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." NY Times
What is it about these Republicans that makes them think they can dictate to the Federal Courts and Congress? Is the passage in red not a challenge to the Supreme Court?
From other talk in the media it seems that it is at least being discussed that these defaulted mortgages shall be purchased by the federal government (us) by a process of "reverse auction" (???? say what?). This is reported to be a method by which the banks would sell to the federal government at the "lowest price that they are willing to accept?" That can’t be right. Sort it out for us all someone.
It is being said by some that these mortgages that we will own shortly, might be worth a lot of money someday and thus the tax stiffs (us) might be repaid with interest? Does anyone understand how that would happen?
All in all this sounds like a scheme designed to save the hides of the semi-rich, and newly rich Yuppies on Wall Street, they who live by the lever. I speak not of the truly rich. They covered their asses against this possibility long ago.
What was it that Leona Helmsley said about the "little people?" That was before she took up her new vocation as a laundress. pl
“Reverse auction” is a euphemism for dumping garbage onto the taxpayer. Unfortunately, it’s probably the only way that most of these finance firms could become solvent again.
Congress just raised the federal debt limit by $1 Trillion. Who exactly is stupid enough to lend them that kind of money unless the terms are positively onerous?
Given the mass “hysteria” surrounding this “bailout,” I have little doubt that Sec 8 is but one of many provisions in this bill that are fundamentally unconstitutional and unAmerican.
This new bill is a lot like the Patriot Act, a sweeping and unconstitutional revision of our basic civil and privacy rights that went thru Congress faster than the runners in front of Pamplona’s bulls. Hell, if 10% of our “elected” representatives even read, much less analyze, this legislation before voting the way the Administration demands, then I’d eat my hat. I think Mike Moore needs to bring his truck mounter speaker and start circling Capitol Hill NOW.
At least our Congresscritters could get something for the people out of this fiasco. A tax hike on the top 1% of America’s income earners (and a similar tax on the wealth of America’s top 1%-ers) would go a small way towards putting the revenue needed to finance the bailout into the Treasury’s coffers.
Then again, that would mean the incumbents on Capitol Hill would have to represent The People and not their friends in the special interest classes.
In most other advanaced nations, the executive leadership would resign to take responsibility for a disaster of this magnitude. That should be the first condition when the Dems negotiate this bailout package. Make John Warner caretake president. The Dems cannot negotiate a package with the current White House in good faith. There is no trust.
And yes, this is a rich-person bailout package. But is there an alternative?
I think it is important to distinguish between Republicans and Regimists. The supine Democrats have done as much to empower these radicals as the party whose name they have appropriated.
It all has to do with the trickle-down effect. In other words, if the big guys go down, then we all go down. So, save the big guys arses’, and we save our own. This ploy has been used to the max over the past several decades, and evidently still has a lot of mileage left in it. Also, they cry wolf: if these “venerable” institutions are allowed to fail (which they have already due to their own actions), then surely all the sheep will be eaten (us?). Oh, how I’d like to see the chips fall where they may.
The proposed language for the bailout law is more properly described as another King George edict. It’s pure bullshit!
Is that the best they can come up with? Paulson is a Wall Street hod-carrier and he’s doing their bidding.
How cynical and insulting.
People should stop new trades, investments and payments to Wall Street unless and until they disclose ALL the details. A “stop payment” threat works wonders.
There is no rush on the bailout. Let them sweat. After the facts have been examined and certified, perhaps a bailout or some form of assistance COULD be arranged.
Bush is not only delusional, he’s deranged.
Also, this situation portends immensely for China. What is the stake for China in all this? How are they influencing Washington? Big time, for sure. So, if the Tresuary does not step in, then China will be a big-time loser in all this. I say let it happen. What are they going to do – charge a fair value for the enormous amount of products they “dump” in the U.S.? It could only mean a better shake for U.S. manufacturers (the ones that are left). Oh, but we can’t do that – they might retaliate by bombing the Straits of Formosa again. Or worse: they might not exert their influence on N. Korea to hold back on that country’s nuclear program. That’s been such an important factor up to now, and a big victory for Rice that we don’t want to jepordize. There are so many dots to connect, it takes a super computer to keep track of it all. Suffice to say, let the Treasury gamble with our money (that’s what it is – the notes supposedly will be worth more than what WE will pay for them!). Then, when the piper comes to be paid, BushCo will be long gone,sitting back in his rocking chair in Crawford, reminiscing about the good ole’ days.
Pat wrote: “What is it about these Republicans that makes them think they can dictate to the Federal Courts and Congress?”
I know I’m probably preaching to the choir here at SST, but one must remember the Republican’s 1st Commandment: “Heads we win, tails you lose!”
In this instance, like almost all instances before it for the last 3 decades, the Republicans insist on making this, not just a political issue, but an issue of Patriotism!
To wit, either you vote yes or you are a traitor to the country.
Framing the debate this way is the hallmark of almost every single issue voiced by Republicans since the days of Nixon.
If one opposes any idea that Republicans propose, then one must be a traitor to one’s country.
The real truth, the one the Republicans dare not allow the public to perceive, is that to accept the argument in the way the Republican’s posit, is the very definition of betrayal of this country!
Fealty to these Republican “principles” is to reject the underlying premises of our Constitution, to reject the concept that the government only governs with the consent of the governed, and instead, this fealty is the very same one that was fought against in the very birth of this nation.
We are not servants of the King!
NO NO NO and NOOO! The rest of the globe seems to think the Bush WH just totally remade the world economic system by barfing up some kind of hideous hybrid Capitalist Socialism. Closer to home, critics note that this bailout appears to be just what Wall Street ordered. Under cover of crisis, Bush/Bernanke will shift Wall Street’s losses to the U.S. taxpayer: Sebastian Mallaby and Paul Krugman both cry foul.
Economosts Zingales and Mc Cormack (PDF) of the University of Chicago have a better idea, one with plenty of well-established American precedent: Chapter 11. They note that Chapter 11 procedures take time and that’s something we don’t have a lot of, but no problem, “we are in extraordinary times and the government has taken and is prepared to take unprecedented measures.” They want the government “to cram down a restructuring plan on creditors, where part of the debt is forgiven in exchange for some equity or some warrants.” They say there are Depression Era precedents for such moves that were upheld by the Supreme Court.
No to system where profits are private, and where losses are socialized!
Unconscionable conduct — and yet more ludicrous/illegal/unconstitutional attempted over-reach (which may be how much of this mess was concocted in the first place).
Unfortunately for these power-mad mugs, their strictures against review are also reviewable and some courts in many cases have proven admirably intolerant of such measures. Even Bush v. Gore “non-precedents” are clear precedents to everyone but nitwits.
But truly invincible stupidity can have a dynamic of its own. Perhaps these guys (as I think Col. Lang said about the current VPOTUS) are just not very bright.
But they know how to use shredding machines.
Pat, probably with tongue in cheek, also wrote: “Sec. 8. Review…”
Is Pat suggesting that we should review the quoted Treasury material with an eye towards:
“The term Section 8 refers to a…discharge based on…assessment of psychological unfitness or character traits deemed undesirable.”
Here is an interesting take from the UK:
“The US Government has just admitted that the financial system was on the verge of total meltdown. And it’s right. On Thursday, even blue chip companies were having difficulty rolling over their short-term borrowings.
“Armageddon was minutes away – averted by Hank Paulson’s plan to insure money-market funds and cut the gangrene out of the banking system.
“The US Treasury Secretary is working over the weekend to nationalise around £450bn of banks’ balance sheets – equivalent to a third of the British economy…
“There is an argument that Paulson should pay a discount to the market price, to protect US taxpayers and soundly spank the banks and their owners.
“However if he did that, banks’ capital resources would be further depleted, which would further undermine their ability to lend to the rest of us. And it wouldn’t do a great deal to reinforce the foundations of the creaking banking system….”
“Banks, money managers, controllers of trillions of dollars on behalf of the cash-rich states of Asia and the Middle East have all had a painful lesson in the meaning of risk over the past fortnight.
“They will for an extended period – possibly years – be less willing to fund our banks without demanding a significant increment in what the banks pay them. That’ll increase the cost of money for all of us, which will make most of us feel quite a lot poorer for some time.”
Have I gone insane in that this seems like a very bad idea, this giving one man SEVEN HUNDRED BILLION DOLLARS to spend without oversight? It’s getting on time to ruck up, boys, this is getting weird. Just a touch ‘o Disaster Capitalism, right? Ramrod a sweet deal while everyone is cleaning their drawers? Sorry, no deal here.
After telling us how dire and desparate we all are, they overreach — wanting all the marbles with this “No Banker Left Behind Act,”
Arbitrary, it’s-fair-value-when-I-say-it’s-fair-value pricing for assets. Omnipotent Treasury say-so.
And yes, Col. Lang, it’ll be well north of $500 billion or trillion (remember when they told us subprime was contained — the good old days, ha)
If this plan actually addressed the causes for this crisis, well that’d be one thing. But how will it keep real estate values from continuing to fall? Will it make foreigns eager to buy our debt? Will it ensure that the financial “books” are open and transparent? (Crickets)
So, where does it get us? Back to The No Banker Left Behind Act.
Colonel, we won’t get “repaid with interest” unless we start think like Wall Street Bankers and Venture Capitalists and demand it.
This is how you do it.
Since the financial community is coming to the American people as deep pockets of last resort, we certainly can impose terms and conditions no different than any other Lender or VC.
I would suggest that any market participant which wishes to avail themselves of Government funding or our purchases of their toxix “assets” through Reverse Auction, has to immediately suspend all restricted stock, option grants or any other form of equity compensation.
Maximum compensation (salaries, wages, benefits and bonuses) for employees including executive management and the Board is forthwith limited to no more than the Senior Executive Service of the US Government which is still around 4x median household income for the suckers who have to pay the tab). Given the number of unemployed already on the Street, I don’t think too many people will be jumping ship.
Limits on compensation shall remain in place until such time as the USG disposes of the acquired assets and generates an Internal Rate of Return of 40% (finance geek speak for lots of profit). If the ultimate disposition of those assets does not reach that level, then the US Government has Preference Dividends on free cash flow (more finance geek speak – simply we get first dibs when they start making money again) until such time as the IRR is achieved.
Now of course these are rather onerous conditions, but certainly no worse than the “market” or any Venture Capitalist.
No one is twisting the arms of these companies. If they can do better in the market, hey go for it!
Isn’t it interesting that the Treasury plan demands practically nothing of them.
Here’s Krugman’s take:
The swedes basically nationalized their banking sector during a crisis back in the 90’s, then later were able to sell it at a profit.
However, this plan looks like its only buying those thing LEAST likely to be worth anything in the long run.
The ‘urgency’ appears to be manufactured–dropping at just the right time to get flown through before the election. While there is more than enough bipartisan backrubbing to pass this, somebody’s tea leaves indicated that an Obama presidency would be at least somewhat less favorable to these terms, and that he appears to be a more probable bet than McCain.
Speaking of Johnny Out-of-Touch, he has a new article out, in which he touts market-based health care reforms, which includes this howler:
Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.
I think the chance of any meaningful negotiation is slim, given the backrubbing nature of today’s Congress. My only hope is that Ron Paul gets involved with these negotiations and oversight, because he saw this coming a long time ago. The same for Dennis Kucinich, Russ Feingold and Ralph Nader. (That a segment of the population may laugh at these names is not coincidental either)
Finally, does anybody doubt the correlation between the (non) campaign reform ruling that ‘money equals free speech’ to the systemic government rollover of the past 8 years?
err….that should have been “and they were able to sell parts of it back at a profit”.
Basically, in any financial crisis, some banks will be undervalued, since its not exactly clear which ones will fail and which actually have sound business models. But there generally isn’t much profit in worthless loans on foreclosed houses.
Regarding Section 8 defining what they are buying, there are multiples and multiples of derivatives based on the actual mortgages. When the mortgages are collected, they will cover only one of the multiple and the remainders will be just completely uncovered.
“1) Mortgage-Related Assets.–The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.
Hanky Panky’s plan is exactly what you would expect from Bush/Cheney. Crony Corruption on steroids!!
Paulson get’s a blank check (note that $700 billion is at any one time – so the actual limit is unlimited) to provide all his cronies unlimited amounts paid by middle class American’s hard earned future earnings with NO checks or balances nor any reviews of any kind.
Folks, it does not take a rocket scientist to figure out that this will be a cesspool of crony corruption the likes of which we haven’t seen. A Treasury Secretary with unreviewable powers to hand out taxpayer money at his sole discretion to anyone he chooses in any amounts. This is like chum for all the KStreet piranhas. It will be a feeding frenzy.
So not only will Wall Street get to keep all the hundreds of billions in bonuses based on sham accounting profits that they have received over the past few years as they have speculated with unprecedented leverage. They now get to sell all their toxic waste at inflated prices to Uncle Hanky Panky and make off once again. And they get a third bite of the apple since they keep all their ownership stakes and management benefits of the financial institutions that they have driven into the ground and created this financial disaster. The brazen nature of this proposal just boggles the mind. But we should expect it from the Bush/Cheney vultures who have no compunction in stealing from us “little guys” and our children who will be in indentured servitude for their entire lives paying back all this debt.
This legislation is being ram-rodded at gun point through Congress with the threat that if this is not passed the financial system will collapse and we will have Great Depression II and the blame will be entirely with the Democrats in Congress. This is the same tactic that was used to pass the Patriot Act, AUMF, FISA.
I hope everyone who congregates here will contact their Congressional reps and Senators post haste and let them know how you feel about it. That’s the least any middle class taxpaying citizen can do.
Switchboard Number for the House of Representatives: 202-225-3121
Switchboard Number for the U.S. Senate: 202-224-3121
Colonel, Sorry to get off topic (though we are still talking about the economy, albeit from a different angle…)
David W says “Speaking of Johnny Out-of-Touch, he has a new article out, in which he touts market-based health care reforms, which includes this howler:
Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.
DW, I think McCain is wrong on many, many points, but this Krugman article is a total hatchet job, see link below…
No bailouts, or any control of the situation will be lost.
The Secretary of the Treasury is attempting to privatize the U.S. Government on behalf of his City of London and Wall Street clients.
If this proposed bill does not prove how much our Republic has come to resemble Rome under the Caesars, then I guess nothing will.
This is interesting. It’s how the game is played, over and over.
This writer also reminded me of something I had forgotten: that my former governor was in Washington to begin organizing governors and states attorneys general to take on the Feds and the mortgage lending industry when he was popped for consorting with a prostitute by Bush’s FBI. You’ve gotta hand it to these guys. They cover all the bases.
If, as Alan Blinder says, the fall in housing prices is fundamental, why not just buy the houses? Given the horrendous leverage we’re told is involved, it would be cheaper than buying all the toxic mortgage-backed paper-at prices which, if high enough to make their current owners solvent, we the people may never recover. Problem is, why did housing prices get so high in the first place? Why, all the toxic paper, of course. They are still too high, so maintaining their current level is unrealistic and undesirable in the longer run.
ISTM the root problems are, one, too much paper, and, two, nowhere to invest it that isn’t actually destructive to the real economy. The Onion said ‘we need a new bubble,and quick!'(readers of Paul Krugman’s blog will remember this). What we need, of course, is something that creates actual wealth, physical stuff we can use. Like T Boone Pickens, I think the answer is obvious- we need a Green Power Boom(look for T Boone to point out that this $700B is one year’s foreign oil bill).
Government will have to set the conditions for this, the market cannot, the risk is too great- in the ’80s Eastern Airlines went bankrupt because their bet on higher fuel prices-a new fleet of fuel efficient aircraft- didn’t pan out. Nothing new about this- at the end of the Civil War, the next order of business for the American economy was obvious to everyone- building the transcontinental railroads. Yet the market could not finance it. Enter that root of all economic and moral evil, that incompetent director of capital, the Federal Government(good short history- Stephen Ambrose’s Nothing Like It In The World).
Given the reality that there are probably trillions of dollars of losses sloshing around the system, the idea that there will be any “repayment” to taxpayers is, well, ludicrous.
The entire $700 billion will be wiped out by the losses that are currently in the system, and the US taxpayer will be further stiffed by either the interest on the debt ( assuming anyone will actually lend to the US – you’re looking at 4% pa in perpetuity, so $28 billion per year for 30 years is another £840 billion in interest costs ) or, if the debt is monetised, then via inflation.
There are already large amounts of toxic paper that have zero value, and in some cases the paper actually costs money to hold ( ie its value is negative ) – there will be an overwhelming incentive for US institutions to get rid of this paper first.
The interesting thing to note is that there is no “paygo” element to the proposal – ie this is all going to be financed via the deficit.
Frankly, if the Dems had any spine they would at least force Bush to cancel his tax cuts, effective now, and make him deliver the message with a shit-eating grin.
The proposal is deflationary and probably only mildly deflationary.
Anything, repeat anything else, is hyperinflationary.
It is a good proposal, and I support it.
we have become accustomed to this kind of phraseology during the bush-cheney administration
“may not be reviewed by any court of law or any administrative agency”
despite the severity of the financial crisis their waning power, the bush-cheney’s demand obsequience, they are remarkably consistent
they send two seemingly reasonable people out to handle the crisis but in the background the previously hidden footprint of bush-cheneyism is revealed in the paperwork
considering all of the implications of the phrase, we can probably consider ourselves lucky that they have not done more damage than they have
but then we really won’t know everything they have done until they are replaced in govening by others
OK folks, this is how it gonna plays.
– The ultra giant blank check will be passed with minimum oversight mechanism.
– In the next few months, Bush/Paulson will do massive bail out and spending spree. moving bad debt into public budget. All at wall street premium price, instead of bargain price.
– This will cause MASSIVE inflation, while not exactly fixing the problem.
– Economy collapses. People wage can’t keep up. So housing price will be lower, cutting down on purchase, ,…. unemployment, etc.
– Then the debt explodes. Government has to pay all the purchased debt…
– MASSIVE budget deficit. $1T/year for 2-3 yrs.
– Global confidence on US ability to pay debt utterly collapse. Cost of financing budget deficit becoming more and more expensive.
– … then real fun starts. we have Korean or argentinian style economic crisis. Liquidate social security, sell government asset, contraction of economy by 10-15%, etc… utter.
They are not going to do what must be done:
1. Clean up banking by
a) properly appraising debt
b) putting back safe guard laws
c) massive hair cut in part of banks
“Mark to market” is great when everything is going up. The other way, not so good.
Key info revealed in the Financial Times:
“The news came as it emerged on Friday that the value of securities held by investment bank Lehman Brothers, which filed for bankruptcy protection on Monday, had fallen to $47.4bn from $72bn – revealed in bankruptcy court proceedings. ”
How many financial firms will have similar-sized holes in their third-quarter filings?
Tosk, thank you for responding, however, I maintain that it is not at all a hatchet job; McCain’s health ‘plan’ as set forth in this article is the same old free market bs. that hasn’t worked in Energy (Enron), or finance. McCain’s plan as set forth here, essentially would give consumers a wider choice of lipsticks to put on this pig.
It is especially tone-deaf for the McCain camp to put this out at this time, when Americans have been told repeatedly over the past several years that national health care is somehow too costly, but yet, no check is too big for us to write the financial sector.
Don’t forget that this was also the same rationalization that was set forth a couple of years ago to ‘save’ Social Security–how would everybody here feel if that had gone through, and our SS kitty was dumped into this sinkhole?
The proposal is deflationary and probably only mildly deflationary. Anything, repeat anything else, is hyperinflationary.?
Any chance you could “show some work” here? I can see several paths to serious inflation (we’re on a couple of them right now!), but I can’t see why all paths save for this particular proposal would be hyperinflationary?
Care to share your logic here? Thanks in advance for your thoughts.
All seem to assume this so-called “bailout” is going to work. Just stop and think a moment about the people proposing it and the people who will be implementing it. Personally, I see no reason to believe it will work. Sure, billions will be flushed down the drain and then…?
Gee Whiz! We should have privatized social security so all the retirement accounts could be bailed out by the Treasury just as with the Wall Streeters. I began to worry about all this when the daughter of friends graduated as a civil engineer from Princeton in the 90’s and told me that not only was she going to Wall Street but the rest of the Engineering grads from Princeton. Greed is a motivator. No long-term thinking need apply, just continue to manipulate the hard-working man and woman on the street’s life savings and largest investment (homeloans). By the way the language of Section 8 in the above post is definitely not “Constitutional.” Who says there is no “Draft” by the government of our young people to serve the egos of our leadership.