Just say no

September 21st, 2008 – 1:11 pm
Tagged as: Economics,Politics

I’ll echo what was said over at Eschaton:

I think everyone who reads this blog who’s American, first thing on Monday morning, needs to call their Representatives and Senators and say: No. Blank. Checks. For. Crooks.

The current bailout plan, as presented, is a farce. Does something need to be done to keep the current financial system from collapsing under the weight of the failed gambles of the ridiculously greedy financial titans? Probably, yes. You can read more about how we got to this point here (the key phrase is “Gramm-Leach-Bliley”).

That doesn’t mean that the Bush plan is the right plan. In fact, if the events of the last 7+ years have taught us anything, it’s that any plan invented by the Bush administration is almost certainly the wrong plan. As the details of the bailout are released, it’s becoming increasingly obvious that the current plan is exceedingly flawed. As Paul Krugman says:

I hate to say this, but looking at the plan as leaked, I have to say no deal. Not unless Treasury explains, very clearly, why this is supposed to work, other than through having taxpayers pay premium prices for lousy assets.

Calculated Risk notes:

We definitely do not want the Treasury to buy RMBS and CDOs at anywhere near the value on the bank’s books. Buying at those prices would help keep the banks lending, but it would also severely impact the taxpayers, it would be a transfer of wealth from the many to the few, and it would also encourage future excessive risk taking.

The bailout plan as currently written would apparently have the government taking on the financial institution’s bad bets (what Atrios refers to as “The Big Shitpile”) at the ridiculously inflated values currently on their spreadsheets, which is nowhere near any sort of fair market value. And it’s now looking like the Treasury would be covering bad bets made up through this past Wednesday (long after it was apparent that the house of cards was collapsing) and possibly those made by foreign banks and even foreign governments.

Glenn sums it all up pretty well (as he so often does):

I don’t pretend to know anywhere near enough — in terms of either raw information or expertise — in order to opine on the necessity or lack thereof of The Latest Plan in terms of whether the alternatives are worse. But what I do know is that an injustice so grave and extreme that it defies words is taking place; that the greatest beneficiaries are those who are most culpable; and that the same hopelessly broken and deeply rotted institutions and elite class that gave rise to all of this (and so much more) are the very ones that are — yet again — being blindly entrusted to solve this.

He also explains why, once again, the Democratic leadership in Congress is more than likely to prove that they are either willfully complicit in the worst of the Bush administration’s crimes or are simply a bunch of little sheep that will barely even bleat when the Republicans push them around. I recommend that you read the entire post for Glenn’s insight into the whole mess.

William Greider adds this:

Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting the Wall Street Journal solution to the crisis: dump it all on the taxpayers. That is the meaning of the massive bailout Treasury Secretary Henry Paulson has shopped around Congress. It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses–many hundreds of billions, maybe much more. What’s not to like if you are a financial titan threatened with extinction?

If Wall Street gets away with this, it will represent an historic swindle of the American public–all sugar for the villains, lasting pain and damage for the victims. My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called “responsible opinion.” If this deal succeeds, I predict it will become a transforming event in American politics–exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.

As much as I would love to see a major transformation in American politics, bailing out the rich at the expense of everyone else seems like a bad way to get there, so any help the Democrats can get at maybe stiffening their spines is a welcome thing.

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