So Wall Street wants $700 billion of taxpayer money for a bailout. Talk about socialism! Glenn Greenwald at Salon had some good comments on the bailout.
He begins by noting that the Federal government is seeking to "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.
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.
The bailout proposal as of Friday included this ditty:
Sec. 8.
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.
Secretary of the Treasury Paulson gets $700 billion to do with as he sees fit with no oversight?! I watch as my 401K loses money every quarter and now those assholes on Wall Street want another few grand from me to bail their asses out. This shit would stop pretty quickly if we instituted the death penalty for this kind of thing. I think the sight of the heads of a few CEOs on spikes would send a good message to those seeking to fleece the taxpayers.
Personally, I'm not going to hold my breath for any meaningful reform. According to the Wall Street Journal, McCain has received $19.6 million in campaign contributions from the financial industry while Obama has been given even more - $22.5 million. And the people that got us into this mess are the ones helping their campaigns develop policy positions and drafting legislation for their own regulation:
This week, two of the biggest financial groups in Washington, the Financial Services Roundtable and the Mortgage Bankers Association, have drawn in members from across the country to grill economic advisers from both campaigns, develop policy positions and urge prudence as both parties struggle to craft a regulatory stance on the deepening crisis.
The Financial Services Roundtable has developed draft legislation that calls for the Federal Reserve to regulate brokerages and dealers that seek access to its discount window; a new federal insurance regulator within Treasury; and a mechanism for federal agencies to coordinate regulation among themselves.
Must be nice to be able to write your own laws.
Hopefully this bailout won't be rushed and in the end will include some provisions for accountability and to try and ensure this won't happen again. If by some miracle our legislators get some balls, both Ralph Nader and Robert Reich have some suggestions.
Nader's:
No bailouts without conditions and reciprocity in the form of stock warrants
No more lobbying for any company that is bailed out
No golden parachutes and get out of jail free cards for guilty executives
No bailouts without public hearings
Reduce the moral hazard in U.S. mortgage markets by introducing covered bonds for the majority of mortgage products as they do in Western Europe. That gives institutions that finance mortgages an incentive to be prudent, because they cannot just unload them and wipe their hands clean of the liability, but are instead on the hook if the homeowner defaults.
Maintain neighborhood stability and housing security by passing a law with a sunset clause allowing below median-value homeowners facing foreclosure the right to rent-to-own their homes at fair market value rates.
Avoid future housing bubbles by removing implicit government guarantees for new mortgages that exceed thresholds of greater than 15-20 times the annual fair market rent value of the home.
Make the Federal Reserve a Cabinet Position, so it is accountable to Congress, as well as making sure all Federal Reserve Bank presidents are appointed by the President and answerable to congress.
Reduce conflicts of interest by taking away power for auditor and rating agency selection from companies and placing it in the hands of the SEC to be administered on random assignment.
Implement a securities speculation tax, starting with derivatives to deter casino-style capitalism.
Reich's:
1. The government (i.e. taxpayers) gets an equity stake in every Wall Street financial company proportional to the amount of bad debt that company shoves onto the public. So when and if Wall Street shares rise, taxpayers are rewarded for accepting so much risk.
2. Wall Street executives and directors of Wall Street firms relinquish their current stock options and this year’s other forms of compensation, and agree to future compensation linked to a rolling five-year average of firm profitability. Why should taxpayers feather their already amply-feathered nests?
3. All Wall Street executives immediately cease making campaign contributions to any candidate for public office in this election cycle or next, all Wall Street PACs be closed, and Wall Street lobbyists curtail their activities unless specifically asked for information by policymakers. Why should taxpayers finance Wall Street’s outsized political power – especially when that power is being exercised to get favorable terms from taxpayers?
4. Wall Street firms agree to comply with new regulations over disclosure, capital requirements, conflicts of interest, and market manipulation. The regulations will emerge in ninety days from a bi-partisan working group, to be convened immediately. After all, inadequate regulation and lack of oversight got us into this mess.
5. Wall Street agrees to give bankruptcy judges the authority to modify the terms of primary mortgages, so homeowners have a fighting chance to keep their homes. Why should distressed homeowners lose their homes when Wall Streeters receive taxpayer money that helps them keep their fancy ones?
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