I wrote last Friday of the reasons behind the current financial mess. Over the weekend, as everyone is aware by now, the US government issued a plan to put up a huge amount of money (initially about $700 billion but likely to grow to well over a trillion) to bail Wall Street out of the financial difficulties caused by its own greed and recklessness.
The public and the Congress are being stampeded with ‘the sky is falling’ rhetoric into giving the Treasury Secretary Henry Paulson a blank check, with no oversight and almost no reforms, to dole out money to his cronies in the financial sector so that they can continue the reckless practices that have led to the present situation. We should not forget that Paulson spent almost his entire career (over three decades) at Goldman Sachs, one of the investment banks at the center of the current mess.
Paulson says he wants a ‘quick and clean’ plan approved by the Congress. To translate, ‘quick’ means he wants Congress to approve the plan immediately without looking too closely at it, and ‘clean’ means he does not want them to demand accountability and reforms in return for shelling out taxpayer money to the very firms and executives who caused this crisis.
The bankers themselves want taxpayer money with no restrictions at all and even want to prevent the courts from having any jurisdiction in the matter, which strikes me as an open invitation to swindle.
Paulson, Ben Bernanke (head of the Federal Reserve Board), and George W. Bush are acting as if there are only two alternatives: giving Paulson this blank check or a collapse of the global financial markets. This is false. Even within this short time, economists have been able to come up with possible alternatives, as has senator Christopher Dodd. I am not endorsing these alternative proposals by any means. I don’t think they go far enough in providing regulatory oversight. But the point is that alternatives exist, more proposals can be created, and all should be discussed when such a large amount of money is involved.
The Paulson plan is a bad plan and should be opposed. Paulson, Bernanke, and Bush are saying that the necessary reforms and oversight can be added later after the crisis has passed, but only a sucker would accept that deal. Once the administration and the Wall Street firms get their hands on the money, you can be sure that they will fight any reforms tooth and nail. It is only now, when they are over a barrel and desperately seeking relief, that Congress has any leverage at all to get the needed reforms enacted.
We need to be wary of false compromises. After all, the leadership of both parties and the Bush administration are almost all bought and sold by Wall Street interests and they have every intention of capitulating to the demands of those interests. They will look for a way to do so while seeming to represent the interests of ordinary people. So we will hear loud grandstanding talk of needing to cap executive salaries (which those executives can easily circumvent) and some crumbs thrown to those whose homes have been foreclosed, while ignoring the fact that the real need is re-regulation of the financial markets, to put back in place those features that prevent executives at these banks and other financial institutions from acting like high rolling gamblers using other people’s money. All this talk of a possible financial apocalypse is meant to steamroll those few people who oppose what is likely to be a blatant rip-off of taxpayers.
Major legislation that is rushed under panic conditions (whether real or simulated) almost always leads to bad results because the authors of the legislation use the rush to stealthily advance their covert agendas. For an example, we need go no further than the abominable USA PATRIOT Act that was rushed through in the wake of the events of September 11, 2001 under conditions of fake panic and which has resulted in the massive violations of citizen rights and protections that were once taken for granted. Or the Iraq war authorization act that was stampeded through Congress because of fake panic created that Iraq was building a nuclear bomb. We know how well those turned out. The plan for the federal bailout of Wall Street has all the signs of being a repetition of those two events.
To get a scale of the amounts currently involved, see this exchange between the hosts of the PRI program Marketplace. The ‘credit default swap’ market referred to is a rough measure of the amount of money that was swirling around in the subprime mortgage dealings.
BOB MOON: OK, I’m about to unload some numbers on you here, so I’ll speak slowly so you can follow this.
The value of the entire U.S. Treasuries market: $4.5 trillion.
The value of the entire mortgage market: $7 trillion.
The size of the U.S. stock market: $22 trillion.
OK, you ready?
The size of the credit default swap market last year: $45 trillion.
KAI RYSSDAL: That’s a lot of money, Bob.
Yes, sirree, Bob, that is a lot of money. And all of it in a shadow economy, without any supervision by the government.
If there was any doubt as to who runs the country and for whose benefit, this episode should remove them, because both the Democratic and Republican parties colluded to create the conditions which gave rise to the current crisis and now both are colluding to save their rich supporters from the consequences of their actions.
What we clearly have now is government of the rich, by the rich, and for the rich.
POST SCRIPT: Religious nuts
Recently John McCain and Barack Obama were interviewed separately by Rick Warren, pastor of the Saddleback evangelical megachurch. Jackie Broyles and Dunlap from Red State Update engaged outside the forum with protestors from the Westboro Baptist Church, a group that is so viciously and irrationally antigay that I sometimes wonder if they are actually a bunch of performance artists, cleverly playing a prank on all of us.
I have written before that humor and ridicule is the best way to deal with such people, and Jackie and Dunlap seem to share that view.