Here is a link to the legislation being reviewed in Congress for a $700 Billion bailout in the current credit crisis: (Wall Street Journal: Financial Bailout Package.)
I first want to draw your attention to Section 8 which 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."
So the Secretary of the Treasury is not accountable either to the courts or to any other administrative agency in the handling of $700 Billion. Am I the only one that has a problem with this? So, what limits do we place on him in the legislation, then? Clearly, Congress must have some protection built in for the taxpayer, right?
Well, then, let's take a look at Section 7: "For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure."
Wait a second, what was that last sentence again? "Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure."
Am I just too cynical in my old age, or does that pretty much grant the Secretary Carte Blanche in using the proceeds from the sale of any of these securities for such administrative expenses as oh, say, salaries or any other perk you can imagine without court or other agency review? I'd say the Treasury Department just struck the mother lode on this one.
For the record, I totally oppose any bailout package that does not contain the following:
- Clear, well-defined oversight by one or more agencies external to the Treasury Department.
- Clear, well-defined criteria regarding the situations in which any federal funds may be used.
- Provisions stating that the sales of any securities purchased by these funds must be used to off-set the establishment of the fund. In other words, the funds must be used to pay back the tax payer.
- A clear set of restrictions placed on the Banking, Brokerage, and Insurance industries designed to prevent a future financial melt-down of this magnitude.
- Prohibitions on the combined ownership of banks, insurance companies, and brokerages by the same corporations or holding companies. Each industry must be insulated from the other.
- Federal requirements regarding the ability of a borrower to pay back a loan. Clearly, leaving it up to the banks as we've been doing for just over a decade is not working. The elimination of federal requirements resulted in a surge in the price of housing as well as a surge in foreclosures and other credit defaults. The requirements must be tightened again, they must be imposed at the federal level, and they must be strict.
- Restrictions against interstate ownership of banks and holding companies. We must return to the pre-1990s restrictions against banks operating across state or regional lines. This means that a break-up of the largest banks in the nation is an absolute requirement. It was the elimination of this restriction that allowed this current crisis to be global in nature as opposed to being restricted to small pockets of the nation. Just as the government required the break-up of Standard Oil and AT&T, so too must we require the breakup of the large interstate financial institutions.
"It's time we stop, hey what's that sound, everybody look what's goin down."