Wednesday, October 01, 2008
Leadership vacuum: USS Economy, meet iceberg
The lack of leadership, on both sides of the partisan aisle, is shameful, cowardly, and deeply unpatriotic.
On Monday, the US House of Representatives failed to pass the $700 billion bailout package. The word was that Treasury Secretary Henry Paulson had worked out a deal with House Speaker Nancy Pelosi and Minority Leader John Boehner. The two leaders had whip counted their caucuses and apparently believed that they had enough votes to eke out passage. Both presidential candidates expressed support for the package, with John McCain even "suspending" his campaign to fly in to Washington to try to finagle public perceptions so that he could take the credit for rescuing the economy. President Junior, his disapproval rating hovering right around 70%, came on television to plead for support.
Then came the vote.
As the world watched, one third of Pelosi's caucus, and two thirds of Boehner's, voted against passage, the measure failed, and the Dow Jones Industrial Average lost 778 points (or roughly 1.2 trillion dollars). Both sides responded immediately with finger-pointing, Junior scurried back to his hole, and Mad Johnny looked like a fool yet again.
As to the actual merits of the legislation, it is not clear that they were abundant. Concerns about burdening the tax-payer, about rewarding irresponsible behavior on Wall Street, about ignoring the plight of desperate mortgage-holders all seem legitimate. The legislation was certainly not a panacea; and even its strongest supporters admitted it had many weaknesses.
But, regardless of its lack of merits, it had been forged in that time-honored American way, through compromise and hard-fought bargaining between the administration, both political parties, and both houses of Congress.
That it would then be defeated in a floor vote in the House of Representatives is a stark indication that there is a leadership vacuum in our nation. There is no trust between the administration and its own Republican party, let alone any trust between Republicans and Democrats.
There is no one at the helm. We're adrift in a sea of ice.
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So just how much did "mad Johnny" achieve when he suspended his campaign and went to DC?
Does not seem like much.
Will be interesting to see what the Senate does with the bailout bill.
On another note, please pass my best wishes to Maty this Eid day. Eid Mubarak to both of you.
On another, thanks for your kind words on Eric Webb.
It was defeated because:
1) It gave Paulson unlimited power to pick and chose who to give the money to.
2) the oversight board was to be chosen by Paulson. Now what kind of oversight is that?
3) It gave Paulson immunity from any investigation. Hence, immunity from the law.
4) It gave Paulson the power to bail out foreign bankers. This is how that works: The bank of Shanghai transfers ALL it's toxic paper from ALL it's international locations to it's branch in the US. Within 24 hours the Treasury would be required to buy up ALL of it. They have to help foreign banks, but nothing there says they have to help all American banks. That is discretionary. See point number 1.
5) the 700 bilion cap is a rolling cap meaning: no more than 700 bill at a time. Let's say 200 bill get's cleared, then Paulson is free to spend that freed up 200 bill. So the total now is 900, but the max of the day is only 700. He has 2 years to spend this way. Now how big can the actual total get in 2 years of this?
6) It limited golden parachutes (severance package) for NEW Executives only. It does NOT limit stock options.
7) It did not limit exec compensation. So, Paulson gives bank XYZ 100 billion. The exec is free to take 100 billion as a 'bonus'. And remember, Paulson is operating under total immunity.
8) No mandated help for mortgage borrowers. The wording used in the bill was "recommended" to re-write mortgages. Not MUST re-write mortgages.
9) It fails to give bankruptcy judges the power to re-write mortgages to more favorable terms. For example, a judge can’t lower a 15% interest rate to something more equitable.
There are more reasons we fought so hard against this bill. Unfortunately, a monster version, 450 page Beast, passed the Senate at 9pm last night. Now according to the Constitution, article 1 sec 7, it says that only the house can originate financial bills. How they got around that one is anyone's guess.
The Senate bill is still the original house bill only the added pages are pork. Agree with this stuff or not, it does not belong in a "bail out the bankers" bill. Here are some of the additions:
1) Insurance companies must pay for mental health care including hospitalization
2) Money for alternative energy
3) Raises the FDIC limit from 100K to 250K. FDIC is also essentially insolvent although that is not addressed.
4) Money for AMTRAC
5) Bush tax 'cuts' will be made permanent.
6) Increase in limit on rum excise tax to Puerto Rico and the Virgin Islands.
7) Extension of mine rescue team training credit.
8) Extension of election to expense advanced mine safety equipment
9) Increases funding to states that have federally owned land.
This is only the tip of the 350+ page pork additions.
To pay for this they are going to have to run the printing presses overtime. The result of this mad printing spree is inflation. Inflation is the debasing of the dollar. Watch it Americans, the price of everything is going through the roof, except for your property value and your paycheck.
Keep in mind though, Paulson promised that bailing out Freddie and Fannie would solve the problem. It didn't. He Let Lehman fail then turned right around and promised us that bailing out AIG would solve it. It didn't. How is giving him total control over the treasury with no oversight going to solve the problem when his promises have already failed? He also said the economy was sound, then a few days later said the economy was facing a total meltdown.
Food for thought: Paulson used to be the CEO for Goldman Sachs. During his stint at GS, he vowed to bring down Lehman. He has a personal wealth of 700 million. GE owns CNBC news, although Goldman Sachs runs it. Now for the last 50 or so years, the Sec of the Treasury has come from Goldman Sachs. The media blitz did not begin until after the house vote failed. And one more note: the market was down 450 points BEFORE the house voted on the bill. I know I was watching it like a hawk. The media has been blaming the 777 point crash totally on the House vote. It’s not true. Before noon, everyone thought the bill was going to pass. By the way, the media failed to announce it was only a 7% drop. In 1987, the market dropped 23%.
Something here really smells. It’s NOT going to be good for Joe Six Pack, but it WILL be good for Goldman Sachs, JP Morgan, Morgan Stanley, Warren Buffet and foreign financial institutions.
They are trying desperately to re-inflate the housing bubble. It won’t and can’t work. Middle America’s credit is too maxed out. They can no longer afford over-priced housing and a new car every couple of years. Something has got to give. And if a company needs a loan to meet payroll, that company is on the edge. How is giving Billions to the very people who caused this problem going to solve it? No rules have changed. IMO this is nothing more than a great plundering of the American treasury. We have been fed a giant shit sandwich for the benefit of a few.
for more reading: http://globaleconomicanalysis.blogspot.com/
Here is some more interesting reading. It lists the house members, how they voted, and the real interesting part is it lists how much money they received from the financial lobby. Pay special attention to how much Barney Frank recieved. He was the greatest cheerleader for the passage of this bill.
Sorry for the rant Dade -- I'll stop now. :-)
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