The Complete (Though Ever-Changing) Elite Consensus Over the Financial Collapse

John Diamond, USA Today, February 4, 2004 -- "A desert mirage: How U.S. misjudged Iraq's arsenal":

The
assertion that Saddam had chemical and biological weapons -- and the
ability to use them against his neighbors and even the United States --
was expressed in an Oct. 1, 2002, document called a National
Intelligence Estimate. The estimate didn't trigger President Bush's
determination to oust Saddam. But it weighed heavily on members of Congress as they decided to authorize force against Iraq,
and it was central to Secretary of State Colin Powell's presentation to
the United Nations Security Council a year ago this week. . . .

The Bush and Clinton administrations, foreign intelligence services, and Republicans and Democrats in Congress all took it as a given that Iraq had chemical and biological weapons.

Walter Pincus, The Washington Post, August 11, 2007 -- "How the Fight for Vast New Spying Powers Was Won":

For
three days, Mike McConnell, the director of national intelligence, had
haggled with congressional leaders over amendments to a federal
surveillance law, but now he was putting his foot down. "This is the
issue," said the plain-spoken retired vice admiral and Vietnam veteran,
"that makes my blood pressure rise. . . .

McConnell won the fight, extracting a key concession despite the
misgivings of Democratic negotiators. Congressional, administration and
intelligence officials last week described the events leading up to the
approval of this surveillance, including a remarkable series of
confrontations that ended with McConnell and the White House
outmaneuvering the Democratic-controlled Congress, partly by capitalizing on fresh reports of a growing terrorism threat.

"We had a forcing function," a senior administration official said,
referring to the intelligence community's public report last month that
said al-Qaeda poses a growing threat to the United States and to
lawmakers' desire to leave town in August. . . .

A critical moment for the Democrats came on July 24, when McConnell met
in a closed session with senators from both parties to ask for urgent
approval of a slimmed-down version of his bill. Armed
with new details about terrorist activity and an alarming decline in
U.S. eavesdropping capabilities, he argued that Congress had days, not
weeks, to act.

"Everybody who heard him speak recognized the absolute, compelling
necessity to move," Sen. Kit Bond (R-Mo.), vice chairman of the
intelligence panel, said later of the closed session.

Democrats agreed. As delivered by McConnell, the warnings were seen
as fully credible. "He's pushing this because he thinks we're in a
high-threat environment," the senior aide said. . . .McConnell deemed
[the Democratic draft's] fine print unacceptable, however, and in the
end, it was the Republican bill, a near-copy of his proposal, that passed both chambers of Congress.

David Herszenhorn, New York Times, today, "Congressional Leaders Stunned by Warnings":

It
was a room full of people who rarely hold their tongues. But as the Fed
chairman, Ben S. Bernanke, laid out the potentially devastating
ramifications of the financial crisis before congressional leaders on
Thursday night, there was a stunned silence at first.

Mr. Bernanke and Treasury Secretary Henry M. Paulson Jr. had made
an urgent and unusual evening visit to Capitol Hill, and they were
gathered around a conference table in the offices of House Speaker
Nancy Pelosi.

"When you listened to him describe it you gulped," said Senator Charles E. Schumer, Democrat of New York.

As Senator Christopher J. Dodd, Democrat of Connecticut and
chairman of the Banking, Housing and Urban Affairs Committee, put it
Friday morning on the ABC program "Good Morning America," the
congressional leaders were told "that we're literally maybe days away
from a complete meltdown of our financial system, with all the
implications here at home and globally."

Mr. Schumer added, "History was sort of hanging over it, like this was a moment."

When Mr. Schumer described the meeting as "somber," Mr. Dodd cut
in. "Somber doesn't begin to justify the words," he said. "We have
never heard language like this."

"What you heard last evening," he added, "is one of those rare
moments, certainly rare in my experience here, is Democrats and
Republicans deciding we need to work together quickly."

Leave aside for the moment whether this gargantuan
nationalization/bailout scheme is "necessary" in some utilitarian
sense. One doesn't have to be an economics expert in order for several
facts to be crystal clear:

First, the fact that Democrats are on board with this scheme
means absolutely nothing. When it comes to things the Bush
administration wants, Congressional Democrats don't say "no" to
anything. They say "yes" to everything. That's what they're for.

They say "yes" regardless of whether they understand what they're
endorsing. They say "yes" regardless of whether they've been told even
the most basic facts about what they're being told to endorse. They say
"yes" anytime doing so is politically less risky than saying "no,"
which is essentially always and is certainly the case here. They say
"yes" whenever the political establishment -- meaning establishment
media outlets and the corporate class that funds them -- wants them to
say "yes," which is the case here. And they say "yes" with particular
speed and eagerness when told to do so by the Serious Trans-Partisan
Republican Experts like Hank Paulson and Ben Bernake (or Mike McConnell
and Robert Gates and, before them, Donald Rumsfeld and Colin Powell).

So nothing could be less reassuring or more meaningless than the fact
that the Democratic leadership has announced that what they heard
scared them so much that they are certain all of this is necessary --
whatever "all this" might be (and does anyone think that they know what
"this" even is?). It may be "necessary" or may not be, but the fact
that Congressional Democrats are saying this is irrelevant, since they
would not have done anything else -- they're incapable of doing
anything else -- other than giving their stamp of approval when they're
told to.

Second, whatever else is true, the events of the last week are
the most momentous events of the Bush era in terms of defining what
kind of country we are and how we function -- and before this week, the
last eight years have been quite momentous, so that is saying a lot.
Again, regardless of whether this nationalization/bailout scheme is
"necessary" or makes utilitarian sense, it is a crime of the highest
order -- not a "crime" in the legal sense but in a more meaningful
sense.

What is more intrinsically corrupt than allowing people to engage in
high-reward/no-risk capitalism -- where they reap tens of millions of
dollars and more every year while their reckless gambles are paying off
only to then have the Government shift their losses to the citizenry at
large once their schemes collapse? We've retroactively created a
win-only system where the wealthiest corporations and their
shareholders are free to gamble for as long as they win and then force
others who have no upside to pay for their losses. Watching Wall St.
erupt with an orgy of celebration on Friday after it became clear the
Government (i.e., you) would pay for their disaster was literally
nauseating, as the very people who wreaked this havoc are now being
rewarded.

More amazingly, they're free to walk away without having to disgorge
their gains; at worst, they're just "forced" to walk away without any
further stake in the gamble. How can these bailouts not at least be
categorically conditioned on the disgorgement of ill-gotten gains from
those who are responsible? The mere fact that shareholders might lose
their stake going forward doesn't resolve that concern; why should
those who so fantastically profited from these schemes they couldn't
support walk away with their gains? This is "redistribution of wealth"
and "government takeover of industry" on the grandest scale imaginable
-- the buzzphrases that have been thrown around for decades to
represent all that is evil and bad in the world. That's all this is;
it's not an "investment" by the Government in any real sense but just a
magical transfer of losses away from those who are responsible for
these losses to those who aren't.

And all of this was both foreseeable as well as foreseen -- see the
2002 grave warnings from Warren Buffett on pages 14-15 of his shareholders letter
(.pdf), among many other things -- and it's also happened before, when
the Federal Government bailed out the S&L industry that (with John
McCain's help) was able to gamble recklessly and then force the country
to protect them from their losses. The people who did this have no fear
of anything -- they completely lack the kind of healthy fear that
impedes reckless behavior -- because they know how our Government works
and that they control it and thus believe that their capacity to suffer
is limited in the extreme. And they're right about that.

What's most vital to underscore is that the beneficiaries of this
week's extraordinary Government schemes aren't just the coincidental
recipients of largesse due to some random stroke of good luck. The
people on whose behalf these schemes are being implemented -- the true
beneficiaries -- are the very same people who have been running and
owning our Government -- both parties -- for decades, which is why they
have been able to do what they've been doing without interference. They
were able to gamble without limit because they control the Government,
and now they're having others bear the brunt of their collapse for the
same reason -- because the Government is largely run for their benefit.

If there is any "pitchfork moment" -- an episode that understandably
would send people into the streets in mass outrage -- it would be this.
Nobody really even seems to know how much of these losses "the
Government" -- meaning working people who had no part in the profits
from these transactions -- is undertaking virtually overnight but it's
at least a trillion dollars, an amount so vast it's hard to comprehend,
let alone analyze in terms of consequences. The transactions are way
too complex even for the most sophisticated financial analysts to
understand, let alone value. Whatever else is true, generations of
Americans are almost certainly going to be severely burdened in untold
ways by the events of the last week -- ones that have been carried out
largely without any debate and mostly in secret.

Third, what's probably most amazing of all is the contrast
between how gargantuan all of this is and the complete absence of
debate or disagreement over what's taking place. It's not just that, as
usual, Democrats and Republicans are embracing the same core premises
("this is regrettable but necessary"). It's that there's almost no real
discussion of what happened, who is responsible, and what the
consequences are. It's basically as though the elite class is getting
together and discussing this all in whispers, coordinating their views,
and releasing just enough information to keep the stupid masses content
and calm.

Can anyone point to any discussion of what the implications are for
having the Federal Government seize control of the largest and most
powerful insurance company in the country, as well as virtually the
entire mortgage industry and other key swaths of financial services?
Haven't we heard all these years that national health care was an
extremely risky and dangerous undertaking because of what happens when
the Federal Government gets too involved in an industry? What happened
in the last month dwarfs all of that by many magnitudes.

The Treasury Secretary is dictating to these companies how they should
be run and who should run them. The Federal Government now controls
what were -- up until last month -- vast private assets. These are
extreme -- truly radical -- changes to how our society functions. Does
anyone have any disagreement with any of it or is anyone alarmed by
what the consequences are -- not the economic consequences but the
consequences of so radically changing how things function so
fundamentally and so quickly?

Other countries are debating it. The headline in the largest Brazilian
newspaper this week was: "Capitalist Socialism??" and articles all week
have questioned -- with alarm -- whether what the U.S. Government did
has just radically and permanently altered the world economic system
and ushered in some perverse form of "socialism" where industries are
nationalized and massive debt imposed on workers in order to protect
the wealthiest. If Latin America is shocked at the degree of
nationalization and government-mandated transfer of wealth, that is a
pretty compelling reflection of how extreme -- unprecedented -- it all
is.

But there's virtually no discussion of that in America's dominant media
outlets. All one hears is that everything that is happening is
necessary to save us all from economic doom. And what's most amazing
about that is that the Natural, Unchallenged Consensus That Nobody
Questions can shift drastically in a matter of days and still nobody
questions anything. This is what Atrios observed as I was writing this post:

It's
fascinating to watch how easily consensus is manufactured. A few days
ago elite opinion seemed to be cheering Paulson's "no bailout" line,
and now they're cheering a trillion bucks thrown down the crapper. All
the Very Serious People will spend their days coming up with their pony
plans, oblivious to the fact that the pony plan is not an option. The
Bush administration's plan is the option.

The way it works
is that Bush officials decree how things will be, and then everyone --
from Congressional Democrats to the Serious Pundits -- jump
uncritically and obediently on board, even if they were on board with
the complete opposite approach just days earlier, and then all real
dissent vanishes. That's how the country in general works. As Atrios
says: "We've seen this game played before."

I don't pretend to know anywhere near enough -- in terms of either raw
information or expertise -- in order to opine on the necessity or lack
thereof of The Latest Plan in terms of whether the alternatives are
worse. But what I do know is that an injustice so grave and extreme
that it defies words is taking place; that the greatest beneficiaries
are those who are most culpable; and that the same hopelessly broken
and deeply rotted institutions and elite class that gave rise to all of
this (and so much more) are the very ones that are -- yet again --
being blindly entrusted to solve this.

UPDATE: Here is the current draft for the latest plan. It's elegantly simple. The three key provisions: (1) The Treasury Secretary is authorized to buy up to $700 billion
of any mortgage-related assets (so he can just transfer that amount to
any corporations in exchange for their worthless or severely crippled
"assets") [Sec. 6]; (2) The ceiling on the national debt is raised to
$11.3 trillion to accommodate this scheme [Sec. 10]; and (3) best of
all: "Decisions by the Secretary pursuant to the authority of this Act
are non-reviewable and committed to agency discretion, and may not be
reviewed by any court of law or any administrative agency" [Sec. 8].

Put another way, this authorizes Hank Paulson to transfer $700 billion
of taxpayer money to private industry in his sole discretion, and
nobody has the right or ability to review or challenge any decision he
makes.