September 21, 2008
The bailout

I don't follow the national stories that much around here, as you know. And I certainly don't claim to have any deep understanding of the crisis in the financial markets, or what should be done from here to make sure it never happens again. But I do understand that $700 billion is a hell of a lot of money, and that the Bush administration cannot be trusted with anything remotely approaching that amount. And I understand that sadly, the Democrats in Congress can't be relied upon to push back against this kind of folly without some strong and vocal leadership showing them the way. So consider me very glad to see this.

As of now, the Bush Administration has only offered a concept with a staggering price tag, not a plan. Even if the U.S. Treasury recovers some or most of its investment over time, this initial outlay of up to $700 billion is sobering. And in return for their support, the American people must be assured that the deal reflects the basic principles of transparency, fairness, and reform.

First, there must be no blank check when American taxpayers are on the hook for this much money.

Second, taxpayers shouldn't be spending a dime to reward CEOs on Wall Street.

Third, taxpayers should be protected and should be able to recoup this investment.

Fourth, this plan has to help homeowners stay in their homes.

Fifth, this is a global crisis, and the United States must insist that other nations join us in helping secure the financial markets.

Sixth, we need to start putting in place the rules of the road I've been calling for for years to prevent this from ever happening again.

And finally, this plan can't just be a plan for Wall Street, it has to be a plan for Main Street. We have to come together, as Democrats and Republicans, to pass a stimulus plan that will put money in the pockets of working families, save jobs, and prevent painful budget cuts and tax hikes in our states.

"No blank check". Everything has to flow from that. This is first principles. If the Democrats can't get this right, what can they get right? FDL, Open Left, McBlogger, BOR, and Kevin Drum have more, including this sob story:

"A lot of those people will have to sell their homes, they're going to cut back on the private jets and the vacations. They may even have to take their kids out of private school," said [Robert] Frank. "It's a total reworking of their lifestyle."

...."It's going to be very hard psychologically for these people," Frank said. "I talked to one guy who had to give up his private jet recently. And he said of all the trials in his life, giving that up was the hardest thing he's ever done."

We should all be able to say that giving up our private jet is the hardest thing we've ever had to do. I sure wish I could say it.

UPDATE: Even better.

U.S. House Speaker Nancy Pelosi said Sunday that Congress should not write a "blank check" to Wall Street in a bill to allow the U.S. to buy up distressed assets.

In a statement issued Sunday evening, Pelosi said a Treasury proposal received by Congress "does not include the necessary safeguards" and that congressional Democrats "will not simply hand over a $700 billion blank check to Wall Street and hope for a better outcome."

Members of Congress and Bush administration officials have been engaged in talks over the weekend on an administration proposal that would give the Treasury Department authority to buy up to $700 billion in distressed mortgage assets from financial institutions, which is expected to become the basis for legislation that could pass within days.

Pelosi, in her statement, said that the Democrats would seek to limit executive compensation - a position also floated recently by House Financial Services Chairman Barney Frank, D-Mass.

"Democrats believe a responsible solution should include independent oversight, protections for homeowners and constraints on excessive executive compensation," Pelosi said in her statement.

You said it, now stick with it. We're all watching.

Posted by Charles Kuffner on September 21, 2008 to National news

The government should not be in the bailout business. Some of these institutions need to fail for the greater health of the economy. To quote Herbert Spencer, "The ultimate result of shielding men from the effects of folly is to fill the world with fools."

Posted by: joewhite on September 21, 2008 10:39 PM

The way to understand the bailout IMO is strictly along class lines. If you have enough income to have a 401k and have a stake in the markets, you MIGHT, stress MIGHT benefit if they do the deed - there's no way to look at it where it's not a HUGE roll of the dice. Everyone without investments in the stock market is harmed by the deal, so this pits interests of the upper and middle classes against those of the working poor.

That said, I'm not sure it will fix the problem even for 401k owners (hence "might"). I cut my teeth as a journalist during the S&L crisis in the late '80s, when the same dynamics occurred to bail them out via the Resolution Trust Corporation. The same crooks who busted the S&Ls sold their bad assets to the RTC and then, by the thousands, turned around and bought them back for pennies on the dollar, profiteering off their crooked deals on the front and back end. This bailout is the exact same kind of deal.

My biggest unanswered questions are: What assets would the government buy and for how much? Unlike the S&L crisis, not all of it's real estate but instead includes stuff like derivatives and financial instruments with no concrete real-world value beyond what the market's willing to pay. So paying market value wouldn't help because the problem is the market imploded. So they must pay some amount above market value, probably substantially above it. But overpaying for an asset doesn't necessarily increase its value, it just makes the person who overpaid a sucker.

Posted by: Gritsforbreakfast on September 23, 2008 12:21 PM

Doesn't the Constitution matter at all anymore??

It would be so refreshing if it was defeated on Constitutional grounds!

Posted by: Mildred Eselin on September 24, 2008 9:45 PM

"The government should not be in the bailout business. Some of these institutions need to fail for the greater health of the economy"
So are you proposing people like my parents should lose their hard earned pensions?

This isn't as simple as keeping a few businesses "in business" but a matter of the worldwide economy.

These are the companies that provide alot of the capital that allow aspiring capitalists to pursue aspirations, creating jobs & wealth (if they are successful); they provide the capital to buy homes for young couples; they invest in projects worldwide.

There is no question they F*cked up, but the question now is: SHOULD WE ALL GO DOWN WITH THEIR SHIP? I say HELL NO, and so far, the bailout seems the only means of averting such a worldwide disaster.

In Canada alone, the fluctuations caused by this mess have robbed 10 BILLION DOLLARS from corporate pensions as if this morning, that will likely get MUCH MUCH worse.
To the author of the original article, I agree with most of your suggestions... Not sure about "this plan has to help homeowners stay in their homes" as that seems to be part of the cause of this disaster. Although I agree there is an irony in paupers losing their homes as the government writes checks to billionaires.

Posted by: wingless on September 25, 2008 11:45 AM

Anything our politicians are involved in will result in more costs to us the taxpayers. But what are we to do. Seems like we can't win (again).

Posted by: H. F. Anthone on September 29, 2008 1:33 PM
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