Monday, September 22, 2008

Conditions for the Wall Street Bailout... by gimleteye

I will concede to critics on one point: that state and national Democratic leaders -- not just Republicans-- utterly failed to anticipate the depth of the crisis that grew out of the Federal Reserve and Bush White House policies that fomented the asset bubble in housing and in credit of all kinds. It should have been obvious, but wasn't because so much wealth was raining through campaign contributions from Wall Street to incumbents and candidates from both political parties.

The $700 billion taxpayer bailout of Wall Street is the most shameful chapter of US economic history if it goes through as planned; giving the US Treasury a blank check to address many forms of distressed private debt-- not just debt tied to mortgages.

It is an act of delusion to entrust politicians with ownership of the private sector. That the Bush White House and its business school manners is nationalizing the financial sector is mind-boggling.

From the White House point of view, there is an imperative to get the deal done quickly. They are trying to put Democrats on the defensive, but this matter is so serious, of such import to the future of the nation, that its key details have to be thoroughly and carefully considered.

Don't rush.

For any instrument the taxpayer is forced to guarantee, take away the profit and enormous fees that have characterized Wall Street's relationship to dizzying confection of debt. You would get no objection from the American public if Congress put an excess windfall profit tax on both Big Oil and Wall Street, both.

It comes as no surprise-- just another grim and depressing fact-- that John McCain's campaign manager "was paid more than $30,000 a month for five years as president of an advocacy group set up by the mortgage giants Fannie Mae and Freddie Mac to defend them against stricter regulations, current and former officials say." (NY Times, 'Loan Titans Paid McCain Adviser Nearly $2 Million", Sept. 22, 2008) It is an indictment nearly as great as news that McCain's VP choice is going to meet with with foreign leaders and Henry Kissinger in the nation's ongoing flirtation with applying the formula of reality TV to the selection by voters of a president.

For Congressional Democrats to approve this deal that there are three additional points that need to be part of a legislative package, by way of ensuring that this national economic calamity never happens again: first, attach a campaign finance reform bill that prohibits federal political contributions by anyone or corporation that directly or through clients does business with the US government. Second, stop the revolving door between government agencies and private industry. Third, embrace a system of incentives tying mortgage financing with land use: no more subsidies, direct or indirect, for suburban sprawl.

But I'm afraid these measures are far too obvious and far too dangerous to a political elite mostly interested in ensuring that the band plays on, that the enormous compensation for destroying the economy continues along the same merry path as the Titanic took before it hit the iceberg in the cold North Atlantic.

The fact is that the US economy is in uncharted waters, but rather than use this information as a cause for haste and for alarm, one would hope that cooler heads might prevail and set out new coordinates to ensure that somehow our economy is brought safely to shore.


Anonymous said...

For some KNOWN reason there was no mention of Fannie Mae's $85,000 donation to Barry Soetero aka Barack Obama.
Chris Dodd and Barney Frank both made speeches today, where were they a year ago? Let Paulson do what he needs to do with bi-partisan oversight. No socialist banking practices are needed.

Educate, work hard and innovate, follow those principles and you will prosper.

Anonymous said...

The Key, and you mentioned it:


We need to think this bailout through. The auto industry wants a bailout...soon the insurance companies will need them for hurricane coverage. Where will it stop....this is a very dangerous road we are on.

Genius of Despair said...

I think your conditions are reasonable. However, I feel like we are sliding down a slipery slope with this bailout. I think we need some equity to go with our hard earned cash -- why get bad paper?