Tuesday, September 23, 2008

Voices Call For Caution Before $700 Billion To Bail Out Profligate Financial Industry

I've read several calls for caution before taxpayers are asked to fork over $700 billion for Treasury Secretary Henry Paulson to bail out the high-rolling financial industry.

Among them are The New York Times editorial "Trust Me" (9/23/08), which points out typical Bush administration tactics to ram through highly expensive undertakings that lack due consideration and that employ scare tactics.

Does that sound like the run-up to a certain foreign invasion and occupation?

The Bush administration's modus operandi is all too familiar: "We’ve seen this kind of over-reaching from the Bush administration before. It has usurped far too many powers under a banner of urgency — think wiretapping — and abused those powers. Now, Congress and the American people are being told that unless they quickly approve sweeping executive powers for the bailout, capitalism may collapse. Even if this administration weren’t so untrustworthy, rushing ahead would be a bad idea."

In addition, in dealing with a crisis that is a direct result of deregulation, Paulson himself wants to operate without oversight: "The proposal, which is now being negotiated with Congressional leaders, would give the Treasury secretary the authority to buy any assets from any financial institution at any price that he deemed necessary to provide stability to the financial markets. And it asserts that neither the courts nor any administrative agency would be allowed to question or review those decisions."

The Times proposes requiring firms that sell assets to the Treasury to give the government stock, modifying mortgages under bankruptcy court protection and establishing an oversight board of federal officials and other experts.

Bob Herbert, in his column "A Second Opinion?" (9/23/08), cautions against the hasty use of taxpayer money to rescue an extravagant Wall Street:

"I agree with the economist Dean Baker, co-director of the Center for Economic and Policy Research in Washington, that while the government needs to move with dispatch, there is also a need to make sure that taxpayers’ money is used only where “absolutely necessary.”

"Lobbyists, bankers and Wall Street types are already hopping up and down like over-excited children, ready to burst into the government’s $700 billion piƱata. This widespread eagerness is itself an indication that there is something too sweet about the Paulson plan.

"This is not supposed to be a good deal for business. “The idea is that you’re coming here because you would be going bankrupt otherwise,” said Mr. Baker. “You’re coming here because you have no alternative. You’re getting a bad deal, but it’s better than going out of business. That’s how it should be structured.”

In an indication that the sense of caution is being urged across the ideological divide, Allan H. Meltzer, former economic adviser to President Reagan, said, "This is scare tactics to try to do something that's in the private but not the public interest."

The Campaign for America's Future, a group that serves as a progressive counterweight to the centrist Democratic Leadership Council (DLC) in the Democratic Party, proposed "The Bailout: A Call For Common Sense," with proposals for public oversight; market regulation; revitalizing the economy through investing in energy, conservation, education, infrastructure and more; canceling stock option programs for companies that apply for relief and limiting CEO compensation until taxpayer assistance is repaid, and helping people who were victims of predatory lenders stay in their homes. To read the full petition, click here.

The Campaign has issued a petition to be issued to Congress that calls for resisting the $700 billion blank check and demanding the conditions outlined above as part of a resolution. To read and sign the petition, click here.

The cartoon above is by Patrick Chappatte of The International Herald Tribune, 3/19/08

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