Posted on Thursday, September 25th, 2008 at 11:30 am
Author: Feature Writer
Gc contributor: Sarah Jaffe
The economic bailout of Wall Street investment banks proposed by the Bush administration is only three pages long. If you click here to read it, you’ll have done more than John McCain apparently had before proposing a “suspension” of Friday’s scheduled presidential debate.
The bail-out proposal is the anti-Patriot act in its brevity, but the rush to push it through in a climate of fear and some of the wording reveals similarities. Most frightening is the clause that reads, “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.”
The Secretary would be Treasury secretary Henry Paulson, nicknamed “Mr. Risk” in a BusinessWeek article in 2006 when he ascended to his Cabinet position after a stint as CEO of Goldman Sachs, one of the firms being bailed out with the $700,000,000,000 proposal.
Oh, and by the way? That’s only $700 billion at one time, not a cap.
“He’s one of the key architects of a more daring Wall Street, where securities firms are taking greater and greater chances in their pursuit of profits,”
Michael Mandel wrote of Paulson at the time in BusinessWeek. In other words, he’s one of the guys who created the situation from which we now need to be rescued.
Aside from the lack of oversight urged in the proposal, another similarity to the Patriot Act is the unprecedented amount of authority granted to one administration official. Former Attorney General Ashcroft had his dreams come true when the Patriot Act was squirted through Congress, and Paulson will have wide-ranging powers unheard of for a Treasury Secretary if this bill goes through largely unchanged.
Thankfully, Speaker of the House Nancy Pelosi, joined by Rep. Barney Frank (D-Mass), chairman of the House Financial Services Committee, and even some congressional Republicans are not so eager to give Paulson what he wants. Senate Banking Committee Chairman Chris Dodd referred to the bill asking the government to buy “toxic assets,” and the ranking Republican, Richard Shelby, agreed, saying that the bailout would only help Wall Street, which had created the problem with “sloppy underwriting and reckless disregard for risk.”
So what’s really going on?
Well, Noam Chomsky pointed out in a BBC interview that “The unprecedented intervention of the Fed may be justified or not in narrow terms, but it reveals, once again, the profoundly undemocratic character of state capitalist institutions, designed in large measure to socialize cost and risk and privatize profit, without a public voice.”
It is indeed funny that the first people to decry suggestions for national health care as “socialism” are willing to take government money to bail out huge investment banks. The idea is that these businesses are simply too big to fail, that our economy hinges on their success, so we must bail them out while people whose mortgages shot up are left to lose their homes.
Naomi Klein noted that this current love affair with government support won’t last, and in fact it will be used to make excuses for cutting funding for social programs later, to lessen the already astronomical debt we’re incurring now.
Klein suggests, though, that a bailout of this size belies the claim of so-called small government conservatives that the government cannot act to help ordinary citizens. According to the New York Times, universal health care for all those in the U.S. without it would cost $100 billion a year. Somehow, after authorizing $700 billion to clean up Wall Street’s mess, $100 billion for health care doesn’t seem so bad, does it?
So what is the solution? I wish I had an easy one. Democrats have suggested more oversight, more regulations (as has John McCain) and a big one: limits on CEO pay for companies receiving federal money. After all, do you want your tax dollars (approximately $2300 per person) going into the pockets of a guy who makes millions?
But the problem with regulations is glaring: they have to be enforced. Recently, This American Life, a program not exactly known for its political reporting, took aim at the Securities and Exchange Commission chair, Christopher Cox, noting that he should be “Wall Street’s Top Cop” but in Senate hearings this summer over the Fannie Mae and Freddie Mac crisis, Cox was offered any legislation he wanted, any money he needed to prevent the collapse of the companies. He said that he had all the authority and cash he needed.
That’s why the government had to take over Freddie and Fannie earlier this month.
One thing is clear: having people who don’t believe in regulation responsible for regulation isn’t helping. At all.
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