Saudi emir and those with the least will be impacted worst.
Fat cat bankers in expensive suits are stealing moutains of money and rtdrury thinks he/she is "mopping up". Get real or get off the payroll. Real progressives work for real change as best we all can, both personal and political without necessarily insulting one another for advocating for causes we may or may not have proper perspective.
Your brass knuckle comment verges on veiled threat. Any physical violence you or other trolls like you might wreak would only be a fraction of the real suffering imposed on fixed income retirees who will likely go hungry or forego health care because of the spiraling costs spurred by this massive dollar dilution. Fat offshore accounts won't buy a clean conscience if you are on the take for these plunderers.
i think, maybe, the brass knuckle comment was figurative...illustrative and effective, but figurative...
Would local communities be Chicago, Cook County, or Illinois? For decades local politicians have been lining their pockets with kickbacks, ghost relative employees, relatives receiving contracts, relatives paid as ghost employees, hirng friends and relatives to manage local pension funds,privatizing government services and as Rod, "I Can Sell That Senate Seat" did whatever he wanted to do....He borrowed 2 billion dollars from the teachers´pension fund knowing that he would never have to pay it back......Does that sound like borrowing 4 TRILLION DOLLARS from Social Security? Or, Mayor Daley selling the parking meter system to a private company for 1.2 BILLION DOLLLARS and for 75 YEARS.....The taxpayers will be screwed for 75 years after they: built the roads, paid for the maintenance of the roads, paid for the parking meters, and paid fines for decades.
First, there needs to be strict state and federal laws against any politician or family member having an interest in government business (Senator Feinstein's husband, Richard C. Blum has made over 1.5 BILLION DOLLARS from contracts with the Department of Defense.) and receiving consultant fees within 5 years of serving in government. Take Rahm Emanuel, he made, at most $150,000 before leaving government. Within 1 year, he earned 7 million dollars in consultant fees and within two years, he had 18 million.....
The feds have an "After The Contract" corrupt system.....they all become consultants or lobbyists and they earn millions for the contacts they provided and continue to provide.....
"The Plunder" has continued and Progressive Democrats are in a small minority.
keepitsimple
Why can't we just call it like it is?? The banksters have shown their ownership of our government with a financial coup d'etat. It's glaringly obvious that they will continue to manipulate their politically elected minions, including Obama, for maximum profit and the enslavement of generations of American citizens. Only a complete disposal of the banking/global corporation cartel will restore any input to the taxpayers.
In a recent meeting of social studies teachers, the dept. head commented that refering to Russia's govt. as communist was no longer accurate. It has become an oligarchy. So what would be an accurate description of our form of government??