Later On

A blog written for those whose interests more or less match mine.

Good analysis of the bailout process

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Glenn Greenwald has an exceptionally good column today, analyzing the process used to meet the current crisis—and how it matches how earlier crises have been met. He begins:

The word being used most frequently to describe the bailout package that is about to pass is “extraordinary.” That adjective may apply to the amounts of money being transferred from taxpayers to Wall Street, but the process by which this is all happening is anything but “extraordinary.” All of the “principles” that drive how our Government functions in general — what explain the last eight years at least — are perfectly evident in what has happened here:

(1) Incredibly complex and consequential new laws are negotiated in secret and then enacted immediately, with no hearings, no real debate, no transparency. Nancy Pelosi has praised herself for decreeing that the new law will be online for 24 hours before Congress votes on it — a full 24 hours for the American public to understand and assess a law that forces them to subsidize Wall St.’s losses in a way that may impact them for decades, if not generations. The most significant and consequential pieces of legislation over the last eight years — the Patriot Act, the various expanded surveillance laws, the Military Commissions Act — were the by-product of identical anti-democratic processes.

(2) Those who created the crisis, were wrong about everything, drive the process. Experts who dissent from the prevailing Washington orthodoxy, particularly ones who were presciently warning about what was happening, are simply ignored — systematically excluded from the process. Professor Nouriel Roubini:

It is pathetic that Congress did not consult any of the many professional economists that have presented — many on the RGE Monitor Finance blog forum — alternative plans that were more fair and efficient and less costly ways to resolve this crisis.

Last week, Hank Paulson — who bears responsibility for the crisis in numerous ways — demanded that $700 billion be transferred to him in order to purchase toxic assets from his Wall St. friends, and while there was much howling of outrage in many quarters, no other framework was ever considered.

(3) Public opinion is largely ignored, as always, and public anger is placated through illusory, symbolic and largely meaningless concessions. Much is being made over the allegedly strong oversight provisions to limit the Treasury Secretary’s power, accomplished through the creation of two oversight panels — one that is composed of 5 administration officials (including the Treasury Secretary himself, the Federal Reserve Chairman and the SEC Chairman — the definitive foxes guarding the hen house), and another that is appointed by Congress but which — as is true for everything Congress touches — has little real authority over what is done.Identically, executive compensation limits — used to bestow the plan with its populist bona fides — are minimal and extremely limited. Worse, the public is being told that the financial services industry must pay for any losses to the Treasury still outstanding after five years, but the bill requires nothing of the sort, simply requiring that the president “propose” a plan for recoupment, not that Congress enact any such plan.

And, most of all, while not as absolute as it was in the original Paulson proposal, the Congressional plan still vests extraordinarily vast and centralized power in the Treasury Secretary — just as Paulson demanded. As the NYT put it this morning: “During its weeklong deliberations, Congress made many changes to the Bush administration’s original proposal to bail out the financial industry, but one overarching aspect of the initial plan that remains is the vast discretion it gives to the Treasury secretary.”

(4) The Government begins …

Continue reading.

Written by Leisureguy

29 September 2008 at 3:38 pm

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