Paulson has tweaked the language of the bailout bill, with the Freudian-slip acronym TARP (“Troubled Asset Relief Program”) to make some additions that in theory make it more sweeping but in practice, with no review or oversight, the Treasury can do what it bloody pleases; the rest of the language of the bill, besides the maximum outstanding at any one time, is window-dressing.
The changes (hat tip jck):
Changes assets eligible for purchase from ” mortgage-related assets” to “Troubled Assets”. This makes clear the willingness to buy instruments such as collateralized debt obligations, which may not contain only mortgages in their underlying assets, and LBO related paper, such as collatealized loan obligations, and any other dreck the Treasury might see fit to acquire.
Changes the eligible sellers from “any financial institution having its headquarters in the United States” to “any Financial Institution” which is defined as
any institution including, but not limited to, banks, thrifts, credit unions, broker-dealers, and insurance companies, having significant operations in the United States; and, upon the Secretary’s determination in consultation with the Chairman of the Board of Governors of the Federal Reserve, any other institution he determines necessary to promote financial market stability.
This change means that Paulson can assist the currently demonized hedge funds and foreign institutions. Note Nouriel Roubini, whose has one of the best records in calling this credit crisis, predicts in today’s Financial Times that the next eruption will be a run on hedge funds.
Reuters described Paulson’s defense of assisting foreign firms:
U.S. Treasury Secretary Henry Paulson said Sunday that foreign banks will be able to unload bad financial assets under a $700 billion U.S. proposal aimed at restoring order during a devastating financial crisis.
“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,” Paulson said on ABC television’s “This Week with George Stephanopolous.”
Since a good deal of the most toxic 2006 and 2007 vintage mortgage paper went to European financial institutions, and we have leaned on the ECB to support our liquidity operations, we aren’t in a strong position to limit the clean-up to domestic institutions.
The earlier post on the bailout received comments from plenty of folks who had, or intended to, write their Congressmen.
For those opposed to the bill (I presume just about all of you) Michael Shedlock advocated focusing on senators and urging them to filibuster, since it take 60 votes to halt one. He provides a useful list of suggestions on how to register your objections. If you are unhappy, first and foremost do something concrete rather than just vent here,
Nevertheless, I thought having readers post their missives might prove useful, as a resource for others who might want to voice their opposition, and as a record of sort of the level and nature of the oppostion to this proposal.
Several political blogs have taken note that virtually no commentator in the econoblogsphere supports the Paulson plan. See:
Many economists skeptical of bailout Avi Zenilman, Politico
A pig without lipstick Steve Benan, Political Animal
Update 11:15 PM: My assumption above, that the officialdom leaned on the Treasury to get foreign banks included in the TARP, appears to have been incorrect. The New York Times reports that they lobbied on their own behalf:
Foreign banks, which were initially excluded from the plan, lobbied successfully over the weekend to be able to sell the toxic American mortgage debt owned by their American units to the Treasury, getting the same treatment as United States banks…..
As the day wore on, some raised their concerns with the Treasury Department, arguing that foreign institutions were both big employers and major players in the American capital markets. By Saturday evening, the language had been changed to allow any financial institution “having significant operations” in the United States.
However, the piece does mention that it might behoove us to be nice to foreigners if we want them to help us.
I found this section in the same article simple astonishing:
“I’m skeptical of the bailout, the whole bill is only a couple of pages long,” said Representative Scott Garrett, Republican of New Jersey, who is a member of the House Financial Services Committee. As for the participation of foreign banks, Mr. Garrett said: “I have a concern with it, they probably should be treated differently, but Congress is really not getting any say.”
Congress is not getting any say? Congress doesn’t have to pass it. I do not understand why the legislative branch has become so spineless.
Another New York Times article described how the prospect of Federal handouts has everyone angling to feed at the trough:
Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.
Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.
At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees….
The scope of the bailout grew over the weekend. As recently as Saturday morning, the Bush administration’s proposal called for Treasury to buy residential or commercial mortgages and related securities. By that evening, the proposal was broadened to give Treasury discretion to buy “any other financial instrument.”
The lobbying became particularly intense because Congress plans to approve a package within just two weeks, without the traditional hearings and committee process.
“Of course there will be fierce lobbying,” said Bert Ely, a financial services industry consultant in Alexandria, Va. “The real question is, Who wouldn’t want to be included in the package?”
Mr. Ely said the open-ended nature of the Treasury’s plan could be interpreted to mean that the government was open to acquiring “any asset, anywhere in the world.”….
Each part of the financial industry is pursuing its own interests…
There were signs of the industry’s fingerprints on drafts of the legislation released over the weekend. While an earlier draft said that only firms with headquarters in the United States could sell assets to the government under the program, a later version said sellers could include any financial institution. Securities firms were initially excluded but were included in a version released Sunday afternoon.
Members of the American Bankers Association held internal meetings to plan their strategy and the group planned to send teams of lobbyists to Capitol Hill.
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As of tonight, the Investment Banks are no more. The Federal Reserve has just baptized MS and GS as bank holding companies, joining the company of the other saved financial institutions masquerading as banks.
Terminal is true. Goldman and Morgan have been recast.
Indeed, I wrote my House Rep and both my senators about the Paulsen bailout plan.
I am pretty upset by the whole thing, so I hope they hear my voice.
I’m in Michigan and our economy was already in trouble, so hopefully my points in my missive will drive the point home.
I did contact a congressman, 2 senators and a presendential candidate. I am looking for where I can go protest. I was too stoned in the 70’s to protest, and too rich in the mean time. But I will go to the streets with a “No trillions for wall street” sign. I am *not* against a bail-out. But we are rewarding the bad guys.
Here is what I wrote to my members of Congress today:
——
I am deeply concerned about the massive treasury funded bailout plan being drafted. I believe a plan in the very near future is necessary, but that it is vital to get it right, and evidence so far indicates it may be severely flawed. According to Dean Baker:
“The bailout proposal that Paulson has put forward is a blank check. It would outrageous if Congress approved it in its current form. This is the domestic equivalent of the Iraq war authorization.”
This should not be forced through in a climate of fear, [A] with unlimited cost (the $700 billion only represents purchases at a given time, not a ceiling on losses), [B] awarding unlimited power with no accountability, and [C] entirely beyond the rule of law! (The legal protections must be MUCH narrower).
From the draft: “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.”
Other key considerations:
1. Prevent gaming of the auction mechanism (reverse auction mechanism gives an incentive to lie about asset quality)
2. Don’t pretend that asset prices may already be fair value and suffer from only lack of liquidity — there is already widespread insolvency (if assets are truly marked to market) and house prices have to fall much further (most serious projections are around 35-40% total) to reach fair value relative to rents and other historical measures. Losses on securities WILL increase dramatically, and the taxpayer will have to bear some portion of them, but let’s not pretend the securities will be profitable to taxpayers in the foreseeable future.
3. The government must not overpay for assets by more than is necessary, and taxpayers MUST have a potential long term upside (equity stakes, etc).
Here are some valuable discussions of current flaws and suggestions for changes (there are many others):
http://alephblog.com/2008/09/20/oppose-the-treasurys-bailout-plan/
http://tpmcafe.talkingpointsmemo.com/2008/09/20/progressive_conditions_for_a_b/
http://krugman.blogs.nytimes.com/2008/09/21/thinking-the-bailout-through/
http://www.nakedcapitalism.com/2008/09/why-you-should-hate-treasury-bailout.html
Another major risk of getting this wrong is foreign capital flight.
Thanks for your consideration of these comments.
If you oppose this bill (and you should) head over to FedUpUsa.Org to join the opposition.
We are running out of time!!!
This is what I sent to my Senators and Congresswoman:
Dear Senator xxxx,
I just wanted to let you know that as a taxpayer and citizen of the United States, I am against the U.S. Treasury Proposal to Buy Mortgage-Related Assets (“Proposal”). The “crisis” that we now face has been brewing for over a year. Enacting knee-jerk legislation during the waning days of the current Administration is a completely irresponsible response to it. The financial institutions that created these toxic assets must not profit from a tax-payer bailout. The Proposal seeks to increase the statutory debt limit of the United States by another $700,000,000,000. This is an unbelievable sum of money which is coming only weeks after Congress raised the limit by $800,000,000,000 for the bailout of Fannie Mae and Freddie Mac. The government is out of control. What happened to the fiscally responsible Republican party?
The Proposal authorizes the Secretary of the Treasury “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.” There are no assurances in the Proposal that the prices to be paid for these assets are either fair to the taxpayer or market-based. Most likely, we will overpay. After all, if these assets had any value, it would not be necessary for the government to buy them.
The Proposal states that “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.” This is completely unacceptable to anyone who believes that America is a country where the rule of law still prevails. In theory, even the actions of the President are subject to review by a court of law. Please do not allow this to happen.
In summary, the banks that have brought financial Armageddon to our doorstep should not profit from their poor decisions. If this Proposal is passed into law, they will loot the treasury of the United States. Please do not pass bad legislation just because the Congress wants to be perceived as trying to fix the problem. Take enough time to properly evaluate all of the consequences, both intended and unintended, of this Proposal.
Thank you for allowing me the opportunity to comment.
Sincerely,
xxxx
What would make an impact are demonstrations that are large enough to be broadcast on TV.
The Internet is nothing more than an outlet for impotent rage. Laughing all the way to the poor house and the velvety embrace of some sort of light dictatorship.
Ralph
if they do this then at a minimum they must keep paulson on a leash with an external independant oversight committe of financial experts who must autorize everything. I would vote for volker and roubini and maybe even (gulp) greenspan
i already wrote my congressman (several times) and will follow up with a priority postal mail in the morning. paulson and berneke are over their heads.
I would rather weather a depression than have congress sign dictatorial powers into law.
i think congress breaks on friday..this is going to be a memorable week :(
the sick irony of this is that everyone is getting a bailout except the homeowners, which is where this started.
Matthew Dubuque
Yves, I hate to break it to you, but Congress has been spineless for decades.
Roubini predicts in today’s FT (the world’s finest paper by far) that A RUN ON HEDGE FUNDS is the next phase of the tsunami of deflationary waves:
http://tinyurl.com/4erfe7
Will we now be asked to shed a tear for the obese billionaires losing it all in hedge funds as well?
Do we need to bail out these money launderers also, who operated outside the bounds of the law and of fiscal sanity with their asinine hyperleveraging?
Matthew Dubuque
Er, wait a minute. Letters no more than 50 words. Use the telephone. Email repeatedly. Go to Washington and demand to see you Senators.
I approve of TARP because I need a little more time to prepare for the end-run whereby my ATM ceases dispensing.
[Matt: You read like a government shrill. Why don’t you go work on a banking system that will last more than eighty years.]
Pelosi asked for oversight and other corrections.
Big love to Anon and Gary for the text – I’ll use it.
Keep it going, everyone!
Please stop referring to a $700 billion bailout. The $700B refers to the maximum that can be held AT ANY ONE TIME. The account will be continually buy and selling and the total bailout, with it’s ever expanding list of qualifying financial entities, is almost certain to be somewhere north of 2 trillion dollars. How about referring to it as the 700 billion to 3 trillion dollar bailout?
Please stop referring to a $700 billion bailout. The $700B refers to the maximum that can be held AT ANY ONE TIME. The account will be continually buy and selling and the total bailout, with it’s ever expanding list of qualifying financial entities, is almost certain to be somewhere north of 2 trillion dollars. How about referring to it as the 700 billion to 3 trillion dollar bailout?
Re Feed at the Trough: I don’t mean to be an ass, and I can understand why people sometimes take me to be one, but THIS IS EXACTLY what I meant when I commented the other day regarding the “Swedish” solution to a finance crises: We are too politically immature. Investment advisors overseeing the assets making hundreds of millions? And people who go to work still losing their homes? What should such a be saved from itself?
ROLL CALL VOTE
ROLL CALL VOTE
ROLL CALL VOTE
I’ve heard they don’t read these emails and letters, they just put them in a stack and measure the height of it or something, so don’t spend a lot of time constructing it, just make sure to sound pissed off.
What about a mortgage boycott where people don’t pay their mortgage, or only pay half of it? Probably too little time to get something like that started.
I take a jaundiced view of electoral politics and elected officials generally. I have not, in fact, written to any elected official since my time as an activist more than twenty years ago. But when ya gotta, ya gotta. I include here the full text of the missal which I have sent to both my senators, and to my representative, the outstanding Jim McDermott. Written letters will follow to them all, and to others in critical committee positions. I offer it as boilerplate, in concept, in part, or entire, to any who find it useful:
Madame Senator:
I implore you NOT to pass the measure before you proposing sweeping financial emergency powers and unlimited funding authority for Treasury Secretary Henry Paulson. This proposal in every aspect flies in the face of the fiduciary responsibilities of our public authorities and government, and will fail in its stated purposes.
• The complete lack of oversight and blanket legal immunity solicited in this proposal abandons any governance over how this vast authority and funding is expended. In our political tradition this is odious, and much harm will result, human frailty being what it is.
• This program is clearly intended to purchase securities from financial institutions, many of them active speculators, at present nominal prices which are above the underlying values of those instruments, and it appears far over what those participants will actually pay for them themselves. With prices of underlying assets, principally home mortgages in the United States, still dropping, this guarantees massive financial losses for the public acquiring authorities. It is a direct gift of money to failed speculators without any legal check.
• These purchases will not serve to halt the decline in mortgage prices. Those prices are inflated, and their price declines will not flatten until they approach the levels which the income of buyers can support, and which private investment capital, of which be it said there are hundreds of billions of dollars aloof from the markets, deems profitable.
• This action will not in many cases recapitalize banking institutions presently holding such declining securities, as the numerous losses of these firms on other speculative investments such as complex derivatives, securitized junk bond debt, and considerable sector overcapacity in a declining economic cycle, ensure that many will yet cease business or fail outright.
I well understand that the banking system in the United States is severely damaged. Its rescue will involve substantial public investment into tens of billions of dollars, and more; this is unavoidable, and I do not call on you to prohibit all public funding. Such intervention must be authorized in a form which has the best chance of success, the best recovery for the public, and the least room for misappropriation, malinvestment, or outright graft. Time is of the essence, but more functional programs will better serve.
• The Congress must promptly enact a public authority vested with emergency powers to wholly seize banks or bank-like financial institutions when near failure but not formally insolvent when these are of a size as to pose systemic risks to the banking system or the country. These can be supported with combinations of public guarantees and funding in return for equity or temporary public ownership, with failed management replaced, and other necessary actions taken.
• The Congress must authorize such a public conservator to strip out mortgage securities from failed institutions in public control—but only those—into a public trust with powers to renegotiate the terms of the underlying contracts, and the mandate to hold such securities for a period of years until property markets settle on appropriate price levels, so as to avoid further price depressing sales.
• The Congress must promptly authorize such an agency to lend to solvent banks or bank-like agencies under market pressure in return for equity warrants in those institutions at prices and terms determined by the public authority. When this crisis is passed, these public investments can be resold to private investors with recovery for the public. As you are aware, the Federal Reserve has no such authority, nor should it be given such.
• The Congress must consider authorizing public investment authorities capitalized in the $100 billion range to lend directly to the public and to institutions in instances, such as the present, of unwillingness by participants in the banking system to lend to each other or conduct normal business. This might involve direct loans to sound small businesses to maintain operations where they are presently damaged by market credit rationing. This might involve directly underwriting and guaranteeing municipal and other public authority bond offerings since those markets remain essential but impaired. When and as the present financial crisis eases, these unimpaired bridge banking services can be sold to private investors, or better retained as public credit authorities as Congress deems wise.
• The Congress must mandate that the administrators of these various emergency and service funding authorities be separate from both the Treasury and the Federal Reserve, that they personally have experience as senior public regulators or otherwise have served in public financial system administrative capacities, that they have stringent accounting and reporting requirements back to the Congress, and optimally that they have a record of skepticism toward the innovations/shenanigans of the investment banking industry which have caused our banking system so much harm at present.
• The Congress must authorize further funding for the Federal Deposit Insurance Corporation, both for public and market confidence in present conditions and because probable losses for the FDIC can be expected to exceed their present reserves and funding authorizations.
• The Congress must strongly consider enacting a Federal statute for a streamlined mortgage resolution process whereby distressed mortgage buyers and their note holders can, by mutual declaration before a judge with appropriate jurisdiction, resolve a pre-packaged renegotiation of their contract terms. This would preserve the underlying compact under contract law while speeding up the otherwise tortuous and fragmentary settlements. This would serve the best interests of all parties.
We have needed these latter measures for a year and more. It would be unconscionable for Congress to adjourn into the Election season leaving these undone. But far, far worse would it be to give sweeping authorities to a compromised Treasury Secretary in the final hours of a failed Administration to pay above market prices, and that with neither penalties nor firmer regulation in return, to legions of failed speculators in the guise of easing a manifest public financial emergency. Such reckless actions and any who might enact them will surely be repudiated subsequently, but the damage to Federal finance, our currency, and the American public will already have been done with no commensurate gains to the stability of the banking or the financial system.
Please recall your oath of office in this, and act for the public wisely and with determination.
Sincerely,
Dear Mr.,
These past few months, Wall Street has been shaken to its very core. Now, Henry Paulson and the treasury want the ability to spend $700,000,000,000 of taxpayer money to bailout the financial institutions. That is over $2,300 for every man, woman, and child of the United States.
I strongly urge you to vote against this bill and, if necessary, filibuster any attempt to pass such a measure. You cannot trust anything that Henry Paulson or Ben Bernake has said. A few months ago, they both stated that the financial crisis was "contained" and would not spread to other areas of the economy. Yet, since then, we've seen the fall of AIG, Lehman Brothers, Bear Sterns, Merrill Lynch, Fannie Mae, and Freddie Mac.
Now, Paulson wants a literal $700,000,000,000 blank check (see section 8): "Sec. 8. Review.
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."
No one can entrust this type of power to one man, especially not one that is a former Wall Street insider who has been so disastrously and dangerously wrong on so many issues. They would have you believe that any Wall Street firm that could fail is a danger to the entire economy. Yet, even as Lehman Brothers went bankrupt and I was still able to trade stocks and take out my money from the bank. Those Wall Street firms must sleep in the bed they have made. New firms will take their place and business will go on as usual. For the largest firms that have geared up to pose a systemic risk to the entire system, a last measure RTC must be set up. I'm going to quote "http://alephblog.com/2008/09/20/oppose-the-treasurys-bailout-plan/" because it so adequately states what is wrong with the current proposal:
"The current proposal is proactive. Proactive solutions are expensive, and do not fairly distribute the losses to those who caused them through their shoddy lending practices. The owners of bad assets should risk their equity before taxpayers put up one red cent. The government should not try to prevent financial failure, but prevent financial failure from spreading as a contagion. Common and preferred stockholders of failed institutions should be wiped out. Subordinated debtholders should take a haircut. But depositors and senior debtholders should be guaranteed, in order to protect other financial institutions that invest in those instruments, thus avoiding contagion effects.
Second, the proposed bill is vague, and offers the Treasury a “blank check” to do pretty much what it wants. Section 8 states: “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.” Who are we kidding here? I don’t care how great the emergency may be, the other branches of government should be able to act as needed.
Third, there is nothing to assure that fair market value will be paid for assets. If an investment manager is hired, who could tell if he plays favorites or not? Clever investment firms will take advantage of the government and its agents, and only sell overpriced assets to the government.
Fourth, there is no easily identifiable upside for taxpayers here. If we bail out a firm, it should be painful, as it was for the GSEs and AIG, where most of the equity gets handed over to the government in exchange for a senior loan guarantee.
Fifth, though the name of the Resolution Trust Corporation has been invoked here, this is nothing like the RTC. The RTC only dealt with insolvent S&Ls. It did not try to keep existing S&Ls afloat.
This proposal is an expensive boondoggle and should be opposed by all."
Please, do not rush on any decision toward fixing the economy, and vote against or filibuster any attempt to bailout these companies.
Thank you,
You have three seconds to make an impression:
I implore you to stop Paulson. Do not vote for the $700 billion TARP. Demand a roll call vote on the record.
Email numerous times. Telephone and yell at a staffer or a voice mail machine. Send a letter. Then go to Washington and demand to see your Senator.
OK!
All my representatives contacted, with content that cannot leave any doubt about what I think and feel about the whole Charlie-Fox.
It is late and I’m too bloody tired to think straight after such a week end.
In any case, there is something in Yves’s post that bugs me to no end. If this situation is such a dire emergency (“the end of civilization as we’ve known it” — Paulson) that Congress has to work all week end and then some to enact a solution, pray tell me how the fuck lobbyists STILL have access to our representatives to the point of leaving their dirty paws all over the drafts circulating right now?
In such a case where clear thinking is imperative, how can Congress can be so damn stupid as to even permit lobbyists to talk to them? Phones, emails, IM and the likes should be filtered and answered ONLY for truly important matters only. In a time like now, lobbyists are simply irrelevant, a nuisance.
I truly fear the very worst. This is going to end very badly.
I weep for our children, for the unbelievable mess we will leave them.
If they come and spit on our graves, who will have the gall to blame them?
This is the invention of private nationalization.
Laymens version videos at –
http://www.fedupua.com
Local protets info –
http://www.tickerforum.org/cgi-ticker/akcs-www?forum=FedUp
Apparantly, the problems with the financial institutions are only minimal, and if the US-taxpayers don´t make their unprecedented gift attractive enough, Wall Street doesn´t want it:
…. But Mr. Paulson said that he was concerned that imposing limits on the compensation of executives could discourage companies from participating in the program [!!!]
“If we design it so it’s punitive and so institutions aren’t going to participate, this won’t work the way we need it to work,” Mr. Paulson said on “Fox News Sunday.”
( http://www.nytimes.com/2008/09/22/business/22paulson.html?pagewanted=2&_r=1&hp )
I faxed this to my Senators and Representative:
Regarding this weekend’s proposal from the Treasury
I write to you as a concerned citizen of the 20th district of Florida.
In the last few years I and many of my friends have been affected by the real estate boom and bust.
I am a native Floridian, and a long-time resident of South Florida. With my wife and family, it is our intention to spend our lives here as productive members of society. I might also point out that, although we do not often write, we follow current events and we vote regularly.
We bought a home in 2004, only to have to sell it in 2007, a consequence of the high price we paid, the dramatic rise in property taxes and insurance, and the realities of our income. We were able to see what was coming clearly enough to recognize that things would get worse, and we did not want to burden ourselves or anyone else with a foreclosure. We hope to buy again one day, when our incomes support it.
We make a solid income, and do not carry much debt. However, prices are still above what we can reasonably afford. It was not always so; with the same income at the beginning of the decade we could have easily afforded a large house in an excellent neighborhood. It is very hard to drive through these neighborhoods now recognizing that we are shut out of responsible ownership as a consequence of the last decade’s developments in the financial industry and its regulation.
I, with the rest of us, would like to see a return to more normal circumstances, and I wanted to write to you as our elected representative in order to enlist your help in this matter.
In particular, there is a significant Treasury proposal under consideration by Congress this weekend.
I have several questions and concerns about this, and I hope you do as well.
The proposal is to buy mortgage-related assets from banks. It doesn’t say this, but presumably it is
in order to prevent them from failing.
Underneath all of this are a group of people who paid more for their houses than they could ultimately afford, primarily because easy money drove prices far too high. These people are some of the citizens and taxpayers who will now be responsible for this very large loan. My question is, if the People couldn’t afford these mortgages in the first place, how are they going to afford them in the second place? It seems to me that having the government come in and write the banks a check for the mortages, and then giving the bill back to us doesn’t sound like a recipe for success for the People.
If you truly want to solve the foreclosure problem, allow house prices to return to their traditional income-price ratios (about 3 times income). There are many, many of your constituents who would be greatly helped by this, and it will happen eventually regardless of your action or inaction. There have always been people willing to pay, and to make good on, mortgages that fit their income. The experiments of the last decade in lending more for less have not turned out well.
Though all of us share some responsibility for the excesses of the last decade, consider that no loan was made by a bank against its will. If you really want to solve the financial crisis, punish the firms that made bad loans, and the regulators who violated the public’s fiduciary trust in allowing this to happen. The bill currently under consideration does exactly the opposite. It is of benefit in proportion to the number of bad decisions a firm has made, keeping the firm intact to continue to make similar decisions. This perpetuates a system that has brought us to the brink of disaster.
Consider that passing a bill which requires the printing of a trillion dollars or more will have an effect on the dollar’s value. It will possibly make buying Treasuries less attractive. Present and future owners of Treasuries may seek alternatives that would cause a further downward spiral in our ability to borrow, thus amplifying the problems we now have. More selfishly, consider the impact that this will have on the majority of your constituents; inflation is a tax on the poor, the old and the middle class. That’s a great many voters.
Consider the track records of the people behind these requests. Ben Bernanke and Henry Paulson are brilliant, hard-working, concerned and responsible citzens. But the consequences of their implemented plans have often been other than what they intended. If the law of unintended consequences continues to hold true, this bill may increase the spiral we have been in rather than decrease it.
Particularly in light of this, I find one component of the proposal to be particularly offensive. Quote “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.” To issue one of the largest loans in the history of the country while freeing the borrower from legal or legislative consequences is not public policy. I will refrain from describing what I think it actually is. However if you are party to this coming in to being, I will remember it when I go to vote.
On the matter of stimulus; I appreciated the check we received earlier this year, but I recognize it as a one-time loan that will have to be paid back. This is not the greatest form of help Congress can provide. The best stimulus for the large majority of your constituents would be for their incomes to meet their expenses. With rent or a mortgage as the largest component of most household budgets, allowing home prices to fall to what incomes can support is the fastest, kindest, cleanest way to address the roots of the current crisis.
Finally, please consider that haste and decisions of consequence seldom mix well, and the results seldom look good from the perspective of history.
We look forward to your wise decisions, both this weekend and in the future.
Best Regards,
Call your senators and congress people TODAY.
Do not waste time with longwinded letters…
CALL NOW
If this bailout talk continues – even a conditional bailout – Wall St. will get their bailout, and working people will get the shaft, This bailout should be stopped immediately and replaced with PERMANENT tax reduction for working families.
Working families are tapped out – this is the root of this crisis. Rescuing the credit markets cannot fix this. In the words of Max Fraad Wolff, debt is no substitute for wages and income. We need to spend this trillion dollars putting money in the pockets of working families where it will do the most good.
Emailed the below last night. Letters are going out this morning:
Dear _____ [my Democratic Rep & 2 Senators],
I was shocked and disappointed to read an online New York Times headline on the evening of September 21 announcing "Bipartisan Support for Wall St. Rescue Plan". I support massive government intervention into the economy in these circumstances; we are in a desperate situation. But that intervention can't come in the form of an unprecedented giveaway to the very people who are responsible for the crisis – and who have, till this year, been raking in massive paychecks. Do not lend the Bush Administration plan your support!
The plan has two particularly outrageous aspects:
1)Despite Paulson's spin, the Treasury Department is fairly obviously planning to pay prices well above fair market value for the toxic assets in question. The plan makes no sense otherwise – their owners' balance sheets won't be turned around unless the assets are sold for a lot more than anyone in the private sector would be willing to pay for them or any analyst thinks they're really worth. And yet the low prices aren't just the result of a temporary panic – a lot of mortgages were sold that can't be repaid, Wall Street was massively over-leveraged, and there's no reason to think that we're at the bottom of the price slide that comes with the bursting of the resulting bubble. So this isn't just a liquidity tool where taxpayers' money would be risked, it's a giveaway where taxpayers are pretty much guaranteed to come out behind.
2)The provision forbidding judicial or legislative review of Treasury decisions is simply absurd. No government department ought to be trusted with that kind of power – there are reasons for checks and balances. But most especially the Bush Administration has shown it can't be trusted with any kind of power. The Treasury Department included: it's lurched from crisis to crisis with an ad-hoc series of bailouts and ludicrously theatrical band-aids like the ban on short-selling. It would be crazy to give these guys a blank check.
Fixing these elements of the proposal would be a small positive step. But even if price conditions and oversight provisions were added, it would remain fundamentally flawed in conception. Tacking on CEO pay reform or a stimulus package for ordinary people that pales in comparison to the bailout wouldn't help much either.
The basic issue is simple – if taxpayers are to socialize Wall Street's risk, we ought to get a corresponding upside. And if any fix is to have lasting effect, the investors who own the insolvent firms and bear ultimate responsibility for their decisions need to be wiped out. So, in exchange for its injection of capital, the government should get equity – or, in perhaps plainer terms, it should nationalize the failing corporations. This may be a radical step, but it's what the situation calls for, as economists from Paul Krugman to Greg Mankiw can see.
Sincerely,
______
If WE can’t even be bothered to read that rambling spam, how the hell do you expect a member of Congress to read it? Jeez.
FIFTY WORDS OR LESS. TELEPHONE. GO TO WASHINGTON.
Among those political blogs that have taken note of the unanimity against this bill in the econoblogosphere, there’s this little one called Daily Kos:
http://www.dailykos.com/storyonly/2008/9/21/11359/7555/652/605498
with 700 comments and counting.
weren’t we being nice to foreigners when we bailed out Fannie/Freddie?
Way back in the good old days of the 1980’s the US had a pretty funny game going: build up a big buble in something, say real estate, watch while foreigners scramble to get into the game, then burst, leaving only the locals who got out solvent. Kind of like being the house in a true old style western game of poker.
Harsh, for the suckers, but great for the society as a whole.
Just exactly why can’t we still play that game?
It’s pretty obvious the real reason: this time the house was all in. But somehow me thinks the city still ought to be able to stand by and watch the carnage.
But no.
“A simple alternative to unchecked Treasury power and moral hazard”
Congress is now considering a plan that would bestow upon the Treasury secretary, an unelected official, $700bn of taxpayer money and near monarchical power to spend it. Specifically, the Treasury is asking for authority to buy any financial assets that the Treasury secretary deems necessary to stabilize financial markets. Additional wide-ranging powers are also being sought, including complete discretion to award contracts to private companies in connection with the financial services industry bailout. The most egregious proposal, however, is that any action taken under the program be shielded from judicial review.
The government argues that we must abandon the fundamental principles of both our political system and our free-market economy to prevent a financial catastrophe. Proponents of the plan warn that an economic downturn not seen since the Great Depression will unfold if no action is taken. Ignoring that the United States emerged from the 1930s Depression and thrived, let’s accept for the sake of argument that a taxpayer-funded bailout of Wall Street is needed to avert financial armageddon. That still does not explain why a plan could not be structured in a way that preserves the integrity of our political and economic systems.
In terms of our political system, the proposal spits on the Constitution and its principle of checks and balances. There is no excuse for wantonly seeking to protect the Treasury’s actions from review by the courts. It’s bad enough that taxpayers fund a private industry bailout, but it is ludicrous that the government wants to remove our ability to hold anyone accountable in the event that any funds are inappropriately spent. This provision should be scrapped.
With regard to our free-market economy, the Treasury has wrongly concluded that embracing moral hazard (i.e. amplifying risk-taking by removing the consequences of mistakes) is the only alternative to allowing “too big to fail” companies to fail. Under the plan, taxpayers will buy distressed assets from financial firms. If it subsequently turns out that the sale price was too high, only taxpayers will lose – the private companies never have to look back. This should be the other way around. Taxpayers should be guaranteed the return, with interest, of the funds they are contributing to the bailout, while the financial firms that benefit from the program should be responsible for potential losses.
I know the premise of the bailout is that financial firms currently can’t bear even the uncertainty surrounding the future value of their risky assets, let alone actual losses. Yet why is it inconceivable that financial firms repay what bailout assistance they receive in the long term, when the economy is growing healthily again and profits are strong. Here’s one idea of how this could work:
* If an individual company sells taxpayers assets that later produce a loss, that company will be responsible for covering the losses. The repayment period will start after the company returns to profitability and be stretched out sufficiently so as to be manageable. Payments could be funded by temporarily reducing shareholder dividends and executive pay.
* If an individual company sells taxpayers assets that subsequently yield a gain, then that company will be entitled to the proceeds after deducting the initial taxpayer investment, plus interest and expenses.
* For companies that fail after receiving bailout aid, the assets purchased from them will be pooled and a net gain or loss will be calculated. Surviving financial firms that received bailout assistance will, as above, be charged (credited) for the net loss (gain).
If financial firms are bullish on the long-term prospects for the US economy, they have no reason to fear heavy future liabilities under this scheme.
In response to suggestions that executive compensation be capped at firms benefiting from the bailout, Paulson said: “In order to have this program work, we don’t want to make it punitive.” Come again? Is he forgetting that the plan is already punitive in that taxpayers would foot the bill to rescue financial firms from their own mistakes. Moreover, asking for something in return from companies that receive government aid is not punitive, it’s called fair.
In a sense, financial firms are blackmailing the US, saying: “If you don’t provide us with aid that is absolutely free of even reasonable conditions, we won’t participate in the program and risk widespread insolvencies that would sink the US economy.” To which Paulson is responding: “OK, I’m with you. I’ll fight to make sure you don’t have to reciprocate anything in return for the rescue.” The US taxpayers deserve a better advocate.
(Note: The suggested cap on executive pay at firms that receive government assistance is only a baby-step toward taxpayer protection. Even if CEOs receive pay cuts, the difference would be re-circulated within the company, not returned to taxpayers.)
Ironically, banks’ approach to home-mortgage modifications and personal bankruptcies implies that they should support a bailout plan in which they own up to responsibility for their losses. Lenders favor extending repayment periods for struggling homeowners rather than reducing principal balances. Banking industry lobby groups have fought hard to keep bankruptcy courts from gaining the authority to lower the amounts owed on home mortgages. And in many cases where lenders have voluntarily reduced the principal balance on a home loan, the lenders have retained a claim on profits if the property is sold at a higher price in the future.
Similarly, banking lobby pressure has led to significant tightening in US personal bankruptcy laws. In particular, it has become much more difficult in personal insolvencies for an individual’s debts to be written off. Clearly this industry frowns on people simply walking away from their obligations.
One last point: In addition to buying assets from financial firms, the Treasury wants to turn around and hire financial firms to, among other things, manage the assets acquired. In other words, private companies will get paid to oversee the losses that taxpayers are assuming on their behalf. This provision takes the bailout plan from being unfair to being obscene.
I’m actually in a minority of people who think a taxpayer-funded bailout of the financial services industry will do more harm than good. But even assuming one is necessary, clearly a bailout ought to be structured more justly than the Treasury’s proposal.
N. Nunez
From the website:
http://www.marketoracle.co.uk/Article6379.html
Contact Your Senator Today!
It’s time to contact your senator. Here is contact information for Senators of the 110th Congress .
Phone or Email your Senators today. Tell them in your own words
Urge your senator to Filibuster any bailout legislation.
Emphatically state you do not want a bailout of any kind for anyone.
No Dictatorial power for Paulson or Bernanke
Taxpayers should not have to bail out banks making bad loans
Tell them that “The Fed” and Paulson are systemic risk”.
Email AND Phone Senators Shelby, Bunning, Kyle, Hagel
Whether Senator Shelby is your Senator or not, flood him with calls and emails asking for a filibuster and to stop the insanity. Senators Shelby, Bunning, and Kyle might be sympathetic to the cause, based on past statements. I am taking a stab at Hagel.
Please email and phone the following. Specifically ask for a filibuster and tell them to vote no to any bailout.
Shelby, Richard C.- (R – AL)
110 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-5744
E-mail: senator@shelby.senate.gov
Bunning, Jim- (R – KY)
316 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-4343
Web Form: http://bunning.senate.gov/public/index.cfm?FuseAction=Contact.ContactForm
Kyl, Jon- (R – AZ)
730 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-4521
Web Form: kyl.senate.gov/contact.cfm
Hagel, Chuck (R – NE)
248 RUSSELL SENATE OFFICE BUILDING WASHINGTON DC 20510
(202) 224-4224
Web Form: hagel.senate.gov/public/index.cfm?FuseAction=Contact.Home
Please email and phone both of your senators as well.
Dear Senator,
I'm a taxpayer from NY, and I understand that you may be sympathetic to my stance on the $700 billion bailout.
I'm outraged by the recent events taken by the government. By taking the actions of the past and potential future, I truely believe we are no longer a capitalist society. If I were to run a business into the ground, I would get no help from the government. I lost 30% of my savings this year investing in Fannie May & Freddie Mac along with some other bank stocks. Why shouldn't I be reimbursed for my losses.
I urge you to Filibuster any bailout legislation.
I do not want a bailout of any kind for anyone.
We should not be giving dictatorial power for Paulson or Bernanke
We taxpayers should not have to bail out banks for making bad loans
"The Fed" and Paulson are systemic risk".
Lastly, I feel that we are creating a moral hazard for the future with commercial banks and investment banks getting together. Doesn't anyone remember why Glass-Steagall was created in the 30's. We are creating a time bomb for our future. And WE THE TAXPAYERS ARE GOING TO PAY!
Thank you for your time,
A good friend wrote this very appealing note,
Dear Member of Congress:
You are being asked to assign unprecedented powers to an unelected, and unaccountable former Wall Street banker, under the guise of bringing stability to the markets and solvency to our banking system. With one hastily thrown together vote, you are going to create the most powerful human being in world history – Henry Paulson.
This is being done for the purposes of fixing a “crisis” that has suddenly, in the last hour, been presented to Congressional leaders. This act would remove the constitutionally mandated powers of regulation of the money supply, and the value thereof, from Congress and give it to an unelected member of the President’s cabinet. According to the act, this person would be above judicial review, and be allowed a $700,000,000,000 revolving line of credit to print money on behalf of the United States government. That is more power than anyone has ever had – anyone. Caesar did not have this power.
This should sound eerily familiar.
In March of 1933, after the “crisis” of the Reichstag Fire, newly named Chancellor of Germany, Adolf Hitler, petitioned the German Reichstag to give him plenary powers over the affairs of German government. The Reichstag transferred its power, on an emergency basis, to the Cabinet of Germany for a period of four years, and this was called “The Enabling Act”. This was to deal with the perceived “crisis” of Communists within the German government, when the “crisis” was never fully substantiated. It is believed by most historians that the Reichstag Fire was a deliberate act to coax the Reichstag into giving up its power.
That history did not end well.
You are being goaded into giving Henry Paulson plenary powers over the economy and government spending, money supply, and value of that money. Those powers belong to you, held in trust for the citizens of the United States. Our Founders gave you those powers TO PREVENT THE VERY SCENARIO THAT SECRETARY PAULSON HAS PRESENTED TO YOU.
You are being manipulated.
For the past 13 months, Paulson, and Federal Reserve Chairman, Bernanke have repeatedly given public statements through the various media, and have testified to Congress on the soundess of our banking system. As that time has worn on, they have repeatedly come to Congress for various bailouts (Bear Stearns, AIG, Fannie/Freddie), as well as acted to install confidence through the manipulation of the Federal Reserve Monatary Policy, and announcing various liquidity programs to keep money in the banking system (TAF, TSLF). While they have been taking extraordinary measures to shore-up the banking system, they have always maintained that the system is sound and just needs a little time to get through a “soft spot,” or a “contained” problem (Subprime).
You now know that they were lying the entire time. There is no way to sugar coat this. They have been lying to you since March of 2007. They are lying now. This was plainly known to many in the professional and amateur investment communities, recently smeared as “short sellers.” It turns out that the cynics were right all along. This is why we have a free press.
Ask yourself, why didn’t they come to you for this unprecedented bailout last October, when Paulson attempted the same thing with various Wall Street banks? Surely, the problem was known last fall when Paulson attempted to create his “super SIV.”
Had he come to you at that time, there would have been at least 11 months to debate the issue, open it for public review, and deal with it while the stock market was trading at an all-time high. Why did he wait until the weekend before the Congressional recess for the bi-annual election cycle, and present the plan over a weekend where the public could not comment? Why did he have to wait until the stock market teetered on collapse, and the credit markets were frozen solid?
He needs a “crisis” so you will not oppose him.
Ask yourself, why did the Senate Majority Leader and Speaker of the House, as late as September 16, attempt to leave the issue in Washington and head back to their districts, leaving the Administration to clean up the mess, then suddenly have a change of heart less than 36 hours later? What was said? Why are the details of the briefing given to Congressional leaders not available for public review? Why are you being asked to vote for something so hastily and without proper briefing or public review? Does Democracy flourish in the dark, or does tyranny and fraud?
We know the following:
Paulson and Bernanke have lied for the duration of the credit crisis.
Every bailout has been bigger, more frequent, and has resulted in a much bigger “crisis.”
Now, Paulson and Bernanke are telling you that they really are telling you the truth and this bailout will work.
You are being played.
They are framing the issue in terms of Congress voting to rescue the banks and the markets. Let me be clear on this point: YOU ARE NOT VOTING ON THE HEALTH OF THE BANKS OR THE MARKETS. YOU ARE DECIDING WHO GETS WHAT MONEY IS LEFT OVER AFTER THEY FAIL. The markets (equity and credit) are going to experience a large dislocation, or in the common lexicon, “a crash.” That is an absolute certainty. You are merely deciding if the US citizens are going to keep their money, or give it to Wall Street bankers. You are deciding if the US government is going to survive or collapse. Giving Paulson unlimited spending powers will ensure that the government collapses. That is a certainty.
Paulson and Bernanke need to be removed from office for malfeasance. For 18 months, the health of the banking system has been very suspect. They have known all along what is happening and have failed to act. Their actions have been limited to lying to Congress and the American people and manipulating the accounting to cover the insolvency of the US banking system.
You are being asked to abdicate. The American people want their Constitution and their government to survive. We will rebuild what Wall Street has destroyed, but we need to keep our money in order to do it.
Vote against this unprecedented power grab. History shows the folly of such endeavors.
Very truly yours,
From Michael Shedlock’s website : What To Do A recap. Contact Your Senator Today!
1. It’s time to contact your senator. Here is contact information for Senators of the 110th Congress.
Phone or Email your Senators today. Tell them in your own words:
(a) Urge your senator to Filibuster any bailout legislation.
(b) Emphatically state you do not want a bailout of any kind for anyone.
(c) No Dictatorial power for Paulson or Bernanke
(d) Taxpayers should not have to bail out banks making bad loans
(e) Tell them that “The Fed” and Paulson are systemic risk”.
Email AND Phone Senators Shelby, Bunning, Kyle, Ensign, Hagel
Whether Senator Shelby is your Senator or not, flood him with calls and emails asking for a filibuster and to stop the insanity. Senators Shelby, Bunning, Ensign, and Kyle might be sympathetic to the cause, based on past statements. I am taking a stab at Hagel.
2. Ask For A Filibuster
Please email FAX and phone the following. Specifically ask for a filibuster and tell them to vote no to any bailout.
Tell them that anyone who votes for this bailout will never get your vote again.
Shelby, Richard C.- (R – AL)
110 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
Tel (202) 224-5744 Fax 202-224-3416
E-mail: senator@shelby.senate.gov
Bunning, Jim- (R – KY)
316 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
Tel (202) 224-4343 Fax 202-228-1373
Web Form: http://bunning.senate.gov/public/index.cfm?FuseAction=Contact.ContactForm
Kyl, Jon- (R – AZ)
730 HART SENATE OFFICE BUILDING WASHINGTON DC 20510
Tel (202) 224-4521 Fax 202-224-2207
Web Form: kyl.senate.gov/contact.cfm
Ensign, John- (R – NV)
Washington D.C. Office
119 Russell Senate Building
Washington, D.C. 20510
Tel: (202) 224-6244
Fax: (202) 228-2193
Web Form: ensign.senate.gov/forms/email_form.cfm
Hagel, Chuck (R – NE)
248 RUSSELL SENATE OFFICE BUILDING WASHINGTON DC 20510
Tel (202) 224-4224 Fax 202-224-5213
Web Form: hagel.senate.gov/public/index.cfm?FuseAction=Contact.Home
3. Please email and phone both of your senators as well.
4. ADDED by Hirsch V Gupta: Fax Numbers – Also suggest that when you call get the name of the person you spoke with and then ask her / him who is the senator’s staff person dealing with Banking, Finance and Budget issues. Request to speak with her/ him and address all your faxes to that person. Also find something to compliment the senator – if you cannot think of anything else just say “his concern for the tax payers and opposition to bailouts, wasteful spending, previous TV appearance” just anything to get the staff person to select your fax for the senator to read. I will find and psot the contact info for Chuck Grassley (opposed Fannie / Freddie) and Dr. Tom Coburn (opposed Bridge to Nowhere)
Hirsch
I just realized while eating lunch today (parallels anyone?) that Paulson may be OUT of a job in a few months….
WHAT? Out of a job? No wonder why he wants no oversight!
FILIBUSTER it IS!
The following links will take you to sites to locate your congressman and senator.
http://www.house.gov/house/MemberWWW_by_State.shtml
http://www.senate.gov/general/contact_information/senators_cfm.cfm
In Joy,
Zev
"Perfect Storm" Next Bailout?
City of Vallejo, Ca. files Bankruptcy, State of California Broke!…What Municipality is next?
States, Counties, Cities, across this country…
With high property foreclosures, Job loss, Business closures & revenue declines is the recipe for the "Perfect Storm" No Municipal tax revenue (Property Tax, Income Tax, Sales Tax, No New Bond Buyers or Loans available etc.) which can cause a Municipality to file bankruptcy.
What problems does this cause?
1. Limited to No funds to pay for daily operations, i.e. Administration, Police, Fire, Medical, Teachers etc.
2. Large Losses to Wall Street Investors, Pension Retirement Funds, Municipal Bonds are up to 50% or more invested into 401k's.
3. Extreme cases, "Temporary Chaos"