Be Afraid… Part Two
I have time now for more details.
The bill passed this week called the “Emergency Economic Stabilization Act of 2008” is the worst piece of legislation maybe in the history of our country. It’s that because it gives incredible authority and close to a trillion bucks to the administration at a time when the administration has little reason to care at all what the public thinks. How stupid can Congress get?
The answer is, more stupid than stupid.
There have been many stories that do a better job than I can but here’s my spin nonetheless:
First, we were told the bill was passed to allow the Secretary of the Treasury to buy bad loans from companies so they would be able to make new and better loans, thus keeping the economy afloat. In fact, the bill DOES NOT stipulate the purchases have to be “bad.” The criteria is that the purchase “promotes financial market stability.” NOW, notice, it says “financial market,” not financial institutions. There is a difference.
Some caution that the bill is not exactly a bailout. They’re right. IF, and that’s a huge IF, the secretary does actually “buy bad debt” what he’s doing is not “baling out” lenders so much as he’s covering their ass, taking bad loans off their books so they won’t be responsible for them, and making it possible for the institutions to make a profit again. A BIG profit.
The bill is worse for what it does NOT include, too. It does NOT stipulate, for one, that lenders suddenly relieved of bad debts must begin lending again. In fact, what they are free to do, and probably will do, is continue keeping their purse strings drawn up tight. This means the whole “bailout” will have been for nothing.
Next, the bill doesn’t just give carte blanc to the administration so they can purchase loans, bad or otherwise, but it allows the Secretary to buy virtually any kind of financial instrument, including stocks and bonds, presumably.
The bill includes power to carry it out. This is not unusual except in what the task is and the lack of true oversight or limits placed on the administration. The bill says the secretary can “take such actions as necessary” to hire staff, enter contracts, choose agents to represent the government and issue regulations. The Secretary can do all of these as he sees fit.
The bill says that the Secretary should “take such steps as necessary to prevent unjust enrichment of financial institutions” who sell to the government. This means the Secretary isn’t supposed to pay more than the original value of an asset. There are, however, exceptions. It does not apply to “troubled assets acquired in a merger or acquisition” or assets purchased from a business in conservatorship, receivership, or bankruptcy. How can these limits be abused? Think about it.
Another ridiculous part of this bill is the “oversight” members of Congress said existed. Who watches? The secretary and four administration appointees, including the head of the Federal Reserve System and the SEC. Well, duh. One would think these people would have a vested interest in the process, the system, and insuring their pals are not left out in the cold. It’s like turning over security at a liquor store to a bunch of alcoholics.
To be fair there are auditing and reporting requirements but considering who does the reporting, when and to whom, any abuse of the program will be done and unfixable well before anyone with guts to speak up will find out about it.
A bit further down there’s a lame part about executive salaries. If I read it correctly it says companies can’t give incentives (bonuses) to executives for something they do that might “threaten the value of the financial institution” while the government has an interest in the company. I suppose that’s a good idea (ya think?) but how much juice can one squeeze from an orange before the peeling breaks? There’s a prohibition of “golden parachutes.” But what about silver or bronze parachutes? There is, of course, not a single clue about what might be “too much.” Maybe one corporate jet or limo rather than two?
There is an initial $250 billion immediately available for pay-out. That means that now that the bill has been signed the Secretary could blow a quarter of a trillion dollars next week if he can crank up the organization fast enough. The rest, up to $700 billion, can be requested by the president. Congress has 15 days to say no. The wording is such that it would be almost impossible for the house and senate to cut off the remainder of the funds.
The bill also raises the national debt limit from $10.5 to $ll.3 trillion. It’s a bad thing for citizens to jump into more debt we can cover but it’s apparently just fine for Uncle Sam to do it. Doesn’t going into federal debt deeper just to buy out private bad debt something like what people in a crunch do when they pay credit cards with credit cards they can’t pay? Sure seems stupid to me. But what do I know?
The last little tid-bit of the primary act (called Division A) raises the FDIC insurance coverage from $100k to $250k. It does the same for the corresponding credit union Federal insurance. Some quasi-small businesses might benefit from this change but the “little guy” will not be helped at all. The ones most likely to find this part of the act a nice touch are all those Bush-supporting upper-middle-class folk, doctors, lawyers, businessmen, whose personal accounts fall into the category.
Of course, the cash for payouts when a bank goes boink has to come from somewhere. The bill lifts borrowing limits of these insurance programs for the next year and some months. How nice. More federal debt to cover losses created by lousy banking practices. Oh, and rates for lending insurance can’t go up either. The world goes ’round and ’round.
Like has been said by many in the press and blogosphere, the rest of the bill, beginning with “Division B,” is mostly crap stuck in there to make assorted members of Congress happy. Those have been covered pretty well by several good articles. I read through them but they’re really non-issue junk. The “Big costs” attributed to them are costs spread out over several years or even a decade. The “fluff” is just common, ordinary fluff one finds in all kinds of bills.
A couple of things tucked away in the remainder of the bill, however, make the bailout part more effective and gives the Fed more ability to turn the screws. Consider Title IV under Division C, “Tax Extenders and Alternative Minimum Tax Relief.” Section 401 is called “Permanent authority for undercover operations [of the IRS]. Section 402 is “Permanent authority for disclosure of information [by the IRS].”
The first section continues IRS authority granted under Homeland Security to undertake clandestine activities. CNet reports the bill “would immunize the IRS from a passel of federal laws, including permitting IRS agents to run businesses for an extended sting operation, to open their own personal bank accounts with U.S. tax dollars, and so on.” Click here for article
The second section really gets down to the dirty nitty-gritty. It allows the IRS to share all information from tax returns with any Federal agency (which will also trickle the information down to local and state law enforcement) any time there is any kind of “suspected terrorist activity.” We all know already how broad “suspected terrorist activity” can be.
So, that’s what I discovered.
Where do I begin? I’m not an analyst and I haven’t stayed at a Holiday Inn Express in quite a while. (Considering this economy it will probably be a long time before I do.) I do have a degree in history with emphasis on American history and politics and with post-graduate classes in pre-law and legal writing. The bill is not in a foreign language to me though like most it’s written in such a manner that it can be interpreted in several different ways. The question is just what is the true intent held by the authors and how will it be interpreted by the Whitehouse?
We’re told the scenario will be thus: The Secretary of the Treasury will buy up bad debts from banks and loan companies, etc., with this bunch of borrowed cash. Relieved of their worries, those banks, loan companies, etc., will turn loose of more of their own cash to the good people and small businesses of America so people can go on borrowing for cars, houses, and small business activities. In other words, the government is going to make sure we can get ourselves deeper and deeper in a crack.
This really sounds absurd. Consider, what if my daughter loaned Susie, $50. Susie gave her a worthless watch for collateral. The friend didn’t pay her back. My daughter knew better than to make the loan since Susie never pays but she just couldn’t resist helping her friend. Now Susie has skipped and my daughter is out $50. She has another friend, Sallie, who wants to borrow. But she’s short of cash. So I say, “awe, daughter, you did a naughty thing loaning to Susie but that’s ok, here’s the $50. Loan to Sallie.” I take the worthless watch and sell it to a friend for $10. My daughter loans to Sallie. Now we have commerce! Is this about right?
The administration, then, is supposed to buy crap loans short on collateral and then …what? Dump the tenants and sell them for a loss? Let the borrower stay and not pay? Who is getting screwed in this deal? I think it might be us, as in (as Paul Harvey used to say) U.S..
What if it don’t quite work the way it’s supposed to? First, what if companies are perfectly happy selling off those bad loans and then keep their belt tight, still not making loans to anybody not at the top of the pyramid? Who will that help? Only the elite whose assets are secure. Low income families who have been struggling and small businesses that are dragging the bottom are totally unlikely to have a good enough rating. They STILL don’t get loans, they go broke, they go bankrupt. They loose all and worse, in the end it’s their benevolent government who will turn them out on their ear and take their less-than-top-value property while the sharks and thieves that helped them get in the mess stroll away counting their greenbacks. This is quite likely.
But worse, what if …just think…. what if, the administration has bigger fish to fry? The bill’s wording implies but does not demand the purchases be “troubled assets.” There are many things that could get in the way of “market stability.” Stretch that definition out a bit. How about a new idea that threatens one of the major corporations? Say, a cheap pill that can put some pharmaceutical company out of business. Won’t the markets go all nutty if a major pharmaceutical tanks? Of course. So, the fed buys the cheap pill company’s note. Gone the company and the cheap pill. Am I being crazy? Maybe.
OK, so look at things differently. That big old ugly fake bear called “terrorism” still looms bright on the horizon. Heck, everybody knows a “terrorist threat” will cause the markets to bounce around too much. So, what if John Q. Public is suspected of “terrorist activity?” (Of course, he REALLY is just an outspoken opponent of the President but what can we say?) Poor old John Q., framed by someone we just can’t identify, looks very suspicious. A few lies, a little manipulation, a bit of planted evidence and a string of fabrications and suddenly John Q. lands up near the top of Homeland Security’s shit list. Hmm….
Now that he’s up there, the good old IRS can and will hand over to the FBI and maybe to the Men in Black everything about John Q. Now the feds know more about him than his mother does. They have plenty enough to continue the setup but there’s more. John Q. lives in a mortgaged house. Make his job a little shaky (or not) and then, with this nice little act called “Emergency Economic Stabilization Act of 2008,” the Feds get John Q.’s house note. Then they get the house. Then they toss him out. Not far from there to indigent or desperate or whatever… all ending in John Q. Wearing one of those baggy orange jumpsuits for the rest of his life.
Yes, it’s a crazy idea. Or is it?
Of course the scenario above is just too bizarre, to ridiculous, too far fetched. Maybe. But even at a less conspiratorial level how easy would it be for an administration (like this one?) to use the bill to destroy any person, business or entity that the administration wants destroyed? It could be open season on political enemies.
Nothing good AT ALL will come from this bill. At BEST the economy will limp along as if the bill was not passed, rich will get richer, poor will get poorer, and some future administration will be screwed with all that debt. At worse we all see Big Brother use this bill as the last twist in the coffin of American freedom. Well, another “at worse” is the whole economy will crash along with or because of a government crash that sends us all back to the stone-age until a nice, kind foreign country invades and flies new flags over our beloved schools and post offices.
As I have reminded my wife lately, I started saying many years ago some day the shit hitting the fan is going to break off a few blades. This bill could be the splat that does the trick. No matter what, we’re going to get something up our rear that will not be pleasant.
Last of all (and most extremely frustrating!) is the fact that we’re in this hellacious damnable mess because of so many lethargic, self-serving, dimwitted, brainless American citizens who wave the flag and sing the anthem but don’t know crap about how this country works, how it should work, or what kind of people we need to make it work. They’re more worried about their big-screens and soft couches and Big Mac’s and nice houses and you-name-it even still to recognize the sky isn’t falling, it is already down around their ears.
This “credit crunch” can be blamed…. oops, not on them, though they hold all those credit notes and over-due mortgages. The “crisis” exists because of the shameless, pathetic, greedy corporations who have treated American citizens as their own private bank. Those big corporations manipulate prices, feed crap to the public through advertisements everywhere or through media news outlets, and then have their jollies risking it all trying to get even more. In the back rooms the biggest of the big guys have been planning and plotting, keeping crises and worries and fears coming right on schedule. Those big guys have had George, Cheney and company in their pocket for the duration. Meanwhile good old Stupid John Q. Public eats their poop up like candy.
Sad. And scary.
Now, let me end by asking, WHY is oil not hitting the roof in this crisis? Why are gas prices going DOWN? WHY did the stock market go so crazy this week when the bill failed and NOT respond upward when the bill went through? Why is it that prices go up just enough to spook us then drop a little, then up a little more, then drop? Why did Obama and McCan’t BOTH get so aroused by this bill? What difference does all this make. And the big one: are we already totally and entirely screwed?
Questions, questions, so many questions.
Who has answers?
Maybe I don’t want to know.
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