A reader posted a link below to an essay by a conservative economics commentator called Karl Denninger, who describes the proposed bailout as "The Mother of All Frauds." I don't know if this guy's a crackpot or onto something. I put it to the room for discussion. But at least on the surface, it looks pretty scary. He analyzes several provisions of the proposed bailout legislation, and is scandalized by the authority it gives to the Treasury Secretary. According to Denninger, not only does it allow for the nationalization of whatever amount of debt Paulson and his successor wish -- as long as it's only $700 billion at a given moment -- but it also makes the Treasury secretary answerable to no one -- not even a court! Look at this from the legislation:
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.
Think about that for a second. Think about how radical this is. How can it even be constitutional? What kind of country are we becoming overnight? Denninger says once people realize what this thing is calling for, it will cause a massive financial panic. What do you say?
Add to Del.icio.us
Add to Technorati
Add to Digg
Add to Newsvine
Add to Facebook
Add to StumbleUpon
Subscribe
It looks like there's a healthy bi-partisan revolt brewing on the Hill to this proposed bailout.
http://thehill.com/leading-the-news/house-conservatives-want-changes-to-bailout-plan-2008-09-22.html
My thanks to David J. White for the fraternal correction
-- indeed 'twas John who signed what William 200 years earlier had set into motion (by getting the people (and their Pope's) knickers in a twist with the Domesday census that captured the property values of not only the immovable assets (the land and estates) of the Faithful in the autonomous shires but also every living breathing form of chattel that scratched an existence off the land, including every hog and mule, in a form suitable for taxation, resulting in serious negative consequences to the spontaneous social cohesion and cooperation of self-government and free markets that continues unabated today)
Glad to expand on my, admittedly rather muddled, contraction of history!
In other words, William was the first central banker in the English speaking world (his was not a "public purse" in the modern sense, the revenues of taxation flowed into his very own "sovereign wealth fund"). John had to concede that he just could not coerce the people's expropriation (calling to mind BXVI's explication on surah 2, 256 "There is no compulsion in religion" at Regensburg in the Fall of 2006).
Logically nothing different today - the national interest is not best served by concentration of powers in a unitary executive, and certainly not by transfering wealth by stealth!
Marc: "Rod, Kevin, and the rest of you who are irritated to hear this message, I am truly sorry. We were telling you this for many, many months, even years. You insulted and ignored us...until it hit your money. Now, it's a problem. Your goat just got cooked."
Franklin: "And by all the gods, shuck your fear, grow up and be citizens. The status quo is your enemy, and their primary tool is your fear."
Amen to both these statements! I think that the past 15 years are of such significance to our society that we're collectively going to need some kind of defacto truth and reconciliation committee to work through it all, at least at an individual level. After supporting Dole, Gore, and Bush (yes, I know) in the past three elections, I am fully aware that I still have an awful lot of owning up to do to incredibly bad judgments I made. Yes, the Democrats have had a heavy hand in this. But there should be no denying the fact that a large part of this crisis is due to the cancerous growth of an economic paradigm and corresponding regulatory structure that was championed by nominally conservative, free market capitalists.
The truth hurts. Lord knows I went through a long period of denial where I just didn't want to acknowledge the increasingly valid criticisms of the occupation of Iraq. Rod and other conservatives are going to have to put up with an awful lot more "I told you so's" before I'll have any sympathy for them saying, "Enough! Let's focus on the future!"
Fixing a problem involves a long, painful review of what went wrong. After all, if you always do what you always did you always get what always got. In war, and in economics. So, I say let the recriminations continue.
The central failing here is the same as the central failing of our nation (well, ultimately, of course it is - sinful, fallen man in need of a redeemer) and that is that we as a people have failed to lead ourselves, and to offer up from within our midst the best among us who are able to lead in government and industry. It's a failure of nerve, and a collective slothful selfishness. We've acted as a Nation Without Chests, to riff on CS Lewis.
OK, I still can't say it better than Franklin. Can we please start acting less like children and more like citizens?
For starters, I'd love it if Rod got a thread going dedicated to what, exactly, we can do as individual Crunchy Cons to alleviate some of the pain this crisis is causing and will cause. How about Rod rallies some of us to fill sandbags instead of heading to the booze hall to cry over our losses?
I don't want to sound any more like an arrogant SOB than I typically do in writing (I'm much nicer in person, really!) but here's an example:
Within the past 2 months, I greatly increased the amount of effort I put in to my small business. One of the fruits is that I've been able to create 5 stable new high pay part-time jobs here in Santa Fe, which have made a very big difference the past couple of weeks to several folks, including a young husband and wife who are just getting started.
Sacrifice starts at home. How about the crunchy con equivalent of purity bracelets? What kind of pledges could we make to each other? "I promise not to buy any luxury item until I've created one new job in my community." That kind of thing. Come on people, can we please show a little adult initiative, enthusiasm and enterprise here?
Really, this just comes back to the most important lesson I ever learned about being an adult, for which I'll always be grateful. I learned it when I became a father and husband at 23, unplanned and very uncool in the eyes of my social circle. The lesson:
If the dog barfs on the floor, or the kid s**ts on it, no one else is going to clean it up except you. Being an adult means knowing in your bones that when things go wrong you may as well get cleaning and not hesitate, because no one is going to come along and clean it for you and the longer you wait the harder it'll be.
So, when can we move from the "b****ing about the crash" phase to the "OK, where the heck did I put the bleach phase"?
Bless,
Doug
Denninger is right.
The so-called "assets" that Paulson wants the US Taxpayer to buy from the banks are simply derivatives - primarily credit default swaps that have no underlying value. Because these assets have no value, the banks put them in a an asset category called "Level 3", which is essentially an accounting trick for hiding bad debt.
Paulson admits they will pay above market value for these toxic notes. No one else would pay ANYTHING for them. That's the whole reason they got stuck in "Level 3" to begin with.
The banks traded these CDS's amongst themselves, making up values for them as they go along, using the made-up values as "assets" to buttress their reserve requirements, then lending money based on the value of those reserves, which was entirely fictional.
The regulators - who were supposed to keep an eye on this kind of blatant fraud - ignored it.
Now Joe Six Pack gets to pay the bill.
This bill is not merely immoral, it is evil.
Post a Comment
By submitting these comments, I agree to the beliefnet.com terms of service, rules of conduct and privacy policy (the "agreements"). I understand and agree that any content I post is licensed to beliefnet.com and may be used by beliefnet.com in accordance with the agreements.