This last minute power play (before the elections eject the President, Paulson and other political appointees from their jobs) is highly offensive to me.
Yes, some major overhaul needs to take place to unclog the lending pipelines at banking and lending institutions. But, not this proposal.
What would it do?
It would give the Secretary of the Treasury, an appointed, not elected official, absolute control of the program and the money, with no questions asked. The wording is "...would make the Treasury secretary's decisions "non-reviewable" — including by "any court of law or any administrative agency." That is, if not unconstitutional (and that's definitely up for debate) absolutely outrageous.
The free capitalist market is based on risk and reward. If you invest in a venture, you reap rewards if it works, and pay the price if it doesn't. That's why there are business schools and advanced degrees given out to people who study business and risk and reward. It takes a lot of knowledge, experience and nerve...and should take ethics and fudiciary responsibility seriously to invest or run a business.
Little people, like me, trust in these people who run banks, investment funds, mutual funds and lend money, to use that knowledge and experience to run safe and profitable entities. But, I, like many of you have to sit here and watch my IRA's and 401K's melt away because of their actions and misdeeds.
As noted in the article below there are other ways to unclog the lending institutions' pipelines so money may flow freely; but if what Paulson and Berneke are proposing is the best way, then why does it start with $700 Billion? (It will turn out to be much more, I believe). What's wrong with starting with $50 or $100 Billion, with establishing the proper and correct procedures, establish meaningful oversight and reporting procedures and audits?
The Secretary of the Treasury can't possibly spend all that money before the elections; they don't know how many institutions would participate, how quickly it would work, or if the plan would work as envisioned.
There's already one holdover issue of the greed and bad judgment that started all this - executive pay. But, Paulson (former executive at Goldman-Sachs) resists this.
He thinks cutting executive pay would discourage companies from participating, and, oh, it would take time to review executive compensation packages. I wonder, just how fast does he think he can give away the money from Congress (read taxpayers)? And why do executives that have failed, failed like no executives before them, deserve huge salaries that range into millions of dollars a year, and golden parachutes?
"Paulson and Bernanke have warned lawmakers about the dire consequences of not acting — but these economic Doomsday scenarios have not been spelled out to the public." And, to me, the fearmongering, the bums rush remind me too much of how the Iraq War got funded
I do understand their argument about the falling dollar, and how it must be stablized. For instance, right now all oil is traded in US dollars. If we don't stablize the dollar, if we don't stop it's fall, there will be worldwide calls to trade/buy oil in Euros. That would be a calamity for the United States, with far reaching changes in our way of life.
And we must stop the volitility of the market; we must pay off our debts; we have been a superpower because we have always been a save haven for investors, and we have an outstandingly stable government. But now our national debt exceeds anything we ever dreamed of, and over $500 Billion in Treasury Bonds are owned by China and Japan, and over $60 Billion by Russia. We certainly don't need them selling off these huge investments or having this kind of economic power over us.
So, yes, we must do something quickly about the banks and mortgages, but to me this is not the answer - to consolidate all this power and money into the hands of an appointed Secretary of the Treasury, who wants no controls, whatsoever, from Congressional oversight to the Courts, yet still wants to protect the executives who blatently disregarded the basics of lending --security, assets, credit, and some of the borrower's money in the game.
Have a great day! Friday will soon be here.
Gloria
Why Congress Objects To The Bailout Plan
by Maria Godoy NPR, September 23, 2008 ·
The outrage was palpable Tuesday as the Senate Banking Committee grilled Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke on the details of their $700 billion plan to bail out Wall Street with taxpayer funds. But lawmakers are hardly the only ones questioning whether the plan will work. Here's a look at some of the objections being raised on and off Capitol Hill.
It's A Huge Amount Of Power To Invest In The Treasury:
The Bush administration's plan would grant the Treasury secretary nearly absolute control of the $700 billion authorized by the bailout measure. The language in the measure sent to Congress would make the Treasury secretary's decisions "non-reviewable" — including by "any court of law or any administrative agency." That would give the Treasury secretary powers that are not only extraordinary but, some would say, also unconstitutional because of the lack of accountability.
Jon Macey, a professor and deputy dean of Yale Law School, says the bill contains the largest transfer of power from Congress to the administration that he has ever seen. Macey says Congress is handing over more power than it did in granting the executive branch leeway in the Patriot Act, and more powers than when authorizing combat through the war powers clause. He says the move amounts to a sidelining of Congress.
Senate Banking Committee Chairman Christopher Dodd, a Democrat from Connecticut, on Tuesday called the language in the plan "so troubling" and said it "cannot last" as part of the legislation.
It Represents A Fundamental Shift In The Way The U.S. Economy Works:
The Bush administration's plan to bail out the nation's financial institutions represents an unprecedented intervention in free markets. If the Wall Street bailout is adopted, Republican Sen. Jim Bunning of Kentucky said last week, "the free market for all intents and purposes is dead in America."
A fundamental principle of free-market capitalism is that investors take on big risks to reap big rewards — but they also assume any losses that occur. The government's plan would radically alter that model, leaving profits private while making losses public.
It's Not The Only Viable Option For Fixing This Mess:
In a nutshell, the Bush administration's plan would authorize up to $700 billion to let Treasury buy up bad mortgages from financial institutions. With these toxic assets off the books for firms, lenders would once again be willing to lend and the money would start flowing freely through the markets, the theory goes. Objections to the plan have come from both sides of the aisle — and from academics and economists who say it amounts to a huge handout to Wall Street without necessarily fixing the problem.
Many economists have proposed alternatives and alterations to the administration's proposal, some of which have been taken up by lawmakers. Details of the plan are still being negotiated, but here are some of the key points of contention:
Equity stakes: Rather than simply buying up bad loans and letting taxpayers assume all the risk, why not take shares in the financial firms in exchange, so that taxpayers could also participate in any potential profits? Banking Committee Chairman Dodd has proposed "contingency shares" that would only be issued if losses are realized on the assets bought up from a firm. In Tuesday's hearing, Paulson rejected the idea of equity shares, saying it would make the bailout program "ineffective" — though he didn't offer details on why that would be the case.
Valuing assets: There are already buyers for these toxic assets out there — they just aren't willing to buy them at prices that financial institutions find palatable. (In some cases, selling at those prices would make firms insolvent.) Many critics argue that the fundamental problem is that the financial markets lack capital, so the only way the government's plan will work is if the Treasury overpays for the assets; otherwise, why not just let investors buy them up?
So, how to price these assets? Technically, assets are only worth what a buyer is willing to pay for them. If no one wants to buy mortgage-backed securities, then right now they are worthless — but that doesn't mean they will always be worthless. Paulson has suggested that one way to set prices would be through what's known as a reverse auction, the goal of which is to drive prices down, rather than up.
But some economists note that reverse auctions work best when the assets being auctioned off are essentially identical. That's not the case with mortgage-backed securities: Some of them may have plenty of healthy, payment-producing mortgages in them, while others may be full of defaulted loans. If the government simply buys the securities with the lowest price, it may end up with $700 billion worth of the worst loans, critics say.
Executive-pay limits: Some lawmakers want any company that participates in the bailout to agree to slash the pay of its executives. After all, they say, those who created the mortgage mess shouldn't be allowed to profit from the bailout.
But Paulson has resisted this idea. He argues that pay cuts would discourage firms from using the program and would force thousands of firms to review their executive compensation before participating, a time-consuming process.
Lawmakers Are Being Urged To Act While Staring At The Barrel Of A Gun:
Congress is being asked to enact a fundamental restructuring of the U.S. economy — in one week. That's not a lot of time for lawmakers to weigh their options and the repercussions of their actions. In private meetings on the Hill, Paulson and Bernanke have warned lawmakers about the dire consequences of not acting — but these economic Doomsday scenarios have not been spelled out to the public.
Democratic Sen. Jon Tester of Montana told Paulson as much on Tuesday: "I fully feel the urgency … But the truth is that we have to be given the time to do this right, or it's not going to work and we'll be back here next year or in two years asking for another $700 billion or more."
With additional reporting by Laura Conaway and Adam Davidson.
Related Story: Bernanke, Paulson Face Skeptics On the Hill Despite Dire Warnings
Don't forget to check out the other new stories, listed at the top of the page under New Postings. Just scroll up and click.
Posts
0 Comments Welcomed:
Post a Comment