Like a modern-day Paul Revere, Treasury Secretary Henry Paulson went on the talking-heads shows on Sunday, Sept 21 to raise the alarm and to gain support for his $700 BILLION plan to bail out America’s moribund financial sector. The most striking thing I take away from his efforts is his strong desire to see it passed “quickly” as a “clean” bill without any enumerated protections for the American taxpayer. He wants us to just trust him. We’ve been down this road before with the Bush Administration—in Iraq—and with disastrous results to our national security. And now we’re expected to put our economic fortunes in the hands of the same people who brought us incompetence and cronyism in what they, themselves, considered their strong suit—military policy.
It seems that Secretary Paulson’s plan needs to be passed quickly without too much debate because the Administration can’t afford to have people question the methods and motives behind it. The fact that this needs to be done with all dispatch—and undoubtedly a minimum of debate—sounds like the specter of an economic mushroom cloud, just like the one Condoleezza Rice used as a club to get the Democratic majority in the US Senate to vote to authorize the use of force in Iraq—just before an election. I fear that the stock Bush sentiments of “be afraid” and “trust us” will win the day and ram through Congress a cure that could very well be worse than the disease.
Secretary Paulson wants a blank check without any additional regulations above what is already on the books. He also doesn’t want the plan debased by compensation caps for the gambling-addict executives of companies needing to be bailed out. He speaks of the need for it to be clean of other provisions, to prevent anything from standing in the way of getting it passed quickly. “Just sign the damned contract already! We don’t have time for you to read it!”
Here is my prediction: People within the Administration, who want to see no consequences for the firms and non-existent independent oversight of the management of the bailout, will come up with an economic version of “weak on terror” which will cause the Democrats to once again show their yellow bellies and turn tail from protecting the American people. They will genuflect before the altar of fear created by yet another Bush-era catastrophe that has become so time sensitive that there is no room for reflection and sensible action. ACTION NOW is what is needed, not thought, Paulson is essentially advising Congress. And Congress will accept this and dutifully obey. And write that blank check.
Once that check is written, Congress will go back to their districts to campaign for re-election. When the new Congress convenes in January, there will be rancorous calls for regulatory reforms that were postponed because of the severe nature of this crisis—and the doomsayers’ claims of immediate economic collapse without a “clean” bill. But those calls for reform will be stifled by K Street lobbyists seeking to prevent regulatory reform from touching the firms that caused this very expensive threat to our national security.
There will be no meaningful reform because the $700 BILLION package will see firms that were on the brink of collapse suddenly flush with new capital that they can funnel to K Street to watch over their interests in Washington. That taxpayer-funded lobbyist slush fund will in turn fill the 2010 re-election coffers of their Corporate Congressional Cronies.
Aside from the well-documented fact that Congress will always choose to protect private special interests over the greater good, there is an even more sinister aspect to this plan: It gives the Treasury “wide latitude” in making decisions that market forces would normally decide. And it allows the Treasury Secretary to appoint private companies in the management of this massive bailout fund. It takes very little imagination to envision a scenario in which Mr. Paulson would conclude that Wall Street banks are the only private firms with the expertise needed to handle this unwieldy sum of money. The example of crony corporations taking no-bid profit from our efforts in Iraq for doing poor (or no) work should create a great deal of misgiving at this part of the proposal. You can’t put enough lipstick on this pig.
Finally, given George W. Bush’s history of executive overreach, do we really want to give him–and the next president—this much unchecked power over our national livelihood? At the end of the day, a bailout may be the only solution to this mess. I don’t like it, but I’m willing to accept the possibility. But it would be a terrible mistake to surrender to fear and accept a blank-check method of correcting the excesses of greedy Wall Street firms, when a few days of calm, rational thought could create a plan that is workable and corrects many of the wrongs that created this problem in the first place, and with the proper checks on the way it is administered.
For further reading, Chuck Collins of The Nation has some very sensible options that should be considered by congress to pay for this grotesque abuse of the public trust: http://www.commondreams.org/view/2008/09/19-3.
Monday, September 22, 2008
Sunday, September 21, 2008
Sept 20 Editorial
This was the editorial I read live on Shared Sacrifice Internet Radio on Sept 20, 2008. You can listen to the show's archive at http://www.blogtalkradio.com/Shared_Sacrifice.
On the topic of the financial crises which began to unfold this week on Wall Street, John McCain has flip-flopped more than the cooks at IHOP. On Monday he said that the fundamentals of the economy were sound and then on Tuesday he proclaimed that we were in a crisis but shouldn’t bail out AIG. On Wednesday, he changed his mind and said it was OK to bailout AIG. On Friday he was back to proclaiming that the bailouts had to stop. Barrack Obama was correct when he said that McCain is in a panic over the situation.
For his 26 years in Congress, Mr. McCain has been a fervent de-regulator. Now, in the span of a few days he has claimed that we need real oversight because of the crisis that deregulation has caused. I’m glad he’s seen the light that unfettered gambling with our pensions and manipulation of our financial markets are bad things. I don’t believe this is a case of too little too late, though. I believe this is a case of someone who doesn’t understand his own culpability in our current dire circumstance saying whatever his advisors think needs to be said to get elected. The Maverick McCain is no more.
This crisis, as Mr. McCain calls it, is proof of the weakness of unfettered financial markets. It was bad enough when our newly-created centralized government Commissars of the economy ordered American taxpayers to underwrite the sale of Bear-Stearns and to bailout Fannie Mae and Freddie Mac, but this week we were also ordered to secure a failing insurance company—which, unlike the banks, is not even regulated or insured by the federal government. Yet John McCain wants to put your health care choices squarely in the market, on what he previously said was a model based on the financial industry.1 His plan would force you to bargain with insurances companies by yourself. According to rigid right-wing ideology, the market is the most efficient method of delivery for ALL goods and services. Right. If that were true, the markets would not need a socialized bailout right now.
Matt pointed out weeks ago on this show that John McCain’s plan would remove the tax exemptions your employer receives for providing you with a group health care plan. Obviously, this will lead many employers to decide that it is too expensive to provide coverage for you and your family. That’s what Mr. McCain and his insurance industry lobbyist-advisors want: To force you to deal directly with the insurance companies, because they know that an individual faces FEWER choices when dealing with an insurance company than he or she would have if they get group coverage. So, you will end up paying more for less. That’s the real intent. But just in case you work for a company that understands its social obligations and continues to provide you with group health care coverage, the IRS will consider that benefit to be taxable income to you.
For those out there that might think I’m being one-sided, let me point out that John McCain’s plan does provide an offsetting tax credit of $2500 for those that go out to the marketplace to buy their insurance. In my personal case, the premium my employer pays for my coverage is more than $400 a month, which means in the unlikely event that I could find the same coverage for the same premium, my health care insurance out-of-pocket expense would net out to be $2300 a year more after the end-of-year credit. That actually sounds like a tax increase to me, when you consider the fact that I just bailed out with my tax dollars the world’s largest insurer. And now John McCain wants me to pay more for my health insurance coverage? I guess the philosophical justification is that profit going to the stockholders of insurance companies would offset the loss from my wallet; somebody gains-somebody loses—that’s the market in John McCain’s deer-in-the-headlights understanding of economics.
The bailouts already in place and those being designed are nothing more than single-payer universal health care for corporations at Emergency Room rates—and the American taxpayer is picking up the tab. Naturally, the proponents of universal healthcare will hold the need for corporate bailouts up as examples of the bankrupt ideology of the Republican right. The markets have failed, and now they need government intervention; it could be accurately argued that the health insurance market has failed and also needs intervention, not because profit is imperiled but because American lives are.
Opponents of universal health care have lost a big club. They used to be able to just shout “socialized medicine” whenever the topic of universal health care came up and the other side of the argument would seem to fade away. But now, with socialized financial markets, that non-argument won’t hold much weight. The greatest argument they will have now is that we simply cannot afford it, because the corporate bailouts are going to cost so much. They might actually have a point there, but that merely proves that the right-wings ideological wars to destroy choice in this country have been successful.
Oh, by the way, don’t fool yourself into believing that the US government taking a 79.9% equity stake in AIG in exchange for bailing it out will actually happen. The shareholders of AIG are already rallying to stop that, and given our Congress’ spineless inability to stand up to the private interests of money, they will win. We hear a lot of talk today from Congressmen saying that the bailouts (notice the plural)—which will undoubtedly total more than $1 trillion of your dollars—must look out for the American taxpayer. Don’t be fooled, as soon as K-Street gets involved (and they will), the whole exercise will turn into a giant bottomless pork-filled trough, complete with bridges to nowhere and make-work projects across the country that we can’t afford.
Because George Bush’s plan to privatize Social Security failed and thus didn’t provide the trillion dollars in profit that Wall Street was aching for, the current situation gives them the perfect opportunity to simply wipe a trillion dollars of bad debt off their books. Same difference. Either way, Wall Street walks away with a trillion dollars of taxpayer money. And the American public will soon forget this fiasco and corporations will scream for deregulation again—and politicians who are afraid of losing valuable corporate campaign sponsors will give in—again.
I proudly proclaim that I am a liberal. Yet I cannot stomach the government existing to create make-work projects. If our social contract was a form of socialism, I would think differently, but I was raised and educated in an environment that talked about personal responsibility. And I fervently believe that Americans can make things happen by sheer will and hard work. But our politicians who mouth those words don’t believe it, otherwise they wouldn’t want endless earmarks for pet projects in their districts—earmarks designed to funnel money back to their home districts in order to put people to work. Ask yourself, besides during desperate economic times and war, when was the government’s mission ever to put people to work?
President Eisenhower warned us in his farewell address to beware of the military-industrial complex. That complex is addicted to make-work programs and they decentralize their contracting centers to ensure that a maximum of Congressmen have a vested interest in funding them. Our politicians’ blind self-service has directly led to the situation we are in right now. Don’t expect them to accept any sort of plan that doesn’t specifically siphon off money from your household to prop up reckless companies and encourage more market inefficiencies.
The Democratic and Republican parties talk constantly about values. On the economy, Republicans like to talk about market fundamentals and self-correction. And to their credit some are even holding to that and openly stating that we should let the companies fail, even if the results are “brutal”, according to ranking Republican member of the Senate Banking committee, Richard Shelby of Alabama. I’m a liberal and I agree with him.
The shareholders of these companies need to be held accountable for their lack of oversight. The most obvious method is the loss of their investment. It is the responsibility of a corporate Board of Directors to find the best talent possible for the day-to-day management of a publicly-traded company. And it is the responsibility of shareholders to elect the right people to the Board to oversee that management. If the shareholders are negligent in their duty, they have only themselves to blame. And the American people should not be called upon to bail them out.
FDR observed that Americans prefer soft living. Maybe America needs a wake-up call to the reality that self-governance is hard and takes effort and intelligence. If the bailout plan currently being designed turns out to just put off the pain for later, we have to face up to this NOW and take it on the chin. This is a problem of our collective making, and we have no right whatsoever to pass it off to future generations.
It’s time for a new generation of leaders in this country with the foresight and open-mindedness needed to lead us on a path to a better future. The leaders with the “me-first” attitude that we have repeatedly elected over the past 30 years have led us down this costly cul-de-sac and now the bills are coming due. It is impossible to deny. My true fear is that our country will not survive this. We are a strong country, but what sacrifices have we recently shown we are ready to take for each other? Besides those who put on a uniform, we have shown remarkably little appetite to sacrifice anything for our fellow countrymen. Can we survive as a nation when we just pile debt on top of debt on top of debt and expect someone else to deal with it down the road? This is our responsibility and if we continue to shirk our duty to each other and to future generations, we will lose the promise of a better tomorrow on the altar of greed. Hard times are around us and in front of us. The sooner we recognize that we must take responsibility for our politicians’ failures and make the sacrifices necessary, the sooner we will put the pain behind us. Matt?
Notes:
1. Retrieved Sept 20 from: http://krugman.blogs.nytimes.com/2008/09/19/mccain-on-banking-and-health/
On the topic of the financial crises which began to unfold this week on Wall Street, John McCain has flip-flopped more than the cooks at IHOP. On Monday he said that the fundamentals of the economy were sound and then on Tuesday he proclaimed that we were in a crisis but shouldn’t bail out AIG. On Wednesday, he changed his mind and said it was OK to bailout AIG. On Friday he was back to proclaiming that the bailouts had to stop. Barrack Obama was correct when he said that McCain is in a panic over the situation.
For his 26 years in Congress, Mr. McCain has been a fervent de-regulator. Now, in the span of a few days he has claimed that we need real oversight because of the crisis that deregulation has caused. I’m glad he’s seen the light that unfettered gambling with our pensions and manipulation of our financial markets are bad things. I don’t believe this is a case of too little too late, though. I believe this is a case of someone who doesn’t understand his own culpability in our current dire circumstance saying whatever his advisors think needs to be said to get elected. The Maverick McCain is no more.
This crisis, as Mr. McCain calls it, is proof of the weakness of unfettered financial markets. It was bad enough when our newly-created centralized government Commissars of the economy ordered American taxpayers to underwrite the sale of Bear-Stearns and to bailout Fannie Mae and Freddie Mac, but this week we were also ordered to secure a failing insurance company—which, unlike the banks, is not even regulated or insured by the federal government. Yet John McCain wants to put your health care choices squarely in the market, on what he previously said was a model based on the financial industry.1 His plan would force you to bargain with insurances companies by yourself. According to rigid right-wing ideology, the market is the most efficient method of delivery for ALL goods and services. Right. If that were true, the markets would not need a socialized bailout right now.
Matt pointed out weeks ago on this show that John McCain’s plan would remove the tax exemptions your employer receives for providing you with a group health care plan. Obviously, this will lead many employers to decide that it is too expensive to provide coverage for you and your family. That’s what Mr. McCain and his insurance industry lobbyist-advisors want: To force you to deal directly with the insurance companies, because they know that an individual faces FEWER choices when dealing with an insurance company than he or she would have if they get group coverage. So, you will end up paying more for less. That’s the real intent. But just in case you work for a company that understands its social obligations and continues to provide you with group health care coverage, the IRS will consider that benefit to be taxable income to you.
For those out there that might think I’m being one-sided, let me point out that John McCain’s plan does provide an offsetting tax credit of $2500 for those that go out to the marketplace to buy their insurance. In my personal case, the premium my employer pays for my coverage is more than $400 a month, which means in the unlikely event that I could find the same coverage for the same premium, my health care insurance out-of-pocket expense would net out to be $2300 a year more after the end-of-year credit. That actually sounds like a tax increase to me, when you consider the fact that I just bailed out with my tax dollars the world’s largest insurer. And now John McCain wants me to pay more for my health insurance coverage? I guess the philosophical justification is that profit going to the stockholders of insurance companies would offset the loss from my wallet; somebody gains-somebody loses—that’s the market in John McCain’s deer-in-the-headlights understanding of economics.
The bailouts already in place and those being designed are nothing more than single-payer universal health care for corporations at Emergency Room rates—and the American taxpayer is picking up the tab. Naturally, the proponents of universal healthcare will hold the need for corporate bailouts up as examples of the bankrupt ideology of the Republican right. The markets have failed, and now they need government intervention; it could be accurately argued that the health insurance market has failed and also needs intervention, not because profit is imperiled but because American lives are.
Opponents of universal health care have lost a big club. They used to be able to just shout “socialized medicine” whenever the topic of universal health care came up and the other side of the argument would seem to fade away. But now, with socialized financial markets, that non-argument won’t hold much weight. The greatest argument they will have now is that we simply cannot afford it, because the corporate bailouts are going to cost so much. They might actually have a point there, but that merely proves that the right-wings ideological wars to destroy choice in this country have been successful.
Oh, by the way, don’t fool yourself into believing that the US government taking a 79.9% equity stake in AIG in exchange for bailing it out will actually happen. The shareholders of AIG are already rallying to stop that, and given our Congress’ spineless inability to stand up to the private interests of money, they will win. We hear a lot of talk today from Congressmen saying that the bailouts (notice the plural)—which will undoubtedly total more than $1 trillion of your dollars—must look out for the American taxpayer. Don’t be fooled, as soon as K-Street gets involved (and they will), the whole exercise will turn into a giant bottomless pork-filled trough, complete with bridges to nowhere and make-work projects across the country that we can’t afford.
Because George Bush’s plan to privatize Social Security failed and thus didn’t provide the trillion dollars in profit that Wall Street was aching for, the current situation gives them the perfect opportunity to simply wipe a trillion dollars of bad debt off their books. Same difference. Either way, Wall Street walks away with a trillion dollars of taxpayer money. And the American public will soon forget this fiasco and corporations will scream for deregulation again—and politicians who are afraid of losing valuable corporate campaign sponsors will give in—again.
I proudly proclaim that I am a liberal. Yet I cannot stomach the government existing to create make-work projects. If our social contract was a form of socialism, I would think differently, but I was raised and educated in an environment that talked about personal responsibility. And I fervently believe that Americans can make things happen by sheer will and hard work. But our politicians who mouth those words don’t believe it, otherwise they wouldn’t want endless earmarks for pet projects in their districts—earmarks designed to funnel money back to their home districts in order to put people to work. Ask yourself, besides during desperate economic times and war, when was the government’s mission ever to put people to work?
President Eisenhower warned us in his farewell address to beware of the military-industrial complex. That complex is addicted to make-work programs and they decentralize their contracting centers to ensure that a maximum of Congressmen have a vested interest in funding them. Our politicians’ blind self-service has directly led to the situation we are in right now. Don’t expect them to accept any sort of plan that doesn’t specifically siphon off money from your household to prop up reckless companies and encourage more market inefficiencies.
The Democratic and Republican parties talk constantly about values. On the economy, Republicans like to talk about market fundamentals and self-correction. And to their credit some are even holding to that and openly stating that we should let the companies fail, even if the results are “brutal”, according to ranking Republican member of the Senate Banking committee, Richard Shelby of Alabama. I’m a liberal and I agree with him.
The shareholders of these companies need to be held accountable for their lack of oversight. The most obvious method is the loss of their investment. It is the responsibility of a corporate Board of Directors to find the best talent possible for the day-to-day management of a publicly-traded company. And it is the responsibility of shareholders to elect the right people to the Board to oversee that management. If the shareholders are negligent in their duty, they have only themselves to blame. And the American people should not be called upon to bail them out.
FDR observed that Americans prefer soft living. Maybe America needs a wake-up call to the reality that self-governance is hard and takes effort and intelligence. If the bailout plan currently being designed turns out to just put off the pain for later, we have to face up to this NOW and take it on the chin. This is a problem of our collective making, and we have no right whatsoever to pass it off to future generations.
It’s time for a new generation of leaders in this country with the foresight and open-mindedness needed to lead us on a path to a better future. The leaders with the “me-first” attitude that we have repeatedly elected over the past 30 years have led us down this costly cul-de-sac and now the bills are coming due. It is impossible to deny. My true fear is that our country will not survive this. We are a strong country, but what sacrifices have we recently shown we are ready to take for each other? Besides those who put on a uniform, we have shown remarkably little appetite to sacrifice anything for our fellow countrymen. Can we survive as a nation when we just pile debt on top of debt on top of debt and expect someone else to deal with it down the road? This is our responsibility and if we continue to shirk our duty to each other and to future generations, we will lose the promise of a better tomorrow on the altar of greed. Hard times are around us and in front of us. The sooner we recognize that we must take responsibility for our politicians’ failures and make the sacrifices necessary, the sooner we will put the pain behind us. Matt?
Notes:
1. Retrieved Sept 20 from: http://krugman.blogs.nytimes.com/2008/09/19/mccain-on-banking-and-health/
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