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."
4 comments :
As always, meticulously researched and dead-on accurate. When I as the freakshow liberal and you as the true Republican, as opposed to the transmogrified version of patriot that Bush claims to be, agree so much and so frequently, it's all the more stunning that the political candidates don't represent either one of us and it's all the more clear that Bush doesn't represent anyone.
You hit this one precisely. I see outrage across the country over it. Excellent job!
It turns out there's even more to watch as this story develops. The ill-advised legislation clearly states in Section 2, "The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States."
The key phrase there is "having its headquarters in the United States." Apparently, Secretary Paulson doesn't see it that way. On the ABC show "This Week with George Stephanopolous," Paulson was asked if foreign banks would benefit as well. His response is frightening:
"Yes, and they should. Because ... if a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution."
Somehow, I don't think bailing out foreign institutions as well as American institutions will sit well with either side of the aisle.
One other statistic of interest is that this bailout - $700 Billion - is just over 7% of the current national debt! It is inconceivable that attempting to borrow this amount, probably in the form of Treasury Bills, would occur without having some profound negative impact to the economy. At the very least the value of the dollar will be impacted, resulting in higher energy prices and higher inflation. We're going to be paying this one off for over a generation.
Assuming we permit it and I mean that in the classic sense of we, the people. I don't see any partisan issue in restoration of liberty and certainly not in any conversation we've had on the subject. It truly gives me hope as I see very little of it in this freakshow of a political contest but perhaps some wisdom will emerge in the debates. We shall see.
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