Second Bailout Proposal More Criminal Than First
If you thought the first bailout plan was a piece of garbage, the second one is one hell of a stinker.
Besides using American taxpayer money to pay for the handiwork of those greedy bastards that live among us, this new bill also takes care of executives’ golden parachutes, increases the deficit, and aids and abets Wall Street in cooking the books. Way to go Congress. The Founding Fathers are rolling in their graves. Even faster now.
From MarketWatch’s Greg Robb and Robert Schroeder last night:
The Senate approved a revised $700 billion U.S. plan to stabilize the financial industry and kick-start credit on Wednesday night, just two days after the House defied President Bush and leaders of both political parties to reject the original package.
By a vote of 74-25, senators authorized the Treasury secretary to buy bad assets from companies’ books, allowed the Federal Deposit Insurance Corp. to raise its deposit-insurance cap to $250,000 from $100,000, extended several tax breaks and required government agencies to modify troubled mortgages…
House Majority Leader Steny Hoyer said the House leadership will likely bring the bill to the floor on Friday.
I wouldn’t expect anything less. As most of us know, money talks on Capitol Hill. And Wall Street banks are anxious to receive their share of the plunder.
A lot of anger has been directed at executive compensation packages. Predictably, that issue won’t be addressed in the new bill. Robb and Schroeder noted:
Executive pay would also be limited in some cases under the bill, as would “golden parachutes” for some corporate chiefs.
Note the multiple use of “some.” The looting goes on.
Greg Hitt Sarah Lueck of the Wall Street Journal pointed out other problems with the “new and improved” bailout plan, such as deficit growth and accounting rule modifications. They wrote last night:
The 10-year, $150.5 billion package of tax proposals includes a measure to ease the bite of the alternative minimum tax, as well as research-and-development tax credits coveted by high-tech companies and drug makers. Its addition is designed to secure the support of Republicans, who were overwhelmingly opposed in the House. But it could irk conservative House Democrats because the measure will add to the deficit.
Add to the deficit? Bring it on, I’m sure the discredited followers of John Maynard Keynes are saying at this very moment.
The Journal reporters added:
The compromise bill represented a marriage of the rescue proposal with a host of measures designed to win the support of reluctant lawmakers. Additions include an increase in bank deposit insurance limits, a suggested change to accounting rules, and a $150.5 billion package of unrelated personal and corporate tax cuts.
And just what is this “suggested change” to accounting rules? Hitt and Lueck explained:
The bill also reaffirms the Securities and Exchange Commission’s authority to suspend so-called mark-to-market accounting, an issue that gained surprising traction among lawmakers looking for less costly alternatives to the Bush plan. The practice, adopted in the aftermath of the savings-and-loan collapse in the 1980s, pegs the value of assets to their current market price, rather than the price paid for them.
Banks have complained the strict application of mark-to-market rules have forced them to write down billions worth of mortgage-related securities for which there are no buyers, intensifying the squeeze in the credit markets.
Um, yeah, there’s a good reason why mark-to-market accounting was implemented after that other famous episode of financial greed in America. Joanna Ossinger of FOX Business wrote yesterday:
Mark-to-market, which is part of fair-value accounting, simply means that companies assigning values to assets they hold must value them at current market levels. If something is trading right around $10, it’s given a value of $10, regardless of whether it was bought for $2 or $20.
That sounds logical, right? The problem, though, and the reason M2M is getting so many opponents, is that the credit markets are in such a bind now that a lot of securities aren’t selling at all. So, technically, you might have a “market” of $0 for a security.
In effect, change the rules, assign fictitious values to securities, announce less write-downs… and pencil in some dates to look at property in The Hamptons and the latest Maserati to roll of the line in Italy.
I don’t know about you, but the suspension of mark-to-market accounting sure sounds like cooking the books to me. With the help of the U.S. government, no less.
We hang the petty thieves and appoint the great ones to public office.
-Aesop
Sources:
“Senate approves $700 billion financial rescue plan”
Greg Robb, Robert Schroeder
MarketWatch, October 2, 2008
“Senate Vote Gives Bailout Plan New Life”
Greg Hitt, Sarah Lueck
Wall Street Journal, October 2, 2008
“In Defense of Mark-to-Market Accounting”
Joanna Ossinger
FOX Business, October 1, 2008
October 2nd, 2008 at 10:04 am
Surprise, surprise - After emailing the (Washington State) senators and house rep urging them to vote “NO Bailout,” I actually received a response.
Senator Patty Murray replied with an explanation of why she voted FOR the Bailout. I will respond to her email and perhaps post the text here, although it would be quite a long read.
Although, admittedly, I vote along (Democrat) party lines, Senator Patty Murray will NEVER get another vote from me!
Please, readers, vote against anyone who supports the Bailout. It is just so wrong!
-Mammoth
October 2nd, 2008 at 10:41 pm
Thanks for the comment Mammoth. Feel free to post the reply from Senator Murray. It would be fun to read…
October 3rd, 2008 at 4:51 pm
Here is the text of an email I received from Washington Senator Patty Murray, in response to ne email which I sent urging her to vote against the Bailout.
(Editor, feel free to cut & paste this into a newer thread about the Bailout, which passed today.)
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Dear [Mammoth]:
Thank you for contacting me about H.R. 1424, the Emergency Economic Stabilization Act of 2008. I appreciate hearing from you about this important issue. The U.S. Senate voted to pass this bill by a margin of 74-25 on Wednesday, October 1, 2008. H.R. 1424 is now being considered by the U.S. House of Representatives.
As you know, in communities across America today, people are finding it increasingly difficult to fill up their tanks, pay for health care, and afford college tuition. Now, all Americans, even those who have paid their bills on time and have excellent credit, are at risk of being severely affected by the current credit freeze on Wall Street.
People want to know if this crisis is real. I have asked the same question of Treasury Secretary Paulson and Federal Reserve Chairman Bernanke. I have spoken with economic experts and Washington state business leaders. Companies like Weyerhaeuser and Microsoft have made it clear that something must be done. Power utilities such as Avista and the farm groups such as the Farm Bureau have told me that the government’s proposal to stabilize our financial markets is critically needed. Throughout various sectors of our economy, there is deep and genuine concern about market collapse and the potential impact on jobs, credit and pensions.
We have already experienced a slowdown in home sales and construction. Our home state bank, Washington Mutual, was unable to withstand the crisis and was acquired by another institution. Millions of Americans have tried to obtain a loan or refinance their mortgage, but have found it increasingly difficult to find a willing line of credit and in many cases have been unable to do so at all. If this crisis worsens, credit could freeze completely for consumers and companies who use credit to pay their employees or run their business operations. The bottom line is that without a steady stream of credit, American businesses will not be able to pay their workers and Americans will lose their jobs. Because of the impact the financial crisis could have on all Americans, from layoffs to access to credit, I supported the Emergency Economic Stabilization Act of 2008.
I understand the frustration of people who want those on Wall Street to be held accountable for their actions and shoulder the consequences of their own misdeeds. Americans are being confronted with two undesirable options. Either do nothing and let the crisis worsen, or take action and use taxpayer dollars to solve a problem they did not create. Americans are rightfully angry. However, those who created the problem will not be those who are hurt most if the government does not act. My top priority is to do what is best for the people of Washington State and the nation, and that is why I believe government action is urgently needed in this situation.
The original plan presented to Congress by President Bush and Secretary Paulson was a non-starter. Congress rightly refused to give Secretary Paulson a blank check to spend hundreds of billions of dollars without oversight. Congress refused to allow executives of failing companies to walk away with millions of dollars in severance packages while taxpayers paid for their mistakes. This legislation is a more prudent agreement to anchor taxpayer dollars to strict Congressional oversight and scrutiny by independent economic experts. We added assistance for responsible borrowers hit by the foreclosure crisis and plans to recoup money from any institutions which use government money and then see a profit. In the future, it is possible that most, if not all, of the taxpayer money invested will be returned once this crisis comes to a close.
Congress has to be vigilant in our oversight of how this law is implemented. I fought to ensure that every transaction that takes place regarding this funding will be on the Internet for all Americans to see. In addition, I strongly support the Federal Bureau of Investigation’s (FBI) and other state and federal agencies’ investigation into the wrongdoing related to the current crisis on Wall Street. If fraud and criminal activity are uncovered, the individuals responsible must be prosecuted to the fullest extent of the law.
Congress must take a hard look at the factors that brought us to this point and seriously address them. Congress will be holding ongoing hearings into the causes of this crisis and the regulation reform that is desperately needed and has been missing throughout the duration of the Bush Administration. The next administration has to work with Congress to pass and implement new regulatory measures so that taxpayers are never put in this position again.
It will take both investment and honesty to get our economy back on track. The next administration will inherit this economic crisis along with many other serious challenges. I hope our new President is honest with the American people about where we stand and what it will take to move America forward.
I believe that to move America forward, we need to invest in the infrastructure and education that create economic growth and jobs. We have to invest in our workforce and find a way to make health care affordable and accessible. We have to increase funding for research and development and reward innovation. We have to implement a smart, forward-looking energy policy that ends our addiction to foreign oil. It is time to put America’s families first and restore their faith that government works for, not against them.
I grew up with a country at my back - one that when my own father got sick and could no longer work was there with Pell Grants and student loans and even food stamps when my family needed them. I will always remember that. I supported this legislation because the American dream of owning a home or going to college is simply too important to take a back seat to politics or to be put at risk by the misdeeds of Wall Street.
As Congress continues to work to restore our economy, I will continue to stand up for our state and listen to your concerns. Thank you for contacting me, and please do not hesitate to contact me in the future.
I hope all is well in [the town where Mammoth lives]
October 5th, 2008 at 10:36 am
Thanks for posting this Mammoth. It was very interesting to read.
“…and that is why I believe government action is urgently needed in this situation.”
You know what really bugs me about this bailout? I haven’t heard any politician apologize for approving the use of taxpayer money to fund this “bailout.” Not one “I’m sorry we have to put your hard-earned money in harm’s way to do this.” Instead, its:
“…it is possible that most, if not all, of the taxpayer money invested will be returned once this crisis comes to a close.”
Isn’t it also possible that a good portion of this taxpayer money could be lost as well?
Someone once told me that apologizing is a sign of weakness. I don’t agree, besides the fact I don’t go around quoting John Wayne from the movie “She Wore A Yellow Ribbon.”
Not apologizing, when it’s called for, is a sign of arrogance, which is one reason we are in this mess to begin with…