Tag Archives: bailout

We got ripped off, so let’s do it again

Posted on by
Reply

The proposed auto industry rescue is phase I of part II of the big rip-off.

After years of letting the Bush administration to push through terrible legislation and start a war by using fear and forecasts of fictional dire consequences for not doing what he wanted, Congress did it again with the $700 billion financial services bailout.

After realizing that Treasure Secretary Henry Paulson and buddies from Goldman-Sachs didn’t really know what they were doing and weren’t doing what they said they would, Congress finally got smart: now our august representatives are going allow the auto industry to rip us off for much less.

At first.

The real bill will come later, after Congress has committed to paying it through this unscrutinized, details-later bad idea of a bailout.

Want to rescue the auto industry? The merits of that can be debated from here to Toyota. But it is just totally crazy to agree to a $35 billion bailout, with conditions the automakers must meet to come later, knowing that the $35 billion is just a down payment on an unquantified much, much larger amount that may not be enough to provide the salvation the auto executives seek anyway.

Bailout blues

Posted on by
1

It’s odd, isn’t it, how the bailout kept expanding — first the government was going to buy mortgage debt, now it is going to buy just about any distressed financial instrument — but the price tag never budged above that $700 billion. Somebody isn’t playing straight with us.

Now a deal is near (again) so our elected Congress people can come home and tell us what a good job they did on our behalf. The deal isn’t done, though. According to the New York Times:

Among the last sticking points was an unexpected and bitter fight over how to pay for any losses that taxpayers may experience after distressed debt has been purchased and resold.

Democrats had pushed for a fee on securities transactions, essentially a tax on financial firms, saying it was fitting that they contribute to the cost.

In the end, lawmakers and the administration opted to leave the decision to the next president, who must present a proposal to Congress to pay for any losses.

What a shameful cop-out.

Borrowing a bailout!!?

Posted on by
Reply

This is crazy — the Bush administration wants to borrow its way out of the financial mess it did so much to help create? No muss, no fuss — just put it on the balance sheet and pretend it’s not real, sort of like how the administration treats the cost of the Iraq war. No one has to sacrifice, not a single program gets cut. There’s just one little detail missing though — how does all that money get repaid?

Robert Preston, business editor of the BBC, puts the $700 billion Bush is seeking in start-up funds in perspective:

That $700bn is about 35 per cent more than the entire annual budget of the US defence department.

And to facilitate the funding, the statutory ceiling on US public debt is being raised from $10.6 trillion to $11.3 trillion a rise of 6.6 per cent – which puts this ceiling at around a fifth less than the entire annual output of the US economy.

Treasury Secretary Henry Paulson, formerly the hugely-compensated head of the Wall Street investment firm Goldman Sachs, would have enormous discretion in using this money under the plan, according to the New York Times.

The administration’s proposal, laid out in a three-page plan, would place no restrictions on the administration other than requiring semiannual reports to Congress, granting the Treasury secretary unprecedented power to buy and resell mortgage debt.

Didn’t we learn our lessons about giving Bush broad powers in the Iraq/torture/illegal spying scandals that sprang from the broad powers he was given and claimed after 9/11? Haven’t we seen enough cronyism and corruption in this administration to make sure there are plenty of safeguards in place in how this money gets distributed?

This proposal needs careful review, but it’s more likely that Congress will again abandon its oversight role. From the Times:

Congressional leaders are hoping to recess at the end of the week for the fall elections, after approving the bailout and a budget measure to keep the government running.

This financial mess isn’t going to be easy to deal with. Moving quickly and blindly isn’t going to make things better.