Wall Street Mushroom Cloud

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.