"The Mother of All Frauds"?

It looks like Democrats aren't going to let them get away with it.

Barack Obama today:
"Even if the Treasury recovers some or most of its investment over time, this initial outlay of up to $700 billion is sobering. And in return for their support, the American people must be assured that the deal reflects some basic principles.

• No blank check. If we grant the Treasury broad authority to address the immediate crisis, we must insist on independent accountability and oversight. Given the breach of trust we have seen and the magnitude of the taxpayer money involved, there can be no blank check."

He continues with additional good points.
http://www.politico.com/news/stories/0908/13703.html

And here is Nancy Pelosi:
"The Administration’s $700 billion proposal does not include the necessary safeguards...We will not simply hand over a $700 billion blank check to Wall Street and hope for a better outcome"
http://thepage.time.com/pelosi-statement-on-legislation-to-address-crisis-in-financial-markets/

There are many examples of the Bush administration skirting and arguably crossing the line of constitutionality. None of them have been put to the official test, whether litigation or impeachment.

I am truly grateful for you bringing this to my awareness, Rod, but I'm just tired and cranky enough to ask: why the heck do you consider that radical? I'd have thought you'd be used to it by now...

I really should be in a better mood. I cleared the backyard jungle this afternoon. I just fed my family with my own hands and labor. The dishes are soaking, and I had my favorite ice cream for dessert. How is your Central Time zone evening shaping up, Rod? I dunno about you, but I need a break... and Richard, I hope at some point you come to decide that Rod could use a break once in a while, too. Just a thought, good sir...

Thanks Franklin. I do deserve a break from Richard Bottoms' trolling. I shall give myself one ... and everyone else.

Franklin, as to the radicalism, I don't think anything we've seen so far from this govt matches this in scope. It's breathtaking, even to we who are jaded, perhaps unwisely, to this sort of thing.

I'm guessing you voted for George Bush. Twice?

Time to pay the piper

Richard, Lay. Off. So did I, in states where he lost anyway, but I am right p---ed at the man right now. So, I gather, is Rod. This is not what we voted for.

Yes, similar arrangements have been placed in federal legislation for decades and they have been upheld. They do not prevent the discussion of strictly constitutional matters, but save precious government money on litigation for matters of non-constitutional essence.

Instapundit explains it here, too:

http://www.pajamasmedia.com/instapundit/archives2/024696.php

There is no reason that concern about this monstrosity of proposed legislation should be along partisan lines. This will take years to resolve, and will mostly be administered by the next president.

If you are rooting for Obama and believe he is likely to be elected, aren't you ecstatic about this week's latest proposed government takeover of another huge section of the US economy? Only a Republican adminstration could ever get away with these types of wholesale government seizure of assets (I'm also referring to the Fannie/Freddie bailout). Just in time to turn it over to the unapologetically Marxist administration to follow.

Unless of course you're convinced that this all has long been the GWB/Rovian plan to annoint himself King for life.

If I was the type to be taken in by the truly massive conspiracy theories, which I'm not, I've got to admit there's plenty of fodder here...

Just more of the Unitary Executive Theory. I can only assume that most Republicans are comfortable putting nearly king-like powers in the hands of one man. This administration has done that with the Iraq war. It now does it with the economy. Reading the Constitution, it is very clear that it was intended that there be checks and balances, separation of powers. That is melting away.

I still do not have a handle on whether this can be changed so that Congress/the courts can have some degree of oversight, or at least some call for accountability. Will all decisions be made in secret? Poulson is a Bush appointee. How will he avoid the appearance of conflict of interest in the money he hands out? What happens when we have a new President?

Steve

sorry--needed reference for the quotation in my last post: http://arstechnica.com/news.ars/post/20050509-4886.html.

Also do not forget that what one Congress can legislate, another congress can unlegislate. As for conflicts of interest--in the original Marbury vs. Madison, the commission that Mr. Marbury wished to take up as a judge was commissioned (decreed by legislation) by the Secretary of State at the time under Adams-one John Marshall, who became Chief Justice by the time the thing hit the Court--so he got to rule on his own action, in a sense. So far, the Republic has survived everything that's been thrown at it.

Just more of the Unitary Executive Theory. I can only assume that most Republicans are comfortable putting nearly king-like powers in the hands of one man. This administration has done that with the Iraq war. It now does it with the economy.

One thing about the Unitary Executive Theory: If the executive branch has all the power, how can they justify avoiding all of the blame?

According to the NYT the SEVEN HUNDRED BILLION DOLLAR bailout with no oversight other than "Trust Hank, he's a nice guy" is now going to be more along the lines of a ONE TRILLION DOLLAR BAILOUT because "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."

Guess what foreign bank is at the top of the list -- UBS. And guess who is a lobbyist for UBS and is the vice president of UBS's US division -- Phil Gramm. And guess who is John McCain's main economics advisor -- Phil Gramm. Some reformer. I know, I know, we're all just whiners.

MarcM, I'm unpublishing Bottoms because he almost never adds anything to any thread other than, "Republicans bad, Republicans suck, nyaah nyaah nyaah!" You are certainly entitled to gloat, but if you think the Dems' hands are clean in this Wall Street pig sty, you simply haven't been paying attention, at least since the Clinton years.

"You are certainly entitled to gloat, but if you think the Dems' hands are clean in this Wall Street pig sty, you simply haven't been paying attention, at least since the Clinton years."

But, you need to recall that from 1994 Clinton had a GOP controlled Congress that came in under the Contract With America. The Gramm-Leach-Bliley act set the foundations for this monumental failure, a piece of legislation crafted by Republicans in the House and Senate. Yes, the Democrats went along with it, but this is a GOP product, make no bones about that.

Rod, it is not about gloating. It is about holding those who put us in this mess accountable for it. The author of this monstrosity of a bill, Phil Gramm, is advising the McCain campaign. McCain supported this legislation.

Rod, at what point do we, the electorate, stop returning these clowns to office?

Why not give Bottoms one last chance? Don't know that I've seen a rebuke to him from Franklin Evans or others on the centre or left side of the aisle before now -- maybe that'll do the trick to turn things around. My two cents on what isn't really my business.

Since most of us have two horses in this race:
___ our private purse and
___ our share of the public purse,

may I recommend we (as acting persons of free will) follow Denninger's recommendations and work personally on two fronts, flooding the phone lines until someone starts paying attention:

~~~~> pester your benefits plan managers (including your union HQ) about what steps they are taking to protect your pension fund from any stock in US financial firms (they're already down the wiped out Fannie and Freddie paper, along with AIG and Lehmann stock they may have had vested) and do the same for any private mutual funds or investment arrangements like term life insurance/college payment plans you are relying on to cover future expenses (some use such instruments to pay off mortgages at the end of the term, or for tax efficient support of non-domiciled dependents). You may be seriously out of pocket if you trust the government to "stabilize" the market in your favor.

~~~~> call your legislators' (Rep. and Sen.) offices and recount the three minimum demands you expect them to articulate in the thrashing out of any immediate rescue plan [ as itemised in this video clip:
www.youtube.com/watch?v=9KYtD-Ff_eM ]

1. Declare all level III assets for all stocks listed on the S&P etc so real values can be transparently traded.
2. All over-the-counter derivatives moved to a public exchange like the Options Clearing Exchange in 90 days or are VOID
3. Leverage no more than 12-to-1, minimum 8% reserves for all financial institutions within six months.

N.B. BEAR IN MIND (forgive the pun) this is a minimal (non-libertarian) defense of fractional reserve banking where FDIC backed deposits are by law permitted to be leveraged at a max of 10-1 (that is they only hold enough of our deposits in reserve to satisfy 10% of us demanding them back -- at which time they are obliged to find depositors of equivalent capital to stay in business -- or all of us only get 10¢ in the $ in a bank run when they go bankrupt). I-banks have NO RESERVE requirements at the Fed funds window and yet have been leveraged at over 30-1 (that means you get 3¢ on a $ in a bank run or, more presciently, if just 3% of their clients withdraw their business -- ie in danger of going bankrupt themselves -- they go belly-up, D.O.A) Now on a business capitalized with stock in the double digits, that's usually a distant, nightmare scenario since their customers are unlikely to withdraw billions overnight, but when stocks drop to the low single digits, they're a lot closer to the precipice: one or two small clients walking away without a replacement investor to be found at such short notice, or a drop of one or two points on the margins they earn on transacting business on behalf of their clients trading in derivatives that are tanking can cause them to declare bankruptcy at the drop of a hat -- this is the truth Bernanke has known since Bear Stearns, if not before (and those who should have known better in the White House and Congress ought to have suspected was possible (if they had any inclination to take their duties as custodians of the wellbeing of "We, the people.." seriously)

P.P.S. By way of disclosure: I'm in the Ron Paul camp, so I think fractional reserve banking cannot be morally defended (seignorage is stealing) and ought be abolished, but that can wait for a later day! Mr Denninger has some sensible first steps. See also "Understanding the crisis" at www.mises.org/story/3118

Wow -- a lot more heat than light on this thread. Setting aside the merit (or lack of merit) of the proposed bailout, here are some relevant Constitutional points:

1. The No Judicial Review clause is designed to prevent the inevitable feeding frenzy of fee-hungry lawyers litigating each and every transaction and action of the Treasury Department. Such a clause is not novel or extraordinary. It does not restrict the judicial branch from reviewing whether the grant of authority by Congress to the Treasury Dept. is permitted by the Constitution.

2. Congress could, in fact, prohibit the courts from reviewing the constitutionality of this legislation. Since the Constitution expressly gives Congress the authority to limit the subject matter of the Supreme Court's jurisdiction (as well as to abolish all lower Federal courts if Congress so desired), it's hardly rational to suggest that taking such action would somehow threaten the constitutional separation of powers. The authority to limit the judiciary's jurisdiction is a proper check on the power of the courts. In any case, however, this bailout legislation doesn't attempt to invoke that authority.

3. Under prevailing interpretations of the Constitution, it's hard to see how this legislation could be seriously challenged. Perhaps it is an improperly broad delegation of legislative authority by Congress to an Executive Branch agency or, less plausibly, that it exceeds the Federal government's authority to regulate interstate commerce. But as it happens, the traditional legal doctrines of Non-Delegation and strict interpretation of the Commerce Clause were eviscerated by the Roosevelt appointees to the Supreme Court in the late 1930s. If we want to revive those doctrines to take down this bailout, it will also mean the end of most Federal programs related to health care, education, pensions, welfare, energy, etc. Alas, unless President Ron Paul appoints 5 Supreme Court justices, we aren't likely to head down that road any time soon.

4. The looniest comments here are the ones talking about the "Unitary Executive Theory." The Unitary Executive Theory has nothing to do with expanding Executive Branch authority in relation to the other branches. It simply asserts that, as a constitutional principle, the President is the head of the Executive Branch. Therefore, he is not answerable to, e.g., the Justice Department, which is subordinate to him. People who know nothing about constitutional law (like Andrew Sullivan and most of the Nutroots) speak as though this involves some drastic expansion of Executive Branch authority. It is, however, a perfectly respectable way of interpreting the Constitution.

5. Finally, this legislation is no more of an improper power grab by the Executive Branch than, say, Obama's health care plan would be. It is, after all, proposed legislation , meaning that the Administration is asking Congress to act. Just because we don't like something, doesn't make it unconstitutional. And as noted above, if it is unconstitutional, then so is practically every Federal program enacted since the New Deal, including 100% of Federally-funded entitlement programs.

I've also been wondering about the constitutionality of the immunity-from-oversight provision of this proposed bailout. Even if Congress and the regulatory agencies were to stand for it, judges don't like to be told they can't review a law and generally reject such a notion unless it's national-security legislation in wartime. It's a stretch to characterize the bailout that way (although I wouldn't be surprised to hear proponents try to).

Surrendering oversight is especially dangerous here, because we don't yet know who holds these bad debts, thus, who's being bailed out.

A distinction should be drawn between investors who knew they were taking a risk in hopes of high returns -- a.k.a. speculators -- and those who were "managed" into these investments through 401(k)s and IRAs, as well as employees enrolled in corporate pension plans, in which investment decisions are largely or entirely out of the individual's control.

Since this is U.S. taxpayers' money, a distinction should be drawn between domestic and foreign investors, whatever the Chinese and oil sheiks think of that.

Also, "give us what we want right now without strings attached" has a familiar odor. Smells a lot like mythical yellowcake from Niger. Paulson, Bernanke, et al., may be entirely sincere, but they should understand they're part of an administration known to, shall we say, make stuff up; and they should moderate their demands accordingly.

About regulation: What's been most obviously missing in this market has been transparency. Investing in securities that are so complex and of such murky provenance that not even experts can estimate their real value and degree of risk is simply crazy. If such paper-creation is so "flexible" it can't be regulated, then call it what it is: gambling. See to it that auditors and ratings agencies -- and brokers -- tell investors when they're playing long odds.

Requiring honesty is not undue interference in the market.

Does anyone really believe that the Constitution is NOT a dead letter?

If so, I can be emailed at hdavidthoreau@yahoo.com, I'd like to sell you a bridge.

The Democrats and Republicans are both parties of rich and wealthy robber barons. Don't fool yourself into thinking the Democrats are anything else.

Ostrea, we are faced with a decision that essentially hinges on which part is worse, not better, for our country. The GOP has demonstrated a wonderful ability to cater to the needs of the wealthiest among us, spend us into oblivion, and continue to hum the mantra of cutting taxes. The situation we face today is the natural outgrowth of such policies.

We cannot continue down that path. More importantly, we cannot reward poor performance with promotion and continued employment.

I'll agree that the Democrats have failed us as well. But going forward we need to ask which choice, McCain or Obama, would be worse for our nation.

McCain's track record speaks for itself. Deregulation, cutting taxes, promoting business interests at the expense of the taxpayers. There's no question in my mind that having him as President would be a catastrophe.

Obama may be only marginally better, but I'm at the point where I am quite willing to get the GD GOP out of Washington. Right now, I'd vote for the devil himself if he were running as a Democrat.

If we vote in another Republican administration we can expect yet more of the same behavior that put us in this mess. Deregulation, worship of free-markets, profligate spending, and a complete disregard for anything resembling paying your own way.

How anyone can think otherwise in light of the last 20 years of Republican dominance of at least one (if not two) of the branches of government simply amazes me.

Will, despite efforts to disassociate themselves from him, the truth is all these "conservatives" voted for Bush twice and defended his behavior at various times. It's convenient now to shout, "he's not a conservative," but Bush wasn't elected and enabled by liberals; he was elected and enabled by conservatives.

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!

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