Bush wants $700 billion -- and more -- for unregulated bailout czar

Folks, we are at a bizarre place in American history. It began in large part with a garden-variety asset bubble, in housing prices, that most politicians to this day refuse to acknowledge. Inability to speak painful truths to the American people is the central hallmark of our democracy in 2008.

After years of denial and willful ignorance at all levels of government, this housing bubble has led us to where we are today: a predictable financial collapse, and an astounding and thorougly un-American power grab by the executive branch, which wants an economic czar with unchecked powers who would operate in private without meaningful congressional oversight.

Various links and headlines:

Section 8 of the president's bailout proposal, the creation of an economic czar:

Decisions by the Secretary (of Treasury) pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

The Los Angeles Times this morning:

...the Bush administration is asking Congress for the authority to spend $700 billion and for powers to intervene in the economy so sweeping that they have virtually no precedent in U.S. history.

...But the most distinctive -- and potentially most controversial -- element of the plan is the extent to which it would allow Treasury to act unilaterally.

... "It essentially creates an economic czar with no administrative oversight, no legal review, no legislative review. And it gives one man $700 billion to disperse as he needs fit," said Sen. Dianne Feinstein (D-Calif.), referring to Treasury Secretary Henry M. Paulson.

The $700 billion figure is misleading; it is not the limit of what the Treasury secretary can buy; it's the limit of what the secretary -- the economic czar -- can have "outstanding at any one time" in asset purchases. And don't forget, the Bush administration has already backed another $285 billion in bailouts for Fannie Mae, Freddie Mac and AIG.

When the administration originally said its plan would only purchase "assets from any financial institution having its headquarters in the United States," it was, for lack of a better word, lying. Treasury Secretary Paulson this morning told ABC-TV that foreign banks can join the party:

"If a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution," Paulson said.

"That's a distinction without a difference to the American people. The key here is protecting the system."

With all due respect to Henry Paulson, what qualifies him to speak about what matters to the American people? How is it that a man who appeared clueless in the early years of this crisis (remember "containment"?) not only survives, but evidently also has the president's blessing to put himself forward as an economic czar unparalleled in American history?

Paulson has been Treasury secretary for 27 months; what was he doing during the first 24 months? I second Lou Barnes' assessment:

You hire an investment banker to look around corners for you. Relentlessly surprised, annoyed at the waste of his valuable time, Hank has only recently discovered that there are corners.

Enough Sunday morning bile and bloviation. The Ryder Cup is on. What are your thoughts? Comments?

--Peter Viles

Photo: Vice President Cheney and President Bush. Credit: Associated Press

Comments

[JO]

Two comments today. Talk about a vision which was right on the money:
1) I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governmentts in the civilized world, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominent men.
Woodrow Wilson, after signing the Fed Reserve Act in 1913

2) If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.
Thomas Jefferson

All American taxpayers must voice their opinion to Congress and band together to stop this monumental fraud being perpetrated by these animals.
JO

[Rational Renter]

This is looking more and more like the end...

[George Smith]

CONGRESS AND THE BUSH ADMINISTRATION ARE ORCHASTRATING THE BIGGEST RIPPOFF IN AMERICAN HISTORY Congress and the Bush Administration are rushing to pass a bill that will cost each and every household in America almost $10,000 . (this conservative calculation EXCLUDES the fact that over 40 percent of filers pay zero income tax ). The Wall Street PR machines have been working overtime all week trying to set the wheels in motion. The reason: They are afraid of the revolt that would otherwise come out about how reckless they were in participating in the THEFT OF THE AMERICAN DREAM. The reason the bill is being put forth with a specific provision EXCLUDING ANY FUTURE COURT REVIEW OF THE DEALS is because they are afraid of the backlash from the American people that would come from the resulting debate in open court. There are actually less than a dozen politicians in congress that haven’t received campaign money from the all powerful Wall Street Lobby. The truth is that this proposed legislation deserves to be debated in open sessions on the floor of congress. The American people deserve the truth.

The amazing recovery of the markets on Friday proves that any argument that the legislation needs to be passed before the markets open on Monday is false. The truth never needs to hide in the shadows. The markets will respond positively to the Full Open and Honest Debate. Now is the time for every American to take a few minutes to speak up and BE A PATRIOT. Let your voice be heard. If we stand together we can stop the politicians from rewarding GREED and DECEIT. If you honestly believe in your country now is the time to stand up and be heard.

[Michael Snyder]

You think you're angry now? wait till you read this! Form today's NY Times: "LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY

TO PURCHASE MORTGAGE-RELATED ASSETS

Section 1. Short Title.

This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

(b) Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

(c) Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

(d) Application of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Sec. 7. Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec. 9. Termination of Authority.

The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Sec. 11. Credit Reform.

The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Sec. 12. Definitions.

For purposes of this section, the following definitions shall apply:

(1) Mortgage-Related Assets.--The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

(2) Secretary.--The term “Secretary” means the Secretary of the Treasury.

(3) United States.--The term “United States” means the States, territories, and possessions of the United States and the District of Columbia."

I'm absolutely speechless! For now...

[Todd in WeHo]

Most Americans don't understand or care about the differences between a democracy versus a republic, but when we allow Bush and Cheney (or anyone else) to overstep the The Constitution of the United States of America and establish an oligarchy, we shirk our responsibility to be actively engaged in the government of our nation. Americans are increasingly disengaged, as if we don't believe we can control our lives. Of this, I am greatly saddened.

[geek]

It's a little too late for the Tax payers to get mad. The money that is being put up is for spending that has already occurred with their money.

The bill has come due and no one can borrow more to pay it.

Calling this a bail out is an over simplification.

Its actually placing the bill with the payer of last resort, us.

The next time someone says they can keep tax's lower, spend as much as they want, and have no one regulating or responsible, maybe just maybe the voters will say, that is BS.

So much for trickle down, or the speeches about the virtue of big unregulated business.

You got the bill for things you already bought but were just too naive to realize it.

You want to know who is the fault for all this go look in the mirror

[syscom3]

JO, hard to believe that the fed was created almost a century ago.

And here the US is still an economic superpower (faults and problems and all).

I think the facts show the fed was one of the more brilliant moves our govt has done.

[Uncle Billy Loves Naomi Klein]

Pete, eloquent.

[LA-renter]

Peter, you said it!

Who are these people!

Before last week, the "experts" said that what happened during the Great Depression could no possibly happen again because government and private institutions had a level of sophistication unlike the 1930s.

This week, we are told, there's no time for debate... else, Depression II.

We are being screwed, not saved.

[Laker]

I'm Republican in general, but i think Paulson is still working for Wall Street (Goldman) and is acting exactly like that. This section 8 is a complete BS, and it is plainly unconstitutional. You can't give any power and especially so much power and blank check without any oversight....This is going to be worse than the unregulated mortgage industry of the last bubble.
But, i think Peter has something there when he(you) say that most congress are still in denial over the housing bubble ever existed...
If you deny the reality and thus do not understand the problems, there is no way you can fix it.
If democrats could stop this thing from happening...I will consider switching....maybe.

[dbc]

I am mad as hell. Once again, the taxpayer will foot the bill for the complete lack of leadership in Washington. And this time, the debacle knows no party. Bush and his administration has completely failed on the economy. Congress has been an even greater failure. We elect Representatives and Senators to lead. We elect them to watch out for our interests. Where has Congress been as this financial disaster has driven the country to it's knees? We as voters are fools. We choose to believe that our representatives are different. But in the end, we have elected politicians that care more about their position in life, their interests, and their power base than they do the people who elected them. And that self serving attitude knows no party.

[Peter]

I hate my government and feel so deprived and helpless - I now understand suicide bombers.

[indigoblue]

I'm furious that we even got to this point -- it's not just the popping of the real estate bubble, it's the popping of the credit default swaps ($45T), which were far, far bigger than the entire US mortgage debt ($7T) and even US GDP ($22T). I don't trust Paulson, or any Bush admininstration official who thought deregulation was the answer to all economic issues, with that much authority. Obama has made 6 sensible points, beginning with "no blank check." Congress, please don't rush into this without some basic safeguards.

[Nader Ebeid]

This is so wrong. They are not holding anyone culpable for the bad decisions and bad investments. There are a lot of people who made a lot of money off of the housing bubble. There are also many executives and managers who made a lot of money during the bubble in return for making bad investments. All those people are sitting pretty while the average tax payer pays for their adventures. This is not fair, and the worst part is that it seems no one is listening. I say find all those people and send them a bill. Empty their savings accounts first before emptying mine

[Biil]

The are try to ramrod this through before the Jon Q Public realizes what is being done to hom / The bill is pure and simple fascism . The GED admin via Paulson gets to be the Dictator . Write your congressmen and get involved in protests against this immediately .

[Lisa W]

"These People" are the Council on Foreign Relations.

Includes most of our headlining senators and House Reps and Paulson and Bush and yes, even McCain and Obama.

We need a revolution.

Pull your money out of the market.

Vote in a totally new Congress (house and senate)

Vote 3rd choice (I'm writing in Senator Ron Paul)

Take back the Govt's Constitutional right to coin money.

Impeach Bush and arrest cronies for trying to overthrow the Federal Govt and for violation of the Constitution of the United States.

Fire the Fed (and Paulson) NOW!

[harlynman]

Questions

If the government received about 80% of AIG in exchange for $85 billion, why is Paulson suggesting taxpayers receive nothing from bailed out banks, whose stocks would rise and dividends paid from taxpayer monies, to shareholders and debt investors, including those who created the mess?

Should banks pay shareholder dividends with taxpayer dollars?

If hedge funds and foreign firms are not eligible to participate, what prevents them from selling or exchanging near worthless securities to eligible US banks to offload on to US taxpayers?

Is legislation stating “Decisions by the Secretary…are non-reviewable…
and may not be reviewed by any court of law or any administrative agency,”
constitutional?

Does bailing out the Banks & Wall Street revitalize the housing market, simulate consumer spending or increase Government Revenue?

If the S&L bailout cost taxpayers $125 billion
and the original estimates were somewhere between $30-50 billion
how much could a financial institution bailout cost
if initial estimates are $700 billion to 1.2 trillion?

Should the USA’s debt rating be AAA?

[RM]

The fact that Paulson in pushing to have this done as soon as possible and with not interruptions or modifications shows that he is only really worried about wall street. His plan is to only help out the financial institutions and not the anyone else.

Clearly Paulson and Bernake saw the two big drops last week and the meltdown in Morgan Stanley and Goldman Sachs and it was just to painful to watch, besides he sees his main role as the protector of the markets. But since we are having an election in less than two months why not leave it to the American voters to decide if they want to approve or disapprove.

[Congressional spending]

700 billion shamed proposal

Citizens shall protest this ashamed proposal through the whole World and request DOJ actions. Those responsible to be in jail first of all.
Elections is just at the corner. So let the new responsible authorities and request citizens referendum about what would be the best for the nation.
We are not authocratic and dictatorial government.
This a DEMOCRACY??
We shall be protected by the bill of rights.

[John]

THIS IS THE BIGGEST SCAM IN US HISTORY!!!!!!!!!!

GOOD GOD!

All you have to do is watch today's interview of Henry Paulson on "This Week with George Stephanopoulos!"

Paulson said that the absent the ripoff bailout for Wall Street, the effects of the Alleged financial mess "might ultimately" reach small banks and small businesses in the United States.
"MIGHT ULTIMATELY." What the hell does that mean?!?!!??
I'll take my chances.
The cure Bush is trying to force down our throat seems worse than the disease.............

[Digitalian]

Where is a critical media in this? I watched all the Sunday news shows and Paulson was interviewed on each of them and was barely challenged. Other than George Will not a single journalist or commentator had the courage to question the wisdom of this bailout plan and of Paulson. And sadly the Democrats seem only to be interested in making sure they add on to plan with further bailouts for individuals. This thing is going to get rammed down our throats with nary a whisper of opposition.
Now I understand what living under tyranny feels like

[The End Is Noir]

This is the time all of us must contact our representatives in the Congress and the Senate and tell them that this must not pass. If the people are loud enough, the leaders will follow the will of the people. Sadly, our government leaders seem devoid of common sense and cannot be trusted to act wisely far too often, but they will listen to jammed phone lines, faxes and emails.

[Tony]

Call your representative.

Insist that if this bail-out is to occur that the following must be inluded:

1. Companies that are relieving themselves of toxic debt shall have to redo their earnings from 2000 to 2008.

2. CEOs, High ranking officials, etc... of companies that profited from the selling of these mortgage related products over the last 6 years should have their PERSONAL assets frozen. Then they should be made to return their bonuses, including interest, to their companies, and that amount shall be used to cancel out the toxic debts on their books BEFORE It is shifted to the governments ledger.

2. The Government shall be granted options or warrants to buy shares in any investment bank that relieves itself of toxic debt.

3. Officers of companies that engaged knowingly in the packaging of faulty debt, either through its sale or through rating the debt as safe when it was obviously not, shall be subject to prosecution to the full extent of the law.

Well, that's just the start. Feel free to add to the above!!

[Steve in Austin]

It is good to remember that Mr.Paulson was the long-time head of Goldman-Sachs and recently sold $500M of their stock. I believe he is potecting G-S first, investment banking second, the rest of Wall Street third. The rest of us are a distant fouth.

[Steve in Austin]

Peter: perhaps that should be a rallying cry: "No Blank Check!" I also fear thisis the last in a series of rip-offs during the past 8 years. More 'Disaster Capitalism".