What!? $700 billion with no oversight? Vomit bucket, stat!
Did anyone miss my preference for replacing golden parachutes with the guillotine?
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| By Paul Campos Here, in just 32 words, is a summation of the state of American democracy in our time: "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." Translation: Congress will take $700 billion from the pockets of ordinary Americans, and hand it to Henry Paulson. Paulson then has absolute, unreviewable authority to do with this money what he thinks best. Many people have pointed out in the past day or so that this is bad. What no one seems to be raising is the question of whether it's even legal. Of course after eight years of George W. L'etat, C'est Moi Bush, the question of whether the biggest financial rescue operation in American history is actually legal is considered nothing more than a bothersome technicality, if that, to be dealt with by the administration's lawyers to the satisfaction of Very Serious People everywhere. | | |
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What's the big deal? It's not like we're giving the $700bn away - we're using it to buy assets. These assets are difficult to price, and because of that they are seen as a liability, thus impairing the free flow of corporate credit. For the US Gov't to buy and hold these will act as an enema to a constipated economy. They are not truly worthless, in fact we (taxpayers) may end up with them at a steep discount.
As far as accountability of gov't officials, that's been stripped away for generations, with presidents waging their own wars without the blessing of congress. Why should this be any different?
I'll accept that some feel that, sigh, there's nothing to be done. But to think this is some sort of solid investment? Yeah, you should jump in while the gettin' is good. There's also a bridge to nowhere I'd like to sell you.
So do you believe that these assets that will be purchased with the $700mm are worthless? Because if that is the case, it isn't a bailout - it is pure absurdity to create a new gov't agency to purchase and administer them.
Banks and hedge funds had no trouble trading these mortgage SIV thingies for a decade. They have become radioactive; the gov't takes them over and they will sooner or later have some quantifiable value again. Once they have value, they can again be traded. People will buy them from the gov't and trade them on the secondary market.
What do we (we = gov't) take them over for? Pennies on the dollar? Who knows? First of all, nobody even knows how to price these complex financial instruments - that's part of the problem. The way they're looking to work out the purchase of the assets is via reverse auction; meaning only the loser corporations willing to part with these for the best price will get to unload them. Meaning they will actually have to have SOME value.
What backs them up, these bundled mortgages (not all of them bad), besides the underlying assets (which is in the end property, and thus not worth nothing)? The Full Faith And Credit Of The US Government{TM}, which definitely ain't what it used to be, but still fools the Chinese into buying our debt. We clean these things up, tranche them, and sell them to the 3rd world. Problem solved.
As for the unchecked profligacy that created these instruments: stepped-up regulation is already happening, thanks to the market's invisible hand. Witness Morgan Stanley (MS) and Goldman Sachs (GS) changing their charter this morning, basically choosing to become regulated banks to stave off a run. Additionally, I love the idea of the Fed taking equity stakes in the companies that participate in the selloff, thereby incentivizing the firms to buy these things back from the gov't, in order to get back their equity stake they had to put up before.
Hey, don't get me wrong: I figure the chances are really, really good that we'll find some way to fuck this up. But I think there's at least a reasonable chance that this will actually work, insofar as "work" means "eventually manage to restore something resembling the financial system status quo." In the process, we may even get lucky enough to make a little money (like when we loaned Chrysler all that $$ in the 80's and got it back with interest); screw over hedge funds, who should be not eligible; and create a whole bunch of union (federal) jobs in the financial sector.
I wish I shared your optimism, but it doesn't matter what I think a widget is "really" worth. If the market thinks they're worth zilch, then that's what they're worth. I understand the hope is that their value will rebound, but it's hard to compare this to Chrysler--at least they produce cars as opposed to ingenious financial schemes.
I'm not opposed to saving the economy, what I'm opposed to is amnesty for these fucks. I'm opposed to adding two trillion to the deficit (and if the Fed just prints it that means higher inflation and God knows what else), without taking a pound of flesh. With that in mind, this morning's NYT headline warmed my heart: "Congress is angry and skeptical: Severe oversight and limits on executive pay are sought."
Also, I reiterate, if foreign Feds think there's no reason to rush in, I think we can take a big breath and design a solid (solider?) plan. We don't need to give those pig-fuckers a trillion with no oversight.
"If the market thinks they're worth zilch, then that's what they're worth."
But right now the market doesn't think they're worth zero; they don't know WHAT they're worth, that’s the problem. And would you want to do business with another business that carries assets, the value of which they don’t even know? Me, neither. And neither do the rest of US and Int’l corporations. That’s why the system’s all constipated, and this is where gov't can and in this case should step in, take on the assets, give them a value, and sell them. So this is frankly an investment: again, these things have SOME value, and once the gov’t owns them, they have a clearer value, and then they will be traded freely.
"I'm not opposed to saving the economy, what I'm opposed to is amnesty for these fucks…pound of flesh…angry and skeptical…"
Sure, all of us pitchfork wielding American li’l guys would love to kill the monster AND the scientist, but at what cost? If you’re not opposed to saving the economy in its current form, then you have to accept that this bailout will include corporate welfare, the fundamental building block of our economy in its current form. Recent history and the weak-wristed inclinations of our political leaders would point to a clusterfuck screwjob of a final bailout package, it's true. That's what you get when you elect the foxes to watch the henhouse.
"I think we can take a big breath and design a solider plan. We don't need to give those pig-fuckers a trillion with no oversight."
The aforementioned constipation is not going away anytime soon, so taking a big breath and hiding under some coats and hoping this will go away won’t work. This needs to happen very soon for the status quo to be maintained (it’s already forever changed – see AIG, Lehman, Merrill, GS, MS, etc). Further, Paulson et al aren’t making a naked grab for money and power; they honestly believe the system is in peril and needs an enema. From my following of the ongoing discussions with Congress, they have conceded plenty on oversight – more to the point, there’s a lot of money to be made here, since the US gov’t will also take an equity stake in any participating company.
The only thing I don’t get is how do we sunset this newly created agency? Has ANY government agency created in the last 50 years "gone away" when it was no longer needed?
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