I am one of those people who think it stinks but is also a necessity. Absolutely distrusted the original plan and I do think Congress improved upon it.
I agree with Obama that it is important to know how we got here. If we do not know that, then how to do we not repeat the same mistakes? How do we even know what are the mistakes. Take a look at A World of Risk Beyond Wall Street for some information on this point (as well as the wider implications for the world if nothing is done or does not work). The Lost Tycoons gives a concise history of investment banking since WW I that makes it worth reading.
A lot of good questions needed asking of the Administration, Crash
The big guy with the crew cut and a hand that lost three fingers to a meat grinder looked out at the most powerful men in global capitalism Tuesday, and asked a pointed question:
“I’m a dirt farmer,” said Senator Jon Tester, the Montana Democrat who still lives on his family homestead. “Why do we have one week to determine that $700 billion has to be appropriated or this country’s financial system goes down the pipes?”
Good question, one that Treasury Secretary Henry M. Paulson and Federal Reserve Chairman Ben Bernanke have yet to adequately answer. If they seemed flummoxed, perhaps it’s because they still can’t explain what will be accomplished by nearly nationalizing the banking system and giving the treasury secretary more power than a king.
And Hastening the ultimate bailout makes me feel no less like we are on the crack of doom.
I still have not fully understood how the House Republicans' proposals would deal with the problem. A preference for financial meltdown rather review their ideology for flaws? I read this paragraph in Scapegoating markets:
Then there was the big role played by mortgage giants Fannie Mae and Freddie Mac, government-sponsored entities whose failure is a testament to the dangers of mixing public and private enterprise. Conservatives had long warned that the government's implicit backing of these companies would someday mean a big bill for taxpayers. Guess what? They were right.
Er, those same conservatives have been in control of most of the federal government since 2001. The Republicans controlled the House since 1994. They warned and did nothing? Why not?
The same question can be asked of the Bush Administration. This comes from The Chicago Tribune today:
David Ruder, former chairman of the Securities and Exchange Commission, said robust oversight can solve a lot of these problems. But he said he has long warned of the pitfalls of these markets.
"I'm not surprised these esoteric instruments crashed," he said. "I don't think they were well-understood by the people who created them and certainly not by the people who bought them."
Ruder served under Clinton. Is that why he was not listened to?
I have no answers to these questions of mine. I am very sympathetic to the following from Reverent and Free's Hell in a Bucket:
I'm not an economist, and I'm hardly a Marxist, but I do understand that a three-legged table may look nice, but it is a precarious situation to place too much weight on, too much faith in such a fragile piece of furniture. You may like limited regulation and unsustainable growth, but once your job growth gets yanked out from underneath, you've got a $700 billion dollar mess to sweep up.
It's a mess ,and most economists who aren't card carrying CATO Institute members have been warning about such a calamity for close to three years now. The banks didn't fail because the free-markets were restrained. The lending industry didn't collapse because taxes were too high, and the market didn't tank because the Democrats took control of Congress two years ago. The people were promised prosperity in a time of war with low taxes and good times around the bend. They were told to shop instead of save and to borrow instead of invest. This is a failure of leadership and that leadership sits in the White House.
I think any single explanation will fail. Not just greed, not just deregulation and lax enforcement of regulations, not just stupidity, but all them together. For 28 years now, the Republicans have promised us riches for all if we let the markets do what they will. We let down regulations, we under enforced regulations. We waited for the pot of gold to be brought to our doorsteps. The party's over and now the sober-minded types have to clean up the mess. Which in this case means the House and Senate Democrats.
There are some great ideas out there. Paulson had no monopoly on ideas. Hey, I like Doug Masson's idea: Bargain Alternative to the Paulsen Proposal. I sure think we ought to get something for our money.
The New York Times reports that there has been an agreement:
The bill includes pay limits for some executives whose firms seek help, aides said. And it requires the government to use its new role as owner of distressed mortgage-backed securities to make more aggressive efforts to prevent home foreclosures.
In some cases, the government would receive an equity stake in companies that seek aid, allowing taxpayers to profit should the rescue plan work and the private firms flourish in the months and years ahead.
The White House also agreed to strict oversight of the program by a Congressional panel and conflict-of-interest rules for firms hired by the Treasury to help run the program.
Among the last sticking points was an unexpected and bitter fight over how to pay for any losses that taxpayers may experience after distressed debt has been purchased and resold.
Democrats had pushed for a fee on securities transactions, essentially a tax on financial firms, saying it was fitting that they contribute to the cost.
In the end, lawmakers and the administration opted to leave the decision to the next president, who must present a proposal to Congress to pay for any losses.
Officials said they had also agreed to include a proposal by House Republicans that gives the Treasury secretary an additional option of issuing government insurance for troubled financial instruments as a way of reducing the amount of taxpayer money spent up front on the rescue effort.
The Treasury would be required to create the insurance program, officials said, but not necessarily to use it. Mr. Paulson had expressed little interest in that plan, and initial cost projections suggested it would be enormously expensive. But final details were not immediately available.
The centerpiece of the rescue effort remains the plan for the government to buy up to $700 billion in troubled assets from financial firms as a way to free their balance sheets of bad debts and to help restore a healthy flow of credit through the economy.
The money will disbursed in parts, with an initial $250 billion to get the rescue effort under way, followed by another $100 billion upon a report by Mr. Bush to Congress.
The president could then request the balance of $350 billion at any time. If Congress disapproved, it would have to act within 15 days to deny the Treasury the money.
I can live with all of that. Although, I am left with a question about the House Republicans. They want to increase the size of the federal bureaucracy by creating a new program? Hmmm, ideological purity?
I also agree with The Chicago Tribune's What $700B can't buy: a crystal ball. The question is not if the plan was perfect but if it was better than doing nothing.
I cannot fault our Congressman Pence for his devotion to ideology,Pence says he’ll vote against financial industry rescue plan:
"WASHINGTON — Rep. Mike Pence said today he will not vote for the financial industry rescue plan that the House could consider as soon as this evening.
“We now have a deal that promises to bring near-term stability to our financial turmoil, but at what price?” the Columbus Republican wrote in a statement to his colleagues today. 'Economic freedom means the freedom to succeed and the freedom to fail. The decision to give the federal government the ability to nationalize almost every bad mortgage in America interrupts this basic truth of our free market economy."
Yes, let us encourage free enterprise to the point that it drags us all into the toilet - and maybe the rest of world, too. I do not seen anything in the plan as it stands now that compensates the Wall Streeters for their own avaricious stupidity but I do see a lot that keeps the penalty of that stupidity from taking us all down.
In an op/ed piece not devoted to the bailout, Sound, but No Fury, Maureen Dowd has three lovely paragraphs that I can only say were a hoot to read:
Bolshie Republicans and capitalistic Democrats. What long, strange trip it has been.
The president, who is so insecure that he could only choose a vice president he knew would never hold his title, and so insecure that he needs proof of presidency emblazoned everywhere, even riding a Trek bike with the presidential seal affixed, was suddenly faced with his bête noire: sitting at a table in the White House with the two men who want his job, either of whom would do a better job, given that nearly everyone in the country thinks things are going horribly.
McCain lost control of his campaign and then, in a gimmicky attempt to gain back ground, ended up in the Cabinet Room with W. when the bipartisan economic meeting collapsed in a humiliating nondeal, causing President Bush to lose control of his White House.
It was quite a memorable moment in history for the M.B.A. president and the nominee of the party of business. Who would have dreamed that when socialism finally came to the U.S.A. it would be brought not by Bolsheviks in blue jeans but Wall Street bankers in Gucci loafers?